{ "episodeId": "SLP169", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "jeff_deist": { "name": "Jeff Deist", "role": "guest", "tag": "JEFF" } }, "segments": [ { "speaker": "stephan", "time": "00:08", "start": 8.37, "text": "Hi, you're listening to the Stephan Livera podcast, a show about Bitcoin and Austrian economics. Today for episode one hundred and sixty-nine, my guest is Jeff Deist, president of the Mises Institute. This show is brought to you by Kraken, one of the world's leading Bitcoin exchanges, offering a high quality platform with high trading volume and low fees, no minimum or hidden fees. They offer twenty-four seven support. It's really Easy to sign up. Kraken are renowned for their security as well. They're consistently rated the best. They've got Kraken security labs and they're also rated the best on a user standpoint as well. 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But with their standard product, you can use a two of three multi-signature setup, you can use Trezor and Ledger, Coldcard is coming soon, and you can split up your keys, which might help you secure them By geographically separating those keys, and also if you need a loan, you can put up some bitcoins and get USD liquidity without selling your bitcoins, and so that can be really beneficial for you. Unchained offer excellent services, they've got awesome content on their blog, and they've got open source tools. Go and learn more at unchained-dashcapital.com. Are you in the US and you wanna buy Bitcoin regularly without any manual processing? Go to swanbitcoin dot com. You can link any major US bank account via ACH and auto buy weekly or monthly. That Bitcoin is then delivered to your wallet or stored with a licensed and regulated custodian. Swan Bitcoin have a focus on education and Bitcoin advocacy. They're also the cheapest in terms of US dollar cost averaging. Check out my recent episode with Corey Clipston, the CEO and co-founder. I'm involved as an advisor. With a small equity stake also, so that's GiveBitcoin.io for Bitcoin gifting and SwanBitcoin.com for your automated Bitcoin stacking. Here's the interview. Jeff, welcome back to the show." }, { "speaker": "jeff_deist", "time": "02:32", "start": 151.79, "text": "Hey, Stefan, it is great to talk to you again after a while." }, { "speaker": "stephan", "time": "02:35", "start": 155.25, "text": "Yeah, so look, Jeff, you were recently on the show, well, it was about a year ago now, and, I think it'd be great to get an update from you on, where your, where your head is at in terms of Bitcoin and thinking about, you know, the impact that Bitcoin will have Where, where, where would you say your head is at on Bitcoin?" }, { "speaker": "jeff_deist", "time": "02:54", "start": 173.75, "text": "Well, it's interesting question, and I know even today, there's, you know, there's a lot of Bitcoin communities, they're not all the same. Some of them are pretty rabid. And even today, the Mises Institute still gets grief for, like, \"You guys aren't pro Bitcoin enough, or you didn't adopt it early enough, or promote it.\" And I look back on it and I think that, I think, no, we were exactly right. In other words, we've always advocated for the" }, { "speaker": "jeff_deist", "time": "03:21", "start": 200.68, "text": "For the market to say. And the truth of the matter is, is that Bitcoin, like any asset you might expect in its first, let's say, ten years of existence, has had a pretty volatile, roller coaster price levels relative to the dollar or other currencies. That's just a fact. And so if, you know, the Mises Institute has, a certain image or reputation, whatever, and if we'd been out there all these years saying, \"Oh, yeah, Bitcoin's the greatest thing since sliced bread,\" we would have had some, some Mises families or something, so I have no regrets about that or, so I don't take any grief about that. I, I would say that my own thinking has changed in a couple ways, and, and it's embarrassing now when I think back of it, and a lot of it's be-- due to, Safedine's book. You know, early on, I had this goofy mentality that Bitcoin, we want private provision of money, just like we want private provision of, let's say, automobiles, we don't want the state to provide them, but Bitcoin's And so we don't promote, or I, I shouldn't necessarily support one brand over another because we don't yet know, whether Honda will win the day or like early on AOL versus Netscape, but you know, and some of those companies aren't even around anymore. And, and looking back on that now, I think that that was wrong and cringeworthy, and that Bitcoin re-really is the, you know, crypto and vice versa. And I, I don't really want to hear about, You know, I don't really have time to investigate other coins. And two, I would say I was naive in the sense that I, I, I saw Bitcoin as maybe this frictionless global payment system, banking for the unbanked. Anywhere you could have a, a mobile device and internet access, you know, some, remote, tradesmen in, a non-developed part of Africa, let's say, was suddenly gonna be able to make change for his small business or something like that. And, and, you know, now that I think about that, now I've read Safe's book, there's just no reason to have, you know, e-every time you buy a sandwich at Starbucks for that to be recorded on a ledger somewhere or something and taking up space, you know, that, that probably doesn't make a lot of sense. But, I, you know, I do view it as an investment. I'm a, a sort of a monthly buyer. And I look at it this way, let's say over a course of many years, you" }, { "speaker": "jeff_deist", "time": "05:46", "start": 346.21, "text": "Bitcoin over a period of ten years or something, which is a very minor amount, you know, if that goes to zero, which I don't believe it will, it could, stranger things have happened, okay, that's, y-you know, you've lost ten thousand dollars. If, if, but if you put ten thousand dollars early on into Google or Amazon or a lot of tech companies, you know, you'd have millions and millions of dollars now. So, that, that's sort of the way I'm looking at it. I don't think the average person, especially a person with In your life, I think you, you know, you have to have a balance, in your life. But that's, look, I'm an older guy compared to most of your audience, and I'm also, you know, have a, I, I'm in a different spot in life. That it's, it's young people, who do go all in on all kinds of things, who, who make the changes and the differences in this world." }, { "speaker": "stephan", "time": "06:35", "start": 395.48, "text": "Yeah, really interesting insights there, Jeff. and also curious if, if you've got anything to share in terms of some of the associated, you know, scholars of the Mises Institute and others who have also," }, { "speaker": "stephan", "time": "06:57", "start": 417.47, "text": "pa-pa" }, { "speaker": "stephan", "time": "07:06", "start": 425.66, "text": "Of the Mises Institute." }, { "speaker": "jeff_deist", "time": "07:08", "start": 427.68, "text": "I think it's the nature almost of academia or academic professors to, to lag behind on things. I think that's just the nature of it because, a-and, and there's almost a rationale for that. knowledge is something that we advance, I think, painstakingly and not willy-nilly, and that we should never have this sort of hubris towards all past knowledge. I don't like people saying, \"Oh, gosh, you know, the US dollar and gold are for-- just forever.\" Obsolete. The minute Bitcoin was invented, all that stuff should just be thrown in the dustbin. That's not how, how civilization advances. And n- you know, nobody alive today is so much friggin' smarter than our parents and grandparents. So I, you know, I, I get that sort of cautious, you know, advancing knowledge. What, what is money? what's, what's the role of money? How does it arise? How does it evolve? Who should be in charge of it? How does it have value? All those things are great questions that ought to be I think for just, all in energetic practitioners, and there's a place in this world for, you know, slower on the uptake thinkers, to be there maybe throwing out warning flags or something like that. So, you know, Bob Murphy actually wrote a book on Bitcoin pretty early on, like I wanna say thirteen or fourteen somewhere in there, which is interesting, of course, it, it reads a little dated now. and there, there's been a lot of people who, who are in our circles who are out there who are Bitcoin pioneers Like Caitlin Long, who's got, who's creating a full reserve bank that will work with crypto in Wyoming and that's requiring some changes to banking and, and regulatory laws. so there's, there's stuff going on out there, and but what people don't understand Is that a decade's nothing? There's, you know, people want things to happen so quickly in this revolution, but if you look back, to the early stages of the automobile, which is at least as much of a disruption as Bitcoin, if you look at the early stages of the internet, the early stages of electricity, hugely disruptive, the early stages of airplane travel, You know, the early stages of radio communication. We always have this, this, romantic idea that we live in this incredible age of change. But you could argue that someone like Mises, born in the eighteen eighties, who died in the nineteen seventies, you could argue that he saw greater changes than we've seen, all the things I just mentioned. And, you know, Peter Thiel argues this, that most of our innovation right now is in software. It's in information technology, but the, the other things, you know, we're not building Hoover Dams and San Francisco Bay Bridges and Sydney Opera Houses, you know, that, that we're not being as innovative in, in lots of other, areas of life are actually somewhat stagnant from Teal's perspective, and I, I kind of agree with that. I mean, why, why does air travel suck so bad still? you know, there's all kinds of things. So, IT isn't everything and, software isn't everything, but, Bitcoin And I, I certainly hope that it's going to create a nice little nest egg for my kids." }, { "speaker": "stephan", "time": "10:16", "start": 615.95, "text": "Well, yeah, I think that's, that's a totally fair perspective to take. And you mentioned the stagnation in society, and it, is it fair to say that much of that is a result of government regulation preventing innovation in certain areas, and that, you know, sometimes some of these things are almost like a regulatory arbitrage, things like the Ubers of the world that perhaps- Got popular enough that they could sort of change the rules a little bit before they were able to, before they were fully shut down." }, { "speaker": "jeff_deist", "time": "10:47", "start": 647.23, "text": "Yes, I think that's true. regulatory arbitrage is a thing, and Uber, the, the brilliance of Uber was that it took a lot of unused capacity. Most people's cars just sit there, and then you use it for twenty minutes back and forth to work each day, and then it sits in your garage, you know? And then every additional person goes out and buys another car. That's kind of stupid. and then we, on top of These cabs drive around with these crazy medallion rules in places like New York City. So U- Uber was brilliant in that sense and, it exposed a lot of problems, i-i-in the regulatory landscape because it was so obviously superior. You can, you can be sitting at a bar in the suburbs where there's no taxi traffic, you're not on some busy street, and you can hail an Uber and you can see where it is and you can sit in the bar till it gets there. I mean, that's, that's just so clearly superior, in every way Adopted it, and the regulatory landscape tried to catch up a little bit afterwards, and they couldn't quite do it because once, once you got a critical mass of users, it's hard for a mayor, let's say, of a city, to ban it because there's some, there's some political pressure not to. So it was brilliant in that sense, in that they didn't ask permission, they just did it. And there's an analogy there to Bitcoin, but yeah, I think that there is a lot of stagnation in the world, and I think a lot of it's caused by" }, { "speaker": "jeff_deist", "time": "12:08", "start": 728.45, "text": "Than it otherwise would be. You know, it, it flows into financial assets. It flow-- you know, it flows into goofy stuff, ra-- you know, rather than we think of, the, the, the real inventor, the real entrepreneur in a garage, you know, how much of it flows into just the next iteration of tech, let's say, a-as opposed to something that's really outside the box. And, the-- here's the thing, Stephan, is, it's-- you can't calculate it. It's incalculable, it's unknow Seen and the unseen from Bastia, and that's what makes our job so tough, is we go around telling people, \"Hey, wait, if it wasn't for central banks, there'd be all this great stuff that you just don't know about yet.\" You know, that's okay, well, because of central banks, we just built this gigantic skyscraper, and it's right here in front of us, and we did it with one, you know, two percent interest rates, and it's tangible, and you can touch it. So, you know, you, you get the challenge in front" }, { "speaker": "stephan", "time": "13:08", "start": 788.49, "text": "Good. So typically, you know, if you're a property developer or if you work in a bank, your sal-- your salary will typically be higher than people in some other industry. And, I think, also, I, I really enjoyed your commentary on some of these rich fund manager billionaire types like the Ray Dalios of the world who, essentially had benefited from this extremely strong tailwind and then turn around and lecture us on the limits of central banking. So So what were your, thoughts on, some of the people who were kind of coming, turning around and, giving us that kind of viewpoint?" }, { "speaker": "jeff_deist", "time": "13:48", "start": 828.41, "text": "Yeah, Ray Dalio is a, a good example that obviously a very brilliant guy, but anybody with investors, any fund manager, you know, they have a boss at the end of the day, and so they have to say sort of politically correct things. They don't want, even a Mark Spitznagel doesn't wanna be out there saying too much, let's say, on the Financial Talking Head shows and drawing Attention to his, let's say, his, his anti-Fed sentiments, because he has investors who might say, \"Look, I, I'm in your fund, why are you out there making waves? Just make money and, and keep quiet.\" And that's what I would say to Ray Dalio, \"Just make money and keep quiet.\" I mean, here's a guy who's clearly brilliant, and, and so when he comes out, kind of like Warren Buffett, let's say, with this lament, \"Oh my gosh, the financialization of the economy's too much, Here's what, here's how we gotta change our tax code, et cetera. It's like, well, okay, let, let's, let's think about that for a second. First of all, most fund managers, most private inv-eq- equity, managers Their entire model since at least the Greenspan era, but especially since the Greenspan era and the Bernanke era, has been based on leverage. Money has been very, very cheap. So as a result It makes more sense to, to do M&A deals using lots and lots of, bank financing and not too much equity. So oftentimes an M&A deal, just the, the various funds involved might represent, you know, twenty, thirty percent of the acquisition price and seventy percent of its credit. And that seventy percent might be sliced up into tranches so that no one lender, bears all the risk. And same with the equity, the thirty percent equity might be sliced up into tranches between the funds. So, you know, when you're gambling in effect, because that's what most M&A deals are, it's the idea is you buy a company, you, you fix it, oftentimes that involves layoffs and new management, and you sort of strip it of assets and you laden it up with debt and you sell it three to five years later at, at a, at a That in that you laid in it, that you, imposed upon in the meantime, of course, is, is tax deductible, the interest on it, whereas paying dividends, which nobody wants to do anymore, isn't tax deductible. So that creates an incentive to finance companies and balance sheets or, or, you know, have the capital structure of companies be, more weighted towards debt. So someone like Ray Dalio, this has been his life's blood. For many decades now, was, is skillfully putting together deals, and if you look at M&A volume activity compared to forty years ago or something, I mean, it's-- no, no, deals weren't happening like this at the fifties, sixties, seventies, even the eighties. I mean, it's exploded, and the reason it's exploded is because the central banks have made it, in a sense, rational. So here's a guy Who gets very, very rich off the financialization of the economy, primarily aided and abetted by the Fed and, and what I would, in my opinion, what I would term artificially low interest rates. And on top of that, as he's going along, you know, first he's a millionaire, then he's a decamillionaire, then a centamillionaire, then a billionaire, then a multi-billionaire, all, you know, all the while he's going along, what they call carried interest in, which is the tax treatment of- Fund manager compensation under the US tax code carried interest is given capital gains tax treatment. Capital gains are taxed at a lower rate, generally fifteen or twenty percent, in the US. So he's getting carried interest treatment, which is, which is treating really his work more like an investment, okay? And he's not complaining about that, mind you. And mo-moreover, because of that tax treatment and because of interest rates being low at the Fed, he is accumulating capital and, and, and, and, you know, more and able to do more and more More and more deals. So, you know, if taxes had been higher, this whole time he's now calls for higher taxes, if interest rates had been higher this whole time, he, he may never have gotten to that critical mass of capital where all of a sudden, you know, even at low interest rates, things become exponential and you get a lot richer a lot quicker. And of course- low interest rates also prop up equity markets in the, the extent he's a, a shareholder in public companies or investor in public companies, that increases his net worth just like Jeff Bezos at Amazon. So, you know, here's, here's someone like Ray Dalio who, you know, if you applied his, his prescription for the illness today, and you went back and applied it to him early on in his career He may never have gotten nearly as rich as, yes, now he's obviously a brilliant guy, take nothing away from him, and I'm sure he would have gotten rich under any circumstances, but that's what central banks do, is they cre- create a big question mark as, would you be as rich? You know, would a guy sells his company for a hundred million dollars, maybe it would have been ten. You, you know, we can't know. Again, it's unknowable, so it creates so much moral hazard and so much questioning in, in society that it gives the left There's kind of this class of unjust rich people in America. That's true. That particular left criticism is correct. There really is an unjustly rich class in, in, in, in America and really in all Western countries. So, that's an uncomfortable thing for libertarians because we, we wanna blame it on the ills of regulated money and not on the ills of markets. So, you know, I, I'm not really so sure I wanna hear from Warren Buffett or Ray Dalio. Video about what we ought to do now that they're rich, because that has kind of a Katie Barthe door element to it. And, and remember, if you're a billionaire, let's say you just have a measly one billion Not forty, not forty or how to-- Let's just say you have a measly one billion, and let's say we enter into a period of draconian authoritarian progressive government, and that government comes along and institutes a confiscatory wealth tax of ninety percent. Okay? And that means you're down to a hundred million dollars. Ninety percent of your billion is, is taken from you by the government, by some new left wing Bernie Sanders government, and, you know, given to all the poor kids i-i-in your country, which of course it never would be. you know, and then you're-- you, you are still an elite in society. Because of, of the marginal value of each additional dollar, you know, because of this, of the marginal utility of money, a hundred million still makes you elite in society, and your, you know, your, your first million means a lot more to you than your ninety-ninth million, because with just one million, that probably means you and your family have a roof over your head and it's food. but with, with a hundred million, you've got a lot more than that, so you can take away ninety percent of an elite's wealth and they're still The elite. You take an orthodontist who makes two hundred and fifty grand US a year, lives pretty well, has a pretty nice house, is able to send his kids to private schools, maybe has a, you know, a, a decent vacations every year, and you think, okay, that's a good upper middle class person. Take away ninety per-- and he's got a million dollar net worth or a two million dollar net worth, you take away ninety percent of that. And, and all of a sudden that person is really treading water, and, and so that's the difference, is, is, you know, wealth scales in a weird way, and so There, there, there really is a relative aspect to it. So you could take away ninety percent of what Ray Dalio and Warren Buffett have, and they'd still be uber elites. You take away ninety percent of what average people have, and they're dead in the water." }, { "speaker": "stephan", "time": "21:41", "start": 1301.21, "text": "Yeah, and, I think you also make a good point. It's almost like someone's climbing up the ladder, and then now that they're at the top, they're just kicking away the ladder to stop some other person climbing that ladder." }, { "speaker": "jeff_deist", "time": "21:52", "start": 1312.06, "text": "Oh, absolutely. there, there's no question about it. The people who, who got wealthy in the financial sector since about the '80s, have basically had the most favorable conditions in US history, both in terms-- and I'm sorry to be so US-centric, but both in terms of the, the tax treatment of the money they were making as they made it and the access to Easy credit, courtesy the central bank." }, { "speaker": "stephan", "time": "22:22", "start": 1342.2, "text": "Yeah, and also that this is becoming very politically dominant as a narrative is this whole idea of, \"Oh, look, these CEOs, they did all these buybacks to pump their own stock price, which in turn pumps the-- gives them the, often their, their compensation is determined based on the stock price of the company.\" but it is also an interesting point because at the same time, there were, there is- It is kind of that interesting question of, well, if the company pays it out as dividend versus stock buyback and the tax treatment difference for the end investor, but at the end of the day, it's driving this funny behavior where companies will do stock buybacks and not have very much of a cash balance left, and then now they're coming to the government with their hand out asking for the bailout. Is this the sort of behavior that we should expect in a Keynesian and, you know, government monetary interventionist world?" }, { "speaker": "jeff_deist", "time": "23:19", "start": 1399.28, "text": "Well, we've certainly found out in the last couple of months, what the term \"satisfaction for money held\" means, because, you know, the le-the left has always criticized the idea of just holding large cash balances. It doesn't do anything in society, it's not out there sloshing about and creating momentum and changing hands, and we shouldn't, allow companies to have, to have all this excess cash. But we find out that they're actually prudent to do so, and that it's gonna-- it, it may well be the difference between companies that serve Survive and don't over the next six months. Companies that have a healthy cash balance sheet continue to operate, to, make payroll, that sort of thing, i-is going to be very, very important, and you never know when you might need it, so cash is a great asset right now. so, you know, it is, it is interesting that- cash is punished in our society. You can't make much money off of it. If you're lucky, you make one or two percent, in a CD or something one and a half percent, and, and that's about it. So it hasn't been economic for companies to hold cash. It's been more economic for them to go buy back stock or something. And I, I read someone the other day defending stock buybacks saying, \"Well, that's, you know, you're returning capital to an investor.\" But that's not really true. You're just swapping one kind of" }, { "speaker": "jeff_deist", "time": "24:37", "start": 1477.03, "text": "Cash is worth more depends on how the stock and the, and the value of the cash perform after that transaction. So, any company that engaged, that spent cash, and especially if they borrowed to spend cash on stock buybacks in the last five years, should be absolutely barred from any public, stimulus bailout, you know, z-virtually zero interest Fed or central bank loan. I, I think that should be an absolute policy." }, { "speaker": "stephan", "time": "25:08", "start": 1507.54, "text": "Yep. a-and it's also worthwhile pointing out that there's such a hidden tax element here as well, right? Because there's capital gains tax in many countries around this world, and at the same time, the fiat inflation has been pushing up the price, and it may well be the case that you bought an asset at a certain real purchasing price, inflation has pushed it up, but in real terms, you're not actually better off, but then the government comes in and, stings you with the capital gains tax. Is that not a, if, essentially, that is a stealth wealth tax?" }, { "speaker": "jeff_deist", "time": "25:42", "start": 1541.8, "text": "Oh, yeah, there's no question about it. you buy, a stock at a hundred, it takes ten years to go to two hundred, you know, you got a hundred capital gain, twenty percent on that's, twenty, but you're using the, you know, today's twenty, not ten years ago's twenty, to pay that capital gains tax. So that's, that's the, the rub. And of course, look at Bitcoin. Bitcoin's a For most people anyway, there's some people who are really into transacting with it and buying, Lamborghinis or something, that was a few years ago. but for, for most people, it's a, it's a buy and hold item. And, You know, i-it's not doing anything, it's not fluctuating. You got the same number of satoshis you had before. It's, it's just the dollars going up and down. And, you know, don't kid yourself. Western politicians are going to go, i-get further and further down the path of wealth taxes, which means just a balance sheet taxes, your money just sits there, you don't have to buy or sell anything, you don't have to even earn any income, interest, capital gains, dividends, whatever it might be, you just happen to be sitting there. Let's say you're an older person who was successful with some small businesses, and you have a net worth of ten million dollars, and you're seventy years old, and you're just sitting there, not making any money. I'm I'm not sure how much longer Western governments are just going to say, \"We're okay with letting that pot of money sit there untouched.\" Elizabeth Warren certainly made that a mainstay of her campaign. She's not going to be president in the United States, apparently, but, you know, there, there are a lot of European countries who, who have flirted with a wealth tax. Some of them have dropped it, found it counterproductive, found that it chased away capital. and, you know, the, the world is still mobile. There's, there's still- Electronic transfer of cash, that we don't have total capital controls yet, and that's why Bitcoin's so important because it represents a potential escape valve for people, you know, I, you know, I've taken your advice and steered clear of exchanges and, and, you know, you, you need a, a hardware wallet or whatever you need, but the, you know, that, that might be, the great underground railway of the twenty-first century is, is getting money out of the grasping hands of these mer- Murderous criminal politicians, you know, that, that could be an absolutely heroic function of, of Bitcoin maybe someday." }, { "speaker": "stephan", "time": "28:11", "start": 1691.25, "text": "Wow, yeah, and I think you're absolutely right to point out that wealth taxes are becoming more popular, even, even here in Australia with superannuation, so I guess the equivalent is sort of like 401K for the US listeners, it's like The government is increasingly sort of making overtures about, \"Oh, we're in this big crisis, and we need a way to pay for it. Maybe we should redirect the superannuation pot of funds towards pandemic, you know, response or recovery.\" And, is that a, a trend that you see happening around the world?" }, { "speaker": "jeff_deist", "time": "28:47", "start": 1727.07, "text": "Yeah, I think there, there's a huge pot of money sitting there in retirement accounts, and different countries have different, mechanisms for how they tax retirement- Accounts in the United States, generally, you can begin taking money out at fifty-nine, age fifty-nine and a half, and you're required to start taking money out, I believe, at seventy and a half. and so the idea was always that when you get older, you might be at a lower tax bracket, so it'll be good for you in the long term, and of course, it's tax-free growth in the interim. But, I think they're gonna go after retirement funds in the United States because there's, there's trillions of dollars just sitting there." }, { "speaker": "jeff_deist", "time": "29:26", "start": 1765.82, "text": "Generation, which is almost all gone now. you know, they're, the, the youngest ones are, you know, well in their eighties now. As that generation has, has died off, it left a stupendous sum of money to the baby boomer generation, and a lot of it was never subject to estate tax, thank God, because, you know, over the years, depending on when it was, there's been, for a long time there was a one point two million dollar exemption, now it's up to, I believe, five million per individual, ten million per married So, a lot of that intergenerational wealth, although it was taxed many times over as, as it was developed, you know, as it was accumulated, it, it, you know, via income and savings, nonetheless, it, it transferred from one generation to the next, relatively unmolested. I don't think the powers that be are gonna let that happen again. F- in other words, from the baby boomer generation to Gen Xers like myself, I don't think they're going to, to let that happen. It's too- Too, too big of an enchilada just sitting there, right in front of them, and, and, you know, personally, I, I'm getting out of my four hundred and one K, and I'm very, very concerned a-about that because, you know, after these last few weeks, especially, a, a lot of people's retirement's in big trouble if that's what they were counting on, you know, it's down thirty percent, forty percent, whatever it is. So, you know, f-frightening times, and what this crisis- What this virus and the financial crisis that governments caused, ha-is really given, folks on the left, I think, an opportunity to say, \"Okay, we need a major reset. We need to rethink everything, how we tax people, how we regulate people, how people work, rethink things like a universal basic income, rethink things like free government healthcare.\" and so- You know, that all, all that stuff's coming and it's our job to resist it." }, { "speaker": "stephan", "time": "31:23", "start": 1882.64, "text": "Yeah. And, you mentioned the generational conflict as well. I think it might also be fair to point out that older generations have more of a concept of the evils and danger of communism and socialism, whereas perhaps it's fair to point out that a lot of Zuma and millennial types don't necessarily feel that fear because they weren't around in the- That time. Do you have any reflections on that?" }, { "speaker": "jeff_deist", "time": "31:51", "start": 1911.12, "text": "Yeah, it's absolutely true. So I'm, I'm kind of a child of the '80s, so I at least was, was steeped in that kind of Reagan- Thatcher era Cold War br-- you know, the Soviets. So, so I'm old enough to have that, it, it, as part, part of shaping my worldview. But somebody who's twenty-five now didn't have that. So the term socialism has a different connotation. It, it, it tends to conjure up Scandinavia or something like that. And the-- also, the, you know, the, the rise in tech has given a lot of people thoughts about singularity, that we have reached some point of superabundance, that a lot of the knowledge- Those problems that Hayek talked about, where the distribution problems that exist in the analog physical world will be, done away with in the digital world, and so there's no reason for people to be working, just so that they can have a basic apartment or food and healthcare and that sort of thing. And that's, that's a dangerous a-attitude for a couple reasons. I mean, first and foremost, it's, it's because people do need to work. We do need to, Bruce, the wealth that's around us could go away very easily, and, and people who And, and restaurants and energy and roads and for shoppings, you know, grocery stores full of ten million kinds of toothpaste just, are just going to happen regardless of incentives, are, are crazy and naive. So, you know, we do still need to work, but, but even beyond that, work is tied to human flourishing. Now, that, that doesn't mean that, we want people, working eighteen hours in a coal mine and wrecking their bodies with dust and, and, you know, ruining their backs. Of course, of course, there was a-- there were great advancements moving from the agricultural period to the industrial age and now into the information age that's given us huge, huge advancements in, in health, and it's, it's freed us up to do more cerebral work, And more interesting work maybe, but work is still part of the, the human psyche. I mean, being productive is just hardwired in us, And so, this is, this is disturbing to me, the idea that we've reached a singularity, because all you have to do is, you know, take a, a, pluck a, a feudal peasant from the Middle Ages and put him in, nineteen hundred And they would say, \"Oh my gosh, you've solved scarcity. Look at, look, look around you. This is unbelievable. There's, there's horses just pulling everybody around, and look at these beautiful gas lamps, and, you know, and then take somebody from nineteen hundred and transport them into twenty twenty, and they'd probably say the same thing. Now there's no more scarcity. You guys have everything. This-- how could there possibly be more? But of course, there's always scarcity, because, you know, human beings want stuff. You don't have to make us And, attention fed, attention, government. We don't, you know, you know, we don't need any stimulus. what we need is productivity and capacity and production. So I don't believe in the singularity. I don't believe in transhumanism. I don't believe in a deterministic arc to history Mi-Miis has warned against that. Sometimes societies go sideways, and sometimes they go backwards. you know, technologically, economically, sometimes barbarity ensues. we had two horrific world wars just in the last century. This isn't ancient history. So, You know, we gotta work at this. We gotta, we gotta make sure that we don't screw the pooch and mess up all this, all this wealth and prosperity around us 'cause it's not guaranteed." }, { "speaker": "stephan", "time": "35:37", "start": 2136.62, "text": "Excellent way of articulating that, and I think there's a lot of strong rhetoric emerging in these days around UBI, Universal Basic Income, and potentially ideas such as MMT, Modern Monetary Theory, so to speak. what are your thoughts on whether MMT becomes popular as a way of funding these kind of crazy authoritarian schemes?" }, { "speaker": "jeff_deist", "time": "36:01", "start": 2161.2, "text": "I think it will be popular, and You know, MMT has some sort of specific technical requirements and jargon, but it's based on the same theory, the same underlying theory, I would argue anyway, of, let's say, a Paul Krugman neo-Keynesian, which is that government is sovereign as a result, government can issue currency at will to pay its debts. It will never run out of money, and in fact, it need not even pay those debts. And Krugman just said this recently. There was an article that he had cited approvingly on his Twitter feed, and he said, \"This article does a good job of explaining that we don't need to worry about debt because we won't pay it back, just like we didn't pay back World War II debt.\" Y-you know, so what he's basically saying is that we can have something for nothing, and that governments And do something that none of us can do individually, which is simply live today at, at the expense of tomorrow by borrowing forever and ever without a downside. And, you know, if you look at the last thirty years or so, if you look at some of the calls that people in our camp have been, have been making since really the '71, since, since, gold, convertibility was completely eliminated, Krugman's kind of been right in a sense. the, the dollar has been the world's reserve currency, interest rates Rates have managed to stay, especially in the last twenty years, quite low, and people have continued to buy our treasury debt, although I would argue only because there's the implicit backstop of the Fed, that they can always dump them on the Fed if another crash happens, the Fed will engage in QE, which of course is doing it once again, and so there's people, I think in the back of their minds, say that this is a safe asset because there'll always be a ready market in the form of the, the, the US central bank itself, if no one else. So I'm not and as a result of all that, we kind of have, broadly speaking, we kind of have, have done MMT as our monetary policy for, for many years now, because a significant portion of the federal budget each year in the United States is, is funded by debt. And so Congress spends more than it takes in. Let's say it takes in three trillion and it spends four, there's a trillion dollar spending deficit. No problem, you know, the Treasury's out there issuing bond debt, and that bond debt is, is being sold. sometimes there is less enthusiasm at, at, Treasury auctions and sometimes there's more, but nonetheless, it, it is being sold. And, you know, when Uncle Sam is a profligate, drunken, crazed spender who will never get his fiscal house in order and wants you to loan him money for ten years at less than one percent, you might think that sounds crazy. Why would anyone loan money to the US government at anything less than junk bond rates? Well, one reason is is because other, other sovereign bonds Debt, like Eurobonds and, and, some European government bonds, is, is le-- is even less, it's negative. So that creates sort of, in a sense, an artificial market for US Treasury debt, 'cause at least it's paying something, at least it's, you know, your rate of loss is, is slower. So when government, for year after year after year, spends more than it takes in in taxes and effectively monetizes the difference, al-albeit in a roundabout way, because first that Treasury debt goes out into, to market Markets for it, and then ultimately is potentially purchased by the Fed. That, that's akin to, I won't say it's the same thing, but it's, it's akin to a form of modern monetary theory. It's just being done, purely on the monetary side rather than, the fiscal and tax side, which is the mechanism for, by which MMT operates, which is just say, you know, the Treasury basically, basically prints as much money as we need, we keep an eye on the economy, and if inflation heats up too much, we raise taxes, Economy slows down or becomes deflationary, we lower taxes, and that's the mechanism as opposed to right now we have kind of a Fed mechanism using interest rates. So, but they're very, very similar. So, you know, the MMTers, I, I hate to say it, but I think they're gaining traction. I think a lot of people look at that and say, \"Well, you know, you, you debt hawks have been talking about the deficit for the last thirty years, and nothing bad ever seems to happen, even though it goes up and up and up." }, { "speaker": "stephan", "time": "40:21", "start": 2421.04, "text": "Right, and at some point, these politicians believe that they're getting something for nothing, and so then they'll just keep, they'll keep winding that up. and you mentioned as well around how a lot of bonds, sovereign bonds, are effectively returning negative in real terms, because they're giving a very small percentage in nominal terms, but then accounting for inflation, they're negative. So, i-is it also a factor there that some of the regulation that's out there, some of it's like Basel, capital? Federal requirement, regulation, and so on that forces some of these companies and maybe big insurers and so on to hold these government bonds even though they aren't taking a loss. And that kind of is difficult, again, if you're trying to explain to people what is the impact of that on society, we're kind of, y-you're, we're, it's like a foregone benefit. How do you, articulate that to people that society could have been richer, but we've been forced into this kind of subsidization? of the government." }, { "speaker": "jeff_deist", "time": "41:22", "start": 2482.44, "text": "Well, it's true there is a, a, an artificial market, for example, for US Treasury debt around the world because certain pension funds are, are required to hold it, cert-- you know, a certain amount, or a certain percentage, certain institutional investors, and you mentioned the Basel III requirement, so there is, p-- people have always thought that US Treasury debt was basically the safest investment, it was, it was as good as, as cash, basically, a-- almost as liquid as cash, and so- That, there's a lot of historical baggage there that creates some inertia and makes people think, you know, and, and as you say, of course, US Treasury debt is, is negative in real returns also, relative to inflation. So you say, \"Why does anybody wanna hold this stuff?\" Part of it is just for the certainty. I mean, you lock in, \"This is how much money I'm going to lose over the next ten years, you know, but I know what my loss is.\" And of course, you might, you know, if, if your bond is, is Negative one percent, and rates go even lower, and, you know, you've got it locked in at negative one, and rates go down to negative three, you know, you have an asset you can sell. So there's not just the loss of in-- it's not just the interest, you know, you've got the underlying asset, so you might sell it for a capital gain, even though you're losing money on the interest side. So that sort of su-- two separate questions. A-and so a lot of it is just that people believe that the US economy is the biggest and bad World, that the US dollar is the biggest and baddest currency, and implicitly, I hate to say it, that the US military is the biggest and baddest nuclear, but, you know, thug. And so, you know, if we have to be somewhere the, a flight to safety counsels us to be in dollars or to be in treasuries, and that's why I would suspect that if we go into a deep global worldwide recession as a result of the shutdown or, or worse yet, a real depression, I think that'll probably be good for the dollar in, in the short term. I, I, I don't know where else people are gonna put money because, You know, in, in depressions, cash is the best thing to have, and treasuries are the nearest thing to cash. But cash is increasingly hard to have. You'd say, \"Well, why would anyone accept negative interest rates when they could just hold the cash literally under their mattress or something for a few years until rates went positive again or something, and then they, they wouldn't be having a loss at all?\" Well, 'cause it's hard to get cash. you know, go, go to your local bank branch in the United States and say, \"I want ten thousand It is a, what do you mean why? It's none of your business. but it is their business because we have what's called know your customer rules here, and we have, what are called SARs, suspicious activity reports, which not just banks, but also, car dealers, jewelry dealers, pawn shops, other places are required to file on certain transactions. So that's a little spooky. But, y-you know, you just, it's very, very difficult to get cash. They're, they're, they're more and more pulling hundred-dollar And so, you know, the idea that you might have pull a million dollars out of the system to protect yourself from loss against negative interest rates, really hard, really difficult, and then you have the security question where do you put it? You don't wanna be in a safe deposit box in the bank because banks can have, bank holidays or shutdowns, which means you gotta have some sort of private vaulting or storage at home or something, which is its own, its own issue. So, you know, for a lot of people, as, you know, who aren't As apocalyptic maybe as us, they look at a treasury and say, \"Eh, you know, least dirty shirt in the laundry.\"" }, { "speaker": "stephan", "time": "45:07", "start": 2707.12, "text": "Yeah. That's a, that's a good way to put it. and so in terms of political activism and what, what can be done about it? I know you've also, expressed some skepticism about political activism. Why is that?" }, { "speaker": "jeff_deist", "time": "45:22", "start": 2721.83, "text": "Yeah, I'm, I'm bad at this. You know, I, I-- We, we have a mission at the Mises Institute to try to promote the Austrian perspective because we think that it's absolutely critical to civilization. I don't want to sound grandiose or something, but to civilization to have real money. And I think that central banks have become the most dangerous, institutions on earth, save for maybe people who have access to nuclear weapons. So I, I think there's nothing more important for the future future, our grandchildren, then for, you know, bringing, you know, to, to people's minds, educating people about money. I, I think there's nothing more important in the, in the purely educational realm. That said, I don't begrudge anyone political activism, it's not my thing. Very, very tough environment in America because it's so polarized and people are so tribal, red team, blue team. And, I mean, look at the polarization in the UK over Brexit. Really ugly. It breaks down over urban versus rural. It breaks down old- Older versus younger, it breaks down over black folks and white folks, you know, it's just endless. And, and politics doesn't make that better, it doesn't create some happy compromise down the middle, it, it intensifies it almost by, by design. And so we don't have this pretense anymore that somebody who runs for office is gonna represent everyone if they win. It's, it's more like, \"I'm gonna win, \" and then the people on the other side deserve to be vanquished. You know, that's what democracy is yielding us in America with three hundred Very, very unsatisfactory result. So, I, you know, I don't necessarily have the answer to how you win over, sixty or seventy million people in America for-- to vote for some presidential candidate of your choice or something. That's a lot of people, and I think we're, we're a long ways away from that. So, I, I like the idea of, acting locally, and I like the idea of acting entrepreneurially. We earlier mentioned the, you know, Bitcoin's role in this Uber's role in this, there's a lot of other entrepreneurial ventures that, do what they can or do what they must to circumvent the state, to work around it, because you don't, you know, it's kind of like a, a kido, the martial art where you try to redirect energy. The state, the state isn't something you wanna take head on in, in most cases, and in the United States especially, if you're an average person, if the US federal government comes and screws with you Your remedy for that is to sue them in federal court, in their own court. Unless you have, you know, a, a couple of million dollars for legal fees in ten years, that's an illusory remedy for the vast majority of people. So I think, I think the, the, the goal for me personally is to bring Aust-- or try to bring Austrian economics to wider and higher audiences, and then to hope that, we help. Obviously, we're just a very minor- Your, organization in a, in a big world, but hope to, to plant some seeds or to spark some sparks, because in, in every human society, really, there's about maybe five or ten percent of people who are drivers or vanguard, and that's just the way it is, and most people will sort of go along to get along, and, you know, unless and until things get really bad, they probably won't agitate for huge changes. That's just, that's just human nature, and there's nothing wrong with that per se. It's, Forks every day, but we're getting pretty close to that pitchfork, stage as far as I'm concerned." }, { "speaker": "stephan", "time": "48:55", "start": 2934.74, "text": "Yes, and, you also have spoken on this topic, and I, I like the way you reflected this, was, this idea of smaller is better, right? So it's this idea that, look, even maybe it's good, it's a good thing that people can just recognize that maybe we're not all going to agree and come under one banner, and maybe it would be better to have smaller town And have a more of a secessionist approach to things. so what are your thoughts on the hope of that kind of movement and that kind of idea?" }, { "speaker": "jeff_deist", "time": "49:26", "start": 2966.48, "text": "Well, I hate the resistance to it because it's clearly humane. It's, it's the, it's the way forward without civil war, without having to politically vanquish people. And when you start to get into big countries with big populations, that doesn't, you know, United States of course, but also China and India, former Soviet Union, I mean, it's very difficult to run The lives of that many people centrally, even, you know, a country like Germany, eighty million people, you know, having a s- a highly centralized government is just a recipe for cultural division, for strife, for dissent, for hatred, and, and, you know, we see this all the time. And if you look at Switzerland, if you look at their website, if their, at their subsidiarity principles, one of the things they say very plainly is that we like, we, we move every decision down to the most local level possible. and we do this on Bonds of social cohesion. And I think that's a beautiful thing. I, I think smaller is better because if you have a bad government, it's a little more isolated, it's not as weaponized across as many people, it claims dominion over fewer people, it is less likely to be able to, To have an imperialistic presence, you know, Liechtenstein isn't gonna roll tanks into Poland anytime soon, right? I think we can all agree on that, and, and that's because Liechtenstein's small and worried about making money and being rich. So, the, the, the problem with whether you wanna call it federalism or subsidiarity or even outright secession, the, the notion of politically unyoking ourselves from each other in, in lieu of some sort of cold or, god forbid, hot civil war The, the problem is that a lot of people are so convinced of the moral certainty of their program, that it must be for everyone. And so there's a lot of people on the left who, if they were more open to secession today, or at least a, a, a hu- a much larger degree of subsidiarity, could have virtually everything they want right now in blue states if we just w- would agree that abortion and gun control and taxes and climate change and all these other things- Don't have to be decided centrally for all fifty American states in Washington. They can have a lot more of what they want right here today, but the, the problem is they would say, \"Well, you know,\" and I would say to them, \"Well, you know, you don't like these red states, why do you wanna be politically yoked to them?\" They would-- I think they would answer with kind of a savior complex. They'd say, \"Yes, but there's some, there's some, you know, good people in those states, some, some minority folks or some them over. We're not gonna let you dominate them. We need to, to protect everyone, you know? I think, I think you'd get sort of that mentality. And I, you know, there's just been, there's been a, a, you know, this idea of manifest destiny in the United States, where we-- The United States started out in the colonies and moved, moved westward into the, the Midwest and Ohio, and then had the Louisiana Purchase, and then, had some wars with Mexico, and then ultimately ended up all the way out getting California and then Fifty is this nice round number, and, I think in a lot of people's minds, we could never, we could never undo that. That's just unthinkable. But, it's getting more thinkable. you know, Gavin Newsom is starting to-- Governor Gavin Newsom of California is starting to refer to California as a nation state, pushing back against Trump. And so these are interesting times, and people are starting to get very frustrated with the limitations of, of a faraway government. I think that's a healthy thing, and I'm all for it." }, { "speaker": "stephan", "time": "53:05", "start": 3184.63, "text": "Right, yeah, and so we, we, we're even potentially seeing some different US states thinking of banding together in their, in terms of their response against coronavirus. So is that another vector by which we might start to see, this, smaller is better idea play out?" }, { "speaker": "jeff_deist", "time": "53:24", "start": 3203.51, "text": "Well, look at Australia. I mean, there are parts of Australia which have extremely low population density, and there's no reason anyone who lives in those parts of Australia should be doing anything but their normal day to day, right? I mean, they should be out and about, and, and the United States is much the same way. In our mountain west, you know, we have vastly unpopulated states like Wyoming and Montana and South Dakota, and then we have densely populated parts of Manhattan and all that, and so the idea that there needs to be one corona Virus rule for the whole country is obviously just goofy and it, it makes no sense, and it's, it's, i-it's been interesting that we've had this sort of laboratory of states. We've had, not just within the US, fifty states, but all around the world, we've had some very interesting experiments in Taiwan, we've had some very interesting, when I, experiments I'm speaking about coronavirus, in South Korea. We have a very exper- interesting experiment happening in Sweden, so we're going to see, we're going to have a scoreboard of sorts, as gruesome as that sounds, to see whether social distancing really works, what, what the story is with herd immunity, but from my perspective, Stephan, the, the even, even slightly risking Great Depression Part Two, for Fifty or a hundred thousand deaths in the US, I think is absolutely crazy. I, I think that is sheer insanity. I think it's a wild overreaction. And we have to remember, there's, there's, there's death when you're in the ground, and then there's sort of partial death where your lifespan is shortened or the, your quality of life is reduced for, out, you know, because of alcoholism or depression and mental illness or, because of a lower standard of living and a, and a worse diet. diet, or because you have, you know, worse schools, worse, worse, apartment or house. I mean, there's all kinds of ways to shrink life That, you know, you don't have to be dead in, in the ground to suffer a diminution in your life, and that's what is so tough to argue with the lockdown folks right now. And I, I'm an anti-lockdown person, a hundred percent. I think we should lift it today, what is it, April twentieth or thereabouts. I would have never instituted the lockdown, and when someone says to me, \"Well, how many lives would it take?\" or \"You don't value life?\" or something like that, I, I, I would simply answer That the economics and life aren't so neatly severable. They're, they're part of the same thing, and, we've had viruses before Markets can help us take care of viruses, and we've had all kinds of, of, you know, we had the Spanish flu, in the, around 1918 in the United States, which killed six hundred, some thousand people out of a much smaller population back then, and, and during that everybody went to work, everybody kept moving forward. look P- people went to work in, in London during the Blitz. you know, I don't know what to say. I, it's just a, a fundamentally different worldview between myself and people who think we should just shut down and hunker at home. And, and again, I don't wanna hate people who have that worldview, I don't wanna impose myself on people who have that worldview. I wanna separate myself politically from them." }, { "speaker": "stephan", "time": "56:58", "start": 3417.63, "text": "Yeah, and, you, I think the other point that, we as libertarians make is this idea that the world is way more interconnected than the central planners understand. They may include, they may think, \"Okay, I'll decide this industry is essential and that is non-essential.\" But the lesson that we can draw from, say, essays such as \"I Pencil,\" that no one person knows how to make a pencil. how do you, try to communicate that point to people? People who are sort of naively fixated only on coronavirus deaths to the exclusion of all those other things that we miss out on." }, { "speaker": "jeff_deist", "time": "57:38", "start": 3457.76, "text": "Well, the-- if we keep this up, they're gonna find out. Because Americans haven't experienced real hardship, economic hardship, in a long, long time, and there's a lot of younger people alive today who are, are, you know, they, they don't know what it's like to go to Walmart and not have fifty jillion kinds of toothpaste and deodorant and all this stuff is just going to be there, and pretty soon it's not, because if you think just organizing, forget a pencil, try organizing a Walmart centrally. Try to plan all those prices and all those items and, and how much of each and when to reorder and when to restock. I mean, a, a, a Walmart is a vast, a single Walmart is a vast enterprise unto itself. And i-if we think that food production won't be affected, that we're gonna be able to sit at home for three months or six months and then all of a sudden reopen and have this V-shaped recovery, I, I think that's just sheer economic ignorance. People don't understand the fragility The interconnectiveness of the world, and they also don't understand division of labor and specialization. You know, there's, it, it's-- there's a reason why things are inexpensive at Walmart, and, and that is because Walmart sells a lot of stuff at very low margin. That's how they make money. They make a couple pennies off each item that's going through that scanner. They don't make a dollar off of three dollar pair of, you know, socks. So A lot of that is specialization and international trade. A, a, a three dollar pair of socks can be produced in China and shipped all the way to America, a long way on a boat. For oftentimes less than they can be made in, in the United States. There's a lot of reasons for that. You know, libertarians have their opinions about those reasons, but that's just a fact right now. And if, if people want to think that they can just sort of, \"Well, we don't need all this Chinese stuff.\" Okay, that's a nice, that's a tough guy thing to say on Facebook, but, you know, your income's not necess- necessarily gonna go up, and that five dollar T-shirt's gonna be ten bucks. So, a-and you multiply that over a year, let's say you're a frequent Walmart shopper, you know, th-this is, this isn't negligible. This would be a real impact on your material standard of living. And I'll, I'll believe it when I see it when Americans say, \"You know, I don't buy...\" And I'll accept, you know, a lesser material standard of living to be, free of Chinese influence or something like that. I'll, I'll believe that when I see it, because that's, that's easy to say, it's not so easy to do. And, and let's, and let's re-let's, let's also remember, a lot of people around the world are make a living off of importing stuff to America. So if we're not buying stuff or as much from around the world, there are going to be a lot of people in less affluent countries very badly. w-countries with lower per capita income, with worse public health systems. So, you know, it's, it's the ripple in a pond from throwing a pebble, except this wasn't a pebble, this was a giant rock." }, { "speaker": "stephan", "time": "01:00:46", "start": 3646.44, "text": "Yeah. And I think another point that anarcho-capitalist libertarians get accused of is that, \"Oh, you guys are too utopian. Why are you thinking you want...\" But where I think a very strong counter that I've seen you articulate is this idea of better, not perfect. So what's that all about?" }, { "speaker": "jeff_deist", "time": "01:01:04", "start": 3664.69, "text": "Yeah, we're the utopians, except when there's a crisis, the first thing they do is start, cutting FDA regulations on drugs and saying that, medical doctors and nurses can practice across state lines. We're not gonna- gonna uphold the licensing requirements, we're gonna strip away all the, all the, FDA regulations on testing ventilators, and, you know, Dyson fan company can just create a bunch of ventilators real quick, and we'll let hospitals use them without the normal regulatory process. So it's interesting that we're the utopians, but I, you know, there is a trap out there for libertarians, which is that we have to explain everything perfectly. Well, what, what would this look like if we didn't have any government? And the, the short answer Bitcoin is that people spend their own money more efficiently than they do other people's money, and that skin in the game and incentives matter a whole lot, and government doesn't have either of those things. And so what we think of as markets is, is really just another word for human beings muddling through, doing their best, coming up with solutions as they always have, decade after decade, century after century. And so I like the, the- Odds on human beings, you know, working cooperatively in the market over top-down centralized bureaucratic control by people who, if they're wrong Unlike private business owners aren't ever punished for it. Obviously there's moral hazard with the Fed and investment banks and Wall Street, we don't, don't need to get into that, but you know my point. bureaucrats not only aren't punished for failure, oftentimes they're rewarded, a bigger budget, you know, FEMA needs more money, the FDA needs more money. so that, that, there's something very perverse about, you know, the, the accusation that libertarians are utopians, because to me, it's the most pragmatic, bottom-up, approach to organizing society of all. It's just, it's you, it's your family, it's your, you know, your neighborhood, your local businesses. That's, that's all markets are. It's not some nefarious system. I don't even consider libertarianism an ideology. Myology per se, I, I consider it more, you know, so what happens when you leave people alone? And, t-there's a lot of creative and technical genius in this country, and the idea that we can't handle a virus Without this crazed centralized response from Washington, i-is very, very frightening to me. So, yes, I think better not perfect ought to be our mantra, and we ought to push back against the, the notion that we have to have a perfect solution to every human problem, because those human problems exist under the, the status system we have now." }, { "speaker": "stephan", "time": "01:03:53", "start": 3833.32, "text": "Yeah, that's a really excellent, point. And I think For, for the, for the last question, let's talk about your outlook over the next, let's say, five years, from an economic point of view, and I know we touched on some of that, and also, I guess, in terms of Bitcoin, what, what's your, thought on how things progress over the next five years?" }, { "speaker": "jeff_deist", "time": "01:04:16", "start": 3856.43, "text": "Well, I'm frightened because I don't think there's gonna be a V-shaped recovery to this economic debacle which we are just getting into. We don't know how deep and severe it's going to be, but I don't think the recovery is gonna look like '08, let's say two thousand eight to twenty eleven or in there, because the-- one of the big differences here is that you've got a lot more fiscal stimulus. That's not central banks, that's just Western governments spending money, giving people money, paying them unemployment, giving them food stamps, giving them just stimulus checks Checks, whatever it might be, and that is all money that's going directly into the economy, that's not being parked as bank reserves somewhere. I mean, that is money that is being put in people's bank accounts and spent. So the idea that you can just create trillions of dollars out of thin air, not pay for it via taxes, and put that, you know, liquid into the economy with no, you know, adverse price inflation, I think is, is very, very, very, very unlikely. So that's a big difference between Now, in '08, the second big difference is that on the monetary policy side, not the fiscal policy side, but on the monetary side, in '08, what, what basically happened was the Fed went into hyperdrive in pushing interest rates down, which caused a lot of problems, but, but, but buying assets in the form of treasury debt and mortgage-backed securities from commercial banks. Now, there was a lot of moral hazard in that because they were buying these, these, especially the mortgage-backed stuff At face value, when if you had marked to market, it would have been worth far less, so it was a, it was a moral hazard and a bailout and basically a, a free recapitalization of bank balance sheets. However That money was basically parked at the Fed as reserves, so banks were able to, to build back up, a-and there were still reserve requirements then, there aren't anymore. So banks were able to build up big reserves, and they were still very, very, very reticent to lend, even flush with reserves, even, with very low interest rates, because obviously they don't lend out reserves, reserves are reserves. so banks were very much capital constrained as we, as we found out, despite all this seeming- New liquidity, and they also didn't find as many credit worthy borrowers as Uncle Sam hoped they would, 'cause the idea was to, get the banks back on their feet, recapitalize them, and then they'd go out there and lend, and that would prop up housing once again, prop up, the economy, hiring, jobs, et cetera. And, but basically all it did was prop up the stock market, and most of those newly created, base money reserves stayed just that, stayed as reserves. So this time, they're buying at Assets, another round of QE, but, but they're also injecting a lot of money directly into the economy through lending facilities. And, you know, whatever we say today about what the Fed's doing in America is gonna be obsolete in a week because it seems like every few days they announce a new lending facility, they're going to be lending against assets that are backed by student loans, assets that are backed by credit card debt, assets that are, you know, municipal bonds, corporate bonds through ETFs, so they are increasingly becoming A player more and more in the market, and I'm absolutely convinced that within a few years, the Fed, like other central banks, would just simply be buying US stocks outright. the, the Bank of Japan does that Swiss National Bank does that, you know, so I don't think that that's off the table. Yellen was talking about that a couple years ago, but clearly that, then, the, the, the incentive for that or the motivation for that is now intensified with this stock market crash. So you put all that in a blender and to me anyway, it looks like a very different animal from two thousand eight because, most of what happened in '08 was a stock market crash. Now that bled over into, obviously a recession in the general economy and to- Layoffs and people losing jobs, don't get me wrong, but, most of the pain was in the stock market itself, and that was rectified through a crazy program of quantitative easing, and that worked in the sense that at least nominally it reinflated that market and blew it up. But this time around, the pain is, is- is small businesses. The pain is mom and pop, the pain is restaurants, the pain is retailers of all stripes, because, you know, when you're literally telling people to stay home, forcing them to, and they've only got maybe a couple months worth of payroll or rent on, you know, that's hugely deflationary. So what, what individuals, businesses want to do What markets want is deflation. They want to shed debt and buy less stuff. That's, that's deflation, because that's, that's the incentive right now for businesses and individuals. So the whole job of central banks is to thwart the market and produce as much credit and liquidity to have an offsetting inflationary pressure, to kill that deflation that the market really wants. And you and I know that that deflation is actually part of the cure. It's something It needs to happen. There needs to be a lot of liquidation of companies, there needs to be bankruptcy and insolvency, and there needs to be new ownership, and that's just the way it is, as, as, as sad as that is. And if there's going to be bailouts, if there's going to be stimulus, if there's going to be central bank monkeying around For the love of God, w-it ought to be at the individual level. I, I mean, in terms of moral hazard, I'd rather that the Fed was just paying Joe Sixpack's mortgage, or, or, you know, giving money to Joe Sixpack rather than giving it through SBA or whatever, to, you know, most of the stimulus that, that the US government has passed is going to go into the financial sector, as usual. So it's, it-- once again, money's never neutral." }, { "speaker": "jeff_deist", "time": "01:10:07", "start": 4207.91, "text": "but if we're, if we're going to have Level. And, and we're not seeing that. So, the, you know, unlike '08, we're gonna see an awful lot of little mom's and pops and, go out of business probably near town. It's, it's heartbreaking. And, I, I don't wanna say this, believe me, I got a couple of teenagers, I don't wanna say this, but I f-- my overall sense is that it's, it's worse than '08, but not as bad as the Great Depression. you know, Bob Higgs points out, Robert H" }, { "speaker": "jeff_deist", "time": "01:10:41", "start": 4241.06, "text": "America has a lot of capital that, that no matter what government and central banks do, it doesn't just go away. There's factories, there's roads, there's distribution networks, there's tech, there's physical buildings and power plants and facilities, you know, and all that, you know, doesn't just, can't just vanish because governments doing goofy things. So that's, that's kind of our, you know, the, the beauty of living in a, in a relatively A modern or advanced economy, and that's what the West has going for it. But man, we're doing our best to, to, destroy it. And, and capital's not forever. Capital can be destroyed just as surely as it can be accumulated, and destroyed a lot easier and faster. So, man, I hope we don't have a war or something to get really crazy." }, { "speaker": "stephan", "time": "01:11:26", "start": 4286.14, "text": "There's a lot of things that can be concerning for us, but, we'll have to see how it all plays out, hey? but, thank you very Hey Jeff, I really enjoyed, chatting with you, and, big fan of the Mises Institute, and, I'm also a listener of the Human Action podcast. So my, for my listeners, make sure you go and follow Jeff, check out the Human Action podcast, and go to mises dot org. Is there anything else, where, is there anywhere else that you would like my listeners to find you, Jeff?" }, { "speaker": "jeff_deist", "time": "01:11:56", "start": 4316.62, "text": "No, just at Jeff Deist on Twitter, but I think your listeners are, you know, they're gonna know what sound money means and how important it is, and your listeners are hopefully, getting into Bitcoin and they're gonna be fine down the road. And, and I, I would just leave you with this, we can't be children. we can't stomp our feet and wish things were different. We have to have a long-term view. Nothing we go through will be as tough as our great-grandparents, and so we oughta suck it up and get busy," }, { "speaker": "jeff_deist", "time": "01:12:24", "start": 4344.38, "text": "you This, but we, we shouldn't hesitate to point out the sons of bitches for what they are, and let's, let them wreck the world." }, { "speaker": "stephan", "time": "01:12:34", "start": 4354.83, "text": "Thank you for joining me, Jeff." }, { "speaker": "jeff_deist", "time": "01:12:36", "start": 4356.23, "text": "Alright, thank you. It's great to talk to you." }, { "speaker": "stephan", "time": "01:12:38", "start": 4358.45, "text": "Thanks to my Patreon supporters. If you wanna sign up and get the episodes early and ad-free or be a part of the SLP chat group, go to patreon dot com slash stephan livera, or you can pay with Bitcoin, just message me. If you're interested to advertise on the show, give me an email, stephan" }, { "speaker": "stephan", "time": "01:12:56", "start": 4376.32, "text": "If you want the show notes and the transcript for this episode, go to stephanelivera dot com slash one six nine. See you in the citadels!" } ] }