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The Honest Money Show is your guide to understanding what money really is, and where Bitcoin fits in. Hosted by Anja Dragovic, Australia's female-led, Bitcoin-only podcast, it cuts through the noise to explore how money shapes our lives, why the current system leaves so many people behind, and what a clearer, fairer future could look like.
Expect honest, accessible conversations with some of the most interesting thinkers in the space, the kind that take you from "I don't really get this" to genuinely curious. No hype, no pressure, just money, made clear.
Whether you're brand new to these questions or already deep in them, you're welcome here.
Once that clicked in my head, I was like
holy shit, this is really important.
There was some point...
their Bitcoin was worth 50 million dollars
Then they were worth 500 million dollars.
No, I'm not gonna sell it.
They're worth a billion dollars, not gonna sell it.
We are just simply gonna default
aah... and...repudiate the debt.
Joining me today on Honest Money Show is
Vijay Boyapati,
Vijay wrote the really famous article
called The Bullish Case for Bitcoin,
which many of you would have heard of.
And yeah, welcome to Honest Money Vijay.
Thanks for having me Anja
it's great to meet you.
As I was preparing for this interview,
I listened to your podcast on Robert
Bradelove and I had no idea that you
first heard about Bitcoin in back in 2011
until you did something about in 2012.
So you're like a really early,
early adopter.
And I'm just really curious to know the
backstory of what leed someone to learn
about Bitcoin so early.
Well, it was just luck.
I think it was the way I came across
Bitcoin was that I had a bet with a
friend and the bet was about federal
reserve policy where they're going to
increase interest rates or not.
It was a fairly small bet and we bet one
silver coin,
one ounce silver coin because we were
both kind of gold bugs and silver bugs
and we were interested in Honest Money.
And so we bet a silver coin,
I won the bet and my friend said, well,
I could give you the silver coin but
there's this new form of money that's
really cool and it's online and it's
called Bitcoin.
And I want to pay the bet in Bitcoin,
not in silver and I said, okay,
show me what this thing is.
And my friend explained that I needed to
download some software so I downloaded
the course software on my laptop,
which is a really cheap, you know,
$200 aces laptop piece of crap.
And it started downloading the blockchain
and verifying transactions and it got
really hot.
I thought the laptop was going to melt.
I was like,
what the hell is going on here and he was
like, oh, don't worry about it,
just let it finish and you finish
downloading the blockchain.
And then he helped me create an address
and he sent me five bitcoins.
I think the price was about $10 at the
time and the price of the silver coin was
about $50.
So he's giving me the equivalent amount
of value with five bitcoins and then he
showed me on a block explorer and said,
look, I sent you five bitcoins.
And I mean,
it didn't mean anything to me like it was
just a bunch of string of string of
numbers and letters like an address.
I didn't know what that meant and had a
five next to it and I was like, okay,
whatever.
I didn't know what this means.
I just forgot about it.
I kind of thought this has come some
weird thing and totally ignored it.
And the funny into that stories that that
laptop I gave to an ex-girlfriend when we
broke up and is Bitcoin started going up
later a few years later in price.
I remembered that laptop and I remembered
that I had five bitcoins and I started
thinking about that laptop's worth like
$10, 000 now.
It's worth like $50, 000 worth of $100, 000.
And so I emailed her and I said,
do you still have that laptop?
I have a few files I want to get back.
And she told me that it had been lost and
she was telling the truth because those
five bitcoins you can still see them on
the blockchain. They're in the same spot.
They've never moved.
So the private key, the private key is dead.
But anyway,
that's how I came across Bitcoin in 2011.
And at some point,
I sort of started thinking about like,
what is this thing that my friend was
telling me about and I started like
exploring it.
Mostly, I mean,
not as from an investor perspective,
I didn't like realize, hey,
this is the next big thing I need to put
a lot of money in it.
And I didn't think about that at all.
I was just like, this is kind of cool.
What is this thing? How does it have value?
And I had a background in Austrian
economics.
I studied Austrian economics and I was
really interested in that question,
not in the context of Bitcoin,
but in the context of gold.
And I had spent years thinking about like,
why does gold have any value? You know,
I have Indian heritage and like Indians
seem to love gold and want to own it.
But why?
And I had also come across this other
perspective and argument from some famous
investors like Warren Buffett who said,
if there were aliens and they came down
to earth and they looked at what we did
with gold, they think we're insane.
We did up this worthless rock from one
point in the ground and then we go and
bury it in another point in the ground.
Like, what are we doing?
Why are we moving like this useless rock
from one place to another?
And so there's also this perspective that
some people have,
it's very skeptical of gold,
like it's a useless. Why do you want gold?
And so I,
with my background in Austrian economics,
I was really interested in monetary theory,
like why does money have value?
And so that thought had been kicking
around in my head for years and I had,
when I used to work at Google,
I was an engineer at Google,
and I had many debates with a lot of
smart people on economics.
Google happens to have all these email
lists for people who have different
interests,
whether it's video games or economics or
whatever you're interested in.
There's a group of people,
there was a group of people who would
want to talk about it and economics is
one of my interests.
And so there's lots of debates about why
does gold have value and is hard money,
a better system than what we have now
with fiat money.
These debates happen well before Bitcoin,
a lot of people have these debates like
for decades before Bitcoin.
So I was super interested in that.
And then I pretty quickly realized that
Bitcoin is like digital gold.
It has all the properties that make gold
special,
but it has this extra property that makes
it even better than gold,
in that you can teleport value.
Like if I wanted to send your gold coin,
I would have to send it in the post,
it would take who knows a week or two
weeks to get to you.
There's some risk in sending it,
someone might steal it along the way.
I have to pay the cost of postage and
insurance and all this stuff is a pain in
the butt, right?
But I can send you Bitcoin as easily as I
can send you an email.
And that is a very,
very powerful ability to be able to send
you value without anyone between us,
a bank or a government,
without anyone's permission,
that's never been possible in human
history.
And so once I clicked in my head,
I was like, holy shit, this is like,
this is really important.
And so I just became obsessed with like
Bitcoin and the same questions about why
gold had value started, you know,
bouncing around my head with Bitcoin.
And it's even more curious because gold,
at least people have this story of like,
it's physical and it looks beautiful and
you can use for jewlery and some of the
questions of like why gold has value
people resort to that.
And it's really, it's really, it's really,
it's really completely nonsense idea.
If you really dig into intrinsic value,
you realize a nonsense idea,
all value is subjective.
That's a foundational idea in Austrian
economics.
Bitcoin doesn't even have that physicality.
You can't wear it.
So it's even more curious.
Like why does this thing that was created
by some anonymous guy on the internet
that came out of nowhere?
Why does that have any value?
And so that's been a question that I've
been obsessed with for goodness 15 years
now.
And yeah,
that's eventually led to an article which
I wrote and I can get into that and then
the book that was based on the article.
Yeah, I love that.
I'm just so curious because I mean,
Austrian economics is such a niche thing.
So how did you even get to study that in
Australia?
I had a bit of a research and there's I
think two professors at RMIT that teach
Austrian economics and Austrian leaning,
but it's not the mainstream.
It's definitely so how did you even get
into that?
And I'm just going to put it in context.
Someone once said,
which I think is really true for every
Austrian economist,
there's 10 Chicago school economists and
for every Chicago school economist,
there's 10 Keynesian economists.
So the vast bulk of economists have got
this kind of mainstream establishment
view of economics.
The government should be controlling the
economy to some large extent and should
be controlling the money supply.
This is the Keynesian school of economics.
Then there's a slightly more free market
school of economics,
which is the Chicago school when there's
far fewer of them.
And there's far,
far fewer Austrian economists that
basically impossible to find in academia.
So I came across Austrian economics when
I was at Google and I came across a group
of people who were libertarians.
And I didn't have any political views.
I didn't know anything about politics and
it's kind of came out of university
naively as a blank slate.
And I came to Google and I met some of
these libertarian people and I got
curious.
And one of them lent me a VHS tape of,
I ran being interviewed by Phil Donahue.
I don't know if you remember Phil Donahue
who's the one of the big talk show hosts
in the 1980s with Oprah and Phil Donahue
were the big ones.
And he gave me a VHS tape of iron ran
being interviewed by Donahue.
And honestly,
it was like being hit by a bolt of
lightning.
I'd never had a feeling like that, like,
oh my god, there's like,
there's an explanation for how so much of
the world works.
That really makes sense and is logical
and can explain the dynamic of how
governments work and why people behaving
the way they do and economic incentives.
And all this stuff.
And then I went down a huge rabbit hole
for several years learning about
libertarianism.
And then I came across Austrian economics,
which is kind of school of economics,
which is philosophically aligned or tied
with free markets and things a lot about
incentives and things like that.
But once I came across Austrian economics,
I went down that rabbit hole as well.
I learned about Ludwig von Mises,
I read human action.
I learned about Murray Rothbard.
I read everything that he wrote.
I just voraciously absorbing all this
stuff and gave myself a course in
effectively an Austrian economics.
I didn't go to school to do it.
I'm a computer scientist by training.
And yeah,
that's kind of how I came across Austrian
economics and learned about it.
And eventually I even gave a lecturer at
the local university University of
Washington on the application of Austrian
economics to healthcare policy,
which is kind of not related to Bitcoin
or gold.
But yeah, that's how I came across.
It was just while I was working at Google
and found a cohort of people who had
these crazy ideas and then infected me
with these crazy ideas and led to many
years of self learning and teaching
myself about this field,
which I think is one of the great tools
to understand how the world works.
It's fascinating and I've certainly built
up a love for it.
I haven't read human action yet,
but I have read a number of books in
economics or Austrian economics.
I should say I'm just kind of bracing
myself for human action.
It's a big book. But it's very good.
It's very very dense
I'm trying to find my bound.
If you do eventually read it,
you will feel this sense of
accomplishment that you would if you got
to the top of a mountain because of its
density, but also its scope,
the scope of what it covers it,
it goes from like epistemology and
philosophy.
Like how do we know anything?
It doesn't even start with economics.
It starts with like how do we know things
and then it builds a framework foundation
and then builds economics on top of that.
And it covers like all of these different
aspects of economics,
which help understand how our world works.
So yeah,
it's one of the most important books are
read and it's always cool to meet people
who read it because it's quite a rare
thing.
Yeah, it is.
Like I'm pretty much friends with a lot
of Austrian economists on LinkedIn that
you just find these people all over the
world when you find a niche interest and
it's such a yeah,
it's such a wonderful thing.
But I'm very curious to know like what is
money actually solving for in the deep
percent.
Like question,
I should firstly apologize is like some
like garden work happening outside my
house.
If you're getting any noise,
then I apologize for that.
But what is money that is such a deep
question and what problem does it solve.
I think one way to answer that is what
would human society look like without
money?
We would live in the most primitive state
of barter where it would be impossible to
have a division of labor where we would
live in very small villages and all trade
would be limited to the very small group
of people around us who we trusted.
Money really allows for civilization
because it allows it allows trade between
people who don't necessarily trust each
other and it allows the solution to this
problem in trade which is a double
coincidence of once problem,
which is if I am a fisherman and you grow
fruit and I want fruit.
You might not want fish at the time that
I'm selling it.
I want the fruit that you're growing but
you don't want my fish but maybe there's
someone else who wants fish and I can
sell to them and then I have something
that you do actually want like I sell
some fish to the baker and the baker
gives me bread and you want to trade that
fruit for the bread that I have.
What happens over time is that society is
kind of finding this common medium of
savings in exchange that everybody can
kind of standardize on so that you don't
have the double coincidence of once
problem.
So it allows trade to become much more
free flowing and with much less friction
and then I say hey I want some of those
fruit.
We don't have the problem where you like
I don't want fish but I'll take those
gold coins because I know I can use those
gold coins to go and buy stuff that I do
want.
So money provides the foundation for all
trade and all savings and then it allows
for specialization it allows for
societies to have people who become the
fisherman and become the baker's and you
don't have these very primitive barter
societies where everyone has to basically
do everything like the most primitive
societies people have to have skills in
effectively everything they don't have
the ability to specialize.
Because trade is so limited in scope to
the people that you know are in that
small society.
And it also allows much bigger
geographical scope for trade because then
you can trade with people you don't know
or trust because what you're getting back
from them is something that you know you
can exchange with a lot of people you're
getting gold for instance like I will
sell my products to someone far away that
I don't know for gold because I can use
the gold coins.
Because I can use that gold locally I
don't have to trust the quality of the
thing that they want to give me an
exchange.
And it has these other advantages as well
like money has the advantage that you can
take your savings through time and space, right.
You have something that you know will be
valuable tomorrow as well. Whereas if you
have just your the things that you have
grown or you built they can perish over time
like if you have fish and that's the
means of savings then you can't really
keep the fish for very long eventually
they will rot and then you don't have any
savings anymore.
Whereas if you have money you have something
where it's going to keep it.
It's going to keep its value over time so
it solves all of these kind of problems
between coordination problems in society.
How do you coordinate have a lot of
people in a society coordinate in a way
where they don't know or trust each other
but they can coordinate at distance and
without trust money solves that problem.
And so humans pretty early on developed
money because it really helped the
development of civilization.
And so then you get the question of like
what is good money why can't money be
fish or cows or you know there have been
a lot of things historically that have
been money.
What ended up winning and that's a really
interesting question too.
And that's also been understood for a
very long time one of the things I've
pointed out is the Aristotle over 2000
years ago wrote a treatise on what made
for good money.
We knew the properties of good money and
humans like didn't.
Aristotle kind of codified this in
document but when money emerged it wasn't
because someone sat down and thought
about the properties it's kind of emerged
organically.
It evolved by people trading with each
other and slowly but surely figuring out
that certain things are good to keep your
savings in and are good as a medium of
exchange.
Yeah and like some curious if with
subjective value theory if everything is
subjective how do we all end up agreeing
what money is worth.
That's another great question.
The way it works is you decide personally
that you value something more than some
other thing and just organically it
emerges that we converge on a one
particular thing because it benefits all
of us to converge on one particular thing.
And that's the thing that we each of us
slowly decide is the thing that we want
to hold this money because we see that
everyone else values it.
So it's just one of these kind of
invisible hand things where each of us
are coordinating because we're realizing
other people are valuing something and
because they're valuing it we value it
more and slowly but surely it emerges as
the dominant thing.
So eventually sets a price level because
people will on the market they'll say how
much gold I am willing to give up for
your bread or your fish or your fruit and
through thousands or millions of trades
prices begin to emerge.
And that's how over you know many
hundreds and thousands of years we got a
price level like gold was eventually
money.
And in the 19th century you could go to a
merchant and you could buy things with
gold and those price levels can all be
traced back through history by people
trading and establishing price levels.
And that happens now as well with money
even if it's not gold if it's fiat money
prices emerge just through constant trade
of supply and demand of people setting
prices and saying I'm going to sell my
bread for this amount.
Not enough people are buying it I have to
lower the price and that's how the price
level of money emerges just organically
and through through the free market.
I was doing some research and preparing
for this interview and I was looking at
the history of gold a little bit just
using AI.
So I don't know the accuracy but it was
interesting that it really took like
hundreds and thousands of years to not
hundreds of thousands but thousands of
years to evolve.
Into money and when it first came out it
was just something that was used by a
lead so it wasn't even adopted widely as
a medium of exchange and one thing that
helped it move along as a medium of
exchange was the government stepping in
and standardizing it.
So when that kind of removed somewhat of
the trust between people who traded
between each other that actually helped
with adoption with Bitcoin we don't have
that issue because you don't need to
trust anyone else it's entire like it's
verifiable and it's final settlement it's
immutable so what will you exchange it's
there forever.
And it's interesting because one of the
things that I think about all the time is.
Will Bitcoin become a medium of exchange
like where do you think we are because I
know you wrote in that a core about the
four different phases of monetization so
where do you think we are and do you
think Bitcoin will go the way.
Yeah so I should talk about what those
four different phases are one of the big
misconceptions that people have about
money and actually a lot of economists
make this.
Yeah,
error is that they define money as a
medium of exchange as if money emerges to
no vote out of nowhere and is suddenly a
medium of exchange that's like you said
that's not what happened with gold gold
didn't.
Get dug up by the first humans and they
started going to the grocery store with
it and buying stuff I mean that's just
not how money evolves the way it evolves
is it always starts out as a kind of
curiosity.
A collectible it's something that humans
see and think all this is cool I want
some of this not because it has any value
and this is true of all the early monies
like seashells and beads and gold.
They didn't have any use you weren't able
to feed yourself with them you weren't
able to do anything productive with them
but they were cool for some reason humans
have this desire to collect things which
are rare and you know there's very
interesting anthropological theory that
this is one of the reasons why Homo
sapiens ended up being the species which
dominated the earth instead of
Neanderthals and some of our kind of near
competitors like Denisovans is that we
had this desire.
To collect things which are rare and
because of that desire we were able to
evolve this social coordination through
money that none of these other
competitors to us had they were not able
to coordinate large groups in the way
that we were because we just happened to
like things which are kind of cool and
shiny right.
So yeah the first stage of money evolving
is the collectible it's just something
you see in these cool and then the next
stage it evolves into is the kind of
store of value stage where because you
see the other people value it that they
want to hold it for whatever reason it's
just cool you recognize other people want
to hold it you start desiring.
Holding some of your savings in that
thing because you know other people also
desire it and you can hold something
that's valuable knowing that other people
might want it and maybe willing to trade
for it.
Eventually when it becomes widely
recognized as something that is valuable
it becomes what you call store value it's
something that you can hold value in over
time you know that if you hold a gold
coin or chunk of gold and you give it to
children that your children will have
something valuable in their life that's
kind of something you recognize as a
store of value.
And then when widely recognized as a
store of value you get the next stage in the
evolution of money which is I now I can
trade with this thing because I know that
everyone else values it and so I can hold
it and then I can go say to another
country or trade with someone and say hey
you have a cow I have a gold coin I know
that you value gold can I trade you my
gold coin for the cow.
And then you start getting the medium of
exchange where instead of doing direct
barter trade where you have a cow and I
have some fish and that trade won't
happen because you don't want to fish we
do this.
In to media trade we do we have a medium
of exchange and so then you have the
evolution from the store value stage to
the medium of exchange stage where people
are starting to do commerce in this thing.
In the final stage of the evolution of
money is so many people are trading in
this thing and it's starting to look like
money that people start pricing in terms
of it they start giving prices in terms
of the money they say hey this cow is two
gold coins that's a price.
That's what we kind of understand money
to be today we go to a grocery store and
we see prices in terms of dollars
Australian dollars for you US dollars for
me.
And that's the last stage is called the
unit of account.
You can think in terms of the price level
of that monetary good and not only you
can think in terms of the price level you
can calculate profits and losses and run
businesses in terms of that.
So you have a bunch of costs when you're
running a business and you know how much
you have to sell for and the profit is
the difference that you measure in that
unit of account.
That's the final stage of the evolution
of money.
So Bitcoin really is at the earliest
stages of this.
When it was created in 2000 when the
network was launched in 2009 and you can
start transmitting bitcoins you were in
the kind of collectible stage that didn't
even have a price level.
And the only people who were interested
in holding Bitcoin with these kind of
very nerdy cypherpunk type people who
thought it was cool.
Just like the first humans thought that a
shiny guy,
a shiny rock was cool and they wanted to
own some.
You had some nerds who,
for them it was the equivalent of a shiny
rock.
They're like look at this cool token
thing that I can send across the internet
and no one can stop me. It's so awesome.
But then eventually a price level was
established in like late 2009,
2010 and then you started seeing a market
for Bitcoin.
People were willing to buy it and trade
it and the price level started increasing.
And that is a phase we're still in now.
What I call it is the establishment of
Bitcoin becoming a story value.
And I think we're still in that phase and
that phase could last many years it could
last decades.
And to the point in which Bitcoin is
widely recognized as having value by most
of the people on earth.
Right now I would say that the number of
people on earth who recognize Bitcoin as
a story value and that they might
consider keeping some of their savings in
is probably single digit percentage of
the earth.
Population of the earth.
When it's like 20 or 30 or 50% of the
people on earth recognize Bitcoin as
something that's worth holding savings in.
Then I'd say it's a deeply established
story value in the same way that gold is.
Like most of the people on earth
recognize gold is something that will
hold its value over time.
And so it has the perception of being a
story value.
Bitcoin I don't think is there yet.
But it's going to I think it'll get there
eventually.
Once that happens then you can move to
the next stage which is Bitcoin becoming
a medium of exchange.
And people are using it for commerce and
going to the grocery store and saying hey
I want to buy some bread and the prices
available in Bitcoin.
Once that happens and law a lot of
merchants accept Bitcoin and they start
showing prices in terms of Bitcoin then
it's a unit of account.
So to answer your question on you know I
think we're still at the early stage.
We pass the collectible stage.
I think Bitcoin is a story value but I
would call it a nascent story value.
It's sort of becoming a real story value.
Yeah and we've like obviously the price
performance last cycle was quite
underwhelming and below what most people
agreed on.
I remember very early in 2024 the general
consensus was around the 200, 000 mark.
I just really remember that figure because.
Yes there were some very bullish
estimates but most people thought you
know 170 180 2000 and then we got 126.
So do you think that is going to really
slow down adoption if we do continue to
kind of flatten out and just not get the
price swings that we did in the early
days.
Yeah so one of the reasons I think this
is happening is that.
The part of monetization that is
something which is an economic good
becoming money like gold going from a
rock in the ground to everyone owning
gold in the 19th century using it as
money is the distribution of that
economic good into the population.
And what does that mean for Bitcoin like
the big chunk of the supply of Bitcoin is
still held by people who were there in
the early days like you know the cypher
punks and the whales who came in in the
early days and bought a big big chunks of
Bitcoin.
And for Bitcoin to become money those
people have to kind of sell like you
can't have something that's money where
the everyone on earth is treating it as
money but there's like a thing.
A thousand people who own 50% of the
supply like that's that's not money.
And what happened I think when Bitcoin
got to 100,
000 that was a really important
psychological level for people who had
been in Bitcoin a really long time.
And because of that a lot of them started
dumping a lot of Bitcoin I mean there
were this is well reported there are a
number of whales who sold big blocks of
Bitcoin one whale soul I think about nine
billion dollars worth of Bitcoin that
they had been holding for 15 years which
is incredible right.
this sitting on an asset that has gone up
that much just think about how hard that
is by the way right think about most
people don't understand what that means
like there was some point between 2010
and 2026 when their Bitcoin was worth 50
million dollars right like that's the
world changing amount of money your life
will change for every if someone gives
you 50 million dollars but they said no
I'm not going to sell it then they were
worth 500 million dollars.
No I'm not going to sell it they're worth
a billion dollars not going to sell it
the ability to hold through that much
growth and not actually selling it is
absolutely extraordinary.
But even for some of these people who've
gone through like that kind of growth.
A lot of them have some number in mind
some psychological level like if Bitcoin
gets to X I'm going to sell a big chunk
of it and I think hundred thousand
dollars for whatever reason humans have
these weird like.
level of which we associate significance
to right whether it's a thousand or
because base ten is important to us we
have ten fingers.
We think in these psychological price
levels oh my god Bitcoin made a thousand
it made a hundred thousand I think a
hundred thousand was very big number and
I think it caused a lot of distribution
of supply.
That's difficult in one sense because it
really slows down the price going up it
would be better for the price in a sense
if those people just didn't sell because
then the supply coming onto the market is
less.
But in the long term it's better because
it's a distribution of supply for people
who are holding a big chunk chunk of the
supply into the wider market so that
means more people now have Bitcoin than
how to in the past and the people who
received the Bitcoin.
Are going to become stronger holders than
the person who had Bitcoin that was worth
ten billion dollars because it is a lot
of psychological pressure when you buy
something and it's worth so much and you
can change your course of your life right
you can do a lot of things with nine
billion dollars.
You become a weak hand in a way but if
you sell those bitcoins to someone who
bought them at a hundred thousand they
want to hold it for their own gain right
they probably don't want to sell it until
Bitcoin is like five hundred thousand or
a million so they become much stronger
hands.
So this is all to say I think the real
reason that Bitcoin stalled out of a
hundred twenty six thousand which is kind
of disappointing also has there's a
silver lining to it that there was a huge
amount of distribution of supply from
people who are long term holders.
And those people are not going to be able
to sell again you can't sell your Bitcoin
twice they're gone.
And so I think when Bitcoin starts moving
again I think it will move rapidly and
it'll move through those price levels
that people were expecting in this cycle.
Which Austrian economist
who's passed on would you most
be excited to tell about Bitcoin and why.
I can't believe you have a thought of this.
I think it's much you know the time.
Yeah it is an interesting question and
the reason I hesitate is because my mind
is going in two directions one direction
is I'd want to speak to Ludwig von Mises
because to me here's the greatest
economist of the 20th century and the
chance to tell him about Bitcoin I think.
would be amazing and to I think he would
understand it and I think he'd be
fascinated by it.
But then my mind goes into another
direction which is Murray Rothbard who
was von Mises a student and the reason I
think of Rothbard is because Rothbard I
think while brilliant made a lot of
mistakes as well.
and one of the mistakes he made that I
think a lot of early Austrians it
prevented them from understanding Bitcoin
was he made the contention that something
can't be money unless it has a commodity
use first.
and a lot of early Austrians got caught
on this and said Bitcoin will never be
money because what was it it wasn't used
for jewelry wasn't used for electronics
it had no commodity use first so that
prevents it.
This is the regression theory of money
that Murray Rothbard really attached to
and I think I would be really excited to
talk to you and say you know you're kind
of wrong.
not but to say it kind of respectfully
and say you know you're brilliant and you
understood all of these economic theories
of your mentor Mises.
but you went a little bit too far and
because he was really thinking of gold
and he was trying to explain why gold was
money and in that he went step too far
and said.
the thing that's special about gold is
that had this original commodity use and
it's just wrong.
you don't need a commodity use to get the
original value there the original value
can just be a whimsy it can just be
someone being curious or.
we humans have this weird desire like
whether it's for marbles or baseball
cards why do we want these things it's
inherent in us and that's where the
original value comes up from it doesn't
have to be because it had some.
utility I think that's one of the most
fascinating things about us as a species
is why do we value things.
just for their own sake because they're
kind of cool it's why it's why it into us.
but it's super power right as a species
that we can coordinate with groups that
are much bigger than any other species
much bigger than Neanderthals and
Denisovans and or any other species not
even human species.
and it's all comes from this quirk
evolutionary quirk that.
I feel seen yesterday I was went to get a
coffee and I saw a marble on the ground
and I was like wow that's so cool and I
wanted to pick it up and then I realized
maybe some kid lost this I'll just leave
it where it is but that compulsion to
just get the marble was there.
I remember it I remember it as a kid in
like primary school right I remember
playing marbles and trading marbles and
just being having this desire for
particular kinds of marbles because they
felt rare.
and you know companies recognize this so
they tap into that they they try and
create these prize programs or like
Pokemon cards are an example of this
where they try and create certain cards
which are very very rare.
and that creates these big industries
just because humans are wired this way to
want things that are rare and we get some
status from it as well like there's this
status premium to own things that other
people think are cool this is where
fashion comes from as well and art and.
I mean it explains a lot of human
behavior which is why I find it so interesting
Hmm, it is but you're also involved in a real
life debate post GFC about inflation
versus deflation and what was going to
occur do you want to tell us about that.
Oh yeah so you know before I knew
anything about Bitcoin like I said I was
interested in Austrian economics and
during the great financial crisis.
There was a debate a lot of Austrian
economists predicted that we're going to
have mass inflation because the federal
reserve increased their balance sheet
dramatically it went from.
I think just a few hundred million to
hundreds of billions of dollars.
And so the the Austrians at the time said
look all this money has been printed.
So we're going to get inflation is very
simple theory it's kind of called the
money multiplier theory where inflation
comes because the fed prince money gives
it to the banks the banks landed out and
then you have more money circulating the
economy because you have more money price
levels go up it's very simple theory.
And I took the other side of the debate
and said no we are not going to get
inflation because what's happened during
the great financial crisis is the banking
industry has effectively become insolvent
and they can't lend out this money.
It doesn't matter that the the fed is
printed all these reserves.
It's like if you print all of these
reserves all this money and you buried in
the ground you're going to get inflation
you're not going to get inflation it's
only if the money is circulating and the
money isn't circulating because the banks
aren't lending it out and why are they
not lending it out is because they had
these enormous losses on their books from
really irresponsible lending which came
from the business cycle which is nothing
the Austrians explain right where does
the business cycle come from it comes
from the federal reserve manipulating the
government.
And so they're also going to be a reserve
manipulating interest rates and causing
people to go into ventures that they
wouldn't otherwise go into at the time it
was you know the housing industry and
like creating all these housing and
lending to people who really shouldn't
have had.
to be in the house they didn't have the
cash flow from their employment to pay
for the kind of house that they were
giving the banks were giving the money to
buy and that created this huge bubble in
housing and eventually the bubble burst
and because it burst it made so the banks
were insolvent and didn't have the
ability to lend because they didn't have
the ability to lend.
That was kind of the main thesis of the
article and it proved to be correct there
was no inflation despite the federal
reserve creating hundreds of billions of
dollars in new reserves there was no
meaningful inflation until like COVID.
And when COVID came around then I said I
think we are going to see inflation now
because the mechanism was very different
the mechanism during COVID was the
government the money started did actually
start circulating because the governments
around the world start effectively air
dropped money into the population they're
giving people money.
And because they were giving people money
there's a lot more cash in people's hands
that they started spending and then
across you know the western world we had
very very high inflation I'm not sure
what it was like in Australia but we had
the highest inflation in the US that we'd
seen in like 40, 40 plus years.
Yeah like I remember post GFC in
Australia it was quite mild it wasn't as
bad as it was in the US like we were
remember I mean I wasn't into economics
or politics or anything back then but I
just remember we were probably more
affected by things that were happening
inside Australia the the booms and the
bust of the mining industry not so much
what was happening overseas but yeah
that's just my my flawed memory.
But I'm really curious to know what it is
that you think of the big print theory
and that the Fed will have to now to
manage the government debt have to do
like a bigger than ever print of money do
do how does that sit against your own
framework.
I think that's directionally correct I
think at a certain point when you have
enough debt built up the only way you can
service that debt there's three different
ways you can grow your way out of it.
The way to think about this is how debt
works in your personal life it's exactly
the same thing right imagine you earn
like a hundred thousand dollars a year
and you have a hundred thousand dollars
in debt like if you have enough money
that you can set aside from your job
after paying for your rent and paying
your taxes and paying your free of food
that you can make the interest payments
on the debt you're going to be okay.
and it would be useful if you could pay
not just the interest but some of the
principal down so you can bring the debt
down over time.
But if you're earning a hundred thousand
dollars a year and you have a million
dollars in debt you're in some deep shit
because the interest payments on that
debt will start overwhelming your income
you won't have enough income just to pay
the interest and so the debt will start
getting bigger just by the fact that you
can't pay down the interest.
So a couple of ways you can solve this
problem just at the individual level you
can become more productive or you can get
a better you can get like a higher paying
job right if you're earning a hundred
thousand dollars a year and you have a
million dollars in debt.
If you shift to a job which is half a
million dollars a year then you're in a
better position you can service it so
growth the equivalent of the nation state
level is growth the economy is growing.
The country is doing more things that are
economically productive more industries
are appearing.
Or AI is making things more efficient all
of those things can help you.
Another way to get out of the problem is
you can default on the debt you can say
oh my god our nation is bankrupt there is
no way will ever services to debt and we
are just simply going to default.
And some countries have done this the
problem with doing this is that no one's
going to want to lend to you anymore.
And so when no one wants to lend to you
anymore interest rates in the country go
through the roof like you you have to pay
massive interest rates because no one
trusts your nation anymore and so that in
a way constricts economic growth when you
have very high interest rates because if
you're a business and you need to borrow
to.
You know create your business and you
know in the short term pay your employees
it becomes much more difficult.
So defaulting is very painful then
there's a third option which most
countries eventually turn to which is
inflation which is this insidious way of
defaulting but not making it obvious you
do print more money.
And when you have more money in the
economy it effectively makes it easier to
pay down the debt because the debt the
difficulty of the debt is the relative
amount of debt to the amount of money in
the economy.
If there's like a million you know a
million dollars in debt but there's money
flying all over the place and there's
tons of money then it's easy to pay down
the debt.
So there is a political tendency to want
to inflate when when you have like a lot
of debt the nation is trying to service a
lot of debt and if you look at the debt
levels across.
Most of the world especially Western
world these are unprecedented amounts of
debt these are kind of wartime levels of
debt like nation state sometimes get into
a lot of debt because they go to war with
another country and they have to borrow
to fund.
Just prosecuting the war against another
nation so after World War 2 the United
States had a very high debt level but
we're in peacetime now I mean the US
isn't running some world war but we have
debt levels which are comparable to World
War 2.
So that's really really scary and it
becomes scary when interest rates go up
because right now the United States the
interest on the debt to the US has
something like 30 trillion dollars of
debt the interest payments alone on the
US debt.
are about the same amount as the US
spends on the Department of Defense.
Which is one of the biggest expenditures
right and so I heard that yeah I heard
that the interest on the debt is higher
than the defense budgets.
Yeah yeah and that's at current interest
rates so the scary thing for the US
government is what if interest rates go
up.
Like what if they have to pay instead of
paying 5% interest to service the 30
trillion dollars in debt what if they
have to pay 7% what if they have to pay
10% the number if it goes up even a
little bit all of a sudden the nation
becomes insolvent right because it's not
bringing in enough revenue through taxes
to be able to pay for these things like
if suddenly.
Instead of making a trillion dollars in
interest payments a year you have to make
two trillion dollars something else has
to be cut out.
Right or taxes have to go up a lot to get
in more revenue but if taxes go up a lot
then you really hope economic growth and
then.
You know you're destroying the economy of
your country so they're not easy choices
here.
And that's the danger you it's very clear
that the people who are in power in the
US government in the Treasury in the Fed
understand we're in a very dangerous
point and they are trying to manage down
the interest rate they recognize this
kind of a panic every time the US
interest rate starts creeping up to 5%
there's a panic and there's like what do
we do how do we address this.
The Treasury Secretary comes out and
starts talking about plans for like how
the US is going to be more physically
responsible and how we're going to pay
down our debt and how we're going to have
more growth.
They're very aware that we're in a
dangerous position so I think it's
correct.
The one thing that I think could save us
even though we're in a very precarious
position is growth there is the potential
now to grow ourselves out of this through
artificial intelligence.
Because artificial intelligence is as
important as significant as the
industrial revolution maybe it's like
even bigger than the industrial
revolution it has the potential to
increase human productivity.
And just by that potential we could grow
our way out of the debt.
So I think the default assumption should
be yes there is a potential for a big
print but there is this kind of wild card
out there.
How important is artificial intelligence.
We don't know yet but we will see over
the next three to five years whether it
does have a dramatic impact on global
growth and productivity.
Do you follow Australian economics much
they say is you most interested in the US.
I hear bits and pieces just because I
have so many family members in Australia
and yeah I do hear that Australia is
becoming kind of more socialist and more
kind of confiscatory in its tax policies
and going after people's superannuation
and things like that.
I have heard a little bit about that but
I also think this is a global trend.
It just it seems like Australia is kind
of out in the front of the trend in a way.
Yeah I think the lever that we're pulling
at the moment because we've just
surpassed a trillion dollar debt
ourselves.
We're in the trillions.
The lever where pulling is just taxing
more heavy hand taxation so it'll be
interesting to see what happens but.
As a last question I'm really curious to
know having you know they've been so many
years that have passed since you wrote
the bullish case for Bitcoin.
Are you still as bullish?
Are you less bullish and why?
I remain very bullish on Bitcoin.
I think the reasons why I was bullish on
Bitcoin have not changed.
I think it's the best form of money that
humans have ever invented and if you look
at the properties that make for a good
money and a good store of value.
Bitcoin excels across all of the
different attributes of money that make
gold the best store value for 5, 000 years.
One of the things I like to point out is
that information in our world travels at
the speed of light but understanding does
not.
And I think it takes time for people to
understand the value proposition of
Bitcoin and it happens in waves.
It happens in these cycles that we've
seen where Bitcoin will go up a lot in
price and then crash and then have this
plateau where people become disinterested
and the media is not focusing on it and
then go through a new cycle.
For some reason that's what the process
of monetization looks like.
Which is kind of, I think,
frustrating for some.
It would feel nice if it was very steady
and linear and the price of Bitcoin just
went up in a straight line.
And that adoption happened in a straight
line.
Like the same number of people adopted
Bitcoin every day but that's just not
what happens.
But I believe in the fundamental reasons
why Bitcoin is valuable and why it has
become so valuable.
I think they are still true.
I think it's just a matter of time before
we get much wider adoption of Bitcoin.
Nice. Alright,
well thank you so much for your time.
I really really love this conversation
and yeah.
Thanks for having me Anja.