An Overview of Austrian and Keynesian Economics

Episode 084

There are two main theories of macro economics – Austrian and Keynesian. Austrian economics developed in the late 1800’s Austria while Keynesian economics was developed in the environment of the 1930’s Great Depression.

I believe that it’s pretty indisputable that the majority of the countries of the world operate under what amounts to Keynesian economics. I believe that these policies are what are bringing us to the brink of a Global Depression.

In today’s episode I give an overview of the two economic theories, a bit of history and the major differences between them.

News and Links

Genesis Loan to 3AC

El Salvador to Issue Bitcoin Volcano Bond

Metamask to Begin Collecting Personal Data

 

Twittersphere

Vladimir Putin asks for a Digital Payment System

Il Capo Thread on Mental Game and Time Factor

Binance auditor, Armanino LLP

DCG, Genesis and Greyscale

Lyn Alden

 

November 27, 2022 Weekly Close (USD)

BTC – 16,453.71

ETH – 1,196.45

ADA – 0.312900

 

Podcasting 2.0 Apps available at http://newpodcastapps.com/ and the Value4Value information page available here: https://value4value.info/

I can be reached by email at mcintosh@genwealthcrypto.com and on twitter at @McIntoshFinTech. My mastodon handle is @mcintosh@podcastindex.social. Looking forward to hearing from you!

Website

https://genwealthcrypto.com

Music Credits

Rock Guitar Intro 07 by TaigaSoundProd

Link: https://filmmusic.io/song/8342-rock-guitar-intro-07

License: https://filmmusic.io/standard-license

Funky Life by WinnieTheMoog

Link: https://filmmusic.io/song/6040-funky-life

License: https://filmmusic.io/standard-license

Transcription

Hey set stackers, it’s November the 28th, and this is episode 84 of the Generational Wealth Cryptocurrency Podcast. I’m your host McIntosh, and today’s episode is about an overview of Austrian versus Keynesian economics. Of course, no one on this podcast is a financial advisor, and all information presented on this podcast is for informational purposes only. Now that we have the legal stuff out of the way, let’s jump on in.

Alright everybody, we have our tea, Earl Grey is nice and hot, and mixed in with a little bit of honey to help the throat as I record this podcast. So I am going to be doing something a little bit different in both this podcast and probably for the rest of the podcast for this year. We are on November the 27th as I record this, and that actually means that we have, after this episode, one, two, three, four episodes until January the 1st. Our first episode of the year will actually come out on January the 2nd. So I wanted to take a little time, I talked quite a bit about Austrian and Keynesian economics and a lot of this macro, kind of the world macro-economic reality that we are in, and I wanted to take a few weeks and actually provide an overview of that. So today we are going to be talking about actually kind of the two main viewpoints of current economic theory, if you want to call it that, which is Austrian and Keynesian and give a little background about both of those. I do believe you would find that certainly the majority of, if not all, of the quote first-world countries, like the United States, like Western Europe, subscribe to, effectively to Keynesian economics. And in my viewpoint, frankly, that’s a bad thing. Of course, I’ve been very upfront about this with the money printing and that kind of thing that’s been going on since, well, for almost a hundred years now, closing in on a hundred years. And I think it’s really what we’re seeing now is kind of the culmination of all of that process. So I think you could say I’m very firmly in the Austrian camp. But that’s my bias if you want to call it that, which I certainly would be considered to be one. I’m going to provide an overview, though, of both of these viewpoints. And you will find that they contrast very much.

So before we go into that, though, we will go through our normal market update. So let’s talk about the market this week. Of course, we’re talking about Bitcoin, which closed the week at $16,453.71. Ethereum at $1,196.45. And then, of course, ADA at 31.3 cents, roughly. 31.29, actually. So there you go. There’s our top three assets that we certainly discuss on this show. And frankly, they’re unchanged, virtually. Going back for the last three weeks now, they’re really unchanged, only a few hundred dollars. During the course of the weeks, we see movement. It’s funny that they kind of end up at this $16,3400 level. I don’t know. I don’t feel the need to reiterate what I keep saying every week. We continue to have this sideways movement, though. If you look at the charts, especially if you’re looking at a daily time frame, you can see a very clear downward triangle that has formed, descending triangle that has formed from that drop on November. It was between November the 6th and 9th. I don’t know exactly without pulling up the chart. But we had a big drop, and then we’ve been in this range. But the range has actually slowly been closing down, even though our weekly price has been near this same level. To me, given if you look at the volume as well as another indicator of interest, that’s not something I’ve talked about a whole lot. But the volume over these last three weeks has been on a steadily descending pattern, and that is bad. If you want to put it that way for the market, I think we still have a fair chance of seeing these lower levels. We keep touching the upper parts of $15,000, but I do believe we’re going to go lower. Let’s see. One, two, three, four, five, six days ago, we were at $15,586, and then seven days ago, so one week ago, we were at $15,459. We have not gone below that since then. However, I still think we’ll see $14,000 maybe lower. That is, of course, my opinion. And as I always say, you should be DCAing. You should not be depending on my opinion to be correct. We do know, obviously, we’re down from all times. This is a great opportunity. I literally just bought $25 of Bitcoin an hour ago, $16,180 or something. Not my regular DCA, but I just kind of thought we were at a little low, so to speak. Maybe a good time to buy and click on strike, and done. So I hope that helps. Again, if we get lower, just to wrap this up, if we do see lower levels here the next few weeks before the end of the year, then we should certainly take as much advantage of that as we can. This will not go on forever. It may go on for a while, but it will not go on forever.

Let us go on to our weekly topic. By the way, just a little note, I don’t recall if I’ve actually mentioned this.
I think I have, but just to reiterate, a few weeks ago I said I was going to start doing chapters and unfortunately I’ve not been able to do that because Captivate.fm, who is my hosting provider, does not support them. I’ve reached out to their support, I talked to them, and they were fairly nice about it, but the reality was they just were very noncommittal. Now one of our regular listeners, Martin from Sweden, shout out to Martin. Actually he’s on the podcast Social Index, Mastodon Instance, and I follow him. I think he follows me on there, and he had been involved in a conversation about chapters for his podcast, which is what kind of triggered this. He was preparing like I was to do that, and I mentioned, I said, hey, you probably should talk to your host because the host has to support them. His provider actually happened to be Captivate as well, so he’s bugging them about it. Hopefully we can get some support. It would be a great thing. I do intend in the, well, somewhat in the near future to self-host. I can do that. I have the skills to do that, and I’m just tired of dealing with stuff like this with providers that are, I don’t know. I have no complaint with Captivate, to be honest, other than this, but it’s time for me to move on and be able to provide those chapters for my users. I’m glad they do the transcripts. That’s good, because that means for the Podcast 2.0 apps that do support transcripts, they’re able to see those. I want to say it’s one of the pod apps, Podverse, I think, supports transcripts. Every week I upload the transcript file, and then you can see it right there.

All right. Let’s move on to our weekly topic. Again, overview of Austrian versus Keynesian economics.
I want to give a brief background about this, where they come from. I actually think that’s fairly important, and then we’ll talk about the basics of them. So Austrian economics, it comes from what you might expect, from the country of Austria, from Vienna specifically, and it originates with a guy named Carl Menger. He wrote a book called The Principles of Economics in the late 1800s. It was 1871, actually, that it was published, so other people since then have built upon his ideas. Maybe you could argue that his ideas were not fully formed. I think they certainly provided a solid foundation for Austrian economics, but other people have built on that. At its core, I think you could say that Austrian economics is based upon what we would call a laissez-faire style of economic policy. Lassez-faire, if I remember correctly, is a French word, but it means hands off. There’s minimal government intervention that the economic situations will tend to work themselves out. So what they really believe is that the minimal government interaction is going to produce the best economic outcome in general.

One of the things that when I was researching for this specifically, because I’m very well aware of in general what Austrian economics is about, but I have not had the time to, for example, read these books. I have some of them on my reading list, actually, but I’ve not been able to get to them. As I was reading through this, one of the things that I saw from multiple sources, they were saying that the Austrian economics, they arrive at their conclusions, and we’ll discuss those conclusions in just a minute, by what they would consider deductive reasoning. They consider Austrian economics to be almost philosophical in nature. People would work together and come up with these, they would do thought experiments, essentially. You find, in my opinion, and of course, this is my opinion, as everything I say on this podcast, but in my opinion, much of Austrian economics, to me, is very logical. I look at it and say, this makes sense. Now, on the other hand, we’ll talk about Keynesian economics. A lot of it, to me, doesn’t make sense, but you can call that bias or whatever. But I believe that the reason why it looks logical to me is because of its background, because of where it came from. And again, I didn’t know any of this until the last few days as I’m researching this. It’s not some formula-driven type economic philosophy, if you want to call it that. It’s very much, we’re going to take these thought models and we’re going to think this through what the effects are. If we do this, what does that mean? How does that affect the nation’s economy? This type thing, and so I thought that was actually very interesting, and I don’t want to be dismissive of that, because to me, I think that’s actually where I kind of find my appeal in it, in that I see this and to me, it looks very logical. It’s almost simple, and we’ll get into more of that as we discover, as we cover these key aspects, what I mean by that, the simplicity of it.

Keynesian economics, on the other hand, came from a man, strictly from basically one person, John Maynard Keynes, during the 1930s, kind of around the time of the Great Depression. That certainly was an influence on him, I think. Now, what his argument was is that what’s called aggregate demand or spending, those two words are virtually interchangeable, was the key area of focus for an economy. Spend, spend, spend, and you need to keep this in mind. When you’re dealing with Keynesian economics, it’s always about, what can we do to make
the economy grow by people spending more?

I will throw this out as a potential bias for me. I view that and I go, well, if the goal of the economic policy is to force everyone effectively to spend more and more and more and more, I don’t view that as a good thing. I think that’s counterproductive. I think that creates a lot of waste. I think that actually leads to exactly what we’re at right now, where people have more and more and more stuff, but the stuff that they have is a bunch of, frankly, junk. Cheap Chinese, and I don’t mean that in a derogatory term, it’s just that that’s where most of it comes from, cheap Chinese junk. And quality is no longer important and it’s about how many inches is my TV and so on and
so forth. Quality, quantity over quality, this kind of thing. And I think that’s one of the things, frankly, that I don’t like about it.

So John Keynes, his background, he actually got a degree in mathematics in 1905 from Cambridge, King’s College in Cambridge, UK. That’s pretty impressive to me as somebody who struggled in math.
That actually is impressive.
I think the issue is, a lot of Keynesian economics also is about making sense of a bunch of formulas
that somehow in theory are supposed to fit reality when reality may be dramatically different.
All right, Keynes always argued about spending being a carrier of focus.
He believed that the government should intervene through monetary policy, fiscal monetary policies,
to try and prevent the effects of recessions and market failures.
So we are seeing this in real time right now where governments all across Western Europe
and the United States and other countries are intervening in the markets.
They’re increasing the central bank interest rates to try and bring down inflation.
And they’re doing a number of other things to actively manipulate the economy.
This is direct Keynesian economics.
So again, understand that most of the people in government, in the governmental bureaucracies
around Western Europe, United States, Japan, China, really even, they all operate under
these Keynesian economics.
So anyways, keep that in mind as we work through this.
Unlike Austrian economics where, like I said, it’s this philosophical almost thought exercises,
this type thing that was used to develop it, Keynesian economics relied on mathematical
and statistical modeling and an empirical data to reach conclusions about macroeconomic
behavior.
Now that sounds good on the surface, but the issue is what if your models don’t actually
model reality?
And if that’s not, if it’s not perfect, then especially amplified through time, we see
dramatically different results.
Okay.
All right.
So those are kind of the basics of each one of these.
Now we’re going to jump into several other kind of these areas of disagreement that they
talk about, and I’m going to talk about these in brief.
Some of these we’re going to dive into over the next few weeks.
So I don’t want to give away too much.
One of the items that you see a dramatic difference is consumption versus savings.
Austrian economics believes that savings are fundamental to growth.
Again, the Keynesian economics believe it’s all about measuring the aggregate spending,
essentially.
If everybody’s spending more this year than they did last year, then that means things
are good.
That’s the difference.
Now, why do the Austrians believe that you should save versus spend?
That savings are fundamental to long-term economic growth.
The reasoning is that money saved by people then becomes available later for businesses
or investments.
That’s the thought exercise, so to speak.
You’re spending it on new technology and other improvements that are going to drive up productivity
for those businesses.
So savings in the long term is a really good thing.
Now, aggregate demand, this money that’s being spent by consumers, is simply the most important
economic factor.
Keynesian people, on the other hand, are all about spending.
If you’re spending more this year than you did last year, it doesn’t matter what it does
to you, the individual, we just want that spending to go up because that’s our measure.
Do you see how that in the long term can be a problem?
I hope that you do.
They are always looking for a higher GDP and a growing economy, which of course a growing
economy on the one hand is a good thing.
But a growing economy at all costs, on the other hand, does lead to financial ruin.
Business cycles and government intervention is another big area where these two things disagree.
Again, Austrian economics is much more laissez-faire.
They operate under the idea that the markets are going to be most efficient, essentially,
if you’re just left alone.
Don’t read laissez-faire and say, well, that means anything goes.
That’s not true.
An Austrian economist would not want the government intervening to try and change, say, interest
rates for one thing.
Why would the central, why does the central bank set interest rates?
It’s because the government is intervening.
One of the things that’s dramatically different between the two groups of thinking are thoughts
about recessions.
They both agree, of course, that recessions happen.
Recessions do happen.
That’s undeniable.
What do you do to fix it?
An Austrian says this is a natural occurrence that’s happening because of something wrong
with the market.
But on the other hand, a Keynesian economist, as we see right now, is going to do everything
they can to try and change a recession.
They think somehow they’re actually going to make it better sooner than if it were just
allowed to work itself out.
I think you could argue that in the 1930s, the late 1930s and early 1940s with the governmental
policies that were put in place to try and get the United States out of the Great Depression,
these were Keynesian policies.
We’re going to go out and we’re going to do all these projects and spend all this government
money in order to lift us out of the Great Depression.
The Austrian economists would say that was a mistake.
And honestly, in hindsight, I would say it was certainly money that was probably misspent.
I think what lifted us out of the Great Depression, frankly, or really what ended it was the war,
the World War II.
Now that’s maybe not a very popular viewpoint, but I think that had more to do with it than
the governmental policies that were put in place to try and solve that.
Now I was not around during that time period, despite what my children might think.
And so that’s just certainly speculation.
But that would certainly be the viewpoint as a Keynesian, I’m in there, I’m doing everything
I can to fix that situation.
And the Austrian would be like, this is, it’s happening for a reason and we need to let
it work itself out.
By the way, the Keynesians do this two different ways, fiscal policy by increased spending
by the government, often funded by borrowing to stimulate this aggregate demand.
So again, during the Great Depression, they’re spending money on projects to give people
jobs and this kind of thing.
So you’ve got increased governmental spending, but that’s done by borrowing money.
There’s a cost to that.
It’s not for free.
The monetary policy, trying to influence the economy by changes to interest rates and creating
more money.
So we’ve seen this now for what, 80 years or so, where definitely since the early 1970s
when we came off the gold standard, where we’ve seen a vast increase in the debt of
the US government and the debt in the US government is essentially money printing.
It’s more complicated than that.
We simplify it and just call it money printing, but the end result is the same.
We have a lot of debt and that money printing, again, has side effects that the Keynesians
effectively don’t account for.
And Austrian would say, we shouldn’t be doing that.
You only take on debt as a governmental agency under extreme duress.
Now, I think they would say in general, there are times maybe when you do need debt, but
they would not be encouraging, certainly like one of these modern governments, so to speak,
Japan, which is, for example, some ungodly amount of percent of GDP is governmental debt.
It’s insane how high some of these countries are.
All right.
But those are direct results of Keynesian policy.
All right.
The last thing that we’re going to talk about, actually, there’s two more things, inflation
and deflation.
So first of all, we should define both deflation and inflation.
Inflation is a general increase in the price of goods and services in an economy.
That’s the actual economic definition.
So what that means, inflation of gas, for example, let’s say it were 10% just to make
this easy and gas cost $1 a year ago.
That means a year later, it would cost $1.10.
That’s inflation.
Deflation is the exact opposite of that.
Price reductions.
And that comes through, the Austrians would argue, the result of productivity improvements
made through the investments of savings.
So see, they’re attaching the savings to the increases in productivity, and then that actually
causes a deflationary aspect for certain items.
If I’m making a widget and I’m investing some savings to create a machine that can create
that widget more efficiently, and therefore it costs me less, I can pass on that savings
to the consumer, to the person who’s buying it.
That is deflation in a nutshell.
Both inflation and deflation are viewed differently between the Austrians and the Keynesians.
Austrians believe that inflation as a result of the increase in the money supply is harmful.
So this is the printing of money that we were talking about.
And they believe that when that happens and that causes inflation, that is bad.
That’s essentially a tax on both middle and lower income families.
And I think my experience has been that this is true.
And this is actually something that’s really important.
If you want to help the lower classes, if you want to call it that, besides essentially
the wealthy and the ultra wealthy, then stop printing money.
Because as we may explain here later, or we will explain in another podcast, the printing
of money benefits the ultra wealthy and the wealthy through growth in assets effectively,
real estate and this kind of thing.
Because when money printing occurs, it causes inflation and in turn, that inflation gets
reflected in housing prices, for example.
And if I own those, then I’m gaining from that.
Now, and people on Wall Street are gaining from these monetary policies as well because
of the inflation of stock prices and this kind of thing.
But the lower class people, especially, don’t have capital to spend on those things.
Middle class people, beyond owning their own home possibly, typically don’t have access
to those kind of things and they are hurt by that inflation.
Because the home prices are going up, they’re not benefiting from that because they’re not
collecting rent, for example, or that asset that they have is not gaining value over time
and they’re not benefiting from that.
And I actually think that’s really important as a way to help level the playing field,
really, because right now it’s tilted.
The upper class, the super wealthy, they are benefiting from these monetary policies at
least to an extent, if they’re smart about it.
Austrians argue that deflation is good as price reductions, as I said, are a result
to productivity improvements made through those investments of savings.
And deflation then enables consumers to benefit from lower prices.
I’m going to go into this very briefly, but for example, when I was a kid, I bought my
first computer when I was a junior in high school.
That computer cost about $800 and could do a very minimal amount of work.
Now for the same $800, I can buy a much, much more powerful computer.
In a nutshell, that’s an example of deflation that’s done because of improvements in technology
over time in the computer industry, in general, in the personal computer industry.
All right, that would be a direct example of deflation.
I’ll give you one more example.
If we had a lot of oil and gas exploration going on in a responsible manner, but let’s
say we had double the amount going on that we do, would gas be cheaper or more expensive?
If we were investing money in energy generation, whether that was through fusion, whether that
was through whatever renewable resource or through those oil and gas explorations, would
energy be cheaper and more stable or would it be more expensive?
I think that’s a very easy argument to understand.
And yet we many times see policies that are in direct contradiction to that.
All right, Keynesians on the other hand argue that a steady rate of modest inflation, I
don’t know what modest inflation is, I think I know what they think it is, but we’ll talk
about that for just a second, is good for a growing economy.
I think they would argue that 2% inflation is what I’ve seen, although after all this
they may have to raise it to 4 or more.
But let’s say it’s 2%.
That’s good.
That means the economy is growing.
Only what it means is we’re printing more money, but okay, let’s push that aside.
The economy is growing and everything is good.
Our number go up in their world.
People are spending more.
What’s 2% inflation stretched out over a lifetime?
If you live 80 years, that’s 2% inflation times 80, that’s 160% inflation.
That’s the part that people don’t think about.
Inflation over a one year span, not a big deal unless you have hyperinflation or the
kind of inflation that we’re seeing right now with 10% or so across much of Europe and
other parts of the world.
But what if it’s only 2%?
Because that’s good.
That’s what the Keynesians want.
If it’s 2%, that’s not very much.
But again, over a lifetime, again, this podcast is generational wealth.
I think a lot about how do I pass things on to my children?
If I have 160% inflation over the course of my lifetime, do you think I will be passing
on very much?
Unless I’m extremely fortunate, no.
So, to me, that’s a very easy argument to debate.
But a steady rate of modest inflation is good for a growing economy because they think that
inflation is what causes a growing economy.
A key reason is that inflation makes borrowing more attractive to people.
So again, it’s the borrowing versus savings thing.
We want you to borrow to buy more things, and a low interest rate is going to help you
do that.
We’ve seen this from 2000 until about 2020-21, okay?
Cheap rates.
People were borrowing, borrowing, borrowing, and then we find a lot of people who are over
their heads.
Austrians, on the other hand, are what?
Save, save, save, save and invest, save and invest, save and spend that money down the
road to increase your productivity so you can make the widget cheaper so you can sell
more widgets at a lower price.
So the viewpoint is 180 degrees apart.
All right.
Borrowing is attractive in an inflationary environment because the amount you need to
pay back gradually gets eroded by inflation over time.
Hey, if we just have hyperinflation, it’ll be really cheap for me to pay my house off
if I can afford to come up with that money.
If money’s only worth one-tenth of what it was a couple of years ago, hey, I’m good to
go if we want to take this and run with it.
You see what I’m saying?
But that’s the thought process, all right?
The increase in borrowing encourages consumer spending, again, the single thing that they’re
looking for and stimulates aggregate demand.
Deflation, on the other hand, is considered bad by the Keynesians because it encourages
people to delay their spending.
In other words, people are going to wait until prices drop further before purchasing something.
The reduction in spending reduces present consumption and is therefore considered harmful
to the economy.
Now, if I buy, let’s say, a 55-inch TV today for $300, $400, and I know that in five more
years that maybe it’s going to be half that price, do you think I’m not going to buy that
TV today and defer that for three, four, five years because it’s going to be half the price?
No, if I want a TV, if I’m ready to buy a TV, I’m not going to put that off.
I’ve owned four or five personal computers.
I probably own more than that, six, seven, eight, I don’t know, personal computers over
the course of my lifetime.
I have never deferred buying a computer for more than a month or two because I thought
things were going to get so much cheaper.
I might wait on a single item out of that computer.
Let’s take graphics cards, for example, who happen to be extremely high in my opinion
right now because they were being used to mine Ethereum and this kind of thing.
But I’m not going to keep from buying a whole system.
I’ll work around that or whatever.
But that is what the Keynesians operate under.
So we’re going to talk about one last thing and wrap this up.
Sound money versus fiat money.
The Austrians are proponents of what’s called sound money.
You will hear that when you talk to a lot of Bitcoiners, they talk about sound money.
Sound money refers to maintaining a currency that doesn’t change over time, at least dramatically.
So you’re not going to have appreciation of that asset or depreciation.
It’s typically going to be linked back to some type of hard asset.
So in other words, gold, silver is what we’ve seen through history.
Countries would mint coins that were made out of gold and the value of that coin would
not change over time because it was gold and gold didn’t change in value that much.
So you would get a $20 gold piece and it would be stamped $20 and that was like an ounce
if I’m not mistaken.
Well now a gold piece is worth, one ounce of gold is worth something, I don’t know,
$1,700, $1,800, a big difference because of inflation.
So we talk, we, Austrians talk a lot about sound money.
They talk about the principles of that.
Austrians typically are going to operate within what they would call a fiat money system.
Fiat currency is one that’s issued by a government, that’s simply what that means, and it’s not
backed by a hard asset.
So in the early 70s, the United States officially went off the gold standard, meaning all the
money that they had printed or whatever was no longer backed by gold.
It was backed by an IOU from the US government and that gave them the ability to start this
printing of money.
And you can look at a chart, by the way, of the debt of the US government and it was really
stable right up until then.
And then it’s just been on this incline going straight up.
I think we just passed $31 trillion or maybe it was 30 trillion.
Wow.
I was correct.
It was 31 trillion.
I just went to this usdebtclock.org and I don’t know where they get all this data, but
this is amazing.
So there’s like all kinds of stuff on here besides the actual US debt clock.
The US federal tax revenue, for example, was on here.
Revenue per citizen, total local revenue, total state revenue, on and on.
Anyways, the point is our money is not backed by gold, hasn’t been for a long time.
It’s backed by an IOU from the US government.
And when you lose trust in that government, then there’s no worth to that.
All right.
The reason why they like this type of system, frankly, is because it allows them to control
the economy.
At least they think they control the economy over the money supply.
So they can decrease that or increase that based on those policies that they’re trying
to combat, you know, economic weakness or whatever you want to put it.
All right.
So that’s it.
I’m going to stop there.
Over the next three weeks or maybe four weeks, three or four weeks, we’re going to discuss
these in more detail.
And I don’t want to go too crazy on this.
But I feel like this is important because what we are seeing right now, in my opinion,
in the world, play out in real time, is the end result of the Keynesian economics really
since post-World War II.
You could argue it goes back further than that, but certainly to the Bretton Woods agreements
in the 1940s, right after World War II.
And as all these countries came off of the gold standard, sound money, as we were just
discussing, and take on more debt, as these debts grow, I have given out this statistic
before.
It’s something like there’s 55 countries that are above 125% in their lifetime and 53 of
them or something failed.
There’s Japan and there’s I think maybe one other country that Japan has sustained a level
since the 1980s is tremendously high, but they are really starting to have issues now.
So anyways, again, of course, my bias Austrian, I try and be very honest about that.
I also would tell you that Bitcoiners in general are Austrian, some of them quite strongly.
I think actually, to be honest, if you looked at this, and this might make an interesting
podcast, the difference between Bitcoin as an Austrian economic tool, why?
Because we would call it stable money.
We have a fixed supply of it.
You cannot print more Bitcoin, so to speak, versus at this point, essentially every other
crypto being Keynesian.
And I think there’s actually a very solid argument for that.
It’s certainly an interesting one and it might be something we want to explore later on.
But for the next few weeks, we’re going to look in depth at interest versus deflation,
this Keynesian versus Austrian view of that, sound money, consumption versus savings.
Well we didn’t talk a whole lot about the business cycle and that may be one thing.
I don’t go into a whole lot of depth, but of course, the Keynesians are all about intervening
for recession versus an Austrian attitude of being more laissez-faire.
So I hope that was helpful.
I do.
And I look forward to jumping into this some more.
This is stuff that I find fascinating.
And to be honest, as I’ve spent the time to look into it, it has shaped, it has confirmed
really, I should say, the worldview that I really already had.
I was an Austrian economist and I didn’t even know it to an extent.
But it’s good to understand the underpinnings of it.
And I have some books, I have some really deep books actually, on my list to fully prepare
me for this.
All right, before we jump into the news, we’ve got one supporter this week.
I do think, in fact, he mentions this, I might have even mentioned this in the past a couple
of weeks ago.
I’ve kind of been noticing, of course, our support’s been down, things don’t seem to
be going quite as well as I would certainly like.
But Stillstream may be having an issue.
And I have mentioned I need to get off of that service.
Probably going back to, or I’m going to go to self-hosting a lightning node instead of
using a custodial service like Voltage.
And I remembered I had an old computer in a closet that I’m going to dust off and try
and get going.
And we’ll see.
I think I want to accelerate those plans, even though I have zero time to do that, because
I may be missing out on quite a bit here.
Anyways, last week’s episode, The Great Unwinding, 2,200 sats from Kyron at Mere Mortal’s podcast,
which is awesome.
Of course, I really appreciate that, Kyron.
Kyron has been a true supporter of this podcast for quite a bit now.
And you should go check out his podcast.
They actually do several over there.
They did the value podcast.
Right now, I think that one’s in a bit of a hiatus, but I think it’s coming back.
And there’s at least a couple others, one around book reviews.
They do, on the Mere Mortal’s podcast itself, they do a lot of, like, Kyron, I don’t want
to put words in your mouth, but self-development, I think, is maybe a good word for it.
Anyways, this is what he had to say.
So many shenanigans.
I’m glad this cleansing is going on.
The grossest part has been watching Bankless, which is frankly a podcast, and all those
other shows advertising other custodial stuff, I’m going to do a little edit there, sorry,
while reporting on the FTX show.
Yeah, yeah.
Some of them have tried to make explanations.
Most of them really not very well.
Some of them have really not said a whole lot at all.
And the whole value for value thing simply sidesteps all this.
I don’t ever have to go ask for money from anybody, and therefore I can talk about, frankly,
everybody.
And as y’all know, I do.
If I feel like this is wrong, we talk about it.
If I feel like it’s right, we talk about it.
I don’t care, because they do not control my purse strings at all, not one bit.
Unbelievable.
Just FYI, I think Satoshi Stream has been having some issues and was missing some boosts
from last week.
That is very unfortunate.
I do appreciate that, Kyron, and if I missed your boost, I’ve read out every boost that
I get on my spreadsheet that I download from them.
But so if I did not hear from you, I know that in one case, a number of months ago at
this point, it did happen for sure that user got in contact with me and let me know.
Please let me know.
There’s not a whole lot I can do other than move off of them, because it is simply something
I have no control over.
So I do hope before the end of the year, certainly, I get off of that service.
I wish them well.
I need to be in control of this.
I didn’t want to run a Lightning node right now, but I’m going to have to.
So there we go.
So we will do that.
Lightning in general, Podcasting 2.0 is semi-beta, if you want to call it that.
The Lightning network itself has actually gotten a lot more stable.
When I first started talking about it on this podcast, it was fairly unstable.
You could send a payment like three times in a row and it would not go.
Two of the three times.
Now you typically don’t lose your money.
It seems in this case, I’m not getting the money.
I’m not sure where it’s going.
But fortunately, of course, we’re typically dealing with very small amounts of money.
Ultimately, I believe that the Lightning network will be a layer two solution for Bitcoin that
provides instantaneous payments with very low transaction fees and it will be rock solid.
So we’ve got two out of three of those.
The third one is not there yet, let’s be honest.
But we’re still in the early stages of this.
So don’t be discouraged.
If you made a donation, I would love to hear from you.
I just want to hear your thoughts.
You don’t have to send me any more money.
That’s fine.
I’m not worried about that.
I’m not living off of this.
I have a day job that I have for the foreseeable future, certainly.
And I’m just not worried about that part of it.
I am worried about hearing from y’all, if that makes sense.
I do love hearing from my users.
The feedback loop, as Adam Curry has talked about, if I’m not mistaken, is very important
to me.
I want to hear from our users.
So now we’ll jump on into the news.
News of the week.
All right, Monday of last week, an article came out about Genesis.
We talked about Genesis in the past, or well, last week at least.
They are one of the subsidiaries of whatever DSG, I think it is called, yes, DCG, sorry.
And they stopped, I think, withdrawals.
So obviously, there’s a great deal of fear at this point about them falling apart.
Well, they loaned two and a half almost billion dollars to three euros capital.
I see stuff like this, and I just shake my head.
I’m like, why would you be borrowing, loaning that kind of money?
So anyways, there’ll be an article about that in the show notes.
Not looking good for Genesis itself.
However, on the other hand, its shell company, the company that actually owns it, the DCG
that I mentioned, they own a lot of other companies, including Grayscale.
I would say in general, those other companies seem to be doing okay.
So even if Genesis does fold, it doesn’t look like, I think Grayscale, because they’re such
a large-scale holder of Bitcoin, they are one of the largest holders, if not the largest.
If they were to dump for some reason, if they were to break up and have to sell all their
Bitcoin, it would depress, I promise you, the Bitcoin price is down to $10,000 or maybe
even less.
It would be a true black swan in the sense that there’s nothing else of that magnitude
that could…
It would happen for a very specific reason, but the amount that they hold, I think is
the number one.
I think they’re well in front of micro strategy even.
And honestly, in my opinion, to redistribute that Bitcoin would not be a bad thing.
Now I don’t, again, I’m always going to be careful.
I don’t want to wish ill will on companies or people or whatever, but to have such a
large holder of Bitcoin, maybe not the best thing in the world, I don’t know.
Maybe that’s just me.
I have talked about El Salvador in the past, about they made Bitcoin legal tender, all
the things they’re doing down there to promote Bitcoin.
I will say this before I jump into this article, and I’ve mentioned I was unsure about the
president of El Salvador.
I will say he’s a very interesting person.
Again, you should probably just follow him on Twitter.
But some of the things at least that I have heard anecdotally, I’m not super pleased with
in terms of maybe human rights, nothing, I think, super egregious, but I think they could
do a better job, to be honest.
But specifically talking about Bitcoin itself, and by the way, all that remains to be seen.
I think history will be written about that.
But in terms of Bitcoin itself, they are about to launch this volcano bond, which I’ve mentioned
in the past, I believe, they actually have submitted the legislation to start that off.
So there will be an article about that in the show notes as well, might want to take
a look at.
That is, honestly, of course, the first large-scale Bitcoin countrywide experiment, and it’s not
been without its bumps.
I think overall, actually, it’s done okay, especially considering the fact that, essentially,
they started buying at the top, which is kind of crazy.
But all right, let’s switch gears for just a second.
This is an important enough thing.
I thought we better talk about it with Ethereum.
Metamask is one of the most popular software wallets for Ethereum.
And listen up, if you use Metamask.
The company that created Metamask, I guess, but they’re certainly involved, that by default,
it’s using a service in the background that will be collecting both your wallet address
and your IP address.
I do not know why.
I do not understand why.
This is not a good thing.
So if you’re using Metamask, and I do, I have some Ethereum in it, you can change this service
that you need to one that doesn’t collect this data.
So I will include some information in the show notes.
I’m not going to make that a big part of this show talking about that.
But this is part of that KYC and financial privacy, in my opinion, is super important
and one of the major reasons that Bitcoin can have a very bright future.
The problem is we don’t even understand how KYC or our information can cause a problem
when we give it to a company.
So recently was one of these meltdowns and I don’t even remember which one it was, but
they revealed in their court filings, everybody’s name and the amount of assets, Ethereum or
whatever that they had on the platform to the public.
Now I never talk about how much Bitcoin I have or of any asset, and I will never because
that’s my information and it’s not for you.
I’m on my journey, you’re on your journey.
But just as a strictly safety thing, let’s say I had 100 Bitcoin, which I do not.
You can go ahead and classify me as somebody who has less than 100 Bitcoin, but let’s say
I did and I had it on that platform and now it’s in the court documents and somebody has
heard me talking about Bitcoin, they can go look at that.
They can say, well, he’s got 100 Bitcoin.
I’m going to go tie him up and make him give me his keys to his Bitcoin.
That’s a serious issue.
So things like this make me personally extremely nervous.
All right.
That’ll be in the show notes.
Moving on.
Late this week, Vladimir Putin, president, I think that’s what he’s called, of Russia.
We might as well call him dictator, but okay.
He’s titled president anyways.
He says on a tweet, well, no, sorry.
It came out in a tweet.
He was at some conference, which I’m not sure why he’s allowed to go to any conferences,
but okay.
He called to create a digital payment systems for international set of months independent
from banks and third party.
So of course Russia got kicked off a swift.
I’ve talked about this.
To me, that’s something that, that hurts far too many people who have nothing to do with
the conflict that’s going on in Russia.
Just because somebody lives in Russia does not mean that they support the invasion of
the Ukraine, plain and simple.
And when you kick a country off the swift network, like we did with Iran in the past,
if I’m not mistaken, and what’s being done to Russia, that affects everyone in the country.
It’s not fair.
It’s not a good thing.
So anyways, he’s dealing with that.
So what does he do?
We’re going to create a digital payment systems for international settlements.
I’m like, I’m like looking at this thinking, so you just described Bitcoin, but okay.
And I know that Russia actually has involvement with Bitcoin.
I do not know if the Russian government itself is mining Bitcoin, but they do have Bitcoin
from what I understand.
So I don’t understand why he didn’t just say, Hey, let’s all use Bitcoin because it will
do the exact same thing.
I thought that was interesting.
Maybe it’s one of the different stories of this week.
I’ll say that.
And then some stuff off of Twitter.
So again, I post on Twitter, I’m trying to be more, I’m trying to do it more.
All right.
So on Bitcoin, on Twitter, on Twitter this week, I posted a few things.
I wanted to go through these real quick.
Ilkapo, somebody that I follow, and he is definitely one of the bears, so to speak.
So he’s at CryptoKapo, C-A-P-O, underscore.
He’s one of the bears.
He’s always bearish effectively, not all the time, but he’s one of the guys right now who’s
calling for 12K.
And I’ll be honest, I follow a lot of his opinions.
That’s just a fact.
But he posted, this isn’t about the price of Bitcoin, short thread about how I deal
with the middle game and time factor.
So this is talking about trading or investing.
The biggest problem when trading or investing is lack of patience.
This generates a lot of dissatisfaction.
This generates a lot of dissatisfaction.
That’s true, absolutely.
And he goes on from there, but it’s things like, if you sleep poorly at night when you
have a position open talking about trades, it’s because the size of the position is more
than you can afford to lose, reduce it.
That’s gold.
That’s actually something, to be honest, I’ve failed at in the past.
There have been times when I had a position that was open, irresponsibly, and I didn’t
sleep well.
And there have been times when I’ve lost those positions and it hurt.
I’ll just give you that example, but this can be helpful for both your investing and
your trading.
So if you trade, and I know most of you don’t, then that’s fine.
A tweet that I saw about Binance, I thought, was interesting.
Do not read too much into what I’m fixing to say.
I’m not saying that Binance is insolvent.
I’m not saying anything except what this says in this tweet.
And I assume, and I am assuming, but I’m assuming that this is a correct statement.
I think that this is true.
So this guy, and I’ll have all these tweets in my show notes.
So it’s BitFiNext, is the name of this person.
I’m sure everything is fine over at Binance.
They’re definitely not co-mingling clients’ and customers’ funds to bail out Ponzi, failing
Ponzi scams.
So that was kind of a little sideways jab.
That’s certainly what was going on at FTX.
And one of the things, of course, Binance is doing a proof of reserves or whatever.
The proof of reserves, you’re going to hear about this, Kraken, Coinbase, all these big
exchanges.
They’re going to do proof of reserves.
They’re going to say, unlike FTX, here’s our money.
The problem is, you can show your reserves.
You can’t show your liabilities in the same way.
I could have $30 trillion in reserves, but I may have $60 trillion in liabilities.
These were extremely large numbers, of course, but I think it made the point.
So a proof of reserve.
There’s nothing wrong with it and it should be done, but it’s not the be all, the end
all.
All right.
Just check in with our auditor, Armani LLP, Armanino, sorry, Armanino, LLP, who did a
fantastic job auditing FTX, and of course, FTX didn’t get audited.
Anybody auditing that company would have been able to tell that there was an issue.
So if Armanino LLP was actually the auditor for FTX, that’s probably not good.
All right.
I’m going to include a tweet that I’m not going to go into about DCG Genesis and Grayscale
that does show it looks like this was actually some documentation that DCG released.
It looks like they kept much more of an arm’s length, what they would term arm’s length
distance between these various companies, which is a really good thing.
So that’s not what happened with FTX, of course.
Alameda did everything wrong and it ended up taking FTX with them, essentially.
I do want to talk about Lynn Alden’s tweet.
Lynn Alden is one of my favorite people in the crypto sphere.
She had a thread here that, again, I won’t go through the whole thing and her first one
is just kind of a meme picture, but I’m going to skip that.
She said this, the reason that many people want to add a blockchain and tokens to things,
to anything, which we see a lot, I do it here, do it there, is for two reasons, seniorage,
I think I’m pronouncing that right, and fast exit liquidity.
So seniorage is a very old term that basically is describing what a government makes off
the cost of printing money.
There’s a difference.
I got a $10 bill and it cost me five cents to print.
The seniorage is the $9.95 and that actually operates, of course, in the government’s favor.
The same thing goes on when you add a blockchain and you pre-mine a bunch of tokens or you
just give the people up front a bunch of tokens and then somehow they start printing out these
tokens for other people to buy.
That is seniorage in that sense because now they’ve got all this that as those other tokens
get sold, these tokens get really valuable and then they will typically give themselves
a very large amount, they can simply turn around and sell that.
So she actually goes on to say, devs and VCs want to get funding via token, make a project,
and exit the project on retail investors prior to it being a self-sustaining business idea.
And we have seen this over and over and over and over in this business.
I have been in cryptos since 2013 and I do not know how many times I’ve seen this.
So they don’t actually come up with anything useful, but they sell all their tokens off,
everybody gets dumped on, the token goes to zero, but they make their money.
All right, that’s going to wrap it up.
The Generational Wealth of Cryptocurrency podcast supports podcasting 2.0.
It’s a value for value podcast with no sponsors and no advertising.
You can support the podcast in three ways by time, talent, and treasure.
If you want to support the podcast and it has some time or talent, I could use help
with some things like transcripts and probably a few other things.
Treasure is just what it sounds like.
If you find the content valuable, you can support the podcast by streaming Sats from
a podcasting 2.0 app.
You can get those apps for the optimal listening experience at newpodcastapps.com.
I’ll have a link to that in the show notes.
If you like the content, I would love it if you would tell your friends about the GWC
podcast.
GWC is the best form of advertising.
Thanks for being here.
I hope this has been helpful.
I would love to hear from you.
I’m on Twitter at McIntosh Fintech, on Mastodon at macintosh at podcastindex.social.
You can reach me by email at macintosh at genwealthcrypto, and of course, the generational
website is also at genwealthcrypto.com.
Stay humble, friends.
Go out and make it a great week.
Bye-bye.

New Episodes Weekly

Every Monday @ 7am Central

Want to Be a Guest?

Come Onto the Show