Elastic vs. Inelastic Money

Every passage, on the record.

1. 00:00Claim

   Bitcoin critics are starting to realize that it is not going away, that it's not going to die, and that it's not going to go to zero.

2. 00:00Claim · condensed

   There is an army of Bitcoin maxis, this hodl army, that will buy at whatever cost on the way down and hold.

3. 00:00Claim

   Bitcoin is permissionless because it's open, anyone can join the network, and that gives a huge advantage to the plebs of the world who have been up against it with the legacy system.

4. 00:00Claim

   In the euro dollar system, being one of the nodes in the network gives you an extreme advantage in terms of the asymmetry of information: if you know a little bit more than the next person you are at an extreme advantage, and that just isn't the case with an open, transparent time chain like Bitcoin.

5. 01:30Claim

   The people currently in power have the most to lose when shifting to a new system, which means they will drag their feet the longest and are very likely to be extremely late in seeing the value in Bitcoin, because they have every incentive not to.

6. 01:30Idea

   Really the basic thesis is we have to know what money is. Money is a tool and the purpose of that tool is to facilitate exchange, and we want exchange because it allows for specialization, which leads to increased energy efficiency. This is all about energy, that's what every single question about the economy, about human action inside of the economy, it all boils down to: the transformation of energy from inaccessible to accessible. Life is order creation, life transforms energy from inaccessible to readily accessible by lowering entropy in the universe.

7. 01:30Quote

   Life is order creation, life transforms energy from inaccessible to readily accessible by lowering entropy in the universe.

8. 03:00Claim · condensed

   Technology advancements are evolution outside biology; they are not restricted by the number of iterations that can be made, unlike evolution, which is restricted by biological constraints.

9. 03:00Analogy

   In the past on this podcast we have looked at things like the study of digging a hole with hands versus a shovel versus an excavator, and why you would do those things. If money is a tool, that means it's a technology, and it makes sense that, like the shovel example, there would be leaps in efficiency gains as total energy reserves grow.

10. 03:00Claim

    Money simply cannot stop evolving, because that is life building up energy reserves; the better money we have, the more efficient we are at transforming energy from inaccessible to accessible.

11. 04:30Analogy

    Readily accessible energy reserves can't be just scattered all over the place, we don't want crazy berries that are spread out all over the field. Berries that are all collected into one basket are significantly better, because you don't have to expend the energy to go out there and collect them yourself, it's already sunk into that basket.

12. 04:30Idea

    Money is how the hive mind moves information on energy transformation needs. This hive mind, it's not brand new, F.A. Hayek called it the extended order. This extended order emerges from all the knowledge and information in each node in the network, so no one person, no one authority, can know the sum total of all the information that is out there because it's so vast and so diverse.

13. 04:30Reference

    This hive mind, it's not brand new, F.A. Hayek called it the extended order.

14. 04:30Reference

    You cannot fight it, this is one of those classic Michael Saylor's, you cannot fight, much like you can't fight an army that is better at organizing power and organizing energy.

15. 06:00Claim

    Price is how information is propagated through the system, so profit and loss are the feedback mechanisms individuals experience to determine whether their energy inside the economy is resulting in more energy reserves or less.

16. 06:00Claim · condensed

    No central authority could ever know or direct energy anywhere near as well as an open, distributed system like capitalism, because the specialization and size of the economy means the connections are too numerous for any one body to track.

17. 07:31Quote

    Energy reserves are everything, and the only question that we have to ask is: is our model, is X, allowing for or enabling greater efficiency when it comes to transforming energy?

18. 09:01Analogy

    It's often cited, the example about the pencil, and how many people it takes to be able to gather up all of the ingredients and then manufacture a pencil. It's incredibly complex, and a central group just simply can't do that.

19. 09:01Reference

    It's often cited, the example about the pencil, and how many people it takes to be able to gather up all of the ingredients and then manufacture a pencil.

20. 10:31Claim

    If Bitcoin is absolutely scarce and there's only 21 million, all prices will eventually go down relative to Bitcoin, and yes, that will incentivize hoarding. But hoarding is code word for not using energy that you've already transformed, for storing it in reserve for activities that don't transform more energy into accessible reserves; that has nothing to do with the monetary unit itself, it says more about the economy overall.

21. 10:31Quote

    Hoarding is code word for not using energy that you've already transformed, that you're storing in reserve for activities that don't transform more energy into accessible reserves.

22. 10:31Claim

    If individuals are hoarding, if they are not expending the energy reserves they have to transform future reserves, that should be a signal, and it's a signal we want, because it lets us know that something inside the system is not working.

23. 12:01Claim

    Hoarding comes when things are actually wrong, something is not working as it should; just because money is absolutely scarce doesn't mean individuals are not going to spend, especially as adoption grows and people realize this is the hardest form of money ever.

24. 12:01Claim

    Inelastic money is better at maximizing energy transformation because market signals are free from noise. We've done an entire podcast on what it means for Bitcoin to become the unit of account, because Bitcoin is the first economic constant, and that's how much more efficient it's going to make the market.

25. 12:01Reference

    We've done entire podcast on this on what it means for Bitcoin to become the unit of account, because Bitcoin is the first economic constant.

26. 12:01Claim

    You don't have to look past our current situation to see the results of the vast majority of market participants not having access to reliable information, essentially not having access to the truth: most people think inflation is occurring right now, but that isn't it, it's the opposite, in fact it is deflation.

27. 12:01Event

    There isn't too much money, there isn't enough, because of how the euro dollar system has evolved; there actually isn't enough US dollars to go around, there isn't enough liquidity inside the system, and that is making things completely unreliable, the economy is in the toilet.

28. 13:31Claim

    Instead of being able to recognize the true causes of the disease in the economy, the most basic symptoms are blamed instead of the actual cause; at the moment that leads to economic chemotherapy, a strategy of kill all and hope we manage to get the thing without knowing what the thing is in the first place.

29. 13:31Analogy

    It's like well, let's just go in and we'll just napalm the entire area because we don't actually know what else to do, we're gonna throw darts at the wall and hopefully something has changed.

30. 13:31Prediction

    I am convinced that chemotherapy will be looked back upon how we view bloodletting today, completely ridiculous, and the same will be said about QE and central banking kabuki theater, about how one time in the day people believed that a guy got up in front of Congress and made a few noises out of his mouth and that somehow set interest rates for the entire global economy.

31. 15:01Claim

    The problem isn't that there isn't enough money, the problem is that banks are responsible for both money creation and financial intermediary duties, and that mix is incorrect; you have to take that away from them, but instead we treat inflation while the real economy starves.

32. 15:01Quote

    We are leaving ungodly amounts of energy on the table, and there is no evolutionary advantage to elastic money because it clouds communication.

33. 15:01Claim · condensed

    Poor energy allocation happens when the euro dollar system gets overextended: money flows to the worst energy allocators inside the economy, the very people we would want to take the ability to expand energy away from, because government debt looks like the most reliable thing to pay back.

34. 16:32Claim · condensed

    If banks are responsible for creating the money, and their number one goal is to keep printing money by staying in business, the last thing they want to do is make bets on uncertain lenders or creditors.

35. 16:32Claim · condensed

    An inelastic cap doesn't mean there will be no hardship, quite the opposite, but that's a positive: we want everyone to know as soon as possible that there are issues inside the economy, because that leads to more intelligent energy expense and limits the amount of pain inflicted.

36. 16:32Reference

    This is classic Joseph Schumpeter: an entrepreneur is someone who combines known resources to achieve new results, and just because you open a business and you're your own boss doesn't make you an entrepreneur.

37. 16:32Claim · condensed

    Innovation through new combinations, new products and services, new modes of production, discovery of new markets or resources, or more efficient organization of businesses, is what causes efficiency increases in the transformation of total energy.

38. 18:02Claim

    Whether an entrepreneur is successful, meaning they get profits or losses, determines the usefulness of the energy allocation; that's the direct feedback mechanism they get from the customers at the end of the line.

39. 18:02Claim

    Without price, without the market telling us there is a need for energy where it is not flowing, pain in the economy is a direct result of a lack of energy where it's needed.

40. 18:02Prediction

    Bitcoin will be spent into the broader market over time.

41. 18:02Claim

    It makes little energy sense to spend into the broader market at the moment, because you are rewarded with bootstrapping the best money ever by delaying energy consumption on a personal level; that is exactly what Bitcoin needs to be able to become the money of the world.

42. 19:32Prediction

    Eventually this is going to level off, and the only way to get Bitcoin will not be to trade paper claims on energy for it, you'll have to trade real energy at its true value, because it's easily divisible and can scale to any amount of the total accessible supply of energy in the world.

43. 19:32Claim · condensed

    Elasticity is really only necessary when there are overcommitments in the system that are being pressured, and the risk of losing the entire system is the thing that doesn't make it worth the chance.

44. 19:32Quote

    There was no pre-mine, there's only one way to get it, and that's energy in.

45. 19:32Prediction

    In the creation of loans to fund new ventures, the interest on the loan will go away, and in its place will live an equity based system.

46. 21:02Claim · condensed

    What really changes under Bitcoin is the risk profile: the people lending stored, accessible energy to those who think they have an idea that will let them transform more, will see much fewer safety nets.

47. 21:02Analogy

    The vast majority of homes bought are done so with a mortgage. Question the system that is currently in place: what has caused demand to spike in the first place, to raise the cost of materials and purchasing a home so high, and what has allowed money to pour into that space rather than a dwelling, you're using it as an investment vehicle.

48. 22:33Analogy

    It's a classic example with education as well: higher education has increased so much because when you remove competition through government regulation for loans and guarantees, that creates a very profitable market for people already in the space, and as it becomes harder for competition to enter, monopolies form and raise prices higher and higher, without actually transforming any more energy.

49. 22:33Claim

    It may sound like the old communism trope of well that wasn't real communism, but in the case of money it's true, because we didn't have the tech necessary to allow for absolute scarcity delivered by an open source, permissionless network that eliminates information asymmetry, until Bitcoin.

50. 22:33Quote

    There were limitations on the gold standard, there were limitations on all of the forms of money, until now.

51. 24:03Analogy

    You think of bank reserves and things like subway cars or carriages, where at peak times there is a significant increase in utilization, so you're going to need enough supply for that peak time. But in no other commodity is an elastic supply even asked for, what good is it to just conjure up something out of nothing, it only creates problems, it only creates misinformation inside the market. The answer with the subway cars is not that we just create a supply that automatically expands and contracts based on demand, the answer is we have this supply, we have to make it work for the demand.

52. 24:03Claim

    There's no benefit in just conjuring up supply out of nothing; energy held in Bitcoin, or money, isn't meant to be idle forever, it's just a storage facility, a way to keep track of who has transformed what and what that means for the total accessible supply of energy going forward.

53. 24:03Quote

    It's meant to be used when it's needed, and the need is what is in question here: who gets to decide when that energy is needed, is it someone else, or is the person that transformed it in the first place and has access to those private keys.

54. 25:33Claim

    Sometimes that energy has to work real hard, other times it will lay idle, but it is always there, and it really depends on who is deciding to do what with that energy reserve.