Bitcoin vs. Fiat (Part 1)

00:02 The presentation is called the tale of 00:03 two systems because I want to compare 00:05 the US dollar fin uh monetary system to 00:09 the bitcoin monetary system because 00:11 bitcoin is a money but it's also a 00:12 monetary system. Okay. So why do we use 00:15 money? We use money because it makes it 00:17 easy to trade. That's why we use money, 00:18 right? It's uh hard to trade a cow for 00:20 eggs, hard to trade a cow for a house. 00:23 Hard to trade a house for eggs. So we 00:24 use money, right? We use money. We work 00:26 for money. We get the money. Then we use 00:28 the money to buy stuff. So all modern 00:30 economies use money, not bargain. Okay. 00:33 So money is also a system. It's not just 00:35 the physical things we touch. It's also 00:37 a system. So for example, the US dollar 00:39 is a system that includes banks. It 00:42 includes a central bank. We'll talk 00:44 about what that is. It includes the 00:46 government and of course taxes. It's 00:48 April 15. Taxes. That's part of the US 00:51 dollar money system. A money system has 00:54 a bunch of purposes, but the two most 00:56 important one are who owns what money 00:59 and the total amount of money that is in 01:02 the system. Those are probably the two 01:03 most important things that a money 01:05 system or a monetary system controls. 01:08 So, how does the money monetary system 01:09 work and how does it matter to your 01:11 money? Well, since this is Rotary in the 01:14 sort of business flare, right? So, we're 01:15 going to use a spreadsheet, the world's 01:17 simplest spreadsheet to understand how 01:19 the US dollar money system works. So in 01:22 this spreadsheet my dollars. Now this is 01:25 literally the only number most people 01:26 think about when you ask them about what 01:28 money is is how much do I have? Like 01:30 literally their understanding stops 01:31 there. Maybe they would say and I have 01:33 to pay some taxes. Okay. But there's a 01:37 there's another number that is just as 01:39 important as the number of you have 01:41 which is how much money there is which 01:44 almost nobody thinks about but it's 01:45 super important. It's super important 01:47 because your purchasing power is divided 01:50 by one divided by the other. So just as 01:53 important of how much money you have is 01:55 how much there is because it determines 01:56 what you can buy. Okay? So if you have 01:60 10% of the dollars, if you own $100, the 02:02 total dollars in the system are $1,000. 02:04 You can buy 10% of everything that money 02:06 can buy right now. Okay? But if somebody 02:09 moves that number up to 2,000, suddenly 02:12 you can only buy 5% of all the things 02:14 that money can buy. Even though your 02:16 $100 didn't change, your ability to buy 02:19 stuff dropped in half due to factors 02:21 outside of your control. If that doesn't 02:23 seem fair, it's not. Okay. So, how many 02:26 dollars are there exactly in the system? 02:29 Well, right now for the US uh US 02:31 dollars, it's called M2 money supply. I 02:33 won't try to explain that, but there's 02:35 about 22 trillion $22 trillion in the 02:38 system, which means if you have $100, 02:40 your purchasing power is $100 of 22 02:43 trillion, which will buy you about uh 02:46 you know, a gold set of earrings about 02:49 that one gram set of gold earrings. 02:51 That's about how much $100 will buy you. 02:54 Okay. So, the problem is the US 02:56 government prints out of thin air about 02:59 7% more money every year. 03:01 Now you can see where that would be a 03:03 problem over time, right? And so back 03:05 here, back in 1960, the total dollars in 03:08 the system was 286 billion. So your $100 03:11 was divided by 286 billion. But today, 03:14 it's 22 trillion. So there's 75 times as 03:17 much money, meaning your dollars have 03:19 been divided by 75 times as much money. 03:22 Basically, it's been diluted, right? You 03:24 have your drink, somebody pours 70 times 03:25 as much water in your drink. It's, you 03:28 know, 175th as potent. Okay? So back in 03:31 1960 when the Beatles were around, the 03:34 same $100 would have buy you 88 gram of 03:37 gold instead of one gram of gold. 88 03:40 gram of gold. Okay. So when that number 03:43 rises, that number falls and your 03:46 purchasing power goes down. Now you may 03:48 be thinking, "Yes, but the wages have 03:50 gone up." The problem is the wages have 03:52 only gone up about as half as much as 03:53 the money printing. So it means if 03:56 you're living on a Campbell soup and a 03:57 burgerer every day, you buy you can buy 03:59 half as much today as you could back 04:01 then for the same for the same hour of 04:03 work. So why don't we feel wealthier 04:05 when we have more money? Because wealth 04:08 does not consist in money. It consists 04:10 in what money can purchase. We've known 04:11 that since 19 1776 with the wealth of 04:14 the nations, Adam Smith. Okay. So what's 04:16 going on here? Who manages the system? 04:18 It sounds like the system is broken and 04:20 it might not be fair. The question is 04:22 who manages the system? So before we get 04:25 to the central bank, thank you. Uh so 04:27 each bank records who who has what 04:29 money, right? Regions, trust mark, who 04:31 has what money. And the central bank 04:33 makes sure that two people don't own the 04:34 same money. So it's really the central 04:36 bank that controls that. Okay? So it's 04:38 actually a big spreadsheet. It's called 04:39 a database, right? But it's really a big 04:41 spreadsheet at the central bank that 04:42 controls how much money is in the 04:44 system. Okay? And the dollars in the 04:46 system, the way they change it is 04:47 there's a Federal Reserve Board of 04:49 Governors. There's a group of people 04:51 that get together about every month or 04:53 two and they the the chair is Jerome 04:56 Powell and they basically double click 04:58 on that number and decide how much 04:59 dollars there's going to be in the 05:00 system and they do they have a bunch of 05:02 complicated way ways of describing what 05:05 they're doing but effectively what 05:06 they're doing is they're printing money 05:07 out of thin air. They're just doing it 05:09 in very creative ways. Okay. So that's 05:12 why that number has been on a tear. The 05:14 reason US dollars are being so diluted 05:16 is because a small group of people 05:17 control controls whether there should be 05:19 more of them. And magically, as 05:22 throughout the entirety of human 05:23 history, every time someone could make 05:25 money out of thin air, it was only a 05:27 matter of time till they found an excuse 05:29 and an emergency that required them 05:31 magically to go down in their basement 05:33 and make money out of thin air. Now, if 05:34 you and I do it, it's called 05:35 counterfeiting. If the government do 05:37 does it, it's called a bunch of fancy 05:38 words that mean it's supposed to be 05:40 okay, but it's not. Okay? So um so if 05:43 the dollar system goes up easily then 05:45 your purchasing power is going down 05:47 quickly. So politicians have to limit 05:49 how much money they're going to print. 05:50 So as the number goes up your purchasing 05:52 power goes down. So this is the 05:54 purchasing power according to government 05:55 statistics. I didn't make this up. 05:57 According to the consumer price index 05:59 CPI, this is like the inflation they 06:01 talk about in the news. Purchasing power 06:03 of the US dollar is down 95% since 1935. 06:07 So from the end of the, you know, the 06:08 sort of the heart of the Great 06:09 Depression to today, you got five cents 06:12 of your purchasing power left as 06:15 compared to what a dollar would buy you 06:16 back then. What? 06:20 Okay. So So the the idea throughout 06:23 history has been we got to got to fix 06:26 this problem. So people have the bright 06:27 idea, why don't we tie that number to 06:29 gold? We'll just the gold standard, 06:31 right? We've all heard of the gold 06:32 standard. uh the gold standard has never 06:34 worked and I'll explain some of the 06:36 reasons why but so the the the promise 06:38 was what if the paper the paper money 06:41 that we can print out of thin air what 06:42 if it's tied to gold then they sort of 06:44 can't print it out of thin air. Um but 06:47 every time this has been tried the same 06:48 thing has happened. Okay so here's what 06:50 it starts with. This is a $10 bill. If 06:52 you zoom in on that $10 bill, it says 06:56 this certifies that there have been 06:57 deposited in the treasury $10 in gold 07:00 coin payable to the bearer on demand. 07:03 Okay, that means you're supposed to be 07:04 able to swap the paper for the gold 07:05 anytime you want. Now, every time humans 07:07 have ever done this in entire human 07:09 history, they print too much of the 07:10 money and eventually they stop being 07:12 willing to swap it for the gold. So, the 07:15 United States did this, in fact, I it's 07:16 in my car. I didn't take it in with me, 07:18 but I have um I I have a a bill that 07:23 says this certifies that they're 07:25 deposited in the treasury uh 07:28 $10 payable to the bearer on demand. So 07:31 after this bill, they had a bill that 07:33 just said $10 payable to the bearer, but 07:35 it landed ambiguous in what? Like is 07:37 this not a dollar bill? Like what am I 07:39 supposed to be able to get for this? The 07:41 answer is nothing. But we don't really 07:42 want to say that. But anyway, ultimately 07:44 in 1971 the government broke the promise 07:47 and they changed the words to Federal 07:49 Reserve note $10 and they took off all 07:52 the words about how you could get it in 07:54 gold coin anytime you wanted and all 07:55 that sort of stuff or in the case of a 07:57 $1 bill was in 08:00 silver. Okay, so that's a huge problem. 08:03 So the dollar system, the US dollar 08:06 system runs on politics. And what about 08:09 different governments? Is this a problem 08:11 unique to America? Uh turns out not none 08:14 of these countries have a better dollar 08:16 than the US uh because they all print 08:17 money out of thin air. And believe it or 08:19 not, they're actually less responsible 08:21 than the United States. So this is how 08:23 these other currencies in the world have 08:25 compared over the last 10 years to the 08:27 US dollar. Now let's remember the US 08:28 dollar is already down 95% in 90 years. 08:32 In the last 10 years, these over here 08:34 are down an additional Venezuela 99% on 08:37 top of how much the US dollar is down. 08:40 So 90 85 99% even major currencies like 08:44 the British pound is down 25% compared 08:47 to the dollar which is already down. So 08:49 all of these currencies are worse the 08:51 Canadian dollar the Indian rupee all the 08:54 euro all of those are down an additional 08:56 20% just in the last 10 years as 08:59 compared to the US dollar which is also 09:01 down in purchasing power you know 09:02 precipitously. Okay so are there other 09:06 options? Is there a way to fix this 09:08 problem that has honestly plagued humans 09:10 from the beginning of