Truth Podcast - Vivek Ramaswamy - May 17, 2023


Bitcoin's Potential Impact on Monetary Policy with Vijay Boyapati | The TRUTH Podcast #27


Episode Stats

Length

34 minutes

Words per Minute

169.88498

Word Count

5,912

Sentence Count

300

Misogynist Sentences

1

Hate Speech Sentences

1


Summary

Vijay Boyapati, author of The Bullish Case for Bitcoin, joins me in this episode to talk about his new book, The Bitcoin Case, and why Bitcoin should replace the Federal Reserve as the world's reserve bank. We discuss Bitcoin's role in catalyzing the financial crisis of 2008, why Bitcoin is better than gold, and what Bitcoin can teach us about monetary policy and what it means for the future of the world economy. Recorded in Los Angeles, CA! Bitcoin is a digital asset that is not backed by a central bank, and can be traded on the internet. It is not tied to any central bank or government, and is not subject to any set of rules, regulations, or restrictions. Bitcoin is not a replacement for gold, but rather a replacement that is independent, decentralized, and non-subject to the same manipulation as the US Federal Reserve, which is responsible for much of our world's money and monetary policy. The Bitcoin case points to Bitcoin as a better alternative to the current monetary system, and suggests that there is another alternative hiding in plain sight that can replace the current one, and that is much more easily accessible and cheaper than gold and silver. In this episode, we discuss Bitcoin, Bitcoin, and Bitcoin's potential role as a replacement to the US dollar and gold, as well as what Bitcoin offers as a digital alternative to gold, silver, and other traditional money. traditional money and the Bitcoin s role in the world, and how Bitcoin is different from gold, Bitcoin s place in the history of money and gold s role as money, and the role Bitcoin plays in the modern world. in the 21st century. Bitcoin s relationship with gold, gold, joins me to discuss Bitcoin and Bitcoin s impact on the world of money, monetary policy, and its potential impact on monetary policy and Bitcoin in general economic and financial stability, and his thoughts on Bitcoin s relation to Bitcoin s potential to Bitcoin's value and its role in Bitcoin s value, and bitcoin s impact in the current economic and its future in the global economic and political landscape in this conversation. and much more. Subscribe to our newest episode of the Bitcoin Case Podcast! Subscribe here! Learn more about Bitcoin's impact on our future and Bitcoin? Subscribe at the Bitcoin case book, "The Case For Bitcoin" by Vijay Bhat et al. Learn more at bit.co/thecaseforbtc


Transcript

00:00:02.000 I recently wrote an op-ed in the Wall Street Journal arguing for radical, drastic reform of the Federal Reserve, making
00:00:31.000 the case that our Federal Reserve has gone so far off the reservation in taking on a broad mandate that the Fed should have never had, hitting two targets effectively making the case that our Federal Reserve has gone so far off the reservation in taking one arrow, inflation and unemployment, and doing a disastrous job of each.
00:00:48.000 That's a longer story, but that's actually in many ways contributed to some of the financial crises we've experienced in the year 2000, 2008, and even some of the banking instability this year, where the Federal Reserve, when it's trying to balance inflation and unemployment, makes a whole host of errors. when it's trying to balance inflation and unemployment, makes a
00:01:07.000 One of them is it treats wage growth as a leading indicator, when in fact wage growth is a trailing indicator of the business cycle, which means they've consistently tightened monetary policy into a downturn in the business cycle itself, turning into actually a boom-bust cycle that then results in the calls for bailouts.
00:01:28.000 I think that's actually been the signature pattern 2008, now repeating itself in the year 2023. But beyond reform of the Federal Reserve, what many outside of government make the case for in the Bitcoin community,
00:01:44.000 it's where we're going to spend our time today, is to say that we should opt out of that system altogether and Transact in a currency that's not backstopped by a federal government at all, but is instead independent and finite in its quantity and is decentralized in a way that isn't subject to the same manipulation as the Federal Reserve.
00:02:05.000 And today we're going to end up talking about one of those leading alternatives, probably the leading alternative today, Bitcoin.
00:02:12.000 And in particular, I think it was apt because a big part of the piece that I wrote last week arguing for radical reform of the Federal Reserve Was the Fed's role in catalyzing financial crises, including 2008?
00:02:26.000 Well, turns out that it was in the aftermath of the 2008 financial crisis that Bitcoin itself was born.
00:02:34.000 And so we'll pick it up right there with today's guest.
00:02:38.000 We have Vijay Boyapati, who's the author of The Bullish Case for Bitcoin, joining live from Seattle.
00:02:45.000 I've been looking forward to this conversation for a long time.
00:02:48.000 But the first thing I'll ask is, We can go into my critique of the Federal Reserve and the way I want to reform it, but you have a different kind of solution in mind.
00:02:58.000 I think a lot of Bitcoiners do to not just reforming the Federal Reserve top-down, putting it back in its place of stabilizing the US dollar.
00:03:06.000 That's where I come from.
00:03:08.000 But I think your perspective is that there's another alternative hiding in plain sight.
00:03:13.000 And I know that you're pretty eager to tell us what that is.
00:03:15.000 And I think it relates to the thesis in the heart of your book too.
00:03:18.000 So take it away and I'm looking forward to hearing and learning from you.
00:03:21.000 Yeah, I want to talk to you a little bit about Bitcoin, which I think is the greatest form of money that humankind has ever seen.
00:03:28.000 But firstly, I just want to say I'm super excited for your campaign.
00:03:32.000 I don't think I've been as excited about a campaign since the Ron Paul movement in 2007-2008 and I quit my very lucrative job at Google to go campaign for him, raise a bunch of money and Help him out because he was talking about something that no other candidate was talking about, which is the importance of monetary policy.
00:03:53.000 He was the only one really talking about the Federal Reserve and that was a message that really resonated with a lot of Americans who feel like this system is really unfair.
00:04:02.000 And if you look at American history, it's really not a part of the American tradition to have a central bank.
00:04:08.000 The founders wrote into the Constitution, gold and silver are money, not paper money.
00:04:14.000 And, you know, during the 19th century, there was a Numerous people fighting very hard to prevent the establishment of a central bank.
00:04:24.000 But eventually the bankers won over and they created a cartel, which is exactly what the central bank is.
00:04:29.000 It's a cartel of banks which benefit the banks at the expense of everyone else.
00:04:34.000 And they demonetized gold in 1933. Which is a huge blow to the American economy and sort of presage this era of constant inflation and credit expansion that the Fed has overseen.
00:04:50.000 As someone with an Indian background, as you are, I've always had this kind of affinity for gold.
00:04:55.000 I think Indians grew up distrusting their government and the monetary policy of their government, so they kept their savings in gold.
00:05:04.000 And Americans used to do that as well.
00:05:06.000 Unfortunately, gold has several disadvantages that Bitcoin fixes.
00:05:12.000 One is actually its physicality.
00:05:15.000 And its physicality makes it difficult to transport.
00:05:19.000 It makes it difficult to divide.
00:05:21.000 And these are some of the properties that are incredibly important for a money to have.
00:05:27.000 We understand what the properties of a good money are.
00:05:30.000 We've understood this for thousands of years.
00:05:32.000 Aristotle wrote about them.
00:05:34.000 Divisibility, portability, fungibility.
00:05:37.000 And probably the most important, the origin of where money gets its original demand is scarcity.
00:05:45.000 We want money to be scarce.
00:05:48.000 Because if money were abundant, if money were as commonplace as sand, no one would want to keep any of it.
00:05:54.000 They wouldn't want to save in it.
00:05:55.000 Is it really true that Aristotle talked about these attributes?
00:05:59.000 Because these are the attributes I know from like a modern study.
00:06:02.000 Of what comprises a good currency.
00:06:04.000 Yeah.
00:06:05.000 I mean, this has been known a long, long time.
00:06:07.000 You look up Aristotle and the attributes of good money.
00:06:10.000 They understood this a long, long, long time ago.
00:06:13.000 So, Bitcoin is...
00:06:15.000 I want to segue into Bitcoin here.
00:06:18.000 Bitcoin is very special because...
00:06:21.000 It was an invention that came out of nowhere in 2008. There was this mysterious figure, Satoshi Nakamoto, who published a paper that solved a problem in computer science that many people did not think had a solution.
00:06:33.000 It's called the Byzantine Generals Problem.
00:06:35.000 And in solving this problem in computer science, he was able to create a system that allowed something that's never been possible in the history of the world.
00:06:45.000 Never been possible to do this, which is to transfer value between two distant people without requiring a trusted intermediary.
00:06:53.000 And this invention has profound implications for global trade, for governments, for nation states, for how we save.
00:07:03.000 And the way I like to describe Bitcoin is it's like gold with teleportation built in.
00:07:11.000 Gold has this problem that if I have a bar of gold, it's actually quite difficult for me to send it to you on the other side of the country.
00:07:18.000 But Bitcoin I can send to you as easily as I can send an email.
00:07:22.000 And so you and I, who may not be introduced or know about each other, can conduct trade with each other without requiring a trusted intermediary such as a bank or a government.
00:07:35.000 This is an incredibly important invention, and we're only just now starting to understand the implications of how important this is.
00:07:43.000 I think that the consequences will be understood better in a few decades.
00:07:48.000 Just as you know, the first decade of the internet, not many people really understood, is this a big deal?
00:07:53.000 Is this bigger than the fax machine?
00:07:55.000 Like Paul Krugman said, this is not going to be bigger than the fax machine, but clearly it's one of the most important inventions of human history.
00:08:03.000 A decade into the internet was 2003. We didn't have Facebook.
00:08:08.000 We didn't have smartphones.
00:08:09.000 We didn't have Google Maps.
00:08:10.000 We didn't have all these things that have changed our life.
00:08:13.000 And it only became clear a decade later.
00:08:16.000 So Bitcoin has existed for one decade.
00:08:18.000 It's been around since 2009, 2010. I think it's going to take about another decade before we fully understand the ramifications of this technology and what it's going to do for global trade, what it's going to do for monetary policy, and how it's going to affect Yeah, I mean, say more about that.
00:08:37.000 You know, you have views on this, so let's just go there.
00:08:40.000 I mean, I hear a lot of Bitcoiners painting that vision, but why don't you just make it a little bit more explicit?
00:08:47.000 How is it going to change the relationship between United States citizens amongst one another and also with other nation states?
00:08:54.000 I think the most important thing, especially for those of us who value human liberty, is it's going to provide a greater level of freedom to people around the world.
00:09:02.000 It allows you to save in something that you can easily transmit and that cannot be debased.
00:09:09.000 Those are the two pillars of Bitcoin's value proposition.
00:09:14.000 And that enables people's freedom in that they cannot have their savings confiscated or debased through inflation.
00:09:22.000 And it's especially important in countries Kleptocracies and dictatorships where people are trying to flee with their savings.
00:09:33.000 I like to give an example of World War II where the great Austrian economist Ludwig von Mises was fleeing just ahead of the Nazis and he managed to escape, but he managed to get to America.
00:09:44.000 He didn't have any of his savings.
00:09:46.000 He was living a fairly upper middle class life in Europe, in Switzerland.
00:09:50.000 When he gets to America, he has nothing but the shirt on his back and he has to settle for A job at a university which isn't one of the most prestigious universities.
00:10:01.000 If he had had his savings, he could have re-established his life.
00:10:04.000 And so for people who are living in these situations around the world today, it gives them the ability to put their savings into something and cross the border without anyone knowing that they have those savings on them.
00:10:17.000 So that's one implication.
00:10:19.000 The other is for monetary policy, because it gives people an escape hatch.
00:10:24.000 If you feel dissatisfied with the monetary policy of your nation, or that it's going down a bad path that's going to destroy your savings, you can jump into Bitcoin.
00:10:35.000 You can put your savings into Bitcoin and escape that.
00:10:39.000 So this is going to have an impact on monetary policy going forward where central banks will look at this and say, we have to be much more prudent.
00:10:47.000 Otherwise, people are going to move their savings into Bitcoin.
00:10:50.000 In the past, they sort of did this with gold.
00:10:55.000 Alan Greenspan famously talked about watching the price of gold, and that's how he set monetary policy.
00:11:01.000 This, I think, is going to be the role that Bitcoin takes on in the future.
00:11:05.000 What gold has is history.
00:11:08.000 It has 5,000 years of history being used as money and savings.
00:11:12.000 But Bitcoin excels on the attributes that make for good money, even more so than gold.
00:11:18.000 So I think over time, it's going to win demand at the margin from other forms of money, such as fiat money, gold, government bonds and real estate.
00:11:29.000 Those savings are going to flow into Bitcoin as people begin to realize this is the greatest form of savings that's ever existed.
00:11:36.000 So let me bring it back into sort of my world and back into your world a little bit here and where they interface with one another.
00:11:43.000 I'm also drawn to the intellectual elegance of what Bitcoin offers and it's different from other cryptocurrencies in that it's actually the scarcity factor Makes a big difference.
00:12:05.000 Tell me if I'm misunderstanding that or misstating that, but the scarcity, the fact that there's a finite number of potentially even discoverable Bitcoin is part of what differentiates it from many other forms of cryptocurrency.
00:12:21.000 Is that a fair characterization?
00:12:23.000 I think that's a fair characterization, but I would clarify a little bit.
00:12:26.000 A lot of cryptocurrencies will advertise themselves as being scarce.
00:12:31.000 Scarcity has no meaning unless you can trust the scarcity.
00:12:34.000 The reason you can trust gold is because we know you can't print it.
00:12:39.000 So people trust that the supply is limited.
00:12:41.000 The reason that you can trust the scarcity of Bitcoin is because the system is truly There is no single point of control with Bitcoin, which means that if a company comes along and says, well, you know, this isn't good for us, we want to increase the supply, and they begin lobbying for that, there's no way to do that.
00:13:02.000 And actually, in 2017, there was a concerted effort by the largest companies In the Bitcoin space, not to increase the supply, but to increase another parameter of the Bitcoin network called the block size.
00:13:16.000 And they failed in doing this.
00:13:18.000 And that was actually a great moment for Bitcoin because what it proved was that this is a network that has immutability.
00:13:26.000 It can't be changed.
00:13:27.000 It can't be changed by the most powerful companies in the space.
00:13:30.000 It can't be changed by nation states.
00:13:32.000 That is the reason that you can trust the fact that its supply is limited.
00:13:36.000 If I created cryptocurrency Vivek and it's just me controlling it, and I say the supply is limited and there's only, you know, a million of them, you'll say, well, it seems like you're in control of it.
00:13:48.000 So maybe you'll change your mind.
00:13:50.000 Bitcoin is unique.
00:13:51.000 It is the only cryptocurrency that's truly decentralized and there's no single point of failure and no one who has enough power or any group who has enough power to change that supply schedule.
00:14:04.000 The unique feature of Bitcoin, I think, is what makes it feel more like gold than a different form of Blockchain-based cryptocurrency necessarily.
00:14:17.000 I want to bring that back into my world here.
00:14:20.000 The case I made for Federal Reserve reform is in part that we need a stable dollar as a precondition for GDP growth in America.
00:14:32.000 So the analogy I used is that if the number of minutes in an hour were volatile, it's a slightly different lens here.
00:14:41.000 So we're Talking about a different subject, we're going to back back into the relationship to Bitcoin.
00:14:46.000 But if the number of minutes in an hour were volatile, then you and I probably wouldn't be having this conversation at the same time.
00:14:54.000 You'd show up at one time, I'd show up at another.
00:14:57.000 That's the analogy that I often offer as it relates to capital allocation in an economy because dollars don't track the most high or highest returning projects when They're volatile.
00:15:11.000 That's the same kind of volatility in the minutes of an hour when the dollar stops being a unit of measurement.
00:15:16.000 That's necessarily a cause of inefficient capital allocation in the economy and inefficient capital allocation is itself an impediment to GDP growth.
00:15:27.000 Now, one of the things I've said then is we need to stabilize the dollar.
00:15:31.000 How do we go about doing that?
00:15:33.000 I've suggested pegging it to a broad basket of We used to be on the gold standard.
00:15:40.000 America actually had its greatest GDP growth stretch over the longest portion of its history when we were pegged to the gold standard.
00:15:48.000 Now, we still grew at three plus percent GDP growth from 1980 to 2000. After we were off the gold standard, but when the Federal Reserve's focus was still on stabilizing the US dollar.
00:15:59.000 But ever since then, as long as we've had a volatile dollar in this century, it's been, you know, largely on average, one point something percent GDP growth.
00:16:09.000 So the question I have for you is in the mechanics of, if you're looking at a plan for the radical reform of the Federal Reserve and the way I'm looking at it, and you're pegging the dollar to something, What would be your perspective on the characterization of Bitcoin as Part of what fits into that basket of commodities,
00:16:30.000 as opposed to, I've said, we don't want a basket of currencies, we want something that has fixed value, like gold, like agricultural commodities, et cetera, that have real value to human beings.
00:16:42.000 Gold, you could debate as an input, it's a hard substance, but baskets of farm-like commodities have real consumable value.
00:16:53.000 That's the direction I've been heading, is peg the dollar to a basket of what you would call standard commodities.
00:17:00.000 What's your perspective as to whether Bitcoin fits the description of what would fit into that commodity basket versus is it better thought of as fitting into a currency basket, which is a totally different equation because that then becomes circular as a reference point if I'm talking about stabilizing the dollar with respect to a basket of currencies that themselves are Subject to the same volatility, you're recreating a new problem that you don't with the basket of commodities.
00:17:27.000 Where do you think Bitcoin fits on that side of the line, looking at it through the lens I am as running for being our next president?
00:17:34.000 I think Bitcoin is certainly ideal as something that would back a nation-state's currency like the dollar.
00:17:40.000 If you look at American history, for the majority of American history, the dollar was backed by gold.
00:17:47.000 A $20 bill was redeemable for a gold coin, a one-ounce gold coin, and it actually said that.
00:17:55.000 It says, redeemable for gold.
00:17:58.000 I actually view the period that we're in between the gold standard and what I think will be a Bitcoin standard.
00:18:05.000 I call it the fiat money interregnum.
00:18:08.000 It's actually an anomaly of history for us to be living in this period of fiat money.
00:18:13.000 Fiat money throughout all history, whenever it's been tried, has ended in gigantic failure.
00:18:19.000 And I think whether it happens next year or whether it happens in a decade or two decades, it's going to eventually lead to failure because it politicizes money.
00:18:30.000 That's the fundamental problem.
00:18:33.000 The way you describe it, I think, is a great analogy.
00:18:36.000 Money is...
00:18:39.000 The fundamental building block for economic coordination.
00:18:43.000 You need that standard of measure for entrepreneurs to perform economic calculation.
00:18:49.000 If they don't have that building block, if it's constantly shifting under them, it's really hard to perform economic calculation.
00:18:57.000 And in the limit, what you see is when you get more and more inflation, You get a breakdown in the division of labor.
00:19:06.000 You look at countries like Argentina today, or you look at historical examples like the Weimar Republic, as inflation gets out of control, people can't do business anymore.
00:19:17.000 They can't calculate profits because they don't know if their profits are real profits or they're just being completely inflated away.
00:19:24.000 So that's a big problem.
00:19:26.000 I would say one thing, I humbly push back a little bit on the idea of a basket of commodities.
00:19:33.000 The reason why we have money, why we have a unique commodity is because supply does not change in regards to demand, which is different to every other commodity.
00:19:48.000 Oil, if there's more demand, the price goes up and then miners will produce more of it.
00:19:54.000 Same with wheat, same with pork belly, same with all of these other commodities.
00:19:57.000 This is why human societies have always chosen a single form of money.
00:20:03.000 Because it's stable.
00:20:04.000 They choose something which has a limited supply and has stability.
00:20:11.000 The US dollar was backed by gold for this entire period that you mentioned and had, just as you said, the greatest period of economic growth in the history of the world.
00:20:20.000 The US went from a poor agricultural backwater clinging to the east coast of the United States to the most powerful industrialized economy in the world on a gold standard.
00:20:33.000 So this idea that we need Credit money, as we have now, which is not backed by anything except the full faith and promise of the US government, is not true.
00:20:45.000 And the framers of this country understood this.
00:20:48.000 They understood it very well.
00:20:49.000 They knew where these experiments lead.
00:20:52.000 We're actually in, I think, the last phase of the experiment since the 1970s.
00:20:57.000 Gold was confiscated in the 30s, but the dollar was really de-pegged in the early 70s by Richard Nixon.
00:21:04.000 And you can see that credit expansion in the US has gone exponential.
00:21:08.000 I think we're in the last phase of this experiment, and there's going to be a bubble that pops.
00:21:15.000 Either the next one or the one after that, and it's going to be so big that it's not going to be containable.
00:21:21.000 And that's what I worry about.
00:21:23.000 And I think we need to be thinking about solutions, just as you're talking about, before that happens.
00:21:28.000 How can we stabilize the US dollar?
00:21:30.000 How can we back it by something that is fixed, that cannot be debased, that people trust?
00:21:37.000 I actually think Bitcoin is inevitable in the sense that its properties make people want to own it.
00:21:45.000 And I think it's going to be monetized just for that sake.
00:21:48.000 I think we speak from really similar motivations and an analysis of the problem.
00:21:55.000 I think realistically, in the year 2024, I say a basket of broad commodities because we don't want to Native human instinct of having seen this, you know, what you would call this anomalous era of fiat money in between a period when actually a $20 bill was redeemable for gold for most of our national history.
00:22:13.000 I agree with you.
00:22:14.000 That's been actually an undesirable anomaly.
00:22:17.000 But the last thing we should want is to pick the wrong horse as opposed to taking a basket of Real commodities, even if some of those commodities, you know, silver, nickel, gold, those supply can increase.
00:22:32.000 Yes, others may be responsive to demand, but there are still constraints with which that supply can still respond to that demand as part of a basket still has a stabilizing effect on the dollar.
00:22:45.000 That's why I've been looking at it the way I've been looking at it realistically.
00:22:48.000 I'm not in this to run some academic thought experiment.
00:22:53.000 I'm running for President of the United States.
00:22:54.000 This is a top priority of mine, restoring the stability of the US dollar.
00:23:00.000 And there's a lot that we need to do to put our fiscal house in order, but as it relates to monetary policy and as it relates to the currency, we'll literally, this is a seismic shock for a lot of people, literally peg the US dollar to a basket of currencies, fire over 90% of the people of the Federal Reserve, and put them in their place to just literally stabilize the dollar against that basket.
00:23:21.000 I think that's a quantum leap in the right direction.
00:23:24.000 We can decide what the specifics of that basket are.
00:23:27.000 You're making a case for Bitcoin being, potentially over the fullness of time, that standard.
00:23:34.000 I'd ask you to maybe respond to the number one counterargument that certainly I hear in conversations, and I would ask as a fair question, that sheer volatility of Bitcoin itself Just empirically,
00:23:53.000 not in first principles, because in first principles, you made an interesting and compelling first principles-based argument, but just on the facts, as they have existed over the last number of years, probably the last, ever since Bitcoin was invented, You may know the numbers better than I,
00:24:09.000 but if you looked at the vol on Bitcoin, it probably is more volatile than most other currencies and certainly more volatile than would cause a currency to be more volatile if pegged to that than to a broad basket of real currencies.
00:24:25.000 And so I wanted to give you a chance to make the case against the backdrop of those empirics.
00:24:32.000 Where's the disconnect between that and the principle?
00:24:34.000 I have a hypothesis on what your answer is going to be, but I thought I might as well hear it directly from you.
00:24:40.000 What's your response?
00:24:41.000 That's a good question.
00:24:42.000 It's a totally, it's a fair question as well.
00:24:44.000 And empirically, you're absolutely correct.
00:24:46.000 Bitcoin has been historically very volatile.
00:24:49.000 But what we're seeing here is the monetization of a new economic good in real time.
00:24:55.000 We've never seen this before.
00:24:56.000 You have to understand the process of gold becoming money and being used at the grocery store, say in the 19th century, that took thousands of years.
00:25:06.000 And so that volatility was spread out of that, sorry, spread over that time.
00:25:12.000 In our digital age, the monetization of a good can happen incredibly rapidly.
00:25:17.000 And it's a fallacy to think something can go from no value to being worth trillions of dollars with no sort of bumps along the way.
00:25:27.000 Eventually, what's going to happen is...
00:25:29.000 Let me explain where the volatility is coming from.
00:25:32.000 I think that's an important point.
00:25:34.000 The volatility is coming from the fact that Bitcoin is a fixed supply monetary good and the demand for it is growing exponentially.
00:25:43.000 And what happens when you have people pouring their savings into it, the price goes up very rapidly.
00:25:50.000 Then you reach the cohort of people who are interested in it in that phase and then you get a crash.
00:25:58.000 And then you get a new group of people who get interested and they come in and it goes up exponentially again.
00:26:03.000 Eventually, everyone on Earth is going to have some of their savings in Bitcoin, and its market cap is going to be enormously larger than it is now.
00:26:11.000 It's going to surpass gold.
00:26:12.000 Bitcoin now has a market cap of, I think, somewhere in the order of $400 or $500 billion.
00:26:18.000 And gold has a market cap of $10 trillion.
00:26:22.000 When Bitcoin gets to the same market capitalization as gold...
00:26:26.000 Can you give me those numbers again?
00:26:27.000 Sorry, Bitcoin's market cap versus gold.
00:26:29.000 Bitcoin is worth hundreds of billions of dollars and gold is $10 trillion.
00:26:34.000 So, Bitcoin is still a very small percentage of the market capitalization of gold.
00:26:40.000 When Bitcoin's capitalization approaches the same level as gold, its volatility is going to decrease commensurately because what that means is that much more of the world's population will have savings in it and they won't have extra savings to allocate to it.
00:26:54.000 What you're seeing, the volatility is just a function of people's savings moving into Bitcoin.
00:27:00.000 When Bitcoin surpasses gold and moves into what I believe eventually will be tens of trillions of dollars of value, the volatility is going to be much, much lower.
00:27:10.000 And that's when it's going to be suitable to use as a currency as you think of it in the standard sense as a medium of exchange where you go to the grocery store and you buy things.
00:27:19.000 It's not there yet.
00:27:20.000 And this is the evolution of money as it's always happened.
00:27:25.000 Money always starts off as a store of value, eventually becomes a medium of exchange, and then it becomes a unit of account.
00:27:32.000 People look at Bitcoin and say, it's not a medium of exchange yet.
00:27:35.000 It's not a medium of exchange.
00:27:36.000 That's putting the cart before the horse.
00:27:39.000 It has to go through the process of monetization becoming a deeply established store of value like gold.
00:27:44.000 Then it will be suitable as money as we commonly understand it.
00:27:48.000 And, you know, let me just – we're getting close to the end of the conversation here, but we've gotten pretty far in a short amount of time here, so let's get a little further, which is – To your point about there'll be bumps along the way, I think the real question, just from any first personal perspective of people who are really thinking through this is, how long are those bumps relative to what is fixed?
00:28:11.000 Which is, roughly speaking, at least fixed, which is human lifespan.
00:28:14.000 I mean, maybe we're going to make changes that blow the top off of the fact that human beings can live hundreds of years instead of 80 years on average.
00:28:24.000 But we're not there yet, and there's no indication that we're going to have a quantum leap there.
00:28:27.000 So there's this finite human lifespan relative to, as you said, the thousands of years it took for gold to reach that level of stability.
00:28:35.000 So as it pragmatically relates to decision-making today, I find the first principles argument alluring.
00:28:43.000 And I'm not off-put by the empirics of it, but as a pragmatic matter, If I'm looking at being the next US president, I'm focused on stabilizing the US dollar against that broad basket.
00:28:55.000 The ability to make that case versus Bitcoin on first principles when we're arguing that the historical volatility measured in months, years, or even a decade is still small on the long arc of history measured in millennia.
00:29:07.000 I could get there based on first principles.
00:29:10.000 But as a percentage of human life, That's still a relatively long time horizon, which is what I think prevents the migration to an all Bitcoin world.
00:29:19.000 I assume you are sympathetic to that argument and acknowledge it as somebody coming from someone who's actually quite sympathetic to the things you're saying about Bitcoin as I am.
00:29:28.000 I just wanted to air that perspective and maybe give you a chance to respond to that.
00:29:32.000 Yeah, that's a fair perspective.
00:29:34.000 And I actually conclude my book by saying I believe, and I genuinely believe this, that Bitcoin will become the world's reserve currency in 50 years.
00:29:40.000 That's what I see as a time horizon.
00:29:43.000 I think things are definitely accelerating much more because of the fact that we're so interconnected globally in a way that we weren't even, you know, 30 years ago.
00:29:52.000 And I think on a shorter time horizon, in the time horizon of 5 to 10 years, I expect Bitcoin to have a similar market capitalization as gold.
00:30:01.000 And that's the size at which it will start to affect monetary policy.
00:30:06.000 It's the size at which central banks will look at it.
00:30:08.000 And if the price starts rising, they will start worrying about their national currencies and people fleeing their national currencies into this alternate form of savings.
00:30:17.000 I think eventually there's an inevitability to Bitcoin because of the fact it's so ideal for savings.
00:30:24.000 Whether you choose it to back your currency or not, I think your hand will be forced eventually.
00:30:28.000 It's just whether or not you get ahead of the curve or you're behind the curve.
00:30:33.000 I would say about your idea of a basket of currencies, it's far superior as an idea to what we have now.
00:30:40.000 Backing the US dollar by something that can't be printed is a huge advance in what we have today.
00:30:51.000 Looking ahead, you would want the US to have some Bitcoin in reserve because if a currency becomes the reserve currency and your nation doesn't have any of that currency in reserve, you become poor.
00:31:03.000 You become impoverished.
00:31:05.000 If gold were to become the global reserve currency again, the US would be fine.
00:31:09.000 We have plenty of gold.
00:31:10.000 The US is the largest holder of gold on Earth.
00:31:14.000 But if Bitcoin were to become the world's next reserve currency, as they believe it will, it will be countries like El Salvador, which have already adopted a Bitcoin standard, who will enrich themselves.
00:31:26.000 Suddenly, they will have a large supply of the currency that's used to transact between businesses and nation states.
00:31:35.000 So, the idea of a basket is fine, but make sure the US has got some Bitcoin in that basket.
00:31:41.000 It does actually have Bitcoin, but unfortunately, the US government has accumulated a large supply of Bitcoin through these criminal investigations, shutting down Silk Road, which I don't want to take a perspective on whether it's right or wrong, but the US has Bitcoin.
00:31:55.000 The problem is it keeps selling it.
00:31:57.000 It's absolutely insane.
00:31:59.000 It's like the...
00:32:01.000 The British Exchequer, they sold all of their gold in 1999 at the absolute bottom of the market.
00:32:08.000 The US government is doing the same thing.
00:32:10.000 They've got Bitcoin- You're saying not build a new Fort Knox instead is what you would say.
00:32:14.000 Exactly.
00:32:14.000 Build a new Fort Knox, keep it in your basket of currencies or goods and make sure that if Bitcoin becomes the reserve currency, the US is not impoverished because of that because it's spurned Bitcoin and said, we don't We have no interest in this.
00:32:29.000 We don't believe in this.
00:32:30.000 We don't want to own any of it.
00:32:31.000 I think that's a huge mistake.
00:32:33.000 I appreciate that, man.
00:32:34.000 I've already learned a lot in this short conversation.
00:32:37.000 I'll tell you something about myself.
00:32:38.000 I'm not one of these people who tries to pretend something I'm not to satisfy or appease an audience.
00:32:44.000 I tend to find that I'm not Christian, but when I talk to a church, I don't pretend to be Christian, but actually it turns out we share things.
00:32:54.000 I kind of feel that way when I'm talking to Bitcoiners like yourself, which is that I'm not going to pretend to be something that I'm not, but it turns out that the nature of the concerns that motivate me about our financial system, about our monetary system, And that lead me to want to reform the Federal Reserve in the way that I'm planning to do as president are among the very same reasons that motivate you to get behind Bitcoin in the way that you have.
00:33:22.000 And I think we're allied in common cause that way.
00:33:25.000 And it turns out, the more I've learned about it, the more deeply sympathetic I am.
00:33:30.000 And I don't think your view of the world is crazy at all about, you know, we can debate the time horizon, but that there is some time horizon where You know, the world's, you know, various nations in the world resort to at least a currency that is actually scarce by definition in the way that it's actually constructed.
00:33:49.000 So I'm interested in that.
00:33:52.000 And I think that it's part of why we'll be soon.
00:33:56.000 I assume this will be well-received.
00:33:58.000 I think if we can work on the technical implementation of it, I'm writing my team about it.
00:34:02.000 Hopefully, by the time people hear this, we'll either be there or nearly there, ready to accept Bitcoin in campaign contributions.
00:34:10.000 We're working on that and I'll keep you apprised of whether that's something we're able to do or not, but every small step forward towards embracing innovative ways to check the failures of our existing monetary system, every little bit can make a difference.
00:34:26.000 We're working on that as we speak.
00:34:27.000 So I may ask for your help and advice on that if we run into any bumps in the road, to borrow our early expression.
00:34:34.000 But in the meantime, I just want to say thanks a lot for taking the time.
00:34:38.000 I learned a ton from you and I expect we're going to be, I can tell, I think we're going to be talking, Vijay, a lot more in the months and years to come about Bitcoin.
00:34:48.000 Thanks Vivek.