0:08

Welcome to another episode of The Blockchain Debate

0:10

Podcast, where consensus is optional, but

0:13

proof of thought is required. I'm your host,

0:16

Richard Yan. Today's motion is: Corporate

0:18

bailouts and capital market rescues

0:21

make sense. We all know the

0:23

dominant crypto native perspective on this topic

0:25

-- generally anti intervention

0:27

both fiscally and monetarily.

0:31

But it's important to hear the other side,

0:33

if only to kick the tires of your own beliefs.

0:36

After all, many smart people embrace

0:38

a statist, big government view

0:40

in how to run an economy. In

0:43

this debate, we covered these topics,

0:45

and more: a way to think

0:47

about corporate bailouts as claims

0:50

on a social insurance policy, with

0:52

an analogy in Social Security and Medicare;

0:55

how the monetary policies are worsening

0:57

the wealth gap by giving a disproportionate

1:00

advantage to the rich but not

1:02

to the poor; whether FDR's

1:04

intervention policies were instrumental

1:07

in lifting the nation out of the great depression,

1:09

or this was just revisionist economic

1:12

history, with these policies accomplishing the

1:14

opposite or having tepid effects

1:17

at best; and many

1:19

more. Our

1:21

two knowledgeable guests are both in the crypto

1:23

circle, but come from very different backgrounds.

1:26

One used to be a Wall Street trader and

1:28

is a finance buff. The

1:30

other is a Bitcoin maximalist

1:33

and an unapologetic libertarian.

1:36

Be sure to also check out our previous episodes

1:38

too. We feature some of the best-known

1:41

thinkers in the crypto space, and

1:43

it was great to have a few no-coiners on from

1:45

time to time. I always appreciate

1:47

their agreeing to do the show, and adding perspectives

1:50

to what sometimes seems like an echo chamber.

1:52

It would be great to have more of them on in

1:55

the future. If you would

1:57

like to debate or want to nominate someone

1:59

please DM me @blockdebate on

2:02

Twitter. Please note that

2:04

nothing in our podcast should be construed

2:07

as financial advice. And

2:09

if you enjoy the show, please don't hesitate

2:11

to give us five stars on iTunes or

2:13

wherever you listen to this show. I

2:16

hope you'll enjoy listening to this debate.

2:18

I get involved in the conversation a bit more

2:20

than I normally do. Let's dive right in!

2:25

Welcome to the debate. Consensus optional,

2:27

proof of thought required. I'm your host, Richard

2:30

Yan. Today's motion, corporate bailouts

2:32

and capital market rescues make sense.

2:35

To my metaphorical left is Qiao Wang,

2:37

arguing for the motion. He agrees

2:39

that corporate bailouts and capital market rescues

2:42

make sense. Now note that

2:44

even though Qiao generally sees merit

2:46

of fiscal and monetary responses to

2:49

fight economic and financial crisis , he

2:51

is not an advocate for what the US government

2:53

is undertaking in the current downturn. To

2:56

my metaphorical right is Jimmy song, arguing

2:59

against the motion. He disagrees that

3:01

corporate bailouts and capital market rescues make

3:03

sense. In fact, he has been a

3:05

long-time, vocal critic for such government

3:07

actions. It's great to have him back

3:09

on the program. He debated David

3:11

Gerard on Bitcoin's store of value status in

3:13

our first episode, so make sure to check that

3:15

out too . Qiao and Jimmy, I'm excited

3:17

to have you join the show. Welcome!

3:21

Nice to be here too. Thanks Richard.

3:21

Thanks.

3:23

Great. Here's a bio for the two debaters.

3:25

Qiao Wang is an advisor at Massari,

3:27

a startup aiming to create Bloomberg for

3:30

the crypto markets. Previously

3:32

Qiao was a quantitative trader. He

3:34

ran R&D teams and helped

3:36

build two trading businesses at IMC

3:39

and Tower Research. Jimmy

3:41

song is a Bitcoin developer, educator

3:43

and investor. He is the author of

3:45

the book Programming Bitcoin. He is currently

3:48

a Bitcoin fellow at the blockchain

3:50

capital and a lecturer at the University

3:52

of Texas. He is also a Bitcoin

3:54

core developer. As usual, the

3:57

debate has three parts: An opening

4:00

statement from both sides starting with Qiao. The

4:02

second round is the body of the debate with

4:05

me directing questions to the debaters.

4:07

Both sides are highly encouraged to follow

4:09

up with our opponent after hearing

4:11

answers on the other side, and

4:13

of course, they're also free to respond to

4:15

each other's points raised during the opening

4:18

statement. The last round is audience questions selected from

4:21

Twitter, and we'll end with concluding remarks from

4:23

both debaters. Currently

4:25

our Twitter post shows 59%

4:27

against bailouts and market rescues and

4:30

28% in favor of them. We'll have a

4:33

post debate poll and whoever tips the

4:35

ratio more to their side wins the debate.

4:38

Okay, let's get started with the opening statement.

4:40

Qiao. Take it away.

4:42

So, I guess before talking about this intervention

4:44

stuff, I want to point out that economics

4:48

is a very nuanced topic.

4:51

Macroeconomics is a complex system

4:53

and in theory, if you have all the data in the world,

4:56

you can answer all the questions that you have. But

4:58

in practice, no one really has all the data. And

5:00

number two, macro is not

5:03

really a repeatable and controlled science

5:05

experiment. So you can't go back

5:07

10 years and say, let's do something

5:10

else and then expect different

5:12

results. There're so many confounding

5:14

variables that you cannot really isolate,

5:17

in a non-repeatable science experiment. So as a result

5:20

of these things, I think in today's

5:22

debate, I want to be really clear that this is

5:24

a very nuanced topic and I don't have the

5:26

right answer. But again,

5:29

like Richard said, I'm not 100% in

5:31

favor of what the government does. But I'm here

5:34

debating Jimmy today, so that

5:36

we as a crypto community at

5:38

least know the other side of the argument,

5:41

see different perspectives so that

5:43

once we actually go out and argue with people who are bitcoin

5:47

skeptics, that we know their arguments. So we

5:49

can argue and debate intelligently.

5:52

So that's my main point today. But

5:55

when it comes to the actual government

5:57

intervention, I think my two

5:59

main arguments, which I can expand later, are

6:02

basically: number one, the bailout

6:05

programs that the Federal Reserve and Congress

6:07

have laid out, they're not free money,

6:10

they're loans, right? We're not giving free money to

6:12

corporations and individuals and small businesses. We're

6:14

actually lending money to them. So that's the number one

6:17

argument. And number two is that

6:20

I think government intervention in

6:22

itself is not what wrecks the economy.

6:25

In fact, the last time we didn't intervene immediately

6:27

was 1929, and we

6:29

basically went into a depression for many,

6:31

many years. So both of

6:33

these points, we can expand a lot more

6:36

later on during this debate. But this is my

6:38

main two points that I want to layout today.

6:41

Okay, thank you . Jimmy, please go

6:43

ahead.

6:44

I'd like to start with a quote from Andrew

6:47

Jackson, who was the President responsible

6:50

for ending the second central bank

6:52

of the United States. And this was

6:54

his reasoning. Gentlemen, I have

6:56

had men watching you for a long time

6:58

and I am convinced that you have used

7:00

the funds of the bank to speculate in the

7:02

bread stuffs of the country. When

7:05

you won, you divided the profits among you, and

7:07

when you lost, you charged it to the bank. You

7:09

tell me that if I take the deposits from

7:12

the bank and a null this charter, I shall

7:14

ruin 10,000 families. That

7:16

may be true, gentlemen, but that is

7:18

your sin. Should I let you go

7:20

on, you will ruin 50,000

7:22

families and that would be my sin.

7:25

You are a den of vipers and

7:27

thieves. I intend to rout you out.

7:29

And by the eternal God, I will

7:32

rout you out. I

7:35

don't think he's really exaggerating there.

7:37

What the system that we have

7:39

currently is one

7:46

of central banking , central bank fiat money. And , essentially

7:48

what it does is it's

7:51

a racket that

7:53

takes money from everybody else that owns a

7:55

part of that money , and gives

7:57

it to other people. It's straight

8:00

up that without any

8:02

sort of consent from , the populace whatsoever.

8:04

and just to give some rough

8:06

numbers around what's going on in the

8:09

last seven weeks, the M2 money supply,

8:12

which includes the money

8:15

from the Federal Reserve and then

8:17

the pyramiding on top by

8:20

, by the member banks.

8:22

it's , as of March 1st or March 2nd, it

8:25

was 15.6 trillion

8:27

currently, or the last data point that we

8:30

have is from April 20th,

8:32

and that says 17.4

8:35

trillion. That's an 11% increase

8:37

in seven weeks. That's

8:40

, almost $2 trillion. That was

8:42

essentially put into the economy , at the

8:44

behest of the Federal Reserve on

8:46

behalf of all of the people

8:49

that quote unquote got these loans. And we'll talk

8:51

about that more a little bit later. the

8:53

fact of the matter is this, a racket that

8:55

is not limited to the United

8:58

States. This is a racket that encompasses

9:00

the entire world ever since Bretton

9:03

Woods in 1944.

9:05

We've essentially been running the entire

9:07

world on our Dollar hegemony. And

9:10

it is not democratic in the least.

9:12

The Fed is an independent organization

9:15

and is not supposed to serve any political

9:17

ends. Therefore, it is essentially

9:20

an autocratic system. They

9:23

get to do whatever they want according

9:25

to the mandates that Congress has

9:27

given to them, which is very

9:29

vague and they can justify pretty much anything

9:32

that they want. So in a

9:34

sense, all of these bailouts, all of this money

9:36

printing, all of the things that the federal

9:38

government is doing is adding

9:40

to a corrupt and fragile system. And as

9:42

Andrew Jackson said earlier

9:47

in the quote that

9:49

I quoted, it's

9:52

essentially continuing the racket . It

9:54

is endangering and fragilizing

9:57

and creating , more

10:00

, badness for the entire global

10:02

financial system , in order to

10:04

keep up the racket that they have and

10:07

it's stealing from savers

10:09

and it's spending on whoever the government

10:11

wants. Now, that's

10:13

not to say that it won't benefit

10:15

some people. Clearly it will, it will

10:17

benefit say, a lot of these zombie

10:19

companies that have been in existence for a

10:22

while , but they have political connections

10:24

and so on. But the people that

10:26

it will hurt the most will definitely be

10:29

the third world country people

10:31

who do not get to spend the Dollar

10:34

first. At least we in the United States get to

10:36

spend the Dollar first. Instead, we're

10:38

essentially exporting inflation because

10:40

the Dollar is the unit that

10:42

everybody wants to be in, because

10:45

of a credit crunch

10:47

that is currently happening. Essentially what

10:49

you're doing is you're stealing from savers,

10:51

savers maybe

10:54

even in the third world, and distributing to

10:56

people that

10:59

you favor , in some way,

11:01

shape or form. So , there's a lot of

11:04

deception at play, because the Fed and the government

11:06

and everyone else that is part of

11:09

this quote unquote macro economic industrial complex are

11:11

pretending that it's actually

11:13

good for everybody, and

11:16

that you're getting something for

11:18

nothing. It is nothing of the sort

11:20

you are making the entire system way more

11:22

fragile. You are probably going to

11:25

put at least several third

11:27

world countries into hyperinflation. And really the

11:29

only argument that I

11:30

would accept for

11:33

these bailouts being good, is that

11:35

it would accelerate the

11:37

whole system to collapse, and that

11:39

Bitcoin could then take over. It

11:41

is an unjust, unfair

11:43

system, where the rich continue

11:46

to get richer, and

11:48

the poor get enslaved. That is a morally

11:54

repugnant system and I oppose it for

11:56

those reasons.

11:58

Okay, great. Thanks for bringing the fire

12:00

Jimmy. Expect no less from you. And

12:03

Qiao, I think you definitely have your hands full.

12:06

So I'll give you a choice. I can ask you

12:08

the first question of the round two first,

12:11

or you can respond to Jimmy now.

12:13

So I'm

12:18

going to quickly respond. So I think all

12:21

the arguments that that Jimmy

12:23

, put out , they have some

12:26

merit and I generally

12:28

agree, but , over the next 45

12:30

minutes or so, I want to hear the actual

12:32

evidence of those things from the

12:35

actual evidence of , wealth being

12:37

transferred from the rich to the poor

12:39

, from emerging markets to the US.

12:42

I want to see the actual data. So that's my

12:46

main thing. But we can start

12:49

with the first question.

12:50

Okay, perfect. Let's move on to round two. So

12:53

my first question is for Qiao. In

12:55

crypto land, the top criticism of

12:57

the recent government action is regarding

13:00

the monetary response. The argument goes

13:02

something like this, and maybe this echoes with

13:04

what Jimmy has said already: Money

13:06

printing transfers wealth to Wall Street, creates

13:08

inflation, and worsens the wealth

13:11

gap, elaborated below. So

13:13

in terms of the money printing, transferring wealth to

13:16

Wall Street, QE buys assets, increasingly

13:19

risky ones from Wall Street at a premium.

13:22

But banks are under no obligations of sharing

13:24

that liquidity with the markets, which

13:26

indeed there are signs of their reluctance

13:28

in doing so. Point

13:31

two, which is the inflation creation increase

13:33

in monetary supply, debases the currency, and

13:35

reduces purchasing power. And then the third

13:38

complaint is the wealth gap. Inflation

13:40

of assets such as housing and stocks makes them

13:42

increasingly inaccessible to main street.

13:45

Borrowing is a rich person's game, both

13:47

asset-based or income-based , which

13:49

allows them to own more assets and rent

13:52

them back to the poor in a new paradigm

13:54

of feudalism. So what are your thoughts

13:56

regarding this? Sorry, this is a bit long

13:58

winded and I'm happy to remind you of the individual

14:01

points.

14:02

So this

14:04

is a really good question. And for each one of these

14:06

three points, we can literally talk about three

14:08

hours, But I want to focus on like maybe

14:12

one of them first and

14:14

then we can explain later. So , when it

14:16

comes to QE , buying assets

14:18

, from Wall Street at a premium, I

14:21

want to question a couple of

14:23

assumptions here. One is if we look at

14:26

the actual breakdown of major holders

14:28

of US Treasuries, right?

14:30

Because QE really buys US Treasuries

14:33

and mostly US Treasuries and a little bit of

14:35

, mortgage backed securities. But if you look at the ownership

14:38

breakdown of US Treasuries,

14:41

half of US Treasuries right now

14:43

is actually owned

14:45

by the rest of the world by foreign entities.

14:47

So we don't have a lot of clarity into

14:51

what know part of , the foreign entities

14:53

own what. But if

14:56

we focus on the other half,

14:58

I think that data suggests

15:01

that , only 2% of US Treasuries

15:04

are owned by banks. The rest are owned

15:06

by things like mutual funds,

15:08

cools and phones, pension funds, individuals, households, and

15:11

so on and so forth. So the first data point I

15:14

want to point out here is

15:16

the entities that actually

15:19

own the QE assets. The vast majority of them are not

15:21

banks. So you could argue that, mutual funds, pension funds are

15:23

part of the Wall Street, the

15:26

system, but in reality, yes.

15:28

But what they're really doing is

15:30

they manage money for the

15:32

households and individuals. So I don't necessarily

15:35

agree with that. QE , benefits

15:37

, Wall Street , by and large.

15:41

So , that's, ...

15:43

Sorry, if I understand you correctly, are

15:45

you saying, because the US Treasuries,

15:48

which are primarily assets being bought up by QE,

15:51

are distributed across a large

15:53

base of institutions, not just banks,

15:56

therefore not just Wall Street banks.

15:58

Therefore the Fed buying

16:00

up these assets are not disproportionately

16:03

benefiting these fat cat bankers. Instead,

16:06

they are benefiting the entire

16:07

pie, right? Which includes

16:10

these money-managers and pension

16:12

fund managers and so forth.

16:13

Exactly, exactly. And obviously

16:16

that the counter argument there is that QE

16:18

benefits the asset owners, right.

16:20

That the owners of those Treasuries, even

16:23

if they're individuals and households, and I

16:25

generally agree. But I just want to question the assumption

16:27

that, Wall Street is the one that's

16:29

being benefited here versus main street.

16:32

So I don't necessarily agree with that. Number

16:35

two , evidence suggests that , over

16:37

the last 10 years , the

16:40

volatility in the market has

16:42

been , depressed by the so-called Fed put,

16:45

right. Both the implied vol and

16:47

realized volatility

16:51

in the stock market has decreased, not

16:54

just stock market but also the bond

16:56

market, FX, and so on and so

16:58

forth. And as a result of that , we

17:00

also have seen a much worse

17:03

price discovery , in the actual markets.

17:05

And I think what this

17:07

does is this actually destroys

17:10

a pretty big portion of

17:12

wall Street's business, which is the trading business,

17:14

proprietary trading business, because

17:17

trading business basically dies when you don't have volatility.

17:19

So again, I don't necessarily agree

17:22

that Wall Street is the one that benefits

17:24

from this. So that's number

17:27

two . Number three,

17:29

buying assets at a premium.

17:31

I think what QE really does

17:33

, at least in theory, is

17:35

that it tries to depress long-term

17:38

interest rate , right? Because what the

17:41

Fed buys is long-term Treasuries, 30 year

17:43

Treasuries. And what they tried

17:45

to do there, is to depress the 30 year

17:47

interest rate in order to stimulate long-term

17:49

borrowing. Now in practice,

17:52

I don't know how well that works, but in theory at

17:56

least, what it tries to do is to stimulate

17:58

this credit creation throughout the economy.

18:01

So as a result of that, I think

18:03

it's really main street that benefits from QE.

18:05

So the distinction I want to make here is

18:08

not Wall Street versus main street. It's really

18:10

asset owners versus cash owners.

18:12

So that's the main thing I want to point out here.

18:15

Can I respond?

18:16

Are you done, Qiao? If you're done, then maybe Jimmy

18:18

can jump in .

18:19

I'll let Jimmy take it from here.

18:21

Okay . So , first of all, like QE, yeah, they

18:23

buy a lot of Treasuries there , but they're also

18:25

buying up a lot of mortgage backed securities. These

18:27

are called toxic securities

18:29

for a reason. No one wants them. And the

18:32

fact that they get, they get dumped to the Fed by

18:34

bankers. I mean they're, they're the ones

18:36

that , own the mortgage backed securities that

18:39

are more or less toxic. That's straight money

18:41

going to them. But there's

18:43

not only the quantitative easing, there are

18:46

all sorts of lending facilities that the Fed

18:49

makes available. This includes stuff

18:51

like muni bonds and corporate bonds

18:53

and things like that. I think it is down to

18:55

the BBB- rated

18:58

level. Right? Like one level above

19:00

like junk bonds basically. Yeah . And

19:03

what they do is you can borrow

19:06

Dollars against whatever

19:08

bonds you might have reducing selling

19:10

pressure and that way you can just sort

19:12

of wait it out instead of being forced to liquidate.

19:15

And that's very beneficial to every Wall

19:17

Street bank getting cash

19:19

through loans via the Fed, at

19:21

very generous valuation

19:23

of the assets that you're getting

19:25

a loan against. So that's happening

19:27

all over the place. And it is Wall

19:29

Street banks that are benefiting primarily

19:32

through these? Yeah, it is pension funds

19:34

and all that. But I mean who manages those?

19:36

It's like Fidelity and Goldman Sachs

19:38

and all of these banks. They do a lot of

19:40

the services for them. So it's

19:43

definitely helping them out significantly.

19:45

And this is all part of the Cantillon

19:48

effect, is that the first spenders of

19:50

the money, the newly printed money, and every

19:52

Dollar that the Fed lends

19:54

out on these is really newly

19:56

printed money. I think Qiao mentioned

19:58

earlier that these are loans

20:00

they have to pay them back, so it's not really,

20:03

they're getting a lot of benefits or whatever. He

20:06

fails to mention that these are loans at

20:08

insanely low rates, right? Like

20:10

these aren't the, loans

20:12

that you get from the bank for your car

20:14

at like 4% or your mortgage at

20:16

three, three and a half or something like that. This

20:19

is like 0.5%

20:21

or 0.7%. This is

20:23

all money that they get lent

20:26

to them at insanely low

20:28

levels and then they re-lend it out to everybody

20:30

else. And the right that

20:32

they have is that if they borrow $10

20:35

million, they can lend out 100 million. So

20:37

you're borrowing 10 million at like 0.25%

20:40

you're lending out 100 million at like

20:43

2.5%. You're making insane

20:45

amounts of money off, a very small

20:47

amount of that you're liable for.

20:49

So it ends up benefiting those

20:52

banks hugely. And all

20:54

US Dollars, all fiat money is

20:56

essentially debt anyway. It's all lent

20:58

money. And so anytime

21:01

that the Fed is lending more

21:04

money, it's printing more money. That's

21:06

how the system entirely works.

21:08

His second point was about

21:10

volatility decreased. And that is true.

21:13

It's decreased. But at the same

21:15

time it's increased a lot.

21:17

The stock market has gone on an insane bull

21:20

run since 2008. and even right now you're

21:23

seeing that S&P500 has

21:25

largely recovered from the dip of all

21:28

this stuff. And you might be like, a

21:30

lot of people are confused. I thought the economy was

21:32

doing badly. What the heck is going on? How

21:34

come? How can the

21:36

stock market be so high? Well, turns

21:38

out that the stock market is not the economy.

21:41

The stock market has a store of value

21:43

premium because the US Dollar is such

21:45

a terrible store of value. What

21:47

that means is that a lot of the people

21:50

that are rich that have access to

21:52

these cheap loans, they put it into

21:54

good stores of value that

21:56

they have access to. And those two end up

21:58

being real estate and stocks. And those have

22:00

, essentially kept up with more

22:03

or less kept up with

22:05

the M2 monetary expansion

22:09

of the over the last 60 years or

22:11

so , and that's good enough for

22:13

them and that's a way that they can store value.

22:16

And that's definitely benefiting the banks

22:18

because while they can leverage the

22:20

hell out of whatever positions that

22:22

they're in, and it's mostly

22:25

been going up the last 12 years.

22:27

Guess who's benefiting? I was reading

22:29

about Mike Bloomberg's presidential run

22:32

and how in 2008, he had something

22:34

like $10 billion. and that

22:36

and that. Now he's worth something like

22:38

20 billion. in 12 years, he

22:40

somehow made $10 billion. It's not like

22:42

he sold 100 million

22:46

Bloomberg terminals. That's not what he did.

22:49

No , he leveraged his way

22:51

into making all that money. This is how

22:53

the rich get richer and the poor

22:55

get enslaved. if you're poor, your

22:57

interest rates are probably in the credit

22:59

card range, right? Like 16, 17,

23:01

25, 35%. Whereas

23:04

if you're rich, you're getting , interest rates at

23:07

like 0.5, 0.75, 1% maybe, and

23:11

you can leverage the hell out of

23:13

it to make a lot more money. And, all

23:16

that is to say that the rich

23:18

get richer, and it is true that they have

23:20

more assets, but that these are

23:22

assets that they get loans against and

23:24

then leverage the hell out of them to

23:26

make even more money. Whereas the poor

23:29

people, they get enslaved to debt

23:31

and they continue to suffer. And

23:33

it gets even

23:35

worse in third world countries because they have

23:37

a global Cantillon effect that they have

23:39

to combat. And it's a terrible

23:44

system. It's an immoral system. It's an unjust

23:46

system. It's an unfair system.

23:49

Okay. So I'm happy to

23:51

go ahead and ask Jimmy another question

23:53

unless Qiao, you want to respond. Although there will be

23:55

plenty of opportunities to respond in the next

23:58

few questions as you cover them.

23:59

I'll respond in the later questions.

24:02

Okay, perfect. So the question

24:04

next was for Jimmy, and this sort of naturally

24:06

follows that line of logic. Basically,

24:09

some people say that there's no problem

24:12

with the rich getting richer, and the poor

24:14

not necessarily having the same advantages, as

24:16

long as everyone has the same opportunity

24:19

to fail and not get bailed out. So

24:21

this question is exactly that. So when

24:23

asked for a solution to financial crisis , crypto

24:26

natives generally give an Austrian economics

24:28

answer that goes something like this, badly

24:30

run companies should be allowed to fail. The bankruptcy

24:33

and liquidation proceedings should be accelerated

24:36

and equity holders should just get wiped out. A

24:38

counter argument here is the negative impact

24:40

of employment pensions invested in

24:42

the stocks and time it will take to rebuild

24:45

a company offering similar essential services.

24:49

And these would basically be

24:51

the backbone of the counter argument against

24:53

just letting companies fail. So

24:55

what is your reaction in this whole line of

24:57

logic, Jimmy?

24:59

Well, the line of logic assumes that

25:01

these companies are going to innovate in

25:03

some way after getting bailed out. And

25:05

all evidence is to the contrary. When when

25:07

you bail out zombie companies, they

25:10

continue to be zombies. A

25:12

good example might be some companies like

25:14

GE, which has been a zombie company for like the

25:16

last 10 years at least. what ends

25:18

up happening is that you

25:21

end up , feeding the beast , feeding

25:23

a fat, lazy corporation that's not

25:27

really contributing anything to society, that

25:29

sucks at the teat of the Fed. and that that's

25:32

what you're doing. If you let companies fail,

25:34

then yeah, the

25:37

people that work for that company will no longer

25:39

have jobs and things like that. But

25:41

that's their problem. They chose

25:46

to work for that company , that

25:48

wasn't doing very good, or

25:50

I had rent seeking arrangements

25:52

with the government , through whatever

25:55

means that they could. The thing

25:58

is , once

26:03

companies like that collapsed, now

26:05

you have a lot more

26:07

people that are available to

26:10

create new businesses. This is what , in

26:12

Austrian economics you would call creative destruction.

26:15

When you have , a

26:17

giant company, say, somebody like GE , release

26:20

all of their resources. If they

26:23

go into bankruptcy, all

26:25

of their equipment and factories and like

26:27

real estate and everything that they own, now

26:29

goes to the highest bidder as part

26:31

of the bankruptcy proceedings. Now

26:33

they get reallocated to new companies that are going to

26:35

utilize them a lot better

26:38

than GE ever was. And that's

26:40

, an overall add to society. The thing

26:43

that people tend to protest is the

26:45

fact that short term, that , those people

26:47

have to suffer pain. But that's going

26:50

to be the case

26:52

regardless, because at

26:54

some point, systems like that collapse,

26:56

companies like that will eventually collapse unless,

26:59

you're committing to keeping them alive

27:01

forever. And you're going to have to have some sort

27:04

of short term suffering.

27:06

it's better to get it done with now instead

27:08

of getting them more and more dependent. It's

27:11

exactly like Andrew Jackson's quote. Like

27:13

you could, you could keep the

27:16

racket going , or you can let them

27:18

fail and have something good

27:20

come out of it instead of delaying the inevitable.

27:24

Okay. Great. So I have some thoughts against this

27:27

too . But Qiao, I'll let you have the first

27:29

response.

27:31

So Jimmy mentioned

27:33

that the Fed is buying junk bonds

27:35

munies at a lower rate, bailing

27:38

out all of these large corporations

27:40

that really should be let fail .

27:41

I said, they're having

27:45

lending facilities where they will

27:48

, instead of

27:50

just straight buying them, they will lend out

27:52

Dollars in exchange and take

27:54

those bonds as collateral, at the valuation

27:57

where they were bought, not at what

27:59

valuation that they would normally sell

28:01

in the market because there's no liquidity in those

28:03

bond markets right now.

28:05

So that is partly correct.

28:07

The Fed is actually buying

28:10

both at issuance and in

28:12

the secondary market. One thing

28:14

I want to point out is yes,

28:17

they're buying out a very low rate, low yield,

28:20

but the rate itself is not

28:22

the whole story. When we look at interest

28:25

rates or yield, we really should look

28:27

at is two components is

28:29

the risk free quote unquote

28:31

risk-free rate plus the credit

28:33

part. The fact of the matter is

28:36

the risk free rate, which

28:38

has right now the Federal Reserve fund , the Federal Funds

28:41

is basically at zero, right? Technically

28:44

it's between zero and 0.25%, and

28:48

so there is a credit component

28:51

in the rate at which those

28:53

junk bonds are being bought. So,

28:56

but if we look at the risk free rate itself,

28:59

we know from the experience of

29:01

Europe, that the

29:03

moment you lower the rate to

29:06

zero or even negative, the

29:08

banks will suffer, right? Deutsche Bank is

29:11

the prime example. Deutsche Bank has been failing for

29:13

10 years. And the

29:15

point is low interest rate or negative

29:17

interest rate is actually not

29:19

beneficial to the banking system,

29:22

at all. That's one of the reasons why

29:24

earlier this week the Federal Reserve was reluctant

29:26

to lower the interest rate into

29:28

the negative territory. That's

29:31

number one. Number two, the Fed,

29:33

yes, they have launched an

29:36

alphabet soup of lending facilities.

29:38

And Jimmy mentioned munies,

29:40

junk bonds, and so on. Munies I

29:44

think it will ultimately benefit

29:47

individuals , partly because,

29:51

there are two problems that the municipal bond

29:53

issuers, which are, cities and

29:55

counties and States are experiencing

29:58

right now. One is a decreasing

30:00

revenue and the other one is

30:03

increase i n expense. But both of

30:05

these problems are a result of the

30:07

pandemic, right? So they're

30:10

actually, spending more money to help

30:12

the medical staff, the medical infrastructure, and

30:15

t hey receive less tax revenue,

30:17

because there's less

30:22

sales, less commerce. So I think

30:24

the money that is

30:26

being lent to these municipal bond

30:29

u sers will actually ultimately flow through, to m

30:31

ain s treet. And when it comes to junk bonds, I think

30:34

that we should look at the actual

30:37

details, like the devil's always

30:40

in the details. The

30:43

first round of , corporate

30:45

bond , purchase was

30:48

actually targeted on , the

30:51

so-called , investment grade , bonds, corporate bonds and investment

30:53

grade are basically some of the lowest

30:57

credit risk corporations. So

30:59

I'm totally fine with that. The second

31:01

round was , targeting the so-called

31:04

falling angels, right? So

31:06

the fallen angels are the companies

31:09

that used to be investment grade

31:11

that were recently downgraded, downgraded

31:13

into junk bonds. I think you cannot

31:15

really say that, bailing out these

31:20

companies, it's like bailing out zombie

31:22

companies. They're not zombie companies, they're doing well

31:24

before the pandemic. And

31:26

then they were hurt by, I

31:28

would call it Black Swan event. You know, the saying

31:31

goes, the pandemic itself is not a Black Swan. It's

31:33

the handling, the political handling of

31:35

the pandemic, that's the Black Swan. And I agree

31:37

with that. So I think

31:40

what the Fed was doing by purchasing these

31:42

falling angel , junk bonds is

31:44

to provide social insurance to a

31:47

Black Swan event. And I think that

31:49

can be justified.

31:51

I totally disagree. A lot

31:55

of these bonds, even the,

31:59

investment grade ones have zero liquidity. There's nobody

32:01

there to buy them. And this is why

32:03

the Fed had to create these

32:06

lending facilities because a lot of these Wall

32:08

Street banks wanted to exit to cash. And

32:11

a lending facility essentially lets you do

32:13

that. You get a loan from

32:15

the Fed for it. And

32:17

because there's no liquidity, no one's actually going to sell.

32:20

So on a book basis, it

32:23

keeps its value, quote unquote. But

32:25

really what they're doing is

32:28

, exchanging these bonds , essentially selling

32:30

these bonds at a higher rate than they could get on

32:33

the market. And basically

32:35

getting cash out of it, but doing

32:37

it in this sort of way.

32:40

Also, you mentioned that Oh, negative rates would

32:42

be bad for the banks. Here, let me

32:44

play the world's smallest violin. I

32:46

don't care about these banks. They've been

32:48

sucking at the teat of the

32:51

Federal Reserve and the American people and

32:54

, worldwide, like the people that

32:56

actually are using the money for

32:58

a very long time. Most of these are

33:01

bloated, completely crazy like , administrative

33:03

, inefficient, just extremely

33:06

, crazily bad companies

33:08

, that have been kept

33:11

up because of all

33:14

of these bailouts. For example, Citibank employs

33:16

something like 50,000 people, and it's

33:18

known that they've merged like

33:23

200 different banks, or something ridiculous,

33:25

and they still have a

33:27

room somewhere full of people that

33:30

take fax orders, and then they

33:34

enter the orders into a

33:36

mainframe so that they can

33:43

keep going. And the

33:45

fact that they employ such people is

33:48

like just complete ... like

33:53

it tells you just how bad the system

33:55

is run or how much of

33:57

a monopoly or a legalized

33:59

monopoly that they essentially had as a result of

34:02

all of these policies. Now, you

34:05

talked about the muni bonds and

34:07

how that's actually going to help

34:10

people or , eventually filter down to

34:13

benefit that people , because

34:15

these cities are not going to go bankrupt and whatever.

34:17

Again, I'm going to play the world's

34:20

smallest violin. I don't have any

34:22

sympathy for these cities and states that

34:25

are overspending their budget. I mean, if

34:28

your deficit spending by millions

34:30

or in many cases,

34:32

billions and billions of Dollars,

34:35

well that's kind of your fault. You spent more

34:38

money than you got in revenue, you

34:40

should suffer the consequences of that

34:42

instead of being bailed

34:44

out by the Fed, through the pockets

34:46

of everybody that has any savings whatsoever.

34:49

So in a sense, like all

34:51

of these arguments for "oh, well,

34:56

it'll eventually eventually benefit you. It's doubling

34:59

down on a bad investment. Like , all

35:01

of these , bonds, corporate

35:04

bonds or whatever." They got

35:06

these loans at , relatively

35:08

cheap rates on the market. And the fact is

35:11

like the banks or pension funds

35:13

or whoever is left holding

35:15

the bag, they want to bail out and

35:18

the government is giving it to them out of

35:21

our pockets. And that is

35:23

unjust, unfair. And this is how the rich get richer and the

35:25

poor get

35:27

enslaved.

35:28

So Jimmy, I have a question. Do you think Social

35:30

security should exist?

35:33

No. I mean, like if

35:36

you want social security, you should save your

35:39

own money. the fact that the government

35:41

forces you to save your own money to

35:43

, eventually pay it back to you, is against

35:47

the principles of Liberty, if you like.

35:50

There's plenty of , ways in

35:52

which you can save. It's basically the government saying,

35:54

we don't trust you to save for

35:56

your own retirement. So we're going to do it

35:58

for you by taxing you in this, and

36:00

this. Of course, like it's a completely

36:03

insolvent system because they use

36:05

the money that they collected from the worker.

36:08

They collect from the workers now to pay the

36:10

people that are getting the benefits.

36:13

Now, there is no lock box or anything like

36:15

that. There's, it's a

36:17

Ponzi scheme , that's going to

36:20

come due . But I like if you're

36:22

like, essentially you should

36:25

be free to do what you want with

36:27

your money and the fact

36:29

that the government forces you to save money

36:32

, in the

36:34

particular way that they demand is

36:38

stupid. And , it's against the

36:40

principles of Liberty. And it's evil

36:44

for that reason.

36:46

So let's take this one step

36:48

even further. Do you think

36:51

healthcare should exist ... Healthcare insurance should

36:55

exist?

36:55

I mean, depends

36:58

like, I don't think universal healthcare

37:00

, I don't think you should force everyone to

37:02

have healthcare. Again, that's government

37:04

, telling everybody what to do

37:06

and forcing everybody to buy something

37:08

on the market. I don't think that's

37:11

very good

37:14

for Liberty. It's not good for personal freedom.

37:16

It's basically the government forcing you to do X,

37:18

Y, or Z. Now I think it's perfectly

37:21

fine to have health insurers out in the market

37:23

that you can buy from, but it's a completely

37:25

regulated market and it's, I

37:28

mean, I used to work for a healthcare company by the way.

37:30

It's a very , regulated

37:32

market and it's sort

37:35

of like a weird , artifact of like

37:38

some capital controls and , price

37:41

controls that they imposed in the fifties.

37:43

But like, at least in the US

37:46

but like universal healthcare and things like that, it's

37:48

essentially the government , taking money

37:50

out of the pockets of

37:53

whoever , of any saver to pay for

37:56

, stuff that other people like

37:58

that they deem favorable. I

38:06

suspect like one of the things

38:09

that was , that I thought was a really

38:11

good tweet was somebody

38:13

saying, okay , all of these people on the left

38:15

, they're tweeting stuff like, if

38:18

these protesters get COVID,

38:20

then nobody should treat them; they should just

38:23

die, right? Like that was sort of their

38:25

attitude and it's like, yeah, that's actually kind

38:27

of the way healthcare works

38:30

in totalitarian regimes and so on

38:32

... is that in order to get

38:34

quote unquote free health services, you

38:37

essentially have to comply with the state in

38:39

order to get it. So if you're somebody

38:41

that the state does not like, you're not going to

38:43

get any of it. So it's not really free. It depends

38:47

completely on your compliance and your

38:49

being in the good graces of the government. And

38:52

so for that reason, I don't think free

38:54

universal healthcare, first of all, it's

38:56

not free and I don't think it should

38:58

exist in that way. I think the market should determine

39:00

stuff like that.

39:02

The reason why I'm asking is all

39:04

these social insurance

39:07

or health care insurance or bailing out,

39:09

some corporations, these are all examples

39:12

of socializing losses. So I just want to

39:14

see, and

39:16

obviously they exist on different points on

39:18

the spectrum. I wanted to see where you are

39:20

on the spectrum.

39:21

Yeah, I'm okay with having

39:26

insurance companies though I think they take

39:28

on way more risk and , generally

39:30

...

39:32

I'm not talking about insurance companies. The insurance companies are still in the private market.

39:34

What I'm talking about is, whether or not this

39:36

insurance should be owned and maintained

39:39

by the government.

39:40

No, absolutely not. No.

39:41

So, healthcare insurance

39:44

should not be part of the government, should

39:46

not be a government program. It should be completely

39:48

in the private market .

39:50

Yeah, of

39:52

course. and I mean they should

39:55

enforce any contracts that people sign with insurance

39:57

companies and so on. But , the government

39:59

, does not have any business being in

40:01

that , in that market. they've been skewing

40:04

the healthcare market for ages for that

40:06

reason. And the fact that Medicare pays,

40:09

for example, a particular rate means that

40:11

that's what every health insurer has

40:14

to pay in order to satisfy

40:16

the doctors and so on. Instead of market

40:19

pricing. What you end up getting is

40:21

a sort of arbitrary pricing. This is why

40:23

like an MRI still costs like

40:26

$10,000 instead of coming down in price. If you look

40:28

at something like LASIK , which

40:30

was like a hundred thousand Dollars

40:32

like 20 years ago, it's steadily

40:34

come down in price because the market makes

40:37

things more efficient. Whereas, like

40:40

anything that Medicare pays for,

40:42

it has no chance of becoming efficient whatsoever

40:44

because the government is

40:46

in charge. And there are people that will lobby

40:48

the hell out of government to continue

40:51

getting paid at the rate that they're getting paid. And

40:53

there's no incentive for efficiency

40:56

whatsoever. So generally if you

40:58

involve government in something, you're going

41:00

to get really bad effects out of

41:03

it. And , generally prices get worse and

41:05

more bailouts have to happen.

41:07

And you end up with a

41:10

lot of bureaucrats and rent seekers , that leech off the

41:12

system. And that's essentially

41:16

what's happened to healthcare. It's happened to education.

41:18

That's happened to a lot of industries where the government

41:21

puts its thumb on.

41:23

So this boils down to the crux of

41:25

my argument is that ... by

41:28

the way, I'm not necessarily married

41:30

to Keynesian or Australian

41:32

economics, I am pro market, but

41:35

the Austrian

41:37

economics assumes that, or classical

41:39

economics assumes that the market is efficient.

41:42

I've been a trader for 10 years, my

41:45

track record shows that

41:47

the market is not efficient, the market is not always

41:50

rational. Most of the time it's efficient.

41:52

Most of the time it's rational, but there

41:54

will be occasions. Maybe once in

41:56

a decade, about once in a decade, the

41:58

market just completely breaks down. And

42:01

that usually happens during recessions. And

42:04

that happens not because of

42:06

some fundamental flaws with the market mechanism itself,

42:09

but because of psychology, because of animal

42:11

spirit, because of herd behavior.

42:14

When something really bad happens, the

42:16

market just stops functioning. And I think

42:18

we've all observed that over the last couple of

42:20

months, there has been so much

42:23

stress within the

42:25

entire, basically within the entire humanity,

42:27

right, that the moment that the virus hit

42:30

us in the US, people started

42:32

panic-selling their stocks,

42:34

their Treasuries. And the moment the

42:37

stock market started to crash, people start

42:39

to feel poor. And when people

42:41

start to feel poor, they tighten their belt and

42:44

they spend less. And

42:46

the result of that is a potential

42:47

... In practice

42:51

a deflation in the consumer goods, in

42:53

the price of consumer goods and services. And

42:56

the moment you see a deflation and the people

42:58

who produce these services and goods,

43:00

their income also get hurt. Not

43:03

necessarily in real terms but in nominal

43:05

terms. Right? But the problem is

43:07

even if the

43:09

real income has stayed the same,

43:12

but their nominal income has gone down, they will

43:14

feel some stress in their life . They will want

43:16

to tighten their belt as well. They will

43:18

want to go spend less money and

43:20

they will feel the panic, the stress, and they will again

43:23

sell their own stocks. So we see a vicious

43:26

circle of deflation in

43:28

the system due to psychology.

43:31

I don't

43:33

think it's due to psychology at all. I think it's

43:35

because there was a lot of

43:38

malinvestment for the last 12 years,

43:40

the last hundred years almost. And all of

43:42

that m alinvestment is coming home to

43:44

roost. The fact is t here, there's

43:46

been an overproduction of goods

43:49

and services that really a ren't h

43:51

aving benefited anybody in the market. And,

43:53

the companies that get bailed out w hile they

43:55

keep producing them because that's what they

43:58

sell. Instead of allowing them to

44:00

fail and allowing these goods

44:03

to not be overproduced, what's

44:05

happened is that they do get o verproduced and now there's

44:07

a glut in the market of various things

44:10

and and these companies are

44:12

suffering as a result. Now, you

44:15

talked about animal spirits and not enough

44:17

demand and whatever. That's all

44:18

Keynesian BS, at

44:21

least as far as I'm concerned, it's malinvestments

44:25

that are coming home to

44:27

roost, whenever you have down cycles like

44:30

this. And it's not that

44:32

the market is rational. The market's

44:34

never really rational because not everyone knows

44:37

everything. If everyone knew all of the

44:39

perfect information, then, then yeah, it would be rational. But

44:41

there's no way for me to know

44:43

what other people are thinking, for example.

44:46

And there's, and there are certain facts in the ground

44:48

that I know that I have privileged to know

44:50

that other people don't. and that's how

44:53

the market works. There . There's

44:55

nothing , quite as arrogant as

44:57

thinking that like something is quote unquote

45:00

priced in . It's never

45:02

that way because nobody, like not

45:04

a single person in the entire market has perfect

45:07

information and certainly not

45:09

the entire market does until that happens,

45:11

that's not going to happen. But

45:14

with respect to this whole idea of mass

45:16

psychology being the being the

45:18

cause of the downfall, that's not it at all. It's

45:22

all of this bad investment. It's

45:25

throwing good money after bad. It's all

45:27

bailouts. It's all the deficit spending.

45:29

It's all the, stupid programs

45:32

that the government has been , throwing

45:34

money at, and it's all the

45:36

zombie companies that continue investing

45:38

in stuff that nobody really wants.

45:41

That's the cause of this downturn.

45:43

And that's what happens with a reset

45:45

every 10 years or so is that it

45:48

may be quote unquote triggered by

45:50

a Black Swan event or a white Swan event

45:52

or whatever you want to call it, but it's really

45:54

just a part of the Austrian

45:56

business cycle. Malinvestments happen

45:59

when there's a lot of credit, and there's been

46:01

certainly a lot of credit available in the last

46:03

12 years. That in turn

46:06

causes malinvestment, that in turn

46:08

causes a glut in the market. Now you're,

46:10

now you're seeing credit contraction,

46:12

depletion, all of this stuff. It's just paying the

46:14

piper, man. It's not, it doesn't have anything to

46:16

do with animal spirits or mass psychology or

46:19

anything. People are just doing what

46:21

they think is right for them

46:23

and that's based on the information that they have.

46:25

It's not that they're manipulated into

46:28

doing something or other, it's that they

46:30

have a good idea of

46:32

the situation that's happening. And

46:35

that's the behavior

46:37

that you should expect. So I

46:39

reject this entire Keynesian line

46:42

of argument.

46:44

I wish I were as optimistic

46:46

as you are about human rationality

46:48

and lack of psychology. I just

46:50

don't think that that's true. What I do agree with

46:52

you is the melody investment, but what we're debating

46:55

today is not the malinvestment

46:57

over the last 10 years. What we're debating today is that

46:59

government intervention during this

47:01

recession. And my point

47:04

is, as long as

47:06

you pay back all your liabilities

47:08

in good times, as long as

47:10

you run, not in deficit, but

47:12

in surplus during

47:15

good times, you can afford to

47:17

do government intervention during bad

47:19

times. That's what I argue for

47:21

today.

47:23

I mean,

47:26

I don't think that's what they're doing. First

47:28

of all, they've been deficit spending for a very long

47:30

time. I think the last time the US had

47:33

a balanced budget was like

47:37

1998 or something , 1997.

47:38

During the Clinton era.

47:38

Yeah, it's been, it's been a long

47:40

time since we've had anything like that.

47:42

So , I don't think you can , say with

47:44

a straight face that , okay , well this is from

47:47

our savings. This is from our rainy day fund. This

47:50

is from , like funds that we've

47:52

saved up over a long time. That is not it at

47:54

all. This is all money that's being

47:57

printed in order to prop up , the malinvestments

47:59

that they did previously. It's throwing bad

48:01

money after good money after bad.

48:04

And this is additional malinvestment

48:07

that's happening right now. And what

48:09

you're going to end up doing, and , I

48:11

think it's fairly clear , just by how the

48:13

stock market is doing, all

48:16

of these companies in the S&P500, many

48:18

of them probably should be going bankrupt,

48:20

but instead they're propped up.

48:22

Mostly because people don't have a good

48:25

store of value. So the

48:30

money ends up finding itself into the

48:32

stock market. They're going to

48:35

continue producing goods that nobody really wants or

48:37

needs. Right? Like, I'm

48:39

hearing , about how the used car market

48:42

is like , really terrible right

48:44

now because , well nobody wants to buy cars, but

48:46

there's also a glut of cars.

48:48

There's way too many cars out

48:50

there and , the manufacturers are constantly

48:53

producing new cars and , the cars

48:55

that were built 20 years ago are still kind of

48:57

on the road. So, who

49:00

do you sell to? There's no more demand.

49:03

this is what malinvestment looks like

49:05

is you, you produce a glut

49:07

of stuff and that ends

49:09

up affecting , the market that you're,

49:12

you're trying to, like quote unquote

49:14

rescue or whatever. So, all of

49:17

this malinvestment is coming home to

49:19

roost and I don't think

49:22

this round the bailouts has anything to

49:24

do with any sort of surplus that you've

49:26

saved up over the good years. We've been

49:28

deficit spending this whole time, so there's

49:31

no way that that applies. It's

49:33

about like throwing good money after bad.

49:35

And I think that's a terrible strategy.

49:37

It's immoral . It only helps the

49:39

rich get richer and makes the poor poorer.

49:42

It's unjust, unfair. And that's why I'm

49:44

opposing it.

49:46

Okay, so I think this is a natural segue

49:48

into the next question. In fact, I'm going to

49:50

ask Jimmy first because this question naturally

49:53

relates to what you were saying. So ethics

49:55

aside, talking about practicality,

49:57

if we examine historical cases

50:00

of crises during the great depression,

50:02

the Hoover's administration took various measures seemingly

50:04

in line with the crypto ethos of self sovereignty

50:07

and sound money. The government let thousands

50:09

of banks fail and try to balance the budget,

50:12

which some think worsen the downturn.

50:14

FDR on the other hand, took the opposite approach.

50:17

He backstopped banks with federal loans

50:19

and did significant amount of deficit spending

50:21

while decoupling USD from gold in

50:23

the process. And this eventually jump-started

50:26

the economy. So a lot of what

50:28

the current regulators are doing is following

50:30

FDRs playbook to prevent a depression.

50:33

So how do you tie

50:35

what has happened between Hoover and FDR

50:37

with what you were saying about letting

50:40

the banks fail, don't bail out these companies

50:42

and essentially let every

50:44

entity be their sovereign self.

50:47

Yeah. it's a lot of

50:52

Keynesian revisionist history that you just

50:54

repeated there . almost all of what you said

50:56

is completely false. First of all, Hoover

51:00

wasn't a conservative and he didn't try to rein

51:02

in the budget. And , like

51:05

stuff like that. He actually

51:08

overspent. I mean, Hoover

51:11

had the Hoover dam, right? Like that was

51:13

a giant public works program as a way to

51:16

quote unquote stimulate the economy. if you read

51:18

Rothbard , The Great Depression

51:20

, and the economics of the great depression, you

51:22

find out that actually Hoover in some

51:25

ways was actually much worse

51:27

than FDR in terms of state

51:29

intervention into the markets. And , one

51:32

of the things that he did, for example, was he got

51:34

all of the CEOs of the major companies

51:36

and convinced them not to lower

51:38

the wage rates of their workers. And of

51:40

course, what that made

51:43

happen was that it kept wages like

51:46

artificially high and it increased

51:48

employment unemployment significantly

51:50

because , the wage prices weren't

51:52

allowed to go down to

51:54

the market level. And,

51:57

as a result, there was a bunch

51:59

of people that were unemployed. It was

52:03

idiotic in many, many ways. and,

52:05

then he had to like spend money

52:07

on public works programs and so

52:10

on. FDR was

52:12

completely unsuccessful in his bid to

52:14

revive the economy during most of his

52:16

tenure until World War II happened,

52:18

things were getting worse and worse

52:21

and worse. Like to suggest that he

52:23

actually kickstarted the economy. Only a

52:26

Keynesian revisionists could really say that.

52:29

Ask anybody from the great depression and

52:31

they'll tell you it was pretty bad, right

52:33

up until, World

52:36

War II. US got involved in World

52:38

War II, then it started getting better. So

52:40

, in a sense like the playbook

52:42

that they're playing from is a

52:48

very deceitful one, because it makes it sound like

52:50

you're going to win, but actually you're just like

52:52

fumbling the ball and giving the ball to

52:55

the other team.

52:57

So it's , that the thing that did

52:59

work , say in like 1920,

53:01

there was also like a stock market drop and

53:04

so on. that that was , I think it

53:06

was Calvin Coolidge that was in office

53:08

at the time. He decided to do nothing. He didn't

53:10

intervene in the market at all. And as

53:12

a result, it recovered in like

53:14

less than six months. Whereas all of the

53:17

stuff that Hoover did, FDR did it

53:19

prolonged the depression for like a dozen

53:21

years almost , until World

53:23

War II , getting involved in World War II.

53:25

So , I mean, they've changed

53:28

things around a little bit. They , back then

53:30

we were on the gold exchange standard . So

53:33

you could actually go and, bring

53:36

like a Dollar to the bank and

53:38

get some amount of gold. So , it was harder to

53:40

manipulate the monetary policy because it

53:42

was so strongly tied to gold at the

53:45

time. So they didn't have sort of like the

53:47

levers that we do today , or the, that the

53:49

Fed has today , with its ability to essentially

53:51

export inflation and thus not

53:53

suffer as much as say,

53:56

like the third world countries and

53:58

so on. but that that's a

54:04

playbook that they're playing by now. So I

54:07

reject this entire

54:09

premise of this question that Hoover

54:12

was a conservative and that FDR rescued

54:14

things by spending lots of money. Neither

54:16

of those things happened. Hoover spent a

54:19

lot of money , intervened in the

54:21

markets a lot. FDR did the same

54:23

thing and it didn't get better until World War

54:25

II. And that's , that's the

54:32

actual history. instead of like

54:34

thinking FDR was this amazing

54:37

, economics , person that , revived the

54:39

economy. He did nothing of

54:41

the kind.

54:42

Okay. Why do you think there was

54:44

this revisionist economics going on

54:47

in education?

54:48

That's very easy to explain.

54:50

like basically , the government always wants to

54:52

spend more money and this is largely

54:55

to , win another term in office or

54:57

whatever. But the economists

55:00

that support that are essentially

55:03

Keynesians, and this

55:05

is why every government think tank,

55:07

every government economist is essentially

55:09

a Keynesian there . They're the ones

55:11

that are telling them what they want to hear.

55:14

This is what you would call biblically, like

55:16

false prophets or something like that. It's people

55:18

that will say whatever the

55:20

ruling party wants them

55:22

to say. And that's why

55:25

, this quote unquote , Keynesian

55:28

revisionist history has legs and

55:30

, continues to be spouted by

55:32

in a lot of these history books and

55:34

, K through 12 schools and so

55:36

on. Because this is what the government wants

55:39

you to believe. This is essentially historical propaganda

55:41

that's been , that we've been

55:43

inundated with. There's a

55:46

reason why, Austrian economists

55:48

can't get any positions in academia

55:51

is because most of these educational institutions

55:53

are, partners with

55:55

the government and at

55:58

least in this latest round of bailouts

56:00

like , recipients of significant amounts of bailout

56:02

money. The reason why they , do

56:05

that is because they

56:07

know that this is what it takes

56:09

to get in favor with the government. And

56:12

this is what , how you get jobs as economists

56:15

in government and so on. So yeah, it's pretty

56:22

easy to explain, just given the incentives that

56:24

are out there.

56:25

Okay, interesting. So this actually reminds me

56:28

of Thomas Jefferson versus Alexander Hamilton

56:31

debate. So after the

56:33

revolutionary war, the various States in the US

56:36

owed a significant amount of debt to foreign

56:38

entities, and then the federal government had a

56:41

decision to make, whether to

56:43

assume that that of the States and essentially

56:45

creating a bank and then sort of

56:48

essentially quote unquote bailing out these States and

56:51

paying their debt on their behalf over time ... therefore

56:54

not letting anybody default the debt

56:57

owed to the foreign entities in the meantime. And

56:59

then Jefferson and Alexander Hamilton had

57:02

diametrically opposing views. So

57:04

Jefferson felt that he was

57:06

more of a libertarian. He believed that

57:09

the States should be responsible for their own

57:11

finances. And if somebody defaults, let them default.

57:14

Hamilton took the other approach, decided that

57:16

all this debt should be nationalized. The US should

57:19

have extremely good credit and

57:22

subsequently was able to borrow even

57:24

more from foreign entities and then

57:26

sort of channeled all that

57:28

amount of money into building

57:30

infrastructure within the country and

57:33

sort of created this modern financial system.

57:35

So the reason why I mentioned all this is that

57:38

aside from the FDR slash Hoover comparison

57:40

that I mentioned, there seemed to be this

57:43

other debate back in history

57:45

that echoed the very same sentiment. And

57:48

the argument against

57:50

Thomas Jefferson's stance and

57:52

in favor of Alexander Hamilton's thought

57:55

is basically that without Alexander

57:57

Hamilton's policy

58:00

of nationalizing States that

58:02

and creating this national bank America

58:05

would not have been set on this route of

58:07

advanced industrialization pushing

58:09

for various infrastructural projects

58:12

that ultimately have, it was extreme positive

58:15

externality that boosted everybody's livelihood

58:18

in the US, right. So basically ...

58:19

I completely disagree.

58:22

Let me finish . Let me finish, right. So

58:24

I think there's also this ... I

58:27

hate to jump into debates by the way. I enjoy

58:29

hosting a lot more ... But I was just going to m

58:31

ention though that there's this mass coordination

58:34

problem when it comes to economic development,

58:36

right? Because if you truly

58:38

let everyone be their own sovereign self,

58:41

there could be these negative externalities that

58:43

ultimately would have these unforeseen consequences.

58:46

And unfortunately the economy i s not something we can

58:48

experiment with. And in the past it just

58:50

seems that we've gone down this path of effectively

58:53

letting the government put together this

58:55

infrastructure a nd letting them quote unquote, make smart

58:57

decisions t o ultimately benefit everyone, and Alexander

59:00

Hamilton v ersus Thomas Jefferson being one of the examples.

59:03

So I

59:10

completely disagree for a lot

59:12

of reasons. First of all, that Hamilton, Jefferson

59:14

debate ended up with first central

59:17

bank of the United States. That's how they

59:19

paid off the debt was by

59:22

basically taking the wealth of the people

59:25

through , issuing more and so on. And this and I

59:27

came back to , I started this

59:30

whole , debate with a quote

59:32

by Andrew Jackson. It took a

59:34

very long time until that was corrected with

59:36

Andrew Jackson. They had the first central bank

59:38

of the United States, which I think had a

59:41

20 year charter. And then , they had a second

59:44

bank of the United States a couple of

59:46

years after that. And , Andrew

59:49

Jackson basically ended the second central bank

59:51

of the United States. And what you

59:53

said was, well, this

59:56

coordination and this banking, that allowed all

59:59

of this , innovation

1:00:01

and stuff in the United States ... I completely disagree

1:00:03

that that was financial shenanigans to

1:00:05

, get States out of debt . But , it

1:00:14

didn't , it essentially took money from the

1:00:16

people. instead , like after Jackson, if

1:00:19

you look at the 19th

1:00:21

century, like, like the US became

1:00:23

a complete juggernaut , like on the

1:00:25

world stage, we went from

1:00:27

essentially a backwater British colony to

1:00:30

a world superpower in that

1:00:32

century. And it was largely without the aid of

1:00:34

a central bank. You know, after

1:00:36

Jackson ended it. and I mean , Lincoln

1:00:38

brought back the greenback and stuff

1:00:41

like that, but

1:00:43

essentially the , this like myth

1:00:45

of , banking was necessary in order

1:00:48

to coordinate all this stuff. Now people are good

1:00:50

at coordinating things on their own. And in fact,

1:00:52

like in a lot of these like , the

1:00:56

West in the United States , there

1:00:58

were like wildcat banks and stuff like that.

1:01:00

It wasn't any sort of like central

1:01:02

bank coordination , that brought

1:01:06

about the conquering of the

1:01:08

West, if you will. And that that was a

1:01:10

large part of the , development technologically

1:01:12

and otherwise of

1:01:14

the United States. So I

1:01:16

mean , the Jefferson , Hamilton , debate , I

1:01:19

think basically set

1:01:23

us on a path

1:01:26

of central banking for something like 30

1:01:28

years, which I think was

1:01:30

a big mistake and wasn't really corrected

1:01:32

until Andrew Jackson. but after that, I

1:01:35

think we see pretty evidently

1:01:38

, until like from Andrew Jackson until

1:01:40

1913, there was no

1:01:42

central bank in the United States.

1:01:44

And we did fine. In fact, we did better than fine. It

1:01:47

was way, way better than almost any other country in

1:01:49

the entire planet. And , the

1:01:51

US , created more things, there was

1:01:54

more invention, there was more economic

1:01:56

activity, there was more wealth , throughout,

1:02:00

than almost any other period of history

1:02:02

on a per capita basis. So

1:02:05

, I completely

1:02:13

disagree that it was , Hamilton's

1:02:16

central bank that , unlocked all of this.

1:02:18

It was Jackson ending

1:02:20

the second central bank that unlocked a lot

1:02:22

of this.

1:02:23

Okay. Well, in the interest of time, let's move on

1:02:25

to a question for Qiao. So

1:02:28

some in crypto circles decry crony capitalism

1:02:30

in that the fiscal bailouts generally

1:02:33

favored corporations over citizens. What

1:02:35

is your reaction to this statement? And

1:02:37

feel free to respond to any other points that Jimmy and

1:02:39

I raised.

1:02:41

I want to first go back to a couple of quickly

1:02:43

address a couple of points that Jamie

1:02:45

raised. Number

1:02:48

one, Jimmy draws

1:02:50

the causality between a lack of central banking and

1:02:52

the fact that the United States , had

1:02:54

a great century. I don't

1:02:56

think in history you can draw that kind of

1:02:59

causality. I'm not necessarily saying that the

1:03:01

opposite is true. I'm just saying there's so many

1:03:04

confounding variables, you cannot , say

1:03:06

one causes the other just because,

1:03:08

as I said at the beginning, economics is not

1:03:10

a repeatable science experiments.

1:03:14

And to be clear, I was responding

1:03:16

to Richard who claimed

1:03:19

what you said, which is that , Hamilton's

1:03:23

like creation of the first central bank actually

1:03:26

kicked off all of this , awesome

1:03:29

activity and , the American century, I was just

1:03:31

saying that we didn't have a central

1:03:33

bank and we did fine. and we did better than

1:03:35

fine. It wasn't that this caused this,

1:03:37

it's that, when

1:03:40

you took it away, it didn't change anything. And

1:03:42

in fact it probably did a lot better.

1:03:44

So there's some good reason to believe

1:03:46

that there's correlation there between a lack

1:03:48

of a central bank and more innovation.

1:03:50

Yeah, fair point. I'm saying, correlation

1:03:52

does not necessarily mean

1:03:55

causality. And I didn't say the opposite. I didn't say that

1:03:57

central banking did lead to

1:04:00

prosperity. I didn't say that. And my second

1:04:02

point is , you said that the US

1:04:04

did not recover until World War

1:04:06

II. I was wondering where your source

1:04:08

is. What source did you use? Because

1:04:10

every source I looked at, the US was

1:04:13

actually improving from 1933

1:04:16

all the way until World War II.

1:04:19

Alright , so if you look at unemployment numbers

1:04:21

, I think you can definitely take a look at

1:04:24

'em . All right , so percent of

1:04:26

labor force that was unemployed as

1:04:28

of 1931, that

1:04:31

you would say that that's probably in the middle of the Great Depression.

1:04:33

15.82%. 1933,

1:04:35

24.75%, 1935, 19.97%,

1:04:39

1937, 14.18%,

1:04:43

it's getting

1:04:46

better. 1938, 18.9%. So it

1:04:48

got worse again. 1939, 17.05%, 1940,

1:04:51

14.45% 1941, it

1:04:54

took a

1:04:57

full decade , actually almost 12

1:04:59

years to recover to 1930 levels. So

1:05:02

1941 was 9.66%, 1930 was

1:05:04

8.67% .so

1:05:07

I mean there's

1:05:09

one particular metric. I'm

1:05:11

sure I could find

1:05:13

more with respect to others. But from

1:05:16

a very practical perspective, you don't have

1:05:18

a job, you're not really doing very

1:05:20

good. I don't see how that's improving

1:05:22

since 1933, and in any

1:05:25

way, shape or form, it was way worse.

1:05:27

like during the middle of

1:05:29

it, like 1935-ish. then, like

1:05:32

even in like 1931.

1:05:39

I think we're using the same source but drawing

1:05:41

different conclusions. from

1:05:43

my point of view. The unemployment

1:05:46

did really, really well. Improved from

1:05:49

1933 all the way to World War II. And so ...

1:05:51

Why is it ... I

1:05:53

mean, it's 14%,

1:05:56

18%, 19%. I mean like 1929, it

1:06:00

was 3%. like to say that it

1:06:07

recovered is idiotic ...

1:06:08

I'm looking at ... You mentioned

1:06:10

that, you started with 1933

1:06:12

all the way until World War II.

1:06:14

And unemployment improved. GDP improved. Not nominal GDP, real GDP improved.

1:06:20

Yeah, by tiny amounts. I mean,

1:06:22

but it's not

1:06:24

recovered in any ways.

1:06:25

Not tiny amounts.

1:06:25

If you compare

1:06:30

it to something like 1920, it recovered in six months.

1:06:32

The fact that it took

1:06:34

this long tells you that the government was probably

1:06:37

suppressing the recovery in many ways.

1:06:39

And if you read Rothbard's The Great Depression,

1:06:41

you find out that they did

1:06:43

all sorts of stupid things in the market

1:06:47

to , with all sorts of , different instruments and

1:06:49

levers that they have , to

1:06:51

hinder the recovery. And , try to keep wages

1:06:54

at a high level so that consumers would

1:06:56

have lots to spend. It was like

1:06:58

Keynesian idiocy all throughout

1:07:01

this thing. And that, quote

1:07:04

unquote improved a little bit each year,

1:07:06

but it was nowhere near like what it

1:07:08

was before. And it got way

1:07:13

worse before it got any better and

1:07:15

it wasn't until World War II, that it really

1:07:17

started to recover.

1:07:20

So Richard

1:07:22

, back to your question about moral

1:07:25

hazard. Unfortunately I cannot argue for that.

1:07:30

Unfortunately this junk bond bull... I just can't

1:07:33

say anything about it. It's completely bull...

1:07:37

Okay. Okay . Well, I would say

1:07:39

one counter argument would be something

1:07:41

I mentioned a little earlier. So

1:07:43

the economy is sort

1:07:45

of a bathtub of water. So

1:07:47

there's the hot side and there's the cold side, but

1:07:50

the hot side is going to affect the cold side, right?

1:07:52

So the temperature is not going to be kept

1:07:55

still on both extremes of the tub.

1:07:57

So what I'm trying to get there, is that yes,

1:08:00

there are the capitalists, but there is also the laborers,

1:08:01

is there's definitely

1:08:04

smart ways to bail out companies, right? And

1:08:06

there's probably ways to do it to lessen the

1:08:08

moral hazard impact. But ultimately

1:08:10

problem with not helping

1:08:13

these companies in times of stress

1:08:15

is that you're not just punishing the

1:08:17

capitalists. There's the whole downstream

1:08:19

effect associated with it. And

1:08:22

not to mention the pensioners and

1:08:24

other externalities.

1:08:26

So actually I want to point out one,

1:08:28

one data point , which supports your

1:08:31

view . there was a historical

1:08:33

high, a

1:08:36

number of corporate CEOs

1:08:39

, that actually left , their

1:08:41

job right before the pandemic. So the

1:08:44

plan there is people who would have

1:08:46

benefited from all the buyout, all

1:08:48

the share buyback and all that stuff, have already

1:08:51

benefited. So whether

1:08:53

or not we do this government intervention that's not

1:08:55

gonna change anything, like these CEOs

1:08:58

already got paid. The new CEO's

1:09:00

are the ones who have to handle all this stuff. And

1:09:03

the government intervention does not change that

1:09:05

situation.

1:09:07

Well, no, they're going to get paid on their

1:09:09

stock options. So I mean, of course there's

1:09:11

a moral hazard. If they could pop their

1:09:14

own stock, then they're going to do it because

1:09:16

most of these guys have a huge moral

1:09:18

hazard. And the incentives that they have to, like

1:09:20

if they 're usually on the helm for somewhere

1:09:23

around three to five years. And if

1:09:25

they can pump the stock in those three to five years,

1:09:27

they will. And that's exactly

1:09:29

what they're going to do. And , they'll take

1:09:32

any risks in order to pump those

1:09:34

share price so that they 'll , they can , exit

1:09:37

with lots and lots of money.

1:09:39

So in a sense of like,

1:09:41

I don't think there are good bailouts . I completely

1:09:45

disagree with this notion that, Oh,

1:09:47

you can do bailouts in a good way

1:09:49

or give it to the people that really need it.

1:09:52

No , I mean that's still the government

1:09:54

picking winners and losers by some

1:09:56

quote unquote moral standard that

1:09:58

you might , like and it's

1:10:01

just as bad as any, any other , bailout

1:10:04

or putting a thumb on the

1:10:06

scales of the market , in many ways. So

1:10:08

I disagree with this notion that

1:10:11

bailouts are useful. it's essentially , putting aside

1:10:14

the market process and

1:10:16

trying to , pick winners and losers.

1:10:18

And the losers, unfortunately, are

1:10:21

the companies that are yet

1:10:23

to be born and they're

1:10:25

the ones that are going to suffer the most.

1:10:28

Instead of entrepreneurs going out and creating new

1:10:30

businesses, you're essentially giving

1:10:33

leverage to lots of inefficient

1:10:35

and zombie companies to

1:10:38

continue whatever they're doing and

1:10:40

crush these , smaller startups that might

1:10:42

, actually do a much better job and

1:10:45

handle money much better. So , yeah,

1:10:47

I mean it's that's the situation that we're

1:10:49

in and that's why I think bailouts

1:10:55

are terrible.

1:10:56

Yeah. So I think there's two kinds of arguments

1:10:58

there. Number one is that depending on the

1:11:01

circumstance, so if a company is

1:11:03

failing out of it's own

1:11:05

fault, okay, so for malpractice or maybe

1:11:07

just excessive stock buyback, then

1:11:11

it should suffer the

1:11:13

consequences somehow. but in the event

1:11:15

that it's an issue with a virus, right? Take

1:11:17

it to the extreme, a visual extreme of let's say an alien

1:11:19

attack, and for whatever reason that just

1:11:22

affected disproportionately , some industry

1:11:24

more than others, then that's not

1:11:26

really the fault of the company

1:11:28

to be operating in that space. That just

1:11:31

sort of, where the jazz

1:11:33

hit the fan, right?

1:11:34

So, well, so I mean, but life

1:11:38

is unfair. Why, why, why do they get like

1:11:40

special treatment? Like to

1:11:42

say, okay, well that was an alien envision. So

1:11:44

therefore you get money. I mean like who,

1:11:46

who made you God? That's

1:11:49

just the market. Life

1:11:51

is unfair all the time. if you

1:11:53

get hit by a bus, then you die. There's

1:11:56

no, you don't get to go revive

1:11:58

that person because it was unfair that that

1:12:00

person got hit by a bus. That's not how

1:12:03

things work.

1:12:04

So the second point I'm about to make is going to illustrate

1:12:06

the first point, right? So regarding

1:12:08

airlines, right, so there was a very

1:12:10

nice tweet thread that I read the other day about

1:12:13

how somebody was advocating for

1:12:15

a bailout of the airlines because if

1:12:18

the airline was to fail, then

1:12:21

all these flight attendants

1:12:23

and the pilots would get laid off. And

1:12:26

if someone were to create a new airline,

1:12:28

right? To sort of generate some kind of innovation

1:12:31

and subsequently hire all this excess

1:12:33

labor force. There are regulations in place

1:12:35

to make sure that all these

1:12:37

airline pilots and stewards, flight

1:12:40

attendants to receive the proper training.

1:12:42

And then there's all these certificates, and so on and so forth that they

1:12:44

have to get in order to be

1:12:46

re onboarded. And then that would mean

1:12:48

that a mission critical industry

1:12:51

would now be completely paralyzed and that would

1:12:53

have ripple effect throughout the economy.

1:12:55

And yes, a libertarian could argue, well just

1:12:57

less than the regulations. And why are you

1:12:59

putting all these hoops that

1:13:02

people have to jump through in order to be re-onboarded as

1:13:04

someone working in the aviation industry? Well,

1:13:07

the unfortunate fact is that the

1:13:09

world's just, doesn't just work like that. Right? You can't let anybody

1:13:12

do anything right. Just, just let

1:13:14

anybody do anything. The are needs to be laws

1:13:16

in place. The are needs to be proper trainings in place.

1:13:19

Right. And then this other argument about how, well,

1:13:21

why did you work for an airline in the first place? Why did

1:13:23

you not foresee these issues that could take place?

1:13:25

Why not become, I don't know, become a software program

1:13:27

or something or just have some , trained

1:13:31

skillset that's completely transferable during economic

1:13:33

crisis. It's your own fault. I don't

1:13:35

think that argument necessarily applies very well

1:13:37

because unfortunately, people

1:13:40

are just predisposed to different sorts of abilities, and they

1:13:43

have different kinds of circumstances. They can't foresee everything.

1:13:46

Right. So I think this goes back to Qiao's point

1:13:48

of, there needs to be some kind of social net,

1:13:50

where when unfortunate events

1:13:52

happen to people not at their own

1:13:54

fault, some kind of bailout is necessary.

1:13:57

That would be ...

1:13:57

No, no,

1:13:59

no, no. I disagree 'cause

1:14:02

like the bailouts and like sort of like social

1:14:04

safety net and stuff like that should come from your

1:14:06

community and it should not be forced

1:14:10

from people at the end of a gun,. essentially, which

1:14:13

is what they're doing with these

1:14:16

bailouts. It's forcing everybody to

1:14:18

contribute to a common , like

1:14:21

, whoever needs a bailout

1:14:23

, okay , well these are the people that we find worthy.

1:14:25

And government gets to be the arbiter of all of

1:14:27

that. In traditional societies, what happened is

1:14:29

if you were down on your luck and people

1:14:32

saw that, like , you, you just

1:14:34

like, you're a hard worker. It's just that you,

1:14:36

you had a string of terrible luck.

1:14:38

Maybe aliens abducted you or whatever

1:14:41

, and you just, they

1:14:43

would have compassion on you, and would try to help you

1:14:45

out. That's what

1:14:49

real social safety nets are supposed to

1:14:51

be. Instead, we have this notion that,

1:14:53

oh, well, the government can bail them

1:14:55

out for free. That's not how it works. It's

1:14:57

always money taken out of the pockets

1:15:00

of everybody else. And that 's forced

1:15:02

, social virtue or something

1:15:04

like that. And it's , it's not

1:15:09

voluntary in the least. The social

1:15:11

safety net is supposed to be your own

1:15:14

community. Not the government. The

1:15:16

government is , like basically we've made the

1:15:18

government the arbiter of who deserves money

1:15:21

and who doesn't, which is really

1:15:23

stupid. and that contains within

1:15:25

it lots of moral hazards. Instead,

1:15:27

it should be your community. And in the

1:15:29

past, whenever you had anybody

1:15:32

that said, hey, like you're down

1:15:34

on your luck , here, here's some money,

1:15:36

or here's a loan, or here's something you

1:15:38

can use my truck, you can live

1:15:40

at my place that I'm not

1:15:42

using, whatever that that's how

1:15:44

it's supposed to be. instead, we have

1:15:47

this notion that the government can

1:15:49

print money and that essentially these people

1:15:51

are getting bailed out and that , nobody needs

1:15:53

to suffer anything. That it's

1:15:55

free money to these people and that

1:15:57

, and that it's not really being

1:15:59

stolen from you , that that's not the

1:16:02

right way to do things. And that's against the

1:16:04

principles of Liberty. if you want to

1:16:07

bail out, you should ask, you should first of

1:16:09

all have to ask for it from the

1:16:11

people that you can make a

1:16:13

good case to instead of, lobbying

1:16:15

government with , officials

1:16:17

that, have no skin

1:16:20

in the game. It's not their money. If

1:16:24

somebody were coming to one of my

1:16:26

relatives came to me for help, I would

1:16:28

try to evaluate the situation and , maybe even lend them

1:16:30

some money if that were,

1:16:32

or give them some money if I

1:16:35

thought it was a worthy cause. That's how it should be.

1:16:37

But , the system of bailouts is completely immoral.

1:16:39

It has all

1:16:42

sorts of moral hazards.

1:16:44

It's unjust, it's unfair. This is why

1:16:46

I hate it. And

1:16:48

this is why I think it's

1:16:51

really stupid.

1:16:58

Okay. So I think there's also , this

1:17:00

is not fully formed argument. I'm just inserting a statement

1:17:03

here. I think that the counter argument

1:17:05

against that would be something like scale.

1:17:07

So if you were to just go to your for

1:17:09

something, then maybe the amount of

1:17:11

the systems you would potentially get

1:17:13

is minuscule or maybe the

1:17:16

sort of the kind of company

1:17:18

you're trying to build, the type of thing that you're trying

1:17:20

to do. Like for example, with Elon Musk trying to go to Mars, right?

1:17:26

I mean, I'm certain if

1:17:28

Elon Musk went bankrupt, there's nobody that's going

1:17:30

to really bail him out. Right? Like, but but

1:17:33

that's a giant company. I like

1:17:36

companies in many ways are

1:17:38

artificially large in this economy because of fiat

1:17:40

money because they have access to cheap loans

1:17:42

and because they can play all sorts

1:17:44

of unfair games by , stacking

1:17:47

the regulation , for in their favor and

1:17:49

buying up smaller companies and like on

1:17:52

their pricing, their competition and all sorts of

1:17:55

things like that. So in

1:18:00

a more fair economic

1:18:02

system , something would more sound money. You would

1:18:04

have smaller companies and

1:18:06

it wouldn't be, like

1:18:08

just giant fragile things that

1:18:10

could collapse and then affect

1:18:13

, hundreds of thousands of lives or something.

1:18:17

Right. So my next question actually

1:18:19

is also related to this point. So since

1:18:22

Jimmy has mentioned very

1:18:24

much a distaste for the

1:18:26

current system, it would be really interesting

1:18:28

to hear any kind of alternative

1:18:31

suggestion. It is often claimed that

1:18:33

Bitcoin or decentralized finance offer

1:18:35

up a better alternative to the current

1:18:37

financial system. Suppose Bitcoin

1:18:39

indeed becomes the new money. It is

1:18:41

a unit of account, store of value, and medium

1:18:43

of exchange. The latter perhaps made possible

1:18:46

via lightning network. Describe for us

1:18:48

how the banking system is now fundamentally

1:18:51

different in a new world. How does this new system

1:18:53

reduce or obviate the wolves from the

1:18:55

status quo?

1:18:57

Well , first of all, like banks are currently

1:18:59

the distributors of newly printed

1:19:01

money. Every bank can fractionally

1:19:04

reserve money , lend money, which is

1:19:06

essentially creating new money into the economy.

1:19:08

This is how , especially , via commercial banks, this is

1:19:11

how most of the money is printed. It's not

1:19:14

actually the Fed per se. It's Fed lending out to

1:19:16

commercial banks who in turn lend out

1:19:18

to big corporations, which is where most of the

1:19:20

money goes. So first of all that that gets

1:19:23

eliminated. If you

1:19:25

have banking at all, it's probably gonna be more

1:19:27

on the full reserve basis and the few that are

1:19:29

fractionally reserving , they go

1:19:35

bankrupt because you have bank runs and stuff

1:19:37

like that. But the nice thing about Bitcoin is that you can be

1:19:39

your own bank and , if

1:19:41

you have the technical chops and

1:19:44

, assuming that, better

1:19:46

technology comes along with securing your

1:19:48

own funds and so on , then you

1:19:50

don't really need the banking system per se

1:19:53

. You still have like , stuff

1:19:55

that banks , did in the past. Like, you

1:19:58

know, loans

1:20:00

to people. Maybe

1:20:03

foreign exchange or , you

1:20:06

know, maybe bond issuance

1:20:08

and stuff like that. But

1:20:10

, the banking system as

1:20:12

we know, it runs on

1:20:15

creating new fiat money through , money creation , and

1:20:17

loans. So I think that's the

1:20:20

main thing that goes away.

1:20:22

And that in turn

1:20:24

means that there's no crony capitalism. There's none

1:20:27

of these bailout things , governments have

1:20:29

to stay within their budget because

1:20:32

no one's going to lend to them

1:20:34

unless they show some fiscal responsibility. And

1:20:37

even if they do get money lent to them,

1:20:39

it's going to be like

1:20:41

a 7, 8, 9% , at least , rather

1:20:44

than the, 0.25% that they're getting now, or

1:20:46

even zero, I think six-month

1:20:48

Treasuries are at zero, almost. So

1:20:56

that's essentially what the interest

1:21:00

rates are for them. So that's what I

1:21:02

think would be different.

1:21:03

Okay, cool. By the way, I think a counter argument

1:21:06

against that could be something like this. So

1:21:09

Bitcoin is effectively digital gold.

1:21:11

It has all the features

1:21:14

of gold, but it's more divisible,

1:21:16

easily transferable and so on and so forth. So it's even

1:21:18

better. Right. But imagine that we

1:21:20

are now in a world where we have all this digital

1:21:22

gold. It's interesting you mentioned

1:21:24

fractional reserve system because I

1:21:27

still think that lending and borrowing will still

1:21:29

exist, right? And lending and borrowing

1:21:31

by some kind of entity where the

1:21:35

amount being lent and borrowed are not fully backed

1:21:37

by whatever is in reserve in that entity. That's

1:21:40

basically fractional reserve system. And

1:21:42

therefore,

1:21:42

Yeah, if that happens, those will go bankrupt

1:21:45

because you're going to have a bank run very quickly.

1:21:48

As soon as anybody finds out, they're going to be like,

1:21:50

okay, give me my money, and then

1:21:52

they go bankrupt because they don't have money

1:21:54

to cover the fractional

1:21:57

reserve . I mean, this is how banking worked in the

1:21:59

19th century. you'd have bank runs

1:22:01

and then these banks would go bankrupt. That's how it would

1:22:03

work. Right. But what I'm saying though is

1:22:05

that the introduction of Bitcoin

1:22:08

going mainstream and being adopted wouldn't

1:22:10

change the fact that people can still run banks and

1:22:12

these banks would not necessarily go bankrupt as long

1:22:14

as they still get to be bailed out,

1:22:16

which is basically what the Fed is trying to do.

1:22:19

Right. Well how would they get bailed

1:22:21

out? Because the fact can't print new money if

1:22:23

it's, if it's based on Bitcoin, what are they

1:22:25

going to do? Print Bitcoin? They can't.

1:22:28

Oh, I see. So, okay. So we're

1:22:30

discussing different things now you're talking about

1:22:32

a world where Bitcoin has become like

1:22:35

the only mode of, or the predominant

1:22:38

mode of value transfer.

1:22:40

Well, you said unit of account, store of value,

1:22:42

and medium of exchange. Of course that's what

1:22:44

it means.

1:22:45

Right, I meant in the sense that it becomes A unit of account.

1:22:47

So I guess it could be different units of account within an

1:22:49

economy.

1:22:50

Well, yeah, I mean you could, you could take out loans

1:22:52

in. Okay. Okay. So this is where

1:22:54

we're talking about like sort of hyper-bitcoinization. Say

1:22:57

they're lending out in US Dollars. What am I going

1:22:59

to do? Well, I'm going to borrow as many US

1:23:01

Dollars and buy Bitcoin and then

1:23:03

like, why and then, and

1:23:05

then pay back in Dollars as I need

1:23:07

to based on that loan. and if

1:23:10

it's already a unit of account, a store of value, and

1:23:12

a medium of exchange that I'm going to, Bitcoin's going

1:23:15

to do way better than , a

1:23:17

currency that inflated 11% in the

1:23:20

last seven weeks. So , I mean that

1:23:22

means that I'm going to make money and that's essentially

1:23:25

what, how hyper-bitcoinization arrives. And

1:23:29

then, I mean, banks are not gonna make that

1:23:31

much money off of , lending out

1:23:33

Dollars or the interest rates that

1:23:35

they're going to demand. They're going to be high enough to where

1:23:37

people aren't going to want to borrow

1:23:39

from them. So, I mean, I think

1:23:42

it's inevitable that you get to the point where

1:23:44

if Bitcoin is

1:23:47

a hard sound money that

1:23:49

we've been talking about, that banks no

1:23:51

longer loan out in anything else because

1:23:53

, like you either have to charge way

1:23:56

too much interest or you're

1:23:59

going to lose money in some way. So

1:24:02

I don't see how the Fed can bail them out. I

1:24:04

mean, they can print way more money, but then that's

1:24:06

just hyperinflation and you destroy the

1:24:09

currency that you're printing.

1:24:11

Okay, great.

1:24:13

Qiao, any follow-ups there?

1:24:16

So, Richard , you actually raised an interesting

1:24:23

point that , I tend to

1:24:25

agree with that even

1:24:27

if Bitcoin becomes , this , global store of value,

1:24:30

unit of account, a medium

1:24:32

of exchange, nothing prevents , banks from emerging in

1:24:35

a free market , and

1:24:38

nothing prevents , fractional reserve.

1:24:40

Nothing prevents , credit creation. And

1:24:42

in fact that the free market will

1:24:45

probably , cause a credit system to arise,

1:24:48

where people would borrow

1:24:50

, not at a hundred percent collateral.

1:24:53

So I think that's an interesting point.

1:24:55

I mean it might happen, but I think

1:24:58

like long-term, those don't survive. I

1:25:00

mean, like they're very fragile

1:25:02

to any sort of disruptive event and any

1:25:04

type of bank-run. So

1:25:07

I mean, they might exist for

1:25:09

a short term, but like, it works until

1:25:12

it doesn't. And then like in

1:25:14

the current system , things are so fragile that

1:25:16

they have to continuously bail out every 10

1:25:19

years or so. but in a system

1:25:21

like that, every 10 years, all those banks just

1:25:23

kind of go away. And then people

1:25:26

just learn not to trust them.

1:25:28

So even in the long run,

1:25:31

all of those , like fractional

1:25:33

reserve , loans and things like that. I mean, that might

1:25:35

happen for the short-term, but long- term, I don't

1:25:38

think they can survive. That just

1:25:40

won't happen.

1:25:40

Yeah. By

1:25:42

the way, I think another angle to think about

1:25:44

the excessive money printing is the

1:25:47

utilization of talent

1:25:49

in the economy, right? So if

1:25:51

you think about resources, it's physical resources

1:25:54

and then, and the labor, right? And I'm talking

1:25:56

about intellectual labor. So all the smart people

1:25:58

in this country are going to finance or Silicon

1:26:00

Valley. And that has a lot to do with the fact

1:26:03

there's cheap money. So the

1:26:05

finance companies are at the spigot and

1:26:07

then for tech firms there are

1:26:09

indeed firms that have made things are more productive,

1:26:12

increase people's general happiness

1:26:14

and wellbeing. But then, there're also arguably

1:26:16

some companies that are very popular and

1:26:19

profitable but do not represent a lot of progress.

1:26:21

Right? So digital drugs. Social

1:26:24

media could have extremely detrimental effects.

1:26:27

So I think one other problem

1:26:29

with easy money is just the incorrect

1:26:33

direction in which the talents actually

1:26:36

get deployed towards. And I

1:26:38

also suspect that there is a sense of

1:26:41

internal Delt in various

1:26:43

talents in that particular world where they

1:26:45

are engaging in these businesses and they seem to

1:26:48

enjoy all the success. But ultimately,

1:26:51

ultimately they would not necessarily admit

1:26:53

that they're doing something super productive. So,

1:26:55

I mean, I myself for one have been in

1:26:58

Wall Street for a while and I have many, many colleagues

1:27:00

that feel very empty for deriving

1:27:03

the sort of profits that we do for the kind of work that we have done.

1:27:06

Yeah, and you're absolutely right. I have

1:27:09

a whole talk around this. Bitcoin

1:27:12

is the ultimate social justice. And I talk

1:27:14

about exactly that, which is that, like

1:27:16

a lot of these people went into

1:27:18

investment banking and Wall Street trading

1:27:20

and things. mostly because you have access to

1:27:22

the early printed money. It's not because

1:27:24

they happen to

1:27:27

be very interested in finance per se.

1:27:29

It's because that's where the money is available.

1:27:31

And , in any sort of

1:27:33

like money scheme, there's a, there's a group

1:27:36

of people that will go towards whatever is

1:27:38

the easiest. And right now finance is the easiest way

1:27:40

to make lots and lots of money.

1:27:43

like if you try to like mine gold

1:27:45

for example, it's going to be very difficult

1:27:47

unless you happen to be very good at geology

1:27:50

and know all the chemical processes

1:27:52

around gold. Not to mention like all

1:27:54

of the management around , procuring

1:27:56

, possible mining sites and

1:27:58

, equipment, heavy equipment and things like

1:28:00

that. the fact of the matter is

1:28:03

like, there , there's a lot of people that go into

1:28:05

the money production business , which is essentially what

1:28:08

investment banking and Wall Street is.

1:28:10

instead of doing something more meaningful in

1:28:12

a hard money system, what ends

1:28:15

up happening is that a lot of those people

1:28:17

, go into stuff that they are really good at

1:28:19

instead of where they happen to have a small

1:28:21

advantage because they 're in

1:28:25

the right place and time.

1:28:28

Stuff like, you

1:28:30

might go and build spaceships

1:28:32

or cars or , new machines or

1:28:35

whatever. and even like Google and Facebook, to

1:28:37

a large degree, you're absolutely

1:28:38

right, they are

1:28:41

kind of meaningless. I think the quote

1:28:43

that I've heard that's I think

1:28:45

very poignant is , I'm

1:28:49

getting paid lots and lots of money just so I

1:28:51

can get a few more clicks and that's

1:28:53

essentially what Google and Facebook are all those

1:28:55

engineers that are working there.

1:28:58

Their lives are all about

1:29:00

getting just few more clicks. And

1:29:03

that's horribly

1:29:05

depressing and I don't think it's

1:29:07

a coincidence that we have

1:29:09

epidemic levels of depression and that drug

1:29:11

use is high, and that , people are

1:29:13

addicted to all sorts of things like alcohol

1:29:16

and sugar and video games, and all

1:29:18

sorts of things because they need to escape

1:29:20

the fact that deep down inside they know

1:29:23

that they don't really, they're not really contributing

1:29:25

anything and that they're essentially rent seekers

1:29:28

in an economy, that

1:29:31

they're not really adding value to civilization

1:29:33

in any way, shape or form. So , yeah, I

1:29:36

agree. I think , once you get to

1:29:38

a hard money, a lot of bad changes , people find a

1:29:40

lot more meaning in what they do.

1:29:42

And they don't have to

1:29:45

spend so much time , trying to store

1:29:47

value by researching stocks and real estate

1:29:49

and things like that. So that

1:29:51

they , put their effort into their

1:29:54

passion and what they think is important for

1:29:56

civilization. I look

1:30:01

forward to that world and I think

1:30:03

that will make , not

1:30:05

just , like our lives better,

1:30:07

but the lives of everyone around the world,

1:30:10

including third world countries, much, much better.

1:30:13

Okay, perfect. So, Qiao, last question

1:30:15

for you. You had mentioned prior to our

1:30:17

debate that you generally

1:30:20

feel that government officials

1:30:22

that understand economics might

1:30:24

be able to do these fiscal

1:30:27

and monetary rescues a little bit smarter

1:30:29

and that could work out. So

1:30:31

outside of the US what are some other

1:30:33

countries with smart policymakers that

1:30:35

seem to have made the right decisions in times

1:30:37

of stress? Or what historical

1:30:40

eras have there been in the US history

1:30:43

where governments have done the right thing?

1:30:46

Ah , that's a good question. well, number one,

1:30:48

I don't think it's a problem with competence. It's

1:30:51

more a problem of politics and

1:30:53

interests. I think. I think the central bankers

1:30:56

actually know what is good and what is bad for

1:30:58

the economy, but they're not doing what is

1:31:00

best for the long run of the economy. What they're doing is

1:31:02

to score wins for

1:31:05

their elections. I think that's what I do and that's the

1:31:07

main problem behind , central banking.

1:31:09

But in theory, I think what

1:31:12

they do, intervention during recessions and

1:31:14

payback, paying back all the liabilities could

1:31:16

work. I don't know

1:31:19

too much about central banking outside of

1:31:21

the US. I

1:31:23

know a little bit about Japan and in Europe,

1:31:25

but I think mostly they've done

1:31:27

a very bad job over the

1:31:29

last two or three decades.

1:31:32

But a good example might

1:31:34

be China, but not in 2020.

1:31:36

It might be China

1:31:39

in 2008 when they had a lot

1:31:42

of bullets, a lot of ammunition , to

1:31:46

pull the economy back. In fact,

1:31:48

to drive the entire world's economy back on track.

1:31:50

But right now they're

1:31:52

sort of following a similar

1:31:55

of path, of going down

1:32:00

a lot of debt during

1:32:03

good times. So

1:32:05

, frankly nowadays in 2020 , I'm

1:32:08

pretty pessimistic about , about

1:32:10

central banking around the world.

1:32:13

Okay.

1:32:13

As well you should be.

1:32:14

Right. Right,

1:32:17

right. Okay. So, alright , let's

1:32:19

move on to round three, audience questions

1:32:22

and then we'll have concluding remarks. So

1:32:24

we have one question from a

1:32:26

Twitter user named Young Bitness. And

1:32:29

his question is, what do you think happens

1:32:31

to the equity market and BTC market next

1:32:34

? So this is not exactly related

1:32:36

to our topic today, but maybe

1:32:38

you guys just highlight an answer.

1:32:40

Alright , I'll give

1:32:46

it a shot. So, equity markets , we're talking mostly

1:32:48

about stocks , S&P500 and

1:32:52

so on. The pattern has

1:32:54

been , for the last , 30, 40 years. actually you could, you

1:32:56

could go all the way back

1:32:58

to like 1959. So here's some

1:33:01

statistics that are really interesting.

1:33:03

1959 M2

1:33:05

money supply was around $285 billion.

1:33:08

Currently it is around 17.4 trillion.

1:33:10

That's as of last week. It's

1:33:12

probably closer to 18 trillion

1:33:15

right now , at least. but that

1:33:17

, if you annualize that ends up being

1:33:20

somewhere around 6.8, 6.9%

1:33:23

per year. if you look at the Dow

1:33:25

Jones industrial index , from

1:33:28

1959 , to now, guess what the percentage

1:33:31

increase has been? It's been right

1:33:33

around 6.8, 6.9%. So

1:33:35

that suggests to me that a

1:33:37

lot of that newly printed money ends up

1:33:39

finding its way to the stock market. And that's because

1:33:42

the stock market has a store of value

1:33:44

premium. Prior to the

1:33:46

Federal Reserve in 1913 , usually a

1:33:49

lot , most of these companies , first of

1:33:51

all paid out dividends and , price

1:33:53

to earnings ratios or price

1:33:55

to dividend ratios were like in the single

1:33:58

digits, right? Like you had to own

1:34:00

a stock over nine years in order to

1:34:02

make back the money and so on. I

1:34:04

think that's the natural price of stocks. but because

1:34:07

of the store of value premium,

1:34:12

because there's no good place to park your

1:34:14

money, it ends up coming into the stock market.

1:34:16

This is why whenever

1:34:19

the Federal Reserve chairman even

1:34:21

hints at, lowering the

1:34:23

, Fed funds rate , that that ends

1:34:26

up driving stocks higher. It's not

1:34:28

necessarily because it's quote unquote good for the

1:34:31

economy. It's because all of those traders are front

1:34:33

running the fact that there's going to be newly

1:34:35

printed money coming into

1:34:37

their , into stocks and they're just running

1:34:39

it. So I suspect that

1:34:42

all of this money printing that's happening , especially

1:34:44

, with the Federal

1:34:46

Reserve and all of these lending facilities , essentially

1:34:50

giving , liquidity to illiquid bonds

1:34:52

and , you like weird

1:34:55

derivatives and so on. That's

1:34:58

going to find its way into the stock

1:35:01

market in some way. And we're kind

1:35:03

of seeing that. So I suspect equities will get higher

1:35:05

, even higher than the previous high in

1:35:07

the next 24 to 36 months. With respect

1:35:10

to BTC , that's a different

1:35:12

animal. And we do

1:35:15

know exactly the supply and the

1:35:17

supply is going to have in a

1:35:19

little over 9 , 10 days.

1:35:21

So , based on that, I

1:35:24

suspect Bitcoin price will

1:35:26

go up. Just

1:35:29

because there's going to be a

1:35:31

supply shock and , there's going to

1:35:33

be increased demand as more people realize , well,

1:35:36

more people have access to more

1:35:38

money first of all. And , because of

1:35:41

the Fed money printing , but

1:35:43

also because of all of the, different

1:35:45

shenanigans going on with the Fed. So

1:35:47

, based on that, I'm

1:35:49

bullish on both markets , at least , over

1:35:52

the medium term. I'm definitely bullish on

1:35:54

Bitcoin over the long term. I think the US

1:35:57

Dollar maybe has like

1:35:59

two or three more bailouts

1:36:01

to go before it collapses.

1:36:04

But I don't

1:36:10

know, that's just my feeling.

1:36:14

Cool. Qiao - Anything

1:36:16

to add?

1:36:17

I'll comment on the long

1:36:20

run. I think the us

1:36:22

stock market is going to face a lost

1:36:24

decade , similar to , basically

1:36:27

what depended in the late eighties

1:36:30

and Europe in the late nineties, and then

1:36:32

emerging market in the two thousands.

1:36:34

So ...

1:36:35

Also the US in the seventies.

1:36:37

Yeah. I mean all

1:36:39

these markets, they

1:36:46

reached an all time high during their respective

1:36:50

decades, and they never recovered. And I think there's

1:36:52

a fundamental reason behind ... my suspicion

1:36:56

that the US stock

1:36:59

market will not recover is that , I think

1:37:02

, I'm really pessimistic on

1:37:04

the economy just because of the debt that we

1:37:06

accumulated in this

1:37:08

recession we're nowhere near complete yet. I think the

1:37:11

balance sheet, the Federal Reserve balance sheet, we'll probably

1:37:14

get to 10 trillion, 20 trillion, and

1:37:18

that's gonna f* up the entire economy,

1:37:20

unfortunately. And , number two , the baby boomers will retire.

1:37:22

They're going to be the largest

1:37:25

sellers of the US stocks over

1:37:27

the next , two to five

1:37:29

years. So no more bids and

1:37:32

a lot of selling , that's going to happen with the

1:37:34

next decade. So we're going to see a lost decade in US

1:37:37

stock markets. Bitcoin,

1:37:39

obviously I'm extremely bullish long-

1:37:42

term. I want to point out a couple of

1:37:44

data points recently, which I found interesting. Number

1:37:47

one, two days ago, or

1:37:53

yesterday, actually, Bitcoin led

1:37:55

, so Bitcoin went

1:37:58

from like 7,500 to like 95 , within like 48

1:38:00

hours. But what was interesting about this rally,

1:38:03

which I haven't seen for a while,

1:38:05

is that big one led the

1:38:08

entire market. So big one actually outperformed alts. I haven't seen

1:38:10

this thing in a while. And usually what

1:38:12

that suggests to me is , there's new

1:38:14

inflow into the market. So people were

1:38:16

actually buying the spot market like on Coinbase. And

1:38:19

by the way, Coinbase crashed yesterday. So

1:38:21

that's a really good sign,

1:38:24

short term bullish sign. and I say

1:38:26

that because , when someone first

1:38:28

learns about crypto, they're not going to buy some

1:38:30

random like top 20 alt , they're going to buy a big one

1:38:32

because big one has the

1:38:36

best brand. so that's why

1:38:38

I think it was new

1:38:40

inflow into, into Bitcoin.

1:38:43

So I generally feel pretty bullish

1:38:45

short term. Obviously I don't, I'm not going to

1:38:48

trade , in the short term and just hold , for

1:38:50

the very long term .

1:38:52

Okay, great. Glad to find a

1:38:54

point of agreement between you guys. Well, that

1:38:56

is our debate. Can you provide your

1:38:59

concluding remarks, starting with Jimmy?

1:39:01

I think

1:39:06

I've made my case pretty clear,

1:39:08

which is that central banking is an anathema.

1:39:11

I really am a libertarian. I think we should end the

1:39:13

Fed. We should audit the

1:39:15

Fed. We should do lots of things

1:39:18

that , make this moral

1:39:20

hazard go away and allow the market to

1:39:22

operate in a more sane way instead

1:39:25

of the crony capitalism that

1:39:27

we're subject to. I think , bailouts

1:39:29

are immoral. they're unfair. The rich continue to get

1:39:31

richer as a result. The poor continue

1:39:34

to get poorer as

1:39:36

a result. I think

1:39:38

, taking , stopping this money printing and

1:39:41

, I mean, perhaps there's an argument

1:39:43

to be made that, accelerating the money

1:39:45

printing so that the Dollar will collapse

1:39:47

faster is a good thing. I don't

1:39:50

take that view. I personally think it

1:39:52

would be better if we had

1:39:55

a smoother transition over

1:39:58

to Bitcoin rather than a

1:40:00

complete collapse of the Dollar system. As

1:40:02

a result of , way too much

1:40:04

money printing. But I think

1:40:06

I've made the case that, bailouts

1:40:10

are bad and central banks are bad. There's a lot

1:40:12

of moral hazards that and

1:40:14

that, Bitcoin would bring a lot more

1:40:16

fiscal sanity, and that's what I'm hoping

1:40:18

for in the future.

1:40:21

Okay , great. Go ahead, Qiao, with your concluding

1:40:24

remark.

1:40:26

So there's this

1:40:28

interesting concept in economics called the

1:40:32

production function. What it

1:40:34

says is that the productivity level

1:40:36

is a function of, generally three

1:40:38

things, labor, capital and technology. And empirically,

1:40:42

if you study a bunch of

1:40:45

economies over the last century.

1:40:47

And currently what happens is the moment

1:40:49

you overuse one of the

1:40:53

three factors, the

1:40:55

general level of productivity actually

1:40:58

decreases. And what we've done over the last,

1:41:00

at least last decade in the US and

1:41:02

probably two or three decades in Japan and

1:41:05

Europe, is that we have overused

1:41:09

capital and not enough labor and technology.

1:41:11

And I think this is very, very

1:41:14

bad for the long run productivity

1:41:17

increase. However, I

1:41:19

think government intervention during

1:41:22

recessions can work.

1:41:26

the key is to payback all of these liabilities

1:41:29

that we accumulate during the recessions

1:41:31

and not overuse capital during

1:41:34

the good times. That's the only condition

1:41:36

for which a government intervention can

1:41:38

work in the long run.

1:41:40

Okay, great. Thank you for your insights, Qiao and

1:41:43

Jimmy. Especially Qiao for braving the show,

1:41:45

and arguing in what seems like an unpopular, contrarian,

1:41:47

and not to mention, angry, opinion on main

1:41:49

street and in crypto circles. I'll

1:41:51

tell you, many were eager to debate in an anti-government

1:41:54

position, while it was much harder to land someone knowledgeable

1:41:56

and willing to argue the opposite side. And

1:41:58

thank you for reinforcing the crypto

1:42:00

ethos, Jimmy. How can our listeners

1:42:02

find you?

1:42:03

you can find me on Twitter media good

1:42:06

hub and sub stack

1:42:08

at Jimmy song. on substack. That's

1:42:12

my newsletter. You can subscribe to it.

1:42:14

I have a technical newsletter that I

1:42:16

give out every Monday morning. I'm

1:42:19

also available on YouTube , Offchain with

1:42:21

Jimmy Song is the name of

1:42:23

my channel. I have a couple of books

1:42:26

on Amazon , Programming Bitcoin, which is more for programmers,

1:42:29

and the Little Bitcoin book,

1:42:31

which is more for non-programmers

1:42:38

, any of your no-coiner or

1:42:41

pre-coiner friends would be

1:42:43

able to understand what's in it and get

1:42:45

a much better idea of Bitcoin

1:42:48

afterwards. Yeah, those are it,

1:42:51

I think. Yeah, there's probably more but

1:42:53

it's alright.

1:42:55

Cool. How about you Qiao?

1:42:57

You can definitely find me on Twitter, @qwqiao. Spend

1:43:03

a lot of time on Twitter,

1:43:05

although generally there's not a lot of nuance on

1:43:08

Twitter. But , I write

1:43:10

long form , for Messari. so you can go on