Bailouts, FedNow, and CBDC ｜ Guest： Black Horse ｜ 4⧸12⧸23
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Summary
In this episode, we discuss the recent bank bail-out of Silicon Valley Bank and what it means for the future of the financial system. We also discuss the role of the media and the financial elite in covering this event, and how they have a role to play in it.
Transcript
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I've got a great stream with a great guest that you're really going to enjoy.
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So a lot of people here in the last few weeks, of course,
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saw what happened with the bailout of Silicon Valley Bank.
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A lot of people connected this to different things with crypto,
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the advance of programs like FedNow with central banking.
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A lot of people concerned about what this means for the financial system
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and where our government could be taking the future of currency.
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So I wanted to dig deeper into that with somebody who understands it.
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He joins other guest, Stephen Carson, Radical Liberation,
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on his YouTube channel very frequently to talk about economic topics.
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He's somebody who's very familiar with the industry.
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And so I'm happy to have him on to delve into this subject.
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So we're going to get deep into, like I said, all the technical aspects.
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We're also going to talk about what this means for different inter-elite factions
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in kind of our government and kind of our financial world.
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What are kind of the behind-the-scenes interests that are attached to a lot of these events.
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Let's go ahead and just dive right into the subject.
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So the first thing I think a lot of people might not be aware of, we have a lot of bank
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bailouts, obviously, during kind of the Occupy Wall Street moment, the crash of 2008.
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The left at that point had to pretend like they cared about that kind of thing.
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Now it feels like we get this major bank bailout and there isn't a lot of pushback.
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Obviously, the left, who's now cozied up to large finance at this point very comfortably,
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Is this something that only kind of enters the public consciousness when the media gets
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enough attention to it and it's actually happening all the time?
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So what you're looking at here is the second and third largest bank failures in U.S. history.
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And a lot of the banks that were bailed out in 08 didn't reach failure status.
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So you might have had a few more large bank bailouts on that list, bank failures on that list,
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if 08 had been allowed to play out a little farther.
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So I think most people have heard of SVB being the first bank bailed out.
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But how many banks were bailed out total and what were their names?
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Well, so calling it a bailout exactly is kind of a...
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So SVB and Signature Bank were the two banks whose depositors were bailed out directly.
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But there's a much longer list of banks that were under stress as a consequence of the broader
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And Credit Suisse, a major European bank, was kind of bailed out in an arranged merger with
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UBS in the weeks following for reasons that are somewhat connected to the dynamics that
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sank SVB but have an independent dimension to them.
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So in order to kind of understand how that works, I think it's worth looking at the business profile
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of these institutions and looking at the factors that created the stress that caused the bank
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And then we can talk about how the bailout was affected.
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And then it's true that the depositors of SVB and Signature were kind of directly bailed out.
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But in point of fact, there were a lot of other banks that might have failed from the same factors
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So from a certain point of view, you're looking at a preemptive bailout rather than for the
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depositors of SVB and the depositors of Signature Bank, a post hoc bailout.
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Yeah, when the government shows that it's willing to step in and when action is taken, it kind
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of relieves the pressure of other banks, right?
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The idea that the run of the bank or that something might topple over kind of gets relieved by the
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So deposit institutions, when they take your money, obviously don't just take that money
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and put it in the Federal Reserve and sit on it as cash.
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They've got a liquidity formula prescribed by the regulators as to how they can allocate
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And that liquidity formula highly encourages them to buy government, U.S. government bonds, bonds
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of the local government and other jurisdictions.
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When the Federal Reserve raised interest rates, they created very large unrealized losses on
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those bonds held against deposits, which created the conditions that made classical bank runs
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So in a typical circumstance where there are not large unrealized losses on instruments related
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to deposits, it's very hard to create a bank run.
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You have to have a very, very large percentage of deposits run off in order to make the institution
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Because of these large unrealized losses, many banks across the system were vulnerable to
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It happened that SVB and Signature were early targets of this, and that has to do with the
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But many of the regional banks were vulnerable in this regard.
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What the Federal Reserve did by creating a liquidity facility to buy back government bonds held in the
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deposit business at par is they eliminated the condition that made classical bank runs relatively
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easy, at least to the limit of the size of their liquidity facility, whatever that limit actually
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And so they took away the critical condition that made all of this possible.
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So like you said, the profiles of those banks made them kind of early targets.
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What about the way that they do business or their client base made them an easier target for
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They've got kind of two businesses that dominate what they do, or I suppose did now.
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They've got the private client business, and they've got the startup financing business.
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And both of these businesses involve very little capital markets activity and a large...
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So their deposit business was very large compared to their investment banking business or any
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of the other parts of their business that would ordinarily create requirements for capital
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And then the other element is that a very large proportion of their depositors are all
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So once rumors began to circulate that they were vulnerable, FDIC estimates that something like 40%
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of all deposits were withdrawn from the bank in a three-day period, which is a kind of...
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You can only have that if the people that are large depositors are tightly networked together
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You know, if the comparable institution is something like Bank of America, you know, it's got a very
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large number of depositors that are not tightly socially networked, it would be very difficult
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Signature Bank is similar in that it's got a collection of depositors that are very high net worth, so they can
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Normally, when people have, you know, 97% of deposits at SVB were over the $250,000 FDIC limit.
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Typically, when you go to the bank and withdraw, you know, $2 million of deposit funds, you're
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So it's important that they had a place to send it to.
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So the fact that these are high net worth individuals that likely have multiple banking
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relationships, that all are talking to each other, make a bank run, make them extremely
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vulnerable to a bank run in ways that I don't think the industry had kind of anticipated.
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So those are some of the reasons why they were some of the first institutions to be targeted
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There's also an element of poor risk management at both institutions.
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And finally, there's this element where both SVB and Signature Bank were serving as depositories
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So these are cryptocurrencies tied to the US dollar.
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There are stable coins tied to other underlying assets, but the stable coins that were using
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And these have very large, these involve deposits that are, you know, very, very unusually large
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In the case of SVB, I think it was on the order of 30 billion in US dollars deposited against,
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sorry, 5 billion in US dollars deposited against the crypto business.
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You know, it's very rare to have what was essentially structured as a retail cash account sitting
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in US dollars with that, at that order of size.
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I can't think of a comparable example almost anywhere else in the industry.
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And that, that created kind of a unique profile for their deposit business that isn't kind of
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well, well approximated in the regulatory framework for how retail deposits should work.
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Um, from just from a liquidity point of view, the people who wrote the liquidity regulations
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for retail deposits weren't considering that you might have 5 billion in a retail deposit.
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Just, it's not, um, it wasn't contemplated by the, the architects of the regulatory framework.
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So ironically, because this was kind of a high end community bank, like the, the, the, uh,
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types of deposits weren't spread out over many different industries and many different
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people that didn't have communication with each other.
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The, the, the more close knit, uh, nature of the community that was depositing there.
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And the fact that they're so high end made a bank run more possible than it would have
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Typical retail clients have good reasons why they have their deposits there and they can't
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easily take them out of the bank and they can't coordinate to quickly do so.
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So they're reached large, widely distributed retail deposit networks are just, they're just
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much less vulnerable to classical bank runs than either of these two institutions.
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So there's a reason that the pressure that made bank runs possible first showed up at these
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And I want to get, uh, deeper into the crypto aspect here in a moment because I want people
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to kind of understand, uh, the differences in the different cryptos and why this one matters
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and how this is connected to, to possible other, uh, uh, uh, currency issues.
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But before we do that, I just want to walk through a little, in a little more detail, the way that
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these were quote unquote bailed out because you, you touched on it some, but I think for
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many people, uh, the details of this might be a little more opaque.
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Uh, so obviously we have an FDIC that's $250,000, right? That's, that's normally what you're insured
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for a deposit. Um, obviously, like you said, the vast, vast, vast majority of these deposits are well
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over. Um, I understand, you know, you know what you were saying with the bonds there and the fact that
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inflation had kind of created this situation, but how, how did this, was this bailout affected?
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Cause you said the kind of bailout may not be the right way to use it. So, uh, how, how would this
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Yeah. So let's contrast this to the kind of bailouts you saw in 08. So in 2008, there were
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many bailouts that involved essentially, uh, the U S government issuing loans, uh,
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directly to a financial institution or agreeing to, uh, well, there, there were two bailout structures,
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but the, the one that people typically think of as bailouts, direct loans, direct asset,
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or direct purchases of equities in, in banking of equity in banking institutions in order to give
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them enough capital to un, unwind their business or, or in the case of 08, to continue their business
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operations. So that's not what happened here. Uh, the U S government, none of,
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its agencies directly gave money to any of the, these banking institutions. Uh, what went on with
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Credit Suisse is kind of a little bit different, but, uh, you know, it's a different pattern out
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there. Instead, what they did is they said, well, the regulatory, the framework around deposits
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compelled you to buy these U S government bonds. They depreciated in value. Now you have to sell them
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in order to fill your depositors requests. And if you do so, you're going to create losses that make
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the institution non-viable. What we're going to do in order to avoid actually exercising the FDIC,
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the FDIC provision, and in order to save all of your other depositors, we're going to create a facility
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at the federal reserve where we agree to buy back these government bonds far above their market value.
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So instead of, uh, giving you cash directly, we're going to create a liquidity facility
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that's available to some, but not all institutions where they can sell government bonds within certain
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restrictions at far above market value. We're going to take the government bonds that the,
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that these two institutions that we've seized control of have against these deposits. We're
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going to pass them through this facility. The FED is going to pay, is going to overpay for these bonds.
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And then the money is going to go out to the depositors. So if you were an equity holder,
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or if you were a bond holder for either signature bank or, uh, SVB, you didn't get any of your money
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back. You didn't participate in the district, in the distribution of funds from the federal government.
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If you were an uninsured depositor from SVB or from signature, you participated directly in the
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bailout. And if you were a regional bank that had not yet gone under, you benefited enormously by the,
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um, either by directly participating in the liquidity facility or by the impression that it gave your
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depositors that in the event of a bank failure, they would have access to the liquidity facility
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in order to get their deposits back. So it radically stayed the, the early bank runs that were on the go
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at many of the other regional banking institutions. So effectively what they did, if I'm understanding
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this correctly is removed most of the risk for the bond. Yeah. So they, they, they agreed to buy back
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as many of these government bonds that they compelled these deposit institutions to buy
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at far above market value in order to, to eliminate their risk that they would, they would lose money when
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the, in the deposit business. So it's important to realize that this liquidity facility is restricted
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to bonds related to the deposit business. It's not universal. Um, but it's, but that's what they did.
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Interesting. So you're able to kind of shore this up and then other depositors that other banks that
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might consider making the same moves, see that this option will be available. And then they're less
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likely to go rush and try to remove their money, which kind of, uh, even, even though no runs on
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those banks have begun kind of preemptively shores up any, any, uh, possibility that people will probably
00:19:22.640
go take that action. Yeah. The intent was to restore confidence in the regional banking system.
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And to that end, the fact that every, that all the depositors at SVB and signature were able to get
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their cash, um, you know, certainly did, certainly did good things for confidence in, in retail
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deposits. Now, what do you think is the motivation behind these particular banks? Is it just that there
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would have been this cascade of bank runs on other possible banks? Is there a particular function that
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these banks serve that political actors or power actors would have wanted to see preserved in this
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situation? Is there any scenario where they could have let these banks go? Had they not been
00:20:08.400
politically important to them? What do you think was kind of the motivating factor here?
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Yeah. So, um, there's a bunch of questions underneath there. Uh, first the, let's talk about what was
00:20:53.880
bailed out and what wasn't bailed out. So SVB and Signature Bank had an important client base of high
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net worth individuals who have, you know, a lot of power and were able to make sure that, uh, their
00:21:08.080
deposits were bailed out. So that, that's important to note on the way through here, the management
00:21:14.440
and investors in Signature and SVB were not bailed out. They've all lost their jobs. They've all,
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you know, lost whatever equity value that they had. Um, and it's important to note that Signature
00:21:29.960
Bank and especially SVB were banks, but they were not part of the sort of, um, they were not part of
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the East coast power network that kind of dominates U S banking. So the best way to kind of think about
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banking, uh, from, uh, you know, organizational dynamics point of view is as, as a series of
00:21:54.720
overlapping networks. Um, there's a very tightly knit network, uh, among the sort of top tier U S banks
00:22:03.720
centered in New York. They all hire each other. You know, if you look at who becomes fed governor
00:22:09.800
who runs all the regulatory agencies, you can trace them all to a fairly small set of institutions.
00:22:16.720
They go in and they go from, from industry to regulator back to industry, from industry to fed
00:22:23.360
back to industry, from industry to treasury back to industry. This happens all the time. If you look at
00:22:29.700
the careers of any of these people, you can kind of, you could network diagram them if the information
00:22:36.880
was public. Silicon Valley bank was not connected to that East coast network. They were connected to
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the West coast network of sort of venture capitalists. So they, so it's, it's interesting
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that the people who were not connected to the network, which controls the, the regulatory infrastructure
00:22:59.800
infrastructure and the federal reserve infrastructure, you know, magically find themselves all out
00:23:04.100
of a job. So that that's kind of piece one. And then piece two is like, why did they do this?
00:23:10.700
Well, if they didn't do this, uh, you would have seen, I mean, there were already several other
00:23:17.300
regional banks that were in distress. Uh, the FDIC estimated that there's something like, uh, 400
00:23:28.300
billion in unrealized losses in government bonds associated with the deposit business, which meant
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that there's a very large number of institutions that were vulnerable because of the speed at which
00:23:38.800
interest rates were rising. So, uh, if they didn't do this, uh, or something like it, they probably would
00:23:47.800
have had a systemic crisis on their hands. What's interesting is that they did it right after SVB and
00:23:54.380
signature went on, went down, not well, when it was obvious that signature that SVB was going to go down.
00:24:01.320
And so saving signature, uh, or saving SVB. So they chose to do it after these two institutions
00:24:07.700
were failed, not before. So if they'd introduced the liquidity facility two days earlier, you know,
00:24:12.780
all these people at SVB would still have jobs. Um, turns out not, uh, and if they'd done it,
00:24:19.640
you know, three days later, then there would have been several other banking institutions that would
00:24:23.780
have been down and all the, those other people would, you know, have been severed from the network.
00:24:28.860
So the politics of it are really in the timing who was saved, who was not saved. Um, and it should
00:24:37.120
be, in my opinion, it should be viewed as inter elite combat. Um, so if you look at the thread that
00:24:45.040
I wrote for you, uh, the results of this are the depositors were bailed out. Other banks were
00:24:51.560
protected. Silicon Valley banks kind of high net worth clients are all headed to the wall street banks
00:24:57.740
because they have nowhere else to go. Uh, and that's kind of element one to this element two to
00:25:05.840
this is the involvement of the two institutions that failed with cryptocurrency. And maybe we want
00:25:10.580
to get into that next. Yeah, absolutely. We'll, we'll definitely dive into that, but just to clarify
00:25:15.540
for people who are following that line, uh, obviously there's a, there's a certain level of
00:25:20.660
speculation that has to happen here because no one's going to openly declare any of this,
00:25:24.680
but it's your contention that the way that this was bailed out and the way this was handled was
00:25:29.860
intentionally to remove alternative or competing banking structures to force a lot of these high
00:25:37.800
value clients over to the, uh, the banking network that is more in control of regulation and bailouts.
00:25:45.540
Yeah. It's, it's just a crime of opportunity. You saw a similar thing in 08 when, uh, earlier on in
00:25:52.280
the summer of 08, when Bear Stearns went under, there was no bailout money for Bear Stearns, but a
00:25:58.280
couple of months later when it looked like Citigroup or Bank of America was going to go down, Merrill Lynch
00:26:04.700
was going to go down. There was all kinds of bailout money available for those institutions.
00:26:08.420
So the question of who gets bailed out when, and for what is an inherently political one and should
00:26:14.520
be thought of that way. It's obviously significant that the institutions that didn't get bailed out
00:26:21.740
are not part of the same social network as the institutions that will now, you know, compete to
00:26:29.300
inherit their clients. Yeah. I think it's really important for people to remember that as much as
00:26:34.240
we talk about the ruling class and the elite and the things that might unify them, there are constantly
00:26:40.660
warring factions going on, even in sectors like finance that might feel more united than say, you know,
00:26:48.640
established liberals versus woke, you know, activists. And so the, that inter-elite combat is always occurring
00:26:55.140
in the background and we got to keep it in mind when we're looking at world events. It's not just one big
00:27:01.880
monolithic kind of oligarchy. Yeah. That's not how oligarchy works, but anyway, it's not one big
00:27:08.100
monolithic action handed down from on high. There are still winners and losers being manufactured even
00:27:14.940
inside our elites. Yeah. Well, and just because these people have more in common with each other than
00:27:20.060
they have in you with you doesn't mean they don't also fight and doesn't mean they all don't have
00:27:25.460
their, you know, their access to grind and their, their desires to eliminate competing networks. That's just
00:27:31.880
how people work. Absolutely. Well, let's go ahead and get into the crypto. Then you've already
00:27:37.620
pointed out or kind of hinted that this is going to be a significant part of this before we get into
00:27:43.940
the technicals of who had interest in what type of crypto and kind of where that leads us might be
00:27:49.020
useful to just explain kind of the basics. A lot of people just hear crypto and they think that's one
00:27:53.920
thing, but obviously that's a blanket term for things that are very different. Bitcoin versus
00:27:59.580
something like a stable coin, you know, what, why does the stable coin exist? How is it different
00:28:04.940
from Bitcoin? If it's pegged to a dollar, why would people hold it instead of a dollar? Maybe kind of
00:28:09.260
explain a little bit of that. Yeah. So there's a bunch of issues at play here. Cryptocurrencies,
00:28:18.320
they broadly speaking, they sit in two categories from a financial point of view. There's cryptocurrencies
00:28:24.440
that are not pegged to anything. So Bitcoin, Ethereum, these are examples of cryptocurrencies
00:28:29.640
that are, they have an internal logic. They don't have an external reference point. And then there are
00:28:35.840
cryptocurrencies that are pegged to some, that are, that are electronic tokens that entitle you to
00:28:41.180
something real. So stable coins are an example of this kind of cryptocurrency. They're pegged to,
00:28:49.320
in most cases, you know, government currencies of one kind or another. The largest stable coins have
00:28:56.400
been pegged to the, to US dollars. There's kind of a troubled history of, of stable coins. Several of
00:29:03.080
them have failed spectacularly and clients of stable coins have lost money. So you should really know
00:29:08.460
what you're, you're buying before you get kind of into it. But the reason for, for stable coins,
00:29:15.000
hypothetically, is that they allow the transmission of the underlying asset, in most cases, US dollars,
00:29:24.280
across international borders, very quickly, without the costs associated with traditional mechanisms for
00:29:31.300
sending money. So if you've ever, you know, tried to send money to a relative in like Vietnam or
00:29:37.100
something, you'll know that it takes time. And usually there are significant fees associated with it.
00:29:43.520
Whereas if you try to send, whereas if you owned a stable coin and sent it to your buddy in Vietnam,
00:29:49.940
he would be able to receive it much more quickly. And because there'd be no intermediating,
00:29:55.760
intermediating institution, there would be, you know, depending on how you did it, there might be
00:30:03.620
small fees, but it'd be very inexpensive to do. So that's the reason why people use stable coins
00:30:08.800
in place of, in place, well, that's one of the reasons why people use stable coins in place of
00:30:15.860
actual US dollars. The other issue is the tax implications of buying and selling crypto,
00:30:21.040
which are complicated and different in different jurisdictions.
00:30:26.220
So what does this interaction then with the banks, with what happened here,
00:30:32.720
how does that impact crypto going forward? Well, there, there were two major institutions in,
00:30:39.180
in the US that tied crypt that would exchange cryptocurrency for US dollars and Signature Bank
00:30:46.920
and SVB were those two institutions. Uh, if you were a crypto exchange, if you were, um,
00:30:54.820
if you were a crypto business, it's also overwhelmingly likely that your financing came through one of these
00:31:02.460
two institutions. Um, so by eliminating these two institutions, uh, the, the, the ability to get
00:31:13.420
financing to do business in crypto and the ability to take crypto and convert it into US dollars
00:31:19.380
directly through a financial institution, uh, has been severely damaged.
00:31:28.120
So one of the claims that you made in the thread that you wrote was that, uh, this paves the way
00:31:34.860
for central bank digital currency. Uh, maybe you could explain what that is first for people who
00:31:41.320
might not be aware why it's significant and why you think this could prepare a path for that.
00:31:46.520
Yeah. Uh, so we're going to be careful in the claims we make here, but it's worth noting that
00:31:52.100
within 48 hours of the failure of SVB, the federal reserve announced that it's fed now payment system
00:31:59.700
was ready to launch in July. So immediately after competing networks to, uh, pass us dollars
00:32:09.320
in crypto were destroyed. The federal reserve announced that it, the federal reserve,
00:32:16.020
the entity that selectively bailed out institutions and ensured that these institutions would fail
00:32:21.280
announced that it would have its, its competing crypto currency available shortly. So I, I'm not,
00:32:29.260
I'm not claiming inside knowledge. I'm simply observing the course of events, uh, in the,
00:32:35.920
in this regard. So let's talk a little bit about what fed now is, what it would compete with in the
00:32:41.420
crypto world. Um, and why fed now is structured the way it is. So fed now is an equivalent in some ways
00:32:52.100
to a stable coin in that it's a token that can be exchanged, uh, using the kind of protocols that are
00:32:59.660
used to exchange crypto, but it's tied to, um, it's tied to, to the U S dollar. So if you hold a fed now
00:33:09.080
token, your, you've got a guarantee from the federal reserve that you can exchange it for U S dollars.
00:33:14.920
So it's not a true central bank digital currency in the way that, you know, some people have
00:33:21.260
discussed the concept. It's a token that is designed to be accessible to financial institutions
00:33:30.160
that already have accounts at the federal reserve. So it's, it's like a stable coin. It's not targeted
00:33:36.900
at regular people. It is targeted at the financial system. And it, if you read through their marketing,
00:33:44.120
their material, but why you should use fed now as a financial institution, it's all focused on ease and
00:33:49.380
speed, ease, speed, and low cost of settlement for transactions between the high profile financial
00:33:56.160
institutions. So it's a way of introducing digital currency into the financial system without disrupting
00:34:03.660
the existing oligarchy that operates, uh, the financial system for kind of the American world.
00:34:11.100
So I think the question that comes to mind, uh, for some people might be, well, I already know that
00:34:16.640
like a large amount of my dollars are digital at this point. Like they're not physically printed out
00:34:22.620
somewhere and no one is handing them to someone else. So if the bank is already just exchanging ones
00:34:28.620
and zeros on an Excel spreadsheet somewhere, anyway, why would you need to generate a separate system
00:34:39.300
Yeah. So at present when financial institutions exchange us dollars, for whatever reason,
00:34:46.240
they have a, a settlements process for, for this, that goes back, you know, more than 50 years.
00:34:53.500
It's a very old process. It was designed for it. It was designed for, you know, a different world
00:35:00.940
and it costs, it costs quite a bit of money to settle financial, to settle us dollar trades.
00:35:06.160
I mean, each trade doesn't cost a lot of money, but there's a lot of money spent in the area of,
00:35:11.700
of settlement clearing. Um, and the protocol for sending crypto, uh, you know, is significantly
00:35:22.840
more sophisticated and efficient than the protocols for settlements for interbank settlements that exist
00:35:28.880
today. Not only that it's, it's virtually instant. Whereas the protocols for, for interbank settlements
00:35:34.740
today are tied to the business day. So they're, they don't go around the clock. It can, depending
00:35:41.460
on the asset type, it takes some time to settle. So fed now is the first step of this, but there are
00:35:50.460
a number of centrally cleared assets, uh, that operate through institutions that are not dissimilar
00:35:58.240
to the federal reserve. So these are the things cleared by DTC OCC that if you were able to tokenize
00:36:06.620
the settlement process, you could probably cut down on costs in settlement and clearing across
00:36:11.700
the financial industry. So there's quite a bit of, of sort of cost of efficiency potentially to be
00:36:17.960
gained by tokenizing the system. Uh, in order to, to explain in more detail, you, you really have to
00:36:23.900
do a lecture on, on how financial settlements work. Sure. Yeah. So, so maybe just to, to, to kind of
00:36:29.880
sum that up as much as possible, uh, a lot of this is just avoiding preexisting regulation. This allows
00:36:37.020
you to use a different system where you don't have to comply with all these other settlement costs and
00:36:42.120
operations and procedures. And so it's just their way of kind of sidestepping their own regulation in
00:36:47.620
many of these areas. Yeah. It's just, it's going around process. So when, when, uh, so the existing
00:36:56.220
pro pro process, uh, for sending cash between financial institutions operates through a protocol
00:37:03.400
called swift, that protocol goes back a very long time. People might be familiar with it because,
00:37:09.180
you know, quite famously, the Russians were cut off of the swift network as part of the sanction
00:37:13.600
package. So, uh, this fed now is a selective replacement for swift, uh, among institutions.
00:37:23.520
And, you know, the intent is that this, that fed now will be a more efficient profile, uh, process.
00:37:32.000
Um, and, uh, both from a cost point of view and from a speed of execution point of view.
00:37:37.920
So a lot of people have been warning that fed now is kind of the end of everything. This is the,
00:37:45.520
this is the complete centralization and control of all financial interactions through, uh, you know,
00:37:52.480
the banking system. This, this is, this is how the regime kind of locks down all interactions,
00:37:58.160
all financial, uh, uh, you know, uh, transactions are, are now going to be recorded and controlled
00:38:04.400
completely. Uh, what, what do you think about that? Uh, is, is F is, uh, fed now a C change or is it a
00:38:12.320
step off and a down inevitable path? What do you think? Well, so the first thing that I would say
00:38:17.600
to this person is what do you think the world of finance looks like right now? Yeah. So, uh, every
00:38:23.920
significant financial interaction that occurs between any two Americans is monitored right now,
00:38:31.040
especially if you're, you know, a target for whatever reason. So this idea that at present,
00:38:37.520
we have a free and open financial system with, uh, you know, if you've ever watched like, uh,
00:38:46.320
how the police target drug, drug crime, or, you know, how counter-terrorism works,
00:38:53.040
you'll know that there are an enormous suite of tools in the financial system as it exists right now
00:38:59.280
to target people who have been identified as doing things that are inappropriate with their money,
00:39:05.200
you know, legitimately or otherwise. So that apparatus mostly already exists.
00:39:10.880
It is true that, uh, fed now, um, especially if you look at what the federal reserve is encouraging
00:39:22.080
its clients to do, it's encouraging the clients of fed now to extend fed now down to their clients.
00:39:29.280
So the idea is to pass digital currency out through the, the same network by which the fed currently
00:39:36.960
introduces fiat currency to the system. So the idea here is that, uh, fed now will kind of flow out in
00:39:47.040
the same way. Um, and it's true that if you create greater efficiencies in the process of financial
00:39:55.840
transactions, it becomes easier. It's an increment. It is an incremental step to making those transactions
00:40:02.160
easier to track. It's an incremental step towards making the federal reserve involved in all of
00:40:09.120
these transactions. Whereas many, there are many cash transactions in which the federal reserve is now
00:40:16.080
kind of only very indirect indirectly involved. So there's, there's definitely an incremental step
00:40:21.840
there, but fed now is not a central bank digital currency in the way that people kind of sci-fi
00:40:27.360
imagine it where, uh, because in order to do that, you would sweep away in order to do like a, a central
00:40:34.800
bank digital currency in the way that people imagine it, you would sweep away the existing oligarchy
00:40:38.880
that kind of operates the financial system. That makes sense. Yeah. So I think we've covered most
00:40:45.280
of this, but I want to ask you one more question, uh, that will now get you in trouble with all the
00:40:50.320
crypto people. So I hope you're, you're prepared. Uh, cause someone is always angry in the comments
00:40:55.280
after this, but, uh, but I'm always interested because I'm not a financial guy, uh, that this is not
00:41:00.240
my wheelhouse. Uh, I get wildly different opinions from people who are very knowledgeable on this. And so I'm
00:41:06.640
always interested to pick, to pick people's brains on this issue, but with crypto, um, some people
00:41:14.640
are like, Bitcoin is the salvation. It's what allows people to be freed from the state. It's the, uh,
00:41:20.720
you know, it's the answer that unlocks, you know, kind of, uh, the exit, uh, aspect of political action.
00:41:27.600
Um, and you're no longer beholden to this thing. Other people tell me that's dumb. The state is the
00:41:34.240
only reason that like money holds value. Uh, and they, they're always going to be able to
00:41:40.960
force you to use whatever medium of the exchange is kind of, uh, uh, required under their system.
00:41:48.080
And so Bitcoin is always meaningless because it has no state force to back it up, uh, and can be
00:41:54.480
stamped out by whatever, uh, government decides that it's not allowing exchange in that medium.
00:42:00.080
Uh, it's not a simple question, but where do you land on this? Do you think that this is a solution
00:42:07.120
that a lot of people think it is, or do you think that those people are not understanding the state
00:42:11.520
aspect of, of currency? Uh, I think this is my views on this are kind of nuanced. Um, so the first
00:42:19.680
thing to remember here is that crypto is fundamentally a technology first and a, and a, a currency second.
00:42:27.760
So, you know, as, as people who've discussed central bank, digital currencies, you know,
00:42:32.320
will make you well aware. You can certainly have a, you can certainly make use of the technology
00:42:38.400
behind cryptocurrency in order to have a new set of currencies that are centralized and backed
00:42:44.800
fundamentally by the power of the state. Um, so that's kind of point number one, it's a technology.
00:42:51.520
Crypto is a technology. It's not a currency. Now there are currencies that are presently independent
00:43:00.400
that use crypto that use the crypto technology. There's Bitcoin, there's Ethereum, and there's a
00:43:06.880
number of other smaller ones. We'll deal with Bitcoin as an example first, and then we can kind of
00:43:14.080
generalize from there. So Bitcoin is attempting to be an independent currency backed by the confidence
00:43:20.800
that exists in Bitcoin. Um, so there's no, you can't exchange Bitcoin for gold or for goods and
00:43:26.880
services unless other people believe that Bitcoin is valuable. It's decentralized. So there's no state
00:43:33.840
actor behind it. And the real question of how to value Bitcoin.
00:43:36.800
value Bitcoin is a question of supply and demand and a question of confidence. So Bitcoin will succeed
00:43:45.840
to the extent that there are people who are, you know, happy to accept Bitcoin.
00:43:52.000
Um, will there be people who are happy to accept Bitcoin? Well, in order to answer that question,
00:44:00.240
it's worth reviewing the history of non non-state fiat currencies. And it turns out there's a very long
00:44:07.120
and broad history of that. Basically up until the 20th century, everybody had
00:44:15.680
non-state bad currencies. So if you look at even the United States in the 19th century, banks were
00:44:22.000
issuing bank notes rather than us dollars. And those bank notes were sometimes exchangeable for gold.
00:44:30.160
Sometimes they, they were just letters of credit. It's kind of, it was a very diverse set of practices
00:44:36.800
in banking at the time. And the U S government culminating in FDR, confiscating everybody's gold
00:44:44.400
was able to put the boot on that, uh, very rapidly, uh, to the point where the FDR regime unilaterally at
00:44:54.160
he abrogated every contract in the United States, because virtually every contract in the United
00:45:00.720
States said that you could make payment either in us dollars or in equivalent gold. Um, so not only did
00:45:08.720
he seize the gold from the banks, not only did he make it illegal to privately hold gold, not only,
00:45:14.800
but he also abrogated all of these provisions and contracts that allowed you to transact in gold.
00:45:21.520
So there's a, you know, a very recent example of, uh, of the U S government making an alternate currency
00:45:31.120
illegal when it suited it to do so. And backing that, uh, backing that up with an enormous show of force.
00:45:39.680
So if you're a Bitcoin advocate and you're totally convinced that no state actor can ban Bitcoin.
00:45:47.920
Well, I don't, uh, I, I think that history shows that, uh, states have been pretty successful at
00:45:55.040
stamping out alternate currencies though, not completely successful. So even in FDRs America,
00:46:00.720
there were still transactions going on in gold. There were still people accepting it. There were still
00:46:05.200
people transacting in foreign currencies, even though that, even though they're not supposed to.
00:46:10.720
Uh, so the amount of force required to enforce a ban is quite high. And it's also worth saying that,
00:46:16.960
you know, the FDR regime held a lot more power than most modern governments do.
00:46:20.960
So would a modern government be able to stamp out Bitcoin? Uh, I don't know. Uh, the other real
00:46:29.040
advantage Bitcoin has, it crosses a lot of international borders. So, and not just the kind
00:46:36.720
of formal international borders that exist between American dominated, uh, countries,
00:46:41.760
but it crosses like real international borders into places like China and Russia.
00:46:46.080
So it would be quite difficult in the present moment to stamp out Bitcoin completely. Um,
00:46:55.040
however, it, I think it's yet to be determined what the impact of an effort to ban Bitcoin
00:47:07.440
by either the, by the U S government would be in terms of like how much value you could destroy.
00:47:15.680
So a bit of a long winded answer to what is, I think a very complicated question. Um,
00:47:24.000
and a question that I don't think, you know, I think if you look at the history of governments
00:47:28.320
trying to stamp out alternate currencies, it's kind of a mixed bag. Sometimes they're able to,
00:47:32.640
sometimes not, you know, North Korea has a thriving black market in the most totalitarian state in the
00:47:38.640
world and they either can't or, or haven't stamped it out. So. Yeah, no, I think that's good though. I
00:47:45.680
think, uh, like I said, no, normally the, the answers to that question are just, uh, people yelling,
00:47:51.440
uh, how dumb it is for anyone to hold the other, the other opinion. Uh, so it's good to have
00:47:56.960
somebody to kind of break down the nuance though. I'm sure you've just made everyone angry, but in
00:48:00.480
the best way possible. Uh, so I think that's, that's good. I mean, at the, the, the bottom of
00:48:06.240
it, it's a question of how much power you think the U S government has to effectuate a ban if they
00:48:12.800
attempt it and you know, uh, there are very mixed opinions about how successful the total state,
00:48:19.840
if I borrow a phase, a phrase, um, you know, is. Nope. Absolutely. All right. Well, we're going to
00:48:27.840
move to the questions of the people here in a second, but before we do, uh, I know like, uh, you're,
00:48:33.520
you're usually a guest on radical liberation's channel, but I know you also have other projects
00:48:38.720
that you're working on. Could you share with people what you're working on and where they can
00:48:42.240
find your work? Yeah, I've got a bunch of things going on. Um, I've got a sub stack that I, I work
00:48:48.880
on with a number of other Canadians called the red ensign, uh, that you can find. I'm, I'm a member of
00:48:54.160
the Veowulf foundation, which is responsible for the skilledings event that I believe you're speaking at
00:48:58.640
shortly. Uh, so if you go and if you go and check out my Twitter, you can find your way through to that.
00:49:04.560
Um, but certainly it, uh, the upcoming conference in Tennessee is well worth your time. Um, and, uh,
00:49:13.520
you can follow my Twitter. You can follow my work either on Brad libs channel or on, uh, or on Lambda
00:49:19.840
Bible studies. Absolutely. Yeah. And I'm looking forward to, uh, seeing a lot of, uh, a lot of
00:49:24.880
people in our sphere at that, you know, in real life over at the skilledings events. So that's going
00:49:29.040
to be exciting. A lot of people are going to be attending there. All right, let's check out some
00:49:34.080
of our questions. Uh, Arthur T for $10 a question. Does the ongoing de-dollarization have an effect
00:49:41.360
on the, uh, increasing bank failures? So, uh, let's talk. So what he's talking about by de-dollarization
00:49:50.480
is he's looking at the trend, uh, of foreign governments, uh, toward using us dollars less
00:49:58.720
frequently as their currency of reserve or as their currency of exchange for commodities.
00:50:03.920
Um, to contextualize that, that trend, uh, I, we did a recent econ minis episode on radlibs channel
00:50:11.280
about this, where you can talk about it for an hour, but broadly speaking, this is a trend that is
00:50:17.920
ongoing, but it's, or in early stages. I don't believe that the bank failures that you see in the
00:50:26.400
United States are substantially connected to it at this point. Uh, the trend towards de-dollarization
00:50:32.480
will damage the U S government if it continues, but we're, we're very early days yet.
00:50:39.760
Makes sense. All right. And then we have, uh, Atraxia here for $2. Thank you very much.
00:50:45.200
Uh, just get chipped and get in the pod and eat the bugs. Yeah. Uh, that is the plan. You will
00:50:51.280
own nothing and you will be happy. Let's see. All right. I think we got everybody there. All right,
00:50:58.480
guys. Well, thanks for coming by. Of course, make sure you check out all of black horses content.
00:51:04.720
And, uh, if this is your first time coming on, uh, on the channel, please make sure that you go ahead
00:51:10.400
and subscribe. If you want to get these broadcasts as podcasts, make sure that you're subscribing to the
00:51:15.520
Oren McIntyre show on your favorite podcast platform. And when you do, if you could leave
00:51:19.840
that rating or review, it really helps other people find the show. Of course you can check out
00:51:25.200
everything on a rumble and odyssey. You can follow me on Twitter and gab. And of course,
00:51:30.560
all of this goes up on blaze TV. In fact, I believe my new column should be out on the blaze
00:51:36.480
here shortly. So make sure that you're checking that as well. Thanks for coming by guys. And as always,