Audible for the best Bitcoin content out there. This is a crypto Connie quick read. Before we jump into today's episode. I wanted to announce that the little bit coin of book audio book has just been has been finally released on Audible and it is read by Yours Truly guys Swan. So definitely check that out if you would like it's a really really good book. I had a lot of fun doing the audio book for And I think you guys would probably love that book. So I'll have the link in the show notes. So you can jump up on Audible and grab yourself a copy of the audio book is like two and a half or two hours and 40 minutes or something like that and it is an excellent breakdown of the the whole Bitcoin idea. But today for today's show. We're going to be reading I don't have explicit permission for this but this kind of made the rounds particularly on bitcoin Twitter like last Tweak some time and it is by Ray. Dalio. He posted it on LinkedIn and I can't imagine that he would care. So I'm just going to ask forgiveness instead of permission on this one and it's supposed that he made titled the world has gone mad in the system is broken. And I think this is going to be a fun one to talk about it's not very long. So let's go ahead and jump right into it and we'll talk about this afterward. The world has gone mad in the system is broken. I say these things because money is free for those who are credit worthy because the investors who are giving it to them are willing to get back less than they give more specifically investors lending to those who are credit worthy will accept very low or negative interest rates and won't require having their principal paid back for the foreseeable future. They are doing this because they have an enormous amount of money to invest that has been and continues to be pushed on them by central banks that are buying Financial Assets in their futile attempts to push economic activity and inflation up. The reason that this money is being pushed on investors isn't pushing growth and inflation much higher is that the investors who are getting it want to invest it rather than spend it. This Dynamic is creating a pushing on a string Dynamic that has happened many times before in history though not in our lifetimes and was thoroughly explained in my book principles for navigating big debt crises as a result of this Dynamic the prices of financial assets have gone way up in the future expected returns have gone way down while economic growth and inflation remains sluggish. Those big price rises in the resulting low expected returns are not just true for bonds. They are equally true for equities private equity and Venture Capital though. These assets low expected returns are not as apparent as they are for Bond Investments because these equity-like Investments don't have stated Returns the way bonds do as a result. Their expected returns are left to investors imaginations because investors have so much money to invest in because of past success stories of stocks of revolutionary technology companies doing so well more companies than at any time since the.com bubble don't have to make profits or even have clear paths to making profits to sell their stock because they can instead sell their dreams to those investors who are flush with money and borrowing power. There is now so much money wanting to buy these dreams that in some cases venture. Investors are pushing money on to startups that don't want more money because they already have more than enough, but the investors are threatening to harm these companies by providing enormous support to their startup competitors if they don't take the money. This pushing of money on to investors is understandable because these investment managers especially venture capital and private Equity investment managers now have large piles of committed and uninvested cash that they need to invest in order to meet their promises to their clients and collect their fees. At the same time large government deficits exist and will almost certainly increase substantially which will require huge amounts more debt to be sold by governments amounts that cannot naturally be absorbed without driving up interest rates at a time when an interest rate rise would be devastating for markets and economies because the world is so leveraged long. Where will the money come from to buy these bonds and fund these deficits it will almost certainly come from central banks, which will buy the debt that is produced with freshly printed money this whole dynamic in which sound finances being thrown out the window will continue and probably accelerate especially in the reserve currency countries and their currencies IE in the US Europe and Japan and in the dollar euro and yen. At the same time pension and Healthcare liability payments will increasingly becoming do while many of those who are obligated to pay them don't have enough money to meet their obligations right now many Pension funds that have Investments that are intended to meet their pension obligations. Use assumed returns that are agreed to with their Regulators. They are typically much higher around seven percent. Then the market returns that are built into the pricing and the that are likely to be produced as a result many of those who have the obligations to deliver the money to pay these pensions are unlikely to have enough money to meet their obligations. Those who are recipients of these benefits and expecting these commitments to be adhered to are typically teachers and other government employees who are also being squeezed by budget cuts. They are unlikely to quietly accept having their benefits cut while pension obligations at least have some funding Most Healthcare obligations are funded on a pay-as-you-go basis and because of the shifting demographics in which fewer earners are having to support a larger population of baby boomers needing Health Care, there isn't enough money to fund these obligations either since there isn't enough money to fund these pension and Healthcare obligations. There will likely be an ugly battle to determine how much of the Gap will be bridge by one cutting benefits to raising taxes and three. Printing money which would have to be done at the federal level and passed to those at the state level who need it. this will exacerbate the wealth Gap battle while none of these three paths are a good printing money is the easiest path because it is the most hidden way of creating a wealth transfer and it tends to make asset prices rise after all debt and other Financial Obligations that are denominated in the amount of money owed only required the debtors to deliver money because there are no limitations made on the amounts of money that can be printed or the value of of that money. It is the easiest path the big risk of this path is that it threatens the viability of the three major world Reserve currencies as viable store holds of wealth at the same time if policymakers can't monetize these obligations, then the rich poor battle over how much expenses should be cut and how much taxes should be raised will be much worse as a result. Rich capitalists will increasingly move. Places in which the wealth gaps in conflicts are less severe and government officials in those losing these big taxpayers will increasingly try to find ways to trap them at the same time as money is essentially free for those who have money and credit worthiness. It is essentially unavailable to those who don't have money and credit worthiness which contributes to the rising wealth opportunity and political gaps. Also contributing to these gaps are the technological advances that investors in the entrepreneurs that are previously mentioned are excited by in the ways, I described and that also replace workers with machines because the trickle-down process of having money at the top trickle down to workers and others by improving their earnings and credit worthiness is not working the system of making capitalism work. Well for most people is broken, This set of circumstances is unsustainable in certainly can no longer be pushed as it has been pushed since 2008. That is why I believe that the world is approaching a big paradigm shift. All right, and that concludes the world has gone mad and the system is broken by Ray dalio. So I'll want to go into this. Let's go ahead and hit our sponsor really fast and then we will come back. For anyone who has a podcast anchor cannot be beaten particularly for trying to get off the ground their entire platform is free. This includes unlimited hosting both in audio that you upload and how much your listeners download. I have uploaded an incredible library of audio now and I've never paid anchor a dime. In fact, they connect me with other sponsors and have run an ad consistently on my show. So they've paid For exposure to my audience that's really hard to beat even if we ignore that I can record directly in the app or my browser. I don't need any other software. If I don't want it I can edit at sound effects clips and they automatically published to all of the top podcasting platforms. I never had to do a thing. So if you were thinking of starting a show or already have a podcast, there's no better platform out there check out anchor by downloading the app or go to Anchor dot f FM today So this is why Bitcoin was created. This is this is the very situation that or these are the these are the sets of circumstances and consequences of monetary manipulation. And what's kind of important about this is not really what's being said because you can find this a million different ways for 10 years in the Bitcoin space this what everybody in Bitcoin has been talking about it is it is Stranger to our sphere particularly with the Austrian economic view of things but it's who is saying it right now Leo is I mean, maybe I admit I don't know a lot about him, but I have heard him in a number of different situations and he sounds he's incredibly mainstream for the majority of his thinking I'm at least in my estimation again. I'm a little bit ignorant of Ray dalio, but I've heard some heard him say some very Keynesian things about like productivity and like how wealth is created. So, I don't know any I couldn't give you any real specifics on it, but he's a founder and billionaire founder of Bridgewater Associates Investment Group, and he's pretty famous for having navigated the previous debt crisis the 2007 to 2009 ERA with Very well, let's say that and but I'm kind of curious after having read this I've dug a little bit more into him than the kind of tertiary knowledge that I knew about him and may actually be like diving into one of his books just to kind of get a better idea of his view of things. But yeah, so this is the the kind of this last sentence. This is why the bully I believe the world is approaching a big paradigm shift. Lift and the recognition of the threatening position or the threat to their position of the dollar euro and Yen and essentially the dominance of the US Europe and Japan economies here is pretty powerful. I don't think that is to be dismissed particularly from to it is coming from but again, we've been talking about this for years, but it's such a great explanation. He kind of calls it capitalism at the end, which I think is ironic capitalism has become such an empty nonsense word. It doesn't it doesn't mean anything anymore because capitalism once meant non-intervention into the economy and now it's somehow is just capitalism just means greedy people. It just means that people looking out for themselves, which is funny because that just means that if that is now like, you know definitions of words change over time because they get used politically things that get particularly as a politically particularly things that get politically abused to basically warp their meaning for you know, political gain and capitalism is a prime example capitalism used to mean literally a free market a freaking economy and this could not be further from it now capitalism means some vague idea of just people are greedy and want to own everything I Guess which just means that socialism communism any system with people in it is capitalism now and so like what we are looking at is socialism. He's describing socialism the Central Bank of this country, which has a government-granted monopoly on money has a government-granted monopoly privilege to manipulate prices in the economy to manipulate the price of time which is the interest rate is creating is printing money out of thin air. You by up Financial assets off the economy that is the socialization of the economy that is a highly socialized and centralized monetary system that is having effects across the board this is why these Healthcare liabilities these pension liabilities were possible to begin with because they owned the printing press so the government's in these states made all of these promises that they couldn't fund and this is all now coming due And the fact that the only weight gain you rightfully recognized is that the only easy way out of this is to print money, but that it will destroy the poor essentially it will worsen the wealth Gap in a pretty profound way that his continued and he seems to suggest though. I'd have to read his other work and kind of dive a little bit deeper but it kind of sounds like He suggests that this started in 2008, which really this whole Trend started in 71 is really the the origin date of when these things started to diverge and when we got these the most extreme of these debt cycles and the gap between productivity and the increase in the standard of living that were actually toe-to-toe is essentially up until that point really great just for visuals and rabbit hole unto itself, which we talked about on this show WTF happened in 1971.com highly recommended I'll put that in the show notes as well as a link to a raid on Leo's Twitter and Linkedin here. But this is this is the result of a an economy where money has no real price. This is the result of the Miss Alec the trillions of dollars in misallocation of resources that come when your economy is managed by a group of by a board essentially a board of people aboard room of people it bunch of politicians who have no idea what the hell they're doing and a bunch of Bankers who think they're their gods essentially the narcissism of this whole system is pretty profound that they think they're going to manipulate the prices which are a consequence of real-world resources being moved in real world demand and Supply shifting and that they're going to manipulate the prices and then that will actually have an effect on the resources when without the price you have no idea what you're doing. The price is what's telling you all the information I give the example. Gave, I think yesterday in yesterday's episode was that it's like covering up the symptom. It's like solving the symptom of your cancer and then pretending that that means your cancer has gone away. No, you have hidden the fact that you are sick. You've done nothing. And in that exact same way. What we are doing is we are hiding the fact that our economy is incredibly sick and were hiding it behind false prices by just fake money and they don't know what to do with it. I don't know what the money is, too. Free it's it's we have one is it twenty trillion now in negative yielding debt, and there's only going to go up. So whatever it is today, even if I'm even if it's only like 19, I've only got like a couple weeks before I'm right. So like as this continues to unfold and there's no way out of it. There's no way out of it and he talks about he's talked about in a couple of different pieces actually watched a video not too long ago right around when this came out by him where he talked about how he does a good job of basically navigating a couple of the basic principles of economics and how you know, when we actually increase all these Technologies that's what creates makes people more productive and per man hour and makes you know the economy grow and makes everybody standard of living grow and that's all great and good, but he it's interesting that he brings up and maybe he means it in this way but talking About how the employees like there's going to be a large cut in the number of workers that are like basically a huge shift in the type of jobs and the breadth of jobs that are in the economy because of automations and machinery and all of that good stuff. But think about when you're in a productive economy where money prices are actually accurate where you're actually representing what's happening with the real resources in the economy and therefore you can adjust your behavior. Based on his prices and that means the resources get allocated properly when that mechanism is actually working. If you don't know use of knowledge in society by fa Hayek, if anybody hasn't listened to something that covers go hours into just the fascination of the price mechanism. But anyway, so if that mechanism is manipulated or broken, well, then what you end up with is you're hiding the fact that we can't afford things you're hiding the fact that there aren't at the resources there. So in a normal situation where that mechanism is operating normally what you have when you automate a task is you're able to you know, let's say you had five people doing a job and now you can have one person managed a machine that produces what those five people produced. Verizon from the economy as a whole outside of the fact that four people got fired their from the economy as a whole you haven't lost value. What you've done is you've actually made that one person so productive and you could do this across the entire economy, but the value is still there though the resources that were hiring those other four people are still there and able to hire them or to expand into new areas of the economy. You didn't lose the Resources for that so the economy can still afford those for people to work. And in fact, they can afford them better now because one person is doing all of their previous jobs, but they do have to figure out something new to do. That's the only that's what happens is the value shifts in the economy. It doesn't go away. You don't actually lose jobs that's like saying that if with the invention of the tractor which made, you know went from 95% of the economy with Arming to like now like 4 or 5 percent of the economy. I don't know. I'm just pulling these out of my ass. I know it's like it was Plus 90 before you know 1900 and now I know it's very low so that's all I got but uh that that shift that means that we're going to have some odd ninety percent of employees out of business that everybody's just going to be poor when in reality it is exactly what freed up all of the resources for us to invent things like the internet computers. Cars planes like all of this stuff exists because we became we became productive enough to free up all the resources needed to do those tasks to make those Innovations, but it meant that everybody who did Farm before now has to figure out how to use a computer or how to fly a plane or whatever it is, but that's not a problem for an economy that's highly productive and for people who aren't so over-leveraged that they actually have funds for Mobility. That was one of the things in what his government done to our money and think I don't remember I'll see if I can't find the piece this comes from but talking about how the ability the stickiness of wages and the price of wages wages are specifically sticky because they are directly tied to how long workers can refuse to work like employees can refuse to work. So if employees are leverage everybody's in debt, and they're basically barely skimming by at 0 by paying off their minimum payments with their salary. Well, then they can't quit their slaves. They are stuck because the essentially our monetary system has forced them into a form of debt slavery by stealing all their value without them knowing but if those people have savings well, then they can quit work for a month and go find something else or learn something new get a certification or This that or the other and then go find some other position but that requires that they have enough resources. They have savings to actually say no I'm not going to do this because you're not paying me enough or that's a terrible deal. I'm going to turn you down because I actually have a little bit of financial Independence and I'm not leverage to the hill, but you can really only get that you only incentivize that in a sound money economy. You incentivize the exact opposite when you're manipulating interest rates to get people to borrow resources that don't exist in the economy. And that is what we're doing. We're popping everything up on promises just like he talks about Investors raising money for dreams. Like they don't even even have real plans, but they're desperate to find a place to put all this fake money. And this is the environment that Bitcoin exists in like there could not the Domino's could not be more perfectly laid up to understand and see this is a huge. This is like a century-long paradigm. It's happening. Like the scale here is pretty profound. We're talking about the world Reserve currencies not being that anymore. Um, and it's going to be a huge shift, but I've totally forgot to finish the point that I was going on to was that so in a productive economy where prices real automation is great automation just on its face is a wonderful thing for the economy artificial intelligence stood should make us Unbelievably wealthy but what's actually going to happen? And I don't know if this is what he was getting at. But the reality is that we have all of this money is actually propping up where we don't have the resources. The resources aren't actually underlying all of these prices it solve liabilities and Promises. So what happens is in a normal economy, you've got the value there. You've got the resources there to hire those four people that got fired in this economy. That's just a Cut loss. If you don't have since they don't actually have the added resources and that added value is just trying to catch up with the debts. We had with the obligations that we couldn't afford those four people get fired and they don't get hired anywhere else because there's no growth. So you get the exact opposite effect in a sound money economy where the like interest rates and prices of goods are actually telling us about the resources which the point of money that is the point of the damn tool in that economy. When those four people lose those lose their job due to automation those four people devalue to hire them is still inside the economy. The resources are actually there in a debt based economy in one where we are leveraged to the hilt and none of this is in balance. And all of it is based on liabilities that can't be paid back obligations that can't be paid back and promises that are totally Fucking empty. Well, then those four people lose their jobs in the resources. They basically admit. Okay. Well, we don't have the resources to hire them back anywhere else and this is just kind of a general Collective idea of what the resources look like in the economy. It's not like one person is making this decision, but it's just so crazy. Like what a disaster this whole thing is and this is this is really 50 60 years coming. These are huge like long Long long term debt cycles and this is the shift in the this is a shift in you know World Reserve currency. This is this is a shift in the foundations of our economic organization and that Bitcoin has had 10 years worth of maturity and might have another might we might be able to buy it another three to five years to Basically be an escape valve on this understand. None of this is possible in Bitcoin. This is the problem that Bitcoin solves you can't do fake money. You can't play the Central Bank game. You can't manipulate interest rates because all you can do is look that's how they meant to manipulate interest rates is they they buy up as assets that they ought they have money. They print pump money into the system when the interest Start going up so that they don't go up. So there's always pressure pushing them down. That's that's their only tool. Is it just keep printing money and a handful of various ways. Basically this whole imbalance using an accounting system that can't be manipulated. That's what this is all a result of the political and Banking and Central Banking manipulation of ledgers of monetary ledgers, that should result or should actually represent real. Is but they're fudging with the numbers and not telling anybody that we didn't change the resources the real resources in productivity haven't moved an inch, but we're going to be manipulate this because it stops are sneeze stops are sneezing and it makes us feel it makes us look healthy, but we're really dying on the inside because we've just covered up the fact that we have a disease and we're telling everybody that it's good. You should go on a trip and you should go out and party and drink and everything is good because you're not sneezing anymore when really you've got like tuberculosis or something terrible and you're gonna die, but and you should absolutely be resting right now. But instead you're going to go do all these great things because your doctors told you your doctors giving you a pill to cover it all up and told you that you're totally fine. Everything's gonna be great. Yeah. So that's kind of where we are right now. That's that's it's not it's not pretty but it's So crazy that Bitcoin a decentralized on manipulable monetary system. I'm too forward for an entirely New Age like for the digital age has sprung up in the time that it is needed more than anything else. Now write a Leo doesn't know the first thing about Bitcoin which is a totally understand and I don't hold it against the guy don't hold it against anybody. It's a stupidly complex and nuanced. Ecology and to know like even with like his knowledge and stuff some of the things that he does know about. I feel like sometimes the the knowledge and understanding of networks of like Game Theory some of these things are so critical to all of this like trying to understand why Bitcoin works and why Bitcoin is actually not controlled by any single party is one of the most difficult things to understand to have like a accurate image of in fact Think you can really only have some vague abstraction of what it actually is because it's just too it's too damn complex and to do a multi-faceted to really imagine so I don't hold that against anybody but he has no idea what Bitcoin versus all coins. I think I heard him give some sort of speech about like, oh a theory amor. I think I think he said something about a theorem. I don't know. He was just talking about cryptocurrencies in like the fact that there's going to be a bunch of them and They are kind of it's a basically that that blockchain is great narrative that after you've been in this space for like nine hours. That's kind of what you come out with until you have to really do hard digging and more specifically the history of money. I feel like and a great place to do. All of that is the crypto Konami podcast because we have read it all and if we haven't if you I if I have not read it, please send me. link to something and I will try to get it on the show because I want to have the most thorough background of all of this stuff that I can possibly imagine so that if anybody wants to dig into this even wants to understand our financial history what has led up to this the critical pieces of our financial system that creates exactly this sort of massive bloated imbalance and the foundations of previous World Reserve currency is the foundation of our current Reserve currencies history of money as a tool Bitcoin cryptography the cypherpunks all of this shit. That's why I'm here. I'm trying to put it all together in one thing that will tell you the full story in just 500 short hours of listening. Thank you guys. I guess we'll go ahead and do that here. I just wanted to rant about this piece. This is really kind of fascinating that has this is come when it has an from who it is come from and it's clear things are changing. It's clear that this is anybody who isn't just painfully blind and just shoving their face in the dirt is obvious. It's so obvious. This is unsustainable and that were only moving in One Direction everything. Getting more negative. In fact, there was just a report. I think Matt Odell. I think I saw him tweeted. Maybe I don't remember but I'll see if I can't find it. But it German savings accounts are now getting charged negative interest rates. And and I think Germany actually is one of those countries in the case for electronic cash by Brito Jerry Jerry Brito. He talks about like the amount of cash. - that actually exist in certain countries and I think Germany is actually one that has a high percentage of cash still if I'm not mistaken. I think there was like like well over half of their economic activity, like like consumer base level activity is still done in cash. I could be wrong on that number, but I know it's in that piece. So maybe I'll look it up, but that's another one to really get into because Germany would actually be in a position to not have to pay that price. To basically give the middle finger to the banks. Whereas a lot of other countries that are cashless now or trying desperately to go cashless which Germany is included in that boat. But those countries will basically have to eat the negative interest rates with a lot fewer options Bitcoin is basically the only option for those probably but they're literally just going to start charging negative interest rates on savings accounts for even smaller balances. Whereas I think is Before like you know over a million dollars or you know some we don't want to piss off too many people number. I don't know what it is. But yeah, so it's getting crazy. It's getting crazy guys. I'll end this here. This is the end of my rant about the world has gone mad in the system is broken by Ray. Dalio. I'll really cool little post really kind of sent out a storm on Twitter. So I thought it'd be fun to cover. Hopefully Ray doesn't Pissed off at me if he actually finds out about this or listens to it. And yeah, that'll be that. Alright. Thank you guys so much for listening. I'll have the links to this piece to Ray dalio on Twitter with the blue check mark and all that good jazz and to a couple of those other examples of the use of knowledge in society case for electronic cash and I'll try to figure out what that one about the Fiat money was I Remember the name of it all top of my head. I guess I will catch you all next time. Don't forget the little bit coin book now has the audio book it just dropped and it is read by yours truly and it is such a good book. I highly highly recommend it. And also if you want to see me at bit block boom, you want to come hang out with the Bitcoin maximalist conference that will be in August of 2020 go to bit block boom.com use offer code CC for 30% off. You tickets join me out. There will hang out get drunk top Bitcoin. Have a good old time. All right. Love you guys. Thanks for listening. I'll catch you tomorrow. Take it easy.
The World Has Gone Mad, & the System is Broken. Ray Dalio drops a bomb recently with his post showing the sorry state of our money, the cracks in our world monetary system, and the coming paradigm shift. A short piece that requires much ranting, don't miss it. Link to the original post and Ray Dalio's twitter page: https://www.linkedin.com/pulse/world-has-gone-mad-system-broken-ray-dalio/ https://twitter.com/RayDalio  Other great works mentioned in this show: The Case for Electronic Cash https://anchor.fm/thecryptoconomy/episodes/The-Case-for-Electronic-Cash-Jerry-Brito-e3rhj6 Use of Knowledge in Society - Parts 1 & 2 https://anchor.fm/thecryptoconomy/episodes/CryptoQuikRead_250---Use-of-Knowledge-in-Society-Part-1---F--A--Hayek-e43pfj https://anchor.fm/thecryptoconomy/episodes/CryptoQuikRead_251---Use-of-Knowledge-in-Society-Part-2---F--A--Hayek-e444k0 How is Fiat Money Possible - Parts 1-3 https://anchor.fm/thecryptoconomy/episodes/CryptoQuikRead_234---How-is-Fiat-Money-Possible-Part-1---Hans-Hermann-Hoppe-e3odu1 https://anchor.fm/thecryptoconomy/episodes/CryptoQuikRead_235---How-Is-Fiat-Money-Possible-Part-2---Hans-Hermann-Hoppe-e3oon2 https://anchor.fm/thecryptoconomy/episodes/CryptoQuikRead_236---How-Is-Fiat-Money-Possible-Part-3---Hans-Hermann-Hoppe-e3p2k1  And if you want to start down a rabbit hole... WTFHappenedin1971.com  ---   This episode is sponsored by  · Anchor: The easiest way to make a podcast. 