Sazmining Podcast Episode 34: Alex Gladstein on Bitcoin's Impact on the World
Synopsis: In this episode of The Sazmining Podcast, Will speaks with Alex Gladstein, Chief Strategy Officer at the Human Rights Foundation. They discuss Bitcoin's impact in the world, a philanthropist's view on mining, and how blockchain differs from its incumbent counterparts.
Will Szamosszegi (00:26):
Really appreciate you coming onto the podcast. I've been looking forward to this one for a while. Now you're one of the people who've not only been in the space for a while, but someone who really understands what Bitcoin's doing globally at such a deep level that I think a lot of people in the us don't necessarily see, thank you for coming on, man.
Alex Gladstein (00:44):
Well, I appreciate those kind words. I'm happy to be here.
Will Szamosszegi (00:46):
If we just dive right into the human rights foundation and the work that you've been doing with them, what impact do you think Bitcoin's having as it continues to grow in adoption? And what are some of the things that you're seeing that many people in the us might not be aware of? Uh, that's happening around the world?
Alex Gladstein (01:04):
Yeah. I mean, look, I think that the kind of American conversation, very price centric is very attuned to the thoughts and feelings of wall street and Washington. And, you know, that's fair. The United States has the most important central bank in the world that issues the reserve currency. So what Washington and wall street think is, is really important. But what they're missing is like what's happening with this new kind of money around the world and like what kind of opportunities it's afforded people and how it's benefited different kind of vulnerable populations. That's just not on the radar. So people are just getting kind of incomplete picture. They're looking at maybe the struggle between traditional policy makers in Washington and traditional investors and years of them just basically being skeptical towards Bitcoin and okay, this like silk road thing and, oh, it's this like little niche thing that, you know, only a handful of people care about.
Alex Gladstein (01:55):
And now they're realizing it's like a big deal. It's a trillion dollar asset, right? So you're having all sorts of reconciliations happening there. All of a sudden, Bitcoin is big enough to start reacting to fed policy, starting to become a macro asset. Like that's kind of what people are looking at right now. They're looking at corporations adding it to their balance sheet, et cetera. But the reason I got interested in Bitcoin is that I started hearing about people in different countries around the world using it's kind of like a plan B because they're their plan a failed. And just in general, something like a 1.6 billion people in 30 or 40 countries around the world right now live under double or triple digit inflation. And for a lot of people in these countries, whether it's Turkey or Nigeria or Argentina to, it can be tough to get dollars, whether you're looking for paper cash dollars greenbacks or, or like a dollar account, right?
Alex Gladstein (02:42):
That's, that's denominated in dollars. There's a shortage right in these countries of dollars, generally speaking. And sometimes they're just not available. So when hundreds of millions of people living in these countries are seeking to like hedge the volatility that they're experiencing, whether it be 15, 20, 30, 40, 50, a hundred percent a year, you know, per annum in terms of inflation, we're seeing 7% in the United States and that's causing like major issues that's causing political issues. That's causing household issues. I mean, imagine double that, triple that quadruple that you know, that that's what a lot of people are facing around the world. They're looking at a situation where they're buying a good one year and the next year it's costing like significantly more, not just like a small percentage, but like a big, big percentage. And I think, you know, when they try to measure the inflation, it's all uneven.
Alex Gladstein (03:25):
Anyway. So even though we say it's 7% in the United States, like people are pretty aware that like things, certain things like housing in some areas has gone up by 25%. So when you're talking about the CPI being 20% or 30%, you gotta realize there's other things that are way higher than that. So life's very difficult for a lot of people. It has been for many years, you know, starting in, you know, five years ago, I would say with like spring of 2017, I think people around the world, generally speaking, who may have seen Bitcoin before and then dismissed it because of the, the bubble in the burst of 20 14, 15, 16, you started paying attention to it again, right? So you had communities around the world start to pay attention in 2017 as it started to go up again. And, and that's where you saw this. Like, I think really this wave of global adoption really truly begin was in 20 17, 20 18.
Alex Gladstein (04:11):
So you had a lot of people in different countries around the world start to get back involved, whether it be mining, education, DCA, whatever it was, you know, and they, they, a lot of them went through that bubble and burst 20 17, 18, but a lot of them started accumulating right. Or started using or learning in 18, 19 20. So I spoke to people in Iran, in Cuba, in, in all over all, all many different places who started really getting serious then. And that was huge for them because you had them entering an asset maybe at three, four or $5,000 and maybe just putting socking it away, maybe saving it. Maybe denominating certain things in it. And then all of a sudden, you know, it's at 10 K it's at 15 K it's at 20 it's at 30 it's at 35. Okay. It goes way higher than that. Right.
Alex Gladstein (04:55):
So that's not something that was like otherwise available to them. People generally speaking around the world in emerging markets, like don't have a stock market. Like they don't, they usually don't have the capital to buy like a stable and safe piece of real estate. They're not like dealing with fine art or like market, you know, markets that typically people would like hedge against inflation with like buying a yacht or sports car. God knows what their best bet is. Dollars really often those aren't able to be found. And as we've seen dollars, you know, are fine, but they depreciate 7% this year, right. Against a basket goods and services. So for people around the world, like talk Lebanon, Palestine, I mean, for them to be able to enter into an asset over the last five years, that's gone up 40 X since the spring of 2017.
Alex Gladstein (05:37):
I mean, we're talking 900 bucks, five years ago. It's 30, 30, 8 grand right now. That's insane. I mean, so that's been like a game changer for so many people around the world and you know, it may not be as noticeable in us where we're like hypersensitive. We, we look every we're so short term in terms of our focus, we're just looking at daily price movements. And yeah, like if you have, have a, like a one or two or three week or four week or whatever, two month timeframe sure. Like it's crashed, but like zoom out, you know, and people around the world have been zooming out, you know, and they've been taking advantage of this thing. So that's kind of my perspective on that.
Will Szamosszegi (06:09):
Yeah. It's incredible. When you look at, from that perspective, when you're zoomed out, because the day to day fluctuations really don't capture the mentorship that's going on here. And when you look at these people in other countries and just looking at the amount of sovereignty that it gives them having an asset in this property that can be sent across the world and that they can access and hold and protect their monetary value. It's something powerful. And so,
Alex Gladstein (06:34):
Yeah. And, and, and for people who like gotta understand, like over the last five years, you've also seen the emergence of tether, which is like hugely important for people in these countries as well. And it's like kind of what they use as their, I don't know, they're like checking account, like, you know, like people in Lebanon or Nigeria or Argentina, like they, they still want, they like Bitcoin, but they still want dollars. So dollars are still important for obvious reasons. Bitcoin does go up, but it also goes down. Right. And it goes up into the right over time. But like you still got bills to pay and stuff to do. Right. So the fact that people have been able to like enter this new financial system where they have Bitcoin is like the bedrock and as like the long term store value and maybe as the payment rail.
Alex Gladstein (07:13):
Right. But then they can enter and go back and forth between that and tether through a variety of peer-to-peer marketplaces means that they have like, you know, a permissionless checking savings account set up. It's kind of interesting. So, you know, yeah. It's allowed them to diversify a little bit. They have a certain amount that they keep in essentially dollars, you know, dollar back to tethers. We can be very skeptical tether. And I think that's fair as like a, as like a what's behind it. But the reality is it's held as peg. It's doing the job. So it's doing the job where no, you know, alphabet super organization's doing their job. Like what UN agency is giving dollars to people in Lebanon, like nobody, but tether is between tether and Bitcoin. I mean, you're talking even during this downturn here close to a trillion dollars in value and a daily trading volume, that's astronomical between the two.
Alex Gladstein (08:00):
I mean, these two assets specifically make up 90 plus percent of all activity in the crypto markets like in emerging markets globally. And even, even in America and Europe, Bitcoin and tether together are like, you know, obviously the super majority of everything that's happening and, you know, look tether is centralized. First of all, it's freezable, confiscate, it's issued by a centralized entity. It, it runs on centralized blockchains, like Tron and stuff like that, which is all important. But at the end of the day, you know, again, it's, it's like a dollar instrument it's not giving you that sovereignty and freedom that Bitcoin does, but, but it is interesting to track. So I think this kind of relationship between the two has been quite beneficial to a lot of people around the world.
Will Szamosszegi (08:37):
Yeah. And just going deeper into that on the Bitcoin side, in particular, one of the things that makes Bitcoin so incredible is this process of mining and the process of how you're essentially storing real world energy and obeying the laws of physics in, in the form of money and transferring value. And I guess my question to you is how do you view mining today and why do you think mining is important for, for Bitcoin as achieving a, becoming the global reserve
Alex Gladstein (09:07):
Currency? Yeah. Well, proof of work is core to Bitcoin. It is something that Satoshi had to figure out to create decentralized digital cash. The thorn in the side of all the previous experiments, going back to David CHAM's E cash and all the others was that the mint was centralized. The issuance was centralized. You could have cool private anonymous E cash, but if the mint was centralized, you were susceptible to the same abuse that's happened since time and Memorial in terms of excessive money printing, right. Which can destroy the asset and disrupt the whole market. So, so she was like, well, how do I print digital currency without a centralized mint? That's hard. Well, they figured it out proof of work with the difficulty algorithm together is how they did it. Right? So, you know, now you have this global competition of minors, expending energy in a way that's very, I would say kind of like equal or equitable in terms of opportunity.
Alex Gladstein (09:56):
Like anybody, anybody can turn energy into Bitcoin at the market rate, essentially dictated by sort of the hash power and the difficulty algorithm. So unlike a proof of stake coin system, where as that coin gets more valuable, the stakers kind of get more control over the system. As Bitcoin, the asset gets more valuable. Like over time, we've seen this like incredible proliferation of minors in all different countries and actually a decentralization of mining. I think mining's interesting as well, because you have this balance between pools and mins and at the end of the day, you're having, I mean, you, you can profitably mind Bitcoin by yourself, solo mining. I mean, Jack Dorsey just posted an image last night of him, ostensibly using water, using flowing water, using hydro power to, um, solo mine, you know, he has a couple machines and, and he's, he's earning Bitcoin hard, hard money by transforming flowing water in Bitcoin is kind of amazing.
Alex Gladstein (10:46):
So, you know, I think that mining is obviously critical to having a, a money system on the internet where, you know, one entity is not in charge of and cannot have use the, the, the printer let's say the issuance, right. It's actually absolutely essential to that. But beyond that, it's got like really interesting implications for energy and our relationship to energy. Cause it just means that like anyone anywhere in the world can turn any kind of energy into money regardless of where it is. Right. So you have all this like high potential energy in inaccessible or remote places. That's just been like, not been able to be used before. So you have a lot of countries and societies that have renewable energy, especially and fossils too, but like also renewable, like in areas that like no one can really use. I mean, it's just like, you know, <laugh> usually like geothermal around volcanoes in like the tropical or subtropical parts of the world is, is not like a friendly place to like set up a power farm because no one really lives there.
Alex Gladstein (11:37):
Right. And you have like geographic limitations as to where that power can go. Okay. All of a sudden, like anyone who's got geothermal in a jungle volcano, they can use that to mine. Bitcoin, you've got tons of countries that have like vast wind resources, obviously tons of solar resources in areas that are not near the population centers. All of that is absolutely ripe for Bitcoin mining. So I think you're just gonna see this like explosion of farms across the emerging markets over the coming decade, as well as a broader understanding of mining and how it can help us with our own, like, let's say, advanced economy, electric grids.
Will Szamosszegi (12:11):
That was one piece in particular that I really wanted to dive deep on with you because there's this current narrative around Bitcoin mining being bad for the environment being a dirty form of money. And I think that a lot of the people who are criticizing mining don't have a true understanding of the mechanisms that you just explained, but also the comparison that should be made, it's almost like comparing like apples to like computers, you know, the way that they're doing it. It's just, it's not even apples to oranges. You know, it's, it's just so off base. And I think that you're someone who understands all the mechanisms and I'm very curious to see how you talk about the ESG of Bitcoin. And after we cover the E the environmental piece really diving into the S and G cuz I, I think at, for the S and the G of ESG, there's no one better to talk about it than
Alex Gladstein (13:00):
You on the energy piece and the environment piece. I think that you have to imagine a couple different scenarios. One is that like the people running energy systems start to like learn about Bitcoin, like in a meaningful way. And they start to get like, wow, this is really interesting. Like what could we do with this? Right. I mean, you could see a situation in the United States, for example, where miners are sold at Walmart, you know, you know, rather cheaply 20, 25, 20, 26, you can walk into a Walmart and buy an ASIC where when you have like a new power system installed in your home, if you live in an area that has like a decent amount of sun, that is sort of default, that there will be a Bitcoin mining built into your home's energy system. And therefore there's no like wasted power, um, rather than a battery, uh, which fills up, right?
Alex Gladstein (13:43):
I mean, if you have extra power during the day, then you know, it can, you can use it to generate income for your household. So I think that that's gonna be started. People are gonna start to more deeply understand that people are gonna start to understand, like at a grid level macro grid level, how, if you overbuild Bitcoin mining with renewables, then when there's like a need for more power from the grid in extraordinary times, you know, the Bitcoin miners can just give the power to the grid that's necessary. They can turn off and they can prevent like spike events from happening. So I think that, you know, in the, let's say like advanced economies, you're gonna see hopefully an understanding that this technology can help like stabilize grids and also like the average person earn more income and have a more efficient energy set up at home as far as like abroad and as how this connects to S and G I mean, like there are a lot of people in difficult environments around the world that is hard for them to raise income or to fundraise as this technology just gets cheaper and cheaper to mind Bitcoin, like more accessible over time.
Alex Gladstein (14:40):
Like you're gonna see off grid mining all over the place. And, you know, that's off grid. Mining is like very hard to police. The world's biggest police state, China, you know, tried to get rid of all the, the Bitcoin mins. And it seems like they did a good job. Generally speaking, there's still Bitcoin mining happening in China right now. If the CCP can't eradicate it, I mean, what about a way less resourced government? You know, that's like way less sophisticated technologically, right? No hope at all. So I think you're gonna have abilities for like, organizations that are like, you know, whether they just be private sector or like actively against the government or whatever in the future, they'll be able to like use this value to check government power. Um, and I just think generally speaking, the whole idea of Bitcoin and its energy use is so poorly misunderstood people don't look at it in context.
Alex Gladstein (15:26):
They don't understand that like it's mostly renewable. Whereas most industries are not, they don't understand that it's like heading in a more renewable direction. They don't understand that it's a money competing against the dollar, which is tied to oil. They don't understand the negative externalities of dollar system. They don't understand that like Bitcoin is something where you can like see transparently the energy externalities, whereas like the other currency systems, you just can't see them at all. It's all hidden behind like an opaque, like slayed system. And I think that in general, the context is just like, you know, oh, Bitcoin's using as much energy as Argentina or whatever. That's not a helpful thing to say, like, how about actually it has the same carbon footprint as closed dryers in the United States or the cruise ship industry. Okay. Then that, that helps a, a human understand really like what we're talking about here.
Alex Gladstein (16:13):
And then we can start discussing, well, okay, closed dryers are a total luxury. And so are cruise ships, like no one needs these things to survive yet. Bitcoin is absolutely essential for tens of millions of people in emerging markets. Like they don't have good money. They have no way of like doing their living without getting destroyed. So, you know, you start to think about morality. I mean, there's a lot of things that would need to go before Bitcoin, you know, we're actually gonna talk about human rights. Right? So that, that debate though is just so freaking hopeless. I mean, you have so many people who are so arrogant, kind of about their understanding of Bitcoin and they don't think they just know that it's bad for the environment and, and they they're letting that guide their thinking. And they're not open to like actually understanding the reality underneath.
Alex Gladstein (16:53):
And that's just gonna be an ongoing debate over the next five to 10 years, which it just is. It's just like the number of people who are like calling for proof of state to replace proof of work inside Bitcoin. They're just clueless. They're not thinking about what that means or like how that would completely destroy Bitcoin, which is so valuable for people. So I like to start on the S and G side and just say like, Hey, are you aware that Bitcoin is valued? Because most people who are criticizing Bitcoin, like they think it's just a speculative asset for rich bros or whatever. They don't get the global impact. Now, once you understand the S and G, which I've documented in my work in terms of how people in west Africa or Cuba or Afghanistan are using this asset in Belarus, Russia, like whether it be, you know, just people trying to get by whether it be human rights activists, whether it be people who are cut off from the financial system, people who are unfairly punished by sanctions, that, that are levied against the government, that they didn't even get to vote for all these things.
Alex Gladstein (17:44):
I think that once you understand the value and that it's actually helping so many people, then we can have the energy argument, right. Or the debate, or we can have that dialogue. But if you don't understand how, like hugely important it is, then you're just not gonna make it. Like you're just missing it, you're missing it.
Will Szamosszegi (17:57):
And you've done some phenomenal work on, uh, the Petro dollar and an understanding of really the foundation behind the dollarized world we live in today, how that came to be and what is really backing that system. Is there anything that you think stands out in some of the research that you've done there that you think would be relevant to people's understanding of this discussion that we're having right now? Like why, for example, this system is so much more efficient in regards to efficient value transfer.
Alex Gladstein (18:27):
Well, I just think that it's important for people to look at monetary history and to understand that, you know, the dollar is a political animal. It's not just something that the world freely chose to be the reserve currency. This was a, a political decision forced upon the world by the United States at Bretton woods. You know, other people wanted a global currency system that would be more fair, but the United States was in a better position in terms of gold holding. And it was a gold standard at the end of the day, or at least a gold exchange standard. And we had all the gold, 1944, and we got our way. And then we abused our promise to the world and all these different central banks had dollars that they thought they could exchange for gold. And that seemed to be working fine in the fifties. And then in the sixties, people started having questions.
Alex Gladstein (19:11):
And then in 1971, you know, we answered the question and we said, actually, just kidding. No, um, you can't, can't have your gold all pieces of all those pieces of paper or, you know, entries in your accounting book that you thought you could redeem for gold. You can't actually anymore. So that left these countries in a pickle, cuz if they dump is really genius because if they dumped the dollars or the debt or the treasuries in protest <laugh>, then the dollar would get weaker on international markets. Then their own currency, let's say it's the yen or the, the mark or whatever. And that would give the United States disproportionate advantage when it comes to exports, which at the time were like really, really key. So the Germans and the Japanese and all the others, like they were kind of stuck. There was only so much they could do.
Alex Gladstein (19:52):
And gradually the pound lost its importance. And, you know, by the end of the seventies, very, very little energy trading was done with the British pound or any other currency. This was of course before the Euro and dollar became the dominant kind of nuMe error for energy and finance by the end of the seventies. And, uh, again, this was like accomplished via force. This wasn't like volunteerism or choice. And that tie between energy and the dollar has, has always been very important. It has led to a pact between the Saudi Arabian government, which is, which is the swing producer at OPAC and which controls most of the world's oil, um, and the us and, and from the beginning, you know, and I understand that dollar system's very different creature today than it was in the seventies. And it's much bigger. And most of the dollars that even exist, aren't even controlled by the fed they're in like the Euro dollar market.
Alex Gladstein (20:38):
I, I get all these things, but at the end of the day, like value of the dollar was, was underpinned by this relationship. After we severed the tie to gold, essentially we tied the dollar to oil, um, through this pact with Saudi where, you know, to buy oil in the seventies, eighties, nineties, two thousands up up until a few years ago, you had to get dollars first. And you know, a lot of people will say, oh, well, that's easy. If you're in Malawi or Cuba or whatever, you would just sell your national currency for dollars. And then you would buy the oil. Yes. But you're, you you're just dismissing the idea that that creates a ridiculously huge demand for dollars that otherwise would not be there. Like if the Malawians could just buy oil from the Saudis, with their own currency and they could print their own currency and buy the oil, there'd be way less demand for dollars.
Alex Gladstein (21:18):
All of a sudden you have this like huge global demand for dollars because everybody needs dollars to buy oil. And that was enforced until pretty recently over the last five to 10 years, you've seen a as, as Lin, Alden and others have pointed out, you've seen a start unraveling of the Petro dollar system. You've seen other countries buying, uh, oil and other commodities in other, in their own currencies with each other, Russia, China, India, like you're starting to see that happen. But for 50 years it was the USS game. It was just the USS system. Um, we don't know where, what happens from here, but I think that's quite important for people to understand that like the post 1971 financial regime was extremely tied to oil and fossil fuels and they became very powerful. These fossil fuel companies, you can look at research like there's disturbing research.
Alex Gladstein (21:59):
If you look at differential profits and you look at the oil companies in the fortune 500 versus the rest of the fortune 500, you break them out and you separate them. Anytime the profits of the fortune 500 oil companies fell below the kind of average profits of the rest of the fortune 500, a war broke out in the middle east. And then the price of oil went up. Okay. You could say it's a correlation, pretty nuts. Like it, it holds back 50 years. Every single time that this price went down, meaning the fortune 500 oil companies, the big, big oil companies lost power compared to other sectors of the world. There was a war that broke out in an oil reef. And I don't know. I mean, we could think about now. I mean, I, I would say that, that if you look at the data, that pattern has kind of started to break apart in the last decade.
Alex Gladstein (22:41):
But again, it was there in the seventies, eighties, nineties, two thousands, like strongly there. Look what happens if us Russia, Ukraine have a big thing in the next few months, what do you think's gonna happen to the oil price. It's gonna go way up. So it's disturbing. And that is an exaggeration like oil is essentially because of this whole relationship. There's so many second order effects that happens, like because of this relationship, oil starts to get used as money. Essentially. It's like monetized. If we have the Bitcoin standard, you don't have the dollar standard, the Bitcoin standard. I think, you know, many things, whether it be commodities like oil, gold itself, real estate, negative yield and government bonds, stocks, these things all have value. There is value in them, but they are exaggerated compared to other things because we use them as money because our money sucks.
Alex Gladstein (23:23):
So if our money, all of a sudden is good money. And if our money is increasing in value over time, and it is not a usable or corruptible, then value will flow out of these things back into money. And obviously people will still pay for houses and interest, any kind of interest on, on, on government debt, cetera, cetera. These things will all have value. They're overvalued right now, Vivi other stuff, and Bitcoin standard that shrinks. So oil becomes less valuable. I mean, people still need it, but like the power of oil and oil companies is vastly exaggerated today because of the currency system we have is my thesis that leads to, you know, again like us, the us supporting the Saudi Arabian government, you know, exaggerated power for all kinds of dictators around the world and the us being essentially unwilling to investigate the Saudis.
Alex Gladstein (24:10):
Literally, if you could look at the details, I'd written about them in my Petro dollar piece, it's like shocking. Like we just like Biden and Trump Obama doesn't matter. They literally refused to push the Saudis. Remember 15 of the nine 11 hijackers were Saudi bin Laden was Saudi. We didn't bomb Saudi. We didn't attack Saudi. We attacked a couple other countries. So it's just worth thinking about that. You know, the current system is, is just so tied to fossils and energy and oil. And, you know, we could have a currency system. That's not like Bitcoin is, is just not really tied to oil. I mean, there's a decreasing over time amount of coal. Okay, fine. Natural gas for sure is something that you see. But at the end of the day, the majority of the mining is done with hydro wind, solar, geothermal, and nuclear as a group. So that's what it is. And, and we could easily be living in a world in 10 years where it's like 90% of Bitcoin mining is powered that way. Cuz that's the cheapest energy. I mean, and this doesn't mean that, I mean, you could like natural gas fields still might be very profitable, but like it just might be more profitable to mine in some remote places of renewables than than to go to some gas field in Alberta. Like it just we'll have to just see how it shakes out.
Will Szamosszegi (25:13):
If we go down this rabbit hole a little bit further, cuz you touched on so many important points. One of those being, you have all this money and value that's held up in these other things like oil and real estate because the money just sucks. Mm-hmm <affirmative> so what happens if you have money that doesn't suck AKA Bitcoin and you have a good store of value and the values flowing out of these other things that aren't really money into the hard money, which is Bitcoin. And we play that out over say five to 10 years, more and more people understand that Bitcoin is a better place for them to store their value and store their money in that type of a world. What do you think the effect of that is on international trade on war in general globally? How do you think that this plays out in that type of a
Alex Gladstein (25:58):
World? Well, I just think that because there would be no issue of the reserve currency, issuer of the reserve currency, that there would just be a little more balance to the world. Like right now, like one country with 4% of the world's population gets to dictate terms to everybody else we have shaped and I've been a beneficiary of that. Okay. Totally guilty is charged. But like we have basically gotten to write up how all the trade flows work. And obviously that's the central planning talking about a little bit more of a, a world that's more organic in the way that it's flowing and probably more efficient, more of a free market world. Now, as far as, um, the war thing goes, I mean, you're still gonna have disputes of conflicts. I guess what I believe is that this idea of like these like undemocratic forever war, things that are happening that are totally disconnected from the population's cares needs and wants are just unlikely because like where are they gonna get the money to do that right today they can use the Fiat central banking system to go and do the wars without consulting.
Alex Gladstein (26:51):
The people I'll describe like one way they might do that in my country. At least we have the treasury department and then we have the central bank, right. What the treasury can do is the treasury can act as the financial agent for the defense department. And let's say, we're gonna go fight in Ukraine. Okay. So the treasury can pay a bunch of private contractors to make the tanks and weapons and whatever we need to go to Ukraine. Okay. Billions and billions of dollars. They get that money, not necessarily by tax, by taxing, but they get it by selling bonds. So they'll do an auction, sell $50 billion of, of bonds or whatever to the private sector. And then they go around and they take the money. The private sector gives them and they, they put it into the bank accounts of these mercenaries who provide weapons to the us government.
Alex Gladstein (27:32):
Okay. The thing is though we're in this new regime of like, like, like for many decade there were foreign buyers of those bonds. So like we were able to get like Japan and Germany and China to pay for our war by through this mechanism, they would basically is it is called the dollar recycling system. Like these, these countries would essentially earn dollars by us buying their stuff, whether it be oil or later goods, exports, et cetera, they would take those profits and recycle them back into treasury. So they would be the ones sustaining this system that has broken down in the last decade, but conveniently something has replaced them. And that's this idea of quantitative easing. So you now have these like primary dealers and banks, like buying debt at these auctions and then just immediately selling it to the government and you can watch this, you can see the government's balance sheet go up up, blah, blah, blah.
Alex Gladstein (28:15):
Right. So we've kind of like made a trade off and we were able to get the world to finance this like warfare welfare state for a long time. Eventually they were like, I'm out. Right? So 20 12, 20 13, 20 14, you started seeing like no more new demand, really like in a, in a big way. Now today, the, the fed is the largest buyer of our debt in the way that I just told, you know, sort of broke down for you. So that warfare state, like in a Bitcoin standard, like you don't have the QE option. There is no like just ability for like the government to like do this like trick where it has like the treasury and then, you know, the fed no, no, it's like, there's only one hand and there's what are you gonna buy it with? There's nothing there. So they're just gonna have to be more efficient and more responsive to the needs of the people. And as much as I love the Ukrainians and as much as I hate Putin, that is not like the need of our country right now, you know, let's speak for myself. But like I would imagine the average American would prefer other that money to be spent elsewhere, not in lining the pockets of defense contractors. Right. But the fight Fiat system has allowed that to be the case. Right.
Will Szamosszegi (29:16):
It's hearing it laid out step by step. Like that is just so eyeopening and draws the direct comparison really of how you could see a Bitcoin standard type world reducing actual international conflict, reducing wars because you don't have that access
Alex Gladstein (29:32):
To the money. Yeah. I mean the like Bitcoin ends wars thing is like, it's an overgeneralization, but it's important to point out that it reduces the possibility for like these like forever wars and occupations that, that the population is not interested in because it takes away that ability for the government to finance the wars through debt monetization, that the public is unaware of this whole process I described to you. It's not like the average voter knows that that's happening. What happens to them is their currency gets debased and things get more expensive for them. Okay. That's, what's, that's what's happening for them. And for a long time, the fed was able to just restrict that to assets. So since the nineties, you just had asset inflation and Hey, asset inflation, who's gonna complain about asset inflation, right? Oh, houses are growing up and stocks are going up.
Alex Gladstein (30:15):
Most people are freaking thrilled about asset inflation. Of course, until the bubble crash, then everybody's devastated. But generally speaking, like if a fed can just like restrict the inflation to the assets, like people are fucking happy. Um, once it creeps into like everyday stuff, okay, now we're having problem. Now Biden's gotta be telling Powell to, to raise rates and stuff like that. It's not politically palatable. Okay. But yeah, I mean, that's kind of where we are. I also think that when it comes to the Bitcoin and war thing, it's important to point out historically that we don't have an example of a Bitcoin standard. It has never existed. However, there are some comparisons you can make to the gold standard. It's not a, a one for one comparison. There's many, many, many, many, many, many things that, that make a Bitcoin standard way different than a gold standard, including the fact that the population holds the Bitcoin, not the government holding the gold, right.
Alex Gladstein (30:57):
Bitcoin is not centralizable in the same way gold was. So, but you could see something very interesting in modern times. Why did governments ditch the gold stand? Well, Germany and Britain ditch the gold standard to fight world war. I, they left it as in, you know, to literally to do that. Why did the us ditch the gold standard to pay for the Vietnam war? It's very clear that the gold standard was like an obstacle. It was an obstacle for warmongers. And it was just like, not a very helpful thing. If you wanna, finance wars like gold standard was like not great. So I think it stands to reason that like the Bitcoin standard will be a similarly annoying for governments who want to go fight wars all, all over the place. And it won't be as easy to like just defeat and demonetize and wrote a piece called the end of super imperialism that lays all this out and how this all works. But you can check that out.
Will Szamosszegi (31:42):
Definitely. Well, I got one final question for you. It's called the Peter teal question and that is mm-hmm <affirmative> what is one belief you hold to be true that the majority of people would disagree with you
Alex Gladstein (31:52):
About, well, quite obviously that one's gonna be the reserve currency of the world in the future.
Will Szamosszegi (31:56):
Yeah. I was gonna say, as I was asking it, I feel like a lot of these answers what I,
Alex Gladstein (32:01):
Well, it's, it's, I mean, I believe a lot of things, but like it's about confidence. Like I'm sure Peter has things he's confident about that that will happen. That most people are like, that's crazy. Well, for me, like the point's the future of money and most people would look at me like I'm freaking crazy. So there we go.
Will Szamosszegi (32:13):
Well, I guess in this particular case, what's one other thing that we haven't talked about in this interview yet would fall in line with, uh, being a disagreement with the majority of people.
Alex Gladstein (32:24):
Okay. How about energy use is good? The more advanced your civilization is the more energy you use and that it's about the type of energy and how do we deal with the negative externalities of that, but that we're not, we're not going forward as a, as a species with less energy use this idea that like we have to like use less profoundly relies on a broken understanding of history and, and how we advance as a civilization forever gonna be a civilization out there exploring the stars. It's not gonna be with less energy. So if that's another one,
Will Szamosszegi (32:50):
That's, that's a very good point. I think, uh, Lynn Alden, and one of her research reports was talking about how with different types of energy being used. Like for example, when we're using a lot of natural gas, all of a sudden we go to renewables and it's not like the total natural gas being used decline. It's just that the energy use went up in renewable energy. Um, which kind of goes to your point, the more advanced our civilization becomes more energy we use, it's just incorporating other forms. And in this case, a lot of renewable energy sources,
Alex Gladstein (33:20):
I would agree. She's a great thanks for having me. I appreciate it.
Will Szamosszegi (33:24):
Yeah. Appreciate you. Coming on. This has been a lot of fun.
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