The (Other) Sound Money episode. January 16, 2026

24:23Anyway, so that's what happens there. The Reserve Bank, central banks were really born out of various other crises where in the past if a commercial bank got over its skis and started lending to an extent that the loans went bad, people lost confidence and there was a bank run where people weren't, word gets around, right? CBA's in trouble. This isn't something from the 1950s. Silicon Valley Bank, do you remember the start of last year? Was it 2024? Oh, God, what was it? Well, there were choices now. Recent history, right? Yeah, yeah, yeah. There was a bank run, not in Zimbabwe, in the United States, where rumour went around Silicon Valley that there's no money there.

25:10Was it true? Doesn't matter. The confidence was gone. It's all confidence. Yeah. Everyone went to withdraw their money. They didn't have to go and line up and speak to a teller. You just open your app and withdraw it. And they, oh, we don't have the money. And the Fed came and bailed them out. We say, was it true? It doesn't matter. True enough, because perception matters more than the reality. But it had as little, I want to say as little, because I haven't done the actual maths. Its shortfall was the same conceptually as every other major modern bank. Couldn't happen here. Couldn't, couldn't, possible to happen here.

25:44We're different for some reason. And people love to assert that to me. It's like, okay, explain to me how. Because that hasn't happened here. So it's impossible? Like, you know what? I've, you know, touched wood. I've never been in a nasty car crash, so therefore I never will. That's the spurious reasoning that we like to employ. Those people crash their cars. We don't crash our cars. No, no, me. It doesn't happen. Where's your proof that it'll never happen? Because it never happened so far. Like, ergo, like, it's just the worst kind of logic and doesn't stand to reason at all. Anyway, that's what we like to invoke.

26:18But anyway, I'm off course again. Central banks. So what happened was is that banks as an association, is cartel too strong a word? Now, let's go with just the banking association. Oligopoly. No, it's even that's got some connotations. That's true, though. It's economically true rather than any sort of bad behaviour. Well, if we want to use the English language, I would say a cartel is actually dead on point if we wanted to find what a cartel is. Anyway, let's not get too, this is what puts people off because you start sounding like a crazy person. So the banks got together and they thought, you know what would be good?

26:59Whenever Scott has a run on his bank, why don't we sort of all kind of collectively sort of pull some resources and then that means that we will stop the potential of a bank run happening because if a bank run runs to its natural conclusion, money just disappears from the system. People are unable to conduct commerce and to live their lives and their savings disappear. That's a really bad thing. Well, let's make sure that doesn't happen. Again, a lot of these things aren't evil in conception. That's where it sort of came from. I've often used the term reinsurance. If you're familiar with the insurance industry, insurers insure themselves.

27:35Yes. And they insure themselves with an organisation called a re-insurer, right? Buffett's, I mean, look at Berkshire, right? That's his business, you know, in a large part. So it's sort of, it's a very, very lucrative business too, by the way. But it's kind of the best way to sort of think about it. And again, these things evolve and adapt over time. And at some point it sort of became more, the Federal Reserve is a private organisation. The Reserve Bank of Australia was the Commonwealth Bank, frankly enough. Yep. It was a private organisation that actually the government gave the power of money for actual base money.

28:10There's a whole other rabbit hole. Base money creation and then they formalised the RBA in 1961, I think it was, and then that took over the role of it. But that was the... Sorry, the only thing I wanted to just stop for a second on, I think the CBA was always a public bank, not a private bank. The RBA was part of the CBA, but I'm almost certain the CBA was a... No, you're right, you're right. It's always been government-owned. Yes. The RBA was... The RBA's modern functions, or at least the modern functions that existed at the time, which sounds like a weird way to say it, but the RBA's fundamental responsibilities were conducted by the Commonwealth Bank before being spun out, as you say.

28:47But it was a for-profit organisation and it was sort of this weird, almost like a public-private partnership maybe we would conceive of it today. The old government-owned corporation like Australia Post was probably the closest. Yes, that's right, yes. Yep. And they just, and then, you know, very reasonably so, people thought maybe we should just formalise it and let's have it as a government institution. So, again, people say the RBA is an independent organisation. It's separate from government. Yeah, notionally it kind of is. I very strongly reject that as an assertion. I think history is on my side and the facts are on my side.

29:18But anyway, that's what they do. And then further along the way, they actually started setting interest rates as well. And also when they bail out some of these banks, they're creating money. Again, this is the keystroke. Someone just brings out a keyboard, tap, tap, tap, tap. There you go. Because banks have a different kind of money that we use. You go, wait, isn't it all Australian dollars? No, there are things called bank reserves. And bank reserves are a special kind of money called a base money that exists only within the banking system. So if you're ANZ and I'm CBA and someone's on a transfer and at the end of the day, we to settle off all our, net off all our transactions.

29:55I'm not sending you the kind of money that citizens use. I'm settling that with reserve money. Yep. And I was like, oh, my God, it's so deep and there's so many layers to all of this kind of stuff. Time check, by the way, we're half an hour in. I'm trying, okay. And then you have the government. Then you have the government, right? And so the government is the one that gets to choose who has this incredible power through a banking licence. Is that a banking licence hard to get, Andrew? Try getting a banking licence and see how hard it is to get. It's incredibly hard to get, right? and so they sort of have a role in it there.

30:26They also receive the profits from the RBA if ever they make a profit. You'd be surprised to know that if you look at the RBA's balance sheet, it's a negative equity. They have far more liability. That's a relatively recent occurrence. Is it just post-COVID or it was post-GFC? I can't remember. Post-COVID. I think they were temporarily there post-GFC and it's like, whoa, it doesn't matter because it's all made up, right? So the other thing where the government comes into it is that the government, which has a structural deficit, which all governments around the world do, is that when they don't have...

31:01They don't need to, by the way. They choose to, just so I'm clear. They don't need to. Oh, they don't. We say all governments do. I don't want to sound like all governments have to because that's what they do. It's like, no, they've all chosen to run structural deficits. They've chosen to do it. They made a devil's bargain with that. So when they spend more, they have to, where's the difference? They borrow it. How do they borrow it? They don't actually go to the bank and take out a loan. They issue these things called bonds, which are just to fire you, so I give you some money, you promise to pay me back and you give me a little bit of interest.

31:25It all works really well until it comes to the point where the private market goes, hey, you guys are spending like drunken sailors. I actually don't trust you to pay me back. Or I know you'll pay me back but you'll pay me back by printing money. So I want a higher interest rate. And the RBA will go, well, we don't want a higher interest rate because we manage the economy. It's like, you what? That's a whole other kettle of fish but okay, you're doing that. So they will come in and they will, this is where you get to quantitative easing which is they will say, well, oh, I guess we'll just buy the bonds.

31:52And you're like, okay, well, where'd you get the money from? Oh, we made it up. Oh, but it's not stimulatory because it's really just an, this is the argument, it's an asset swap. So you're swapping a real asset for one that you just made up. Yes. But on a set of financial statements, it's true. In reality, it's complete fairyland. And in the short term, it's true as well because the money doesn't immediately, you mentioned the cotillion effect last week. For the first of all, it's not because it is literally just that. I mean, it is a financial-only transaction with no physical world impact at all on day one.

32:25Yes. Maybe not on day 30, maybe on day 60, but at some point that money becomes an asset. About 18 months when the economists have tried to measure it, there's usually an 18-month lag between money creation and an inflationary impulse. Right. But growing over that 18 months or literally nothing and all of a sudden it blows? No, growing, growing. Yeah, just before it's like really manifest. And that's when you start to get people noticing that their paycheck's not going as far. And then you start – we touched on this in the pod earlier this year. There's demand, pool, inflation, and there's – oh, I've gone blank now.

32:56What is it? Supply push. Supply push, inflation. Although it was late last year, not early this year, but late last year, yes. Oh, that's right. Yeah, true. We're 2026. This is next year. Yeah, I forgot. Welcome to the future. I'm trying to be quick.

33:12So that is a very, very, very – I know I crapped on for a long time. That's a very, very short description. Do you have any quick questions before then we can talk about the legitimacy of why that is notionally a good idea that that is the system we have? Or did I miss anything? No, I don't think so. I think so. A couple of thoughts from me. Bank runs are always and ever possible. It is, by the way, the full faith and credit of either the banks or the governments that stop that happening. It's when that trust is lost, like Silicon Valley Bank, that it becomes problematic. And I want to say that both in positive and negative senses.

33:47It is always a massive risk. But also, ordinarily, it never happens because as long as the banks lend. The issue with Silicon Valley Bank wasn't they didn't have the money per se. It was that the markets didn't trust that they could match up what they call their durations. In other words, the money they owed and the money they were owed or money owing to them, to make the language easier to understand, simply wasn't matching up. A 10-year loan and a 10-year deposit weren't matching up. They couldn't meet. And they had also a pricing mismatch because rates went up or down. down. I'm trying to remember the time frames.

34:18But anyway, basically they went up. Which meant the bond prices went down. That's right. So they mismanaged their maturities, to use the French, so in other words the way those numbers net out. They were in no or more greater threat, challenge, risk whatever, than CBA. If CBA made the same mistakes, CBA would conceptually, now government guarantees made different things to the actual final outcomes, but that's where the issue was. So it wasn't so much that, and again as a positive and a negative, right? Every other bank's in the same situation, which A, should scare their pants off you, B, should reassure you that only Silicon Valley Bank has a run on it because they screwed up.

34:54So your bank screwing up is far more likely to be a problem than just a bank run, I'll say well, well within the financial reserve system, which it has an issue with, which is fine. But just to kind of do the bank run thing from end to end, just to kind of illustrate that a little bit. It's always never a risk. It's very rarely an actual risk or a realised risk because as long as you bank reasonably prudently and not, I mean, banks will screw up and do stupid things. Separating that all out, as long as you manage your exposures properly and like I'm talking about, you know, like five-year experienced bankers, you don't have to be a 50-year-old, a 50-year experienced person to get that right.

35:30It's not hard to do properly as long as you're dedicated and decide to do it properly and do it right. And that's kind of the, so that's that bit. Other than that, I think you've pretty much nailed it. I think, yeah, good going. I didn't, I didn't, I didn't. I scratched the surface. I mean, the other thing there, you've often heard me on the podcast say that we don't live in a capitalistic society, and we don't for that exact reason because the banks aren't subject to the rules of capitalism. Not just that reason, by the way, but one of. Yeah, actually very true. One of the examples, yeah. One of, but the most important example, because they are very, as I like to say, they're not making socks and undies.

36:05They're making money. It's an incredibly. Literally making money. Literally making money. it is an incredibly privileged position. Incredibly. And it's not just money's money, but also what you spend it on. If they conjure out a bunch of money into thin air and put it into the housing market, it's very different if they put it into businesses, right? Why have house prices gone up so much? Jeez, I wonder if that's got to do with the incredible growth of bank balance sheets and the money that they've pumped directly into that particular asset class. No one talks about that as one of the causal factors, But anyway, let's not go there.

36:43So when the banks are doing all of this kind of stuff, you've got to then sort of say to yourself, where's my incentive? Charlie Munger, I say it every episode, show me the incentive, I'll show you the outcome. Now, you know, in a world without a central bank or, dare I say, a responsible, prudent central bank, CBA gets itself into trouble because it lends a bunch of money to subprime lenders who can't pay it back. And they go out of business. That's what would happen in capitalism. You get the profits, but you also, where there is, Munger was fond of saying you can't have heaven without hell, right?

37:23Christianity without hell isn't Christianity, right? And capitalism without loss isn't capitalism. And that's why we don't have capitalism, because if they do lend out recklessly, hello, GFC, Let's just watch the big short again if you want the short version of all of that. That was just terrible. We'll bail you out. And I'm always talking about asymmetry. So if I lend a lot of money, for many, these things can go on for a decade or more before the reality catches up with you. You make out like a bandit. You make ridiculous amounts, god-awful, obscene amounts of money. It's why bankers are some of the richest people in the world.

38:01Okay, fair enough. arguably, ostensibly, you're stimulating the economy, you're creating a lot of value for people. But the second it goes bad, I get bailed out. So it's sort of like heads I win, tails I don't lose. So under that incentive structure, what am I going to do? Am I going to be incentivised to create as many loans as possible? Because every loan I create, I don't have to have the money. Now, we can get into capital adequacy ratios. I was going to say, because they don't create every dollar they lend out, They're obliged to have a certain amount of assets per dollar lent out. It's actually got nothing to do with deposits, though.

38:35They can't treat that as their – it's actually the – it's on tier one capital, so it's actually best thought of as their net equity of the business, which restricts how much they can do. That's around 12 % as it stands at the moment. Again, the assets minus the level. It's a bit circular at some level. It's very circular. I just want to make the point that there is a limit to how much money they can create. That's not a limit. there is a function that governs how much they can create. Not that it's particularly relevant, but CBA couldn't go and double its loan book tomorrow just because it wanted to.

39:06No, it couldn't. It would need to actually grow that over time by collecting more or retaining more equity and doing other things. And again, it's not actually not even necessarily relevant to your point. No, you're right to point that out. Just so people understand it. It's something worth knowing. The banks can create money. They can't create all the money in the world as quickly as they like. There are a few handbrakes like the amount of capital they must have on the balance sheet before they can create another dollar of loans. I think thanks to Trump they can be on the US because they wound back a lot of...

39:32Yeah, I think they're all in the process of winding it all. I'm sure that'll work out fine. It's never gone wrong before. What could go wrong? I don't see any problem with that. And the bank, we've already seen a lot of the rules from the GFC. History doesn't repeat, but it rhymes. Like, oh, that was really dumb. We should have stricter regulations around what banks can do. Totally, let's do it. Oh, things have been going really well for like five years. Do we really need that? And I think we're like hamstringing like wealth creation and economic prosperity and growth. Let them create a little bit more.

40:03But the other misconception is that they're lending out your deposit. They're not. They need your deposit for liquidity requirements. In other words, it's just to say someone decides they do want their cash. It's like, well, I guess we've got to have some cash on hand to give out. But it's really constrained by their net equity. But it is circular, though, because they create sort of loans. Those loans go out into the real economy. They buy things. that acts as collateral for other people to make loans. Actually, the money that's deposited by those who the houses are bought from go back into the bank for a period of time.

40:30It's all that stuff. You nailed it. It's very circular and self-referential, right? But my original point 15 minutes ago was that in a world where there wasn't an implicit bailout, if the bank got into trouble, it would go. It would cease to exist. All depositors would lose their money. Yeah. And everyone in all the shareholders be wiped out. The CEO would lose their job, you know, and it's like, and why that is it, do I wish this ill upon people? No, I don't. But my point is, is that without the fear of failure, I don't have an incentive to be as responsible as I should be. And I can guarantee you if that happened, all of a sudden Westpac, NAB and ANZ are like, okay, hey, everyone.

41:21Team meeting, team meeting. Let's stop lending money to drug addicts and the unemployed. Right? It's just I'm going to put that out there, right? And then you will find that there is a more, I am against fractional reserve banking for the record, but at least under a system of consequence that would be mitigated. Now, this is why I'm so against, one of the many reasons I'm against central banks is because they remove that and that's why we don't have capitalism. So that's where I was going with all of that at that point. So we are 41 minutes into the pod. Yes, Shivers. No, no, no. We talked about talking about the implications.

41:58I feel like now's a good time. Is there anything else you wanted to kind of cover on the mechanics or the detail? Just to hammer that point of, again, you can make the argument and the theory and the rationalisation from academia and vested interests is this is good because if we don't do this, there won't be growth. And let's take the counterfactual and then this will lead to where you want to go. Let's say that that is not the world that we live in, that there is a sound money. There is however many fixed amount of units of money in there. So in other words, if I want to borrow money, if I buy a home or to start a business or to do anything that I want to do, someone has to lend that to me.

42:33Now, a bank will be the intermediary there. We'll put our deposits in and the bank will say, great, thank you for that. If we're smart, we'll duration match it so there's no risk of a bank run. But what we'll also do is I'll now give that to someone else. They will pay me back in interest and we'll share in the spoils of that. And the argument goes, well, if we did that, there would, A, debt would be more expensive and B, credit would be harder to get. And therefore, economic growth would be much more limited than what it is today and that would be a bad thing and that's why we can't have sound money.

43:09Stop there for a second. Why, so debt would be limited because you couldn't create money through fractional reserve banking. I assume that's the implication. Yep. Why would get in? Someone has to, there has to be a real world cost imposed on someone somewhere. That's what a hard money means. So if I'm going to lend, I've worked very hard, I've been very successful, I've got a mountain of money, it's sitting there doing nothing. Always ask, where does the interest come from, right? I'm not getting any, in a hard money system, there is no interest, right? Unless I lend it to someone and they decide to sort of pay me back.

43:40So if I've got enough, I will lend it to you. But the cost on me is I can now not use that money. In the current system, that doesn't exist. There is no opportunity cost because I can just conjure it out of thin air. Now, banks could still, though, not have to put aside your specific$100 you've loaned to me. They could still say, well, Andrew will want the whole$100 back. And they could sort of say, well, I'll assume Andrew wants his back over time. And so does Jenny. And so does Harold. And so does Shane. And so does whoever. And so I can still kind of mould or average that stuff out. You just couldn't lend out money that actually wasn't there.

44:18I've got$100 in deposits, great. Maximum you can lend out$100. However you want to do it, whoever it comes from. Or I can lend out$1 ,000 and just hope that not everyone asks for their money back at the same time. Yes, and do good luck. So you can do that too. Yeah, you can. That's going to mess with your noodle, right? And that's how fractional reserve banking is. I'm saying without fractional reserve banking though. Oh, yes, without fractional reserve, there's$100 to lend. And so that's why there's less debt and less credit creation because you can't create the credit. So there's less borrowing.

44:48And it's more expensive because now you have to... Yes. Go. Well, think about it at the moment. So we live in a world where let's assume that the official CPI figure is meaningful in any way, shape or form. I see you rubbing your face. I'm just waiting for you to finish. but let's say that inflation really is what what's the latest read 3.7 something like that now uh what is it 3.8 that's most recent one let's go for the time of recording yeah i mean it's only that if we exclude housing energy and food and health care but you know let's go with four percent for the record now if i'm going to lend out money to you in an inflationary environment four percent what do you think i mean i at the very minimum one four percent just so otherwise I'm going backwards.

45:32And also there is a risk that the person that you lend money to doesn't pay you back. Their business fails. As I say, they die, they get sick, something happens, right? So I also need compensation for the risk that I am taking indirectly. Now I am, at the moment I can go, and it depends, the wealthier I am, this is the irony of the modern banking system. The less you need the money, the easier it is to get new money. The more desperate you are in the money, the harder it is to get, right? Yep, totally. I wonder if that has any consequences for wealth inequality. Maybe not. I don't know. Let's not go there.

46:07Or let's not go there yet.

46:13So less money available to be lent and also a higher cost because I just want compensation for all of that kind of risk. Sorry, was there a question in all of that? No, no, no. Or what's the consequence of that? No, no, no, not at all. You just made this up. I just want to flesh out why debt would be less prevalent and more expensive. So it would be. And the hard money advocates have to acknowledge that. By the way, can I say that, just quickly to that point, you may, not you personally, but people generally, may like some money more than whatever we call this thing. You may like this more than the other one.

46:44But there are drawbacks on both. And it's absolutely wrong in my opinion. You can disagree. I don't think you do. It's absolutely wrong in my opinion to say, actually, this will fix the world in either direction or this is better than the other because of all these positives. I mean, the positive can be true. you have to acknowledge there are actually, there are going to be negatives that come with it. And that is just, that is the job of policy in any sphere, is choose the least worst situation. If you look for the perfect one, you'll never find it, right? And we know that. And it sounds obvious to say, but it's really important because you can't say, don't do so many because there's drawbacks, until you say, actually, the current system has least drawbacks and which are least worst consequences and which are the strongest and best benefits and line those two up and go, on balance, I will take this set of outcomes over that set of outcomes, positive and negative combined.

47:35I try and sell you on the virtues of your asset prices falling and prices falling in general. That's good. Tell me more, Andrew. My house is going to go down in value and I'm probably going to get paid less over time. Yeah, that's absolutely a consequence and downstream of hard money. And I will tell you why that's a great thing if I manage to be concise enough in the meantime. That's exactly right. Do you want to go there now or have you got other? I do want to acknowledge the argument of generally making credit more expensive and harder available. This is really the nub of the argument of the current proponents of the system that we have.

48:13They will say we can't do that because the economy will crash and absolutely the economy as we conceive and measure it today, GDP would go backwards in a big way. It really would. Measure GDP. Measure GDP, yes. Very good point. By the way, I don't mean it's badly measured. I mean the thing that you choose to measure matters. So does it matter that GDP goes backwards? It does in an expansionary monetary system we have now. Yeah. Would it matter as much in the other system? A little bit, maybe even a lot, but not as much as you think it might because of the next sort of set of consequences. You keep going.

48:46This is why, and I think anyone who cares for the environment should be a hard money advocate as well because we have such an extractive growth at all costs economy because we have to, because we've got to pay. Every time money gets created, there's an interest component attached to that, which, you know, it only makes sense to grow. To borrow money as a business that's not growing is really going to be difficult to rationalise and justify unless there is growth. And I'm going to be more and more predicated towards engineering growth in any way, shape I can. If that means going using slave labour in Southeast Asia, if it means ignoring certain environmental impacts, if it means reducing the quality of things or paying my labourers, there's any like, I'm going to do that because I have to do that because the incentive structure is such that I need to do that.

49:31So anyway, that's a whole other kind of thing. But I would say, and the Austrian view would say, is that while that is true, it is a mistake to argue that no investment would be made. If you come up to me and say, Andrew, I have just invented a hoverboard, it takes me$3 to make, It is going to revolutionise transport. It is the best invention since sliced bread. Can I borrow some money? Yes. Oh, my God. Actually, let's not even do a loan. I want an equity stake in it. Any good idea will be funded because people like making money. I'm going to stop you there and disagree slightly. Okay. Only in the context of any good idea.

50:11And so, A, because it's subjective and uncertain. Okay. My hubbub will come about crashing bird. You're like, well, I thought it was a good idea or I funded it and I got it wrong. But all that mattered was you were able to convince lenders to think it was a good idea. And that's not, I mean, that's capitalism. That's trade. That's okay. Bad ideas should die. Right. Absolutely. The other thing I would say, and again, this is not an anti-sum money. This is one of those consequences. I wonder whether Amazon, Google, Tesla, whatever, get started in a hard-earned money or purely hard-money world because if there's limited debt and high-expensive debt, Only the most certain things, I would say, rather than the best things will get funded.

50:51Now, you can argue about the definition between those two and how they overlap. Yeah. But I would argue that the moonshots that actually have made us better, that in some cases have come from the ability to have – now, I'm not saying therefore somebody's bad. I'm saying there's one of the drawbacks of that system. I suspect there would be less – what's the right word? Inventive or expansive or risky or something. entrepreneurialism. Experimental. That's a great word in that environment. You'll actually fund the third steel mill. The bloke has already got two because why the hell wouldn't you? You've got to probably fund Ford's 85th car plan before you fund Tesla's EV.

51:30If there was enough steel in the world and there wasn't enough steel to sell, I still wouldn't, like, you're going to be the richest Midas. I'm still not going to lend you money if there's no end. If there's no economic viability at the end of that chain, I'm not going to do it. I'm saying the that the certainty would have a premium or near certainty would have a premium. Yes. And I suspect... A lower cost of funding. Yeah, and on one level, because on one part of our analysis, we say banks lend too much to housing, lend enough to businesses so they can grow. Yep. Banks are kind of doing actually now what we would say if our money system would deliver, which is, why would it not lend on housing?

52:04It goes up. It's physical. Everyone loves it. It's the lowest risk lending I can do. Now, you can argue about whether the house price eventually crashed, but from their perspective, they're doing exactly what I suspect would happen to our money system, which is the least perceived risk, the lowest, start again, the least riskiest from a perception basis, I think stuff gets funded. I don't think, and again, I'm not saying therefore it shouldn't happen. My suspicion is there will be less experimental, I love that word, less experimental entrepreneurialism, and that would actually help us of some of the stuff we've had.

52:37Now, I'm not saying therefore we should do otherwise. I think that would be a cost to my mind. It's an absolute and acceptable downside, but a downside nonetheless, in my view. It's great. It's an excellent point, and that's exactly the point that people make. So a couple of things that I would push back on. One is it's an assertion. You don't know. And I'm not going to go at you. 100%. Yeah, I agree. But people, like, so the hard money advocates will make assertions and the pushback, oh, you're just saying that. Well, we don't know. Like, that is true. Yes. Except we can reason and derive things from first principles and we're cognitive, capable, intelligent beings and we should be able to understand these things and we can reference history and point to periods of hard money where flourishing and economic prosperity and wealth creation was rampant.

53:22So maybe or maybe not. I would assert that's the most likely outcome, but you may disagree on that. We don't know. Again, that's completely cool. We don't know. We don't know. But also it's to account for that in a wholesome, holistic way, It's not that a Tesla is invented. It's what in aggregate was the benefit. So let's say that 1 ,000 EV car manufacturers were spawned into creation that wouldn't have otherwise been spawned into creation through a hard money standard. At the end of the day, Tesla comes out and is like, wow, I guess it was worth it. It's like maybe, but not if those 999 other companies not only burned the money but misdirected very scarce valuable resources away from other things?

54:11And again, we don't know, right? And that's where I think the argument falls down. It's the same, you've used the argument before. It's sort of like the best investment on the ASX is always a junior mining exploration company or a biotech, always. You look at any five-year period, what's the best performing stock in the market? A stock that was 0.1 of a cent that had an office in Perth and nothing else and they struck literally gold or iron or lithium and then they went from a$5 million incorporated company to$200 million. That's the best investment. And so you go, well, I guess I should invest in those companies.

54:45Well, no, because when you do that in aggregate, most companies lose. And so even though that company came into existence and did do well, and that's where I push back. So, and again, we're both just asserting things. But it is wrong to assume that it was definitely going to be a net negative or we definitely won't have productive investment. We definitely won't have creativity, experimentalizing, creative capitalism and entrepreneurship in a hard money system. I think, nah, we will always have that because you speak to most entrepreneurs, like they're more often than not, they're just sitting on an idea that they love and they're going to do it.

55:24Does that make any sense to me? Like rationally, why would you start a business for it? It's the most, it's an act of self-harm more often than statistically, right? But we do it anyway because everyone's got a dream and a passion and they do it. And I think that's still true under a hard money system. Yeah, I will assert with zero evidence, to your point, as you are, so we're both doing the same thing, which is fine. Yeah, we're doing the same thing. I agree with you when it's one of a thousand cafes or one of a thousand restaurants, one of a thousand. I think the truly breakthrough innovation that, frankly, spawns a thousand competitors because at the time the idea is...

55:59AOA is a good example. Yeah, the idea is right and the money is available. How many food delivery businesses went broke during 2024? I think it was three or four. Yeah. The milk runs of the world because they all got birthed in - An era of free money, free and easy money. That's exactly what happened in that period. But I do suspect that given the capital intensity of Tesla, for example, I'm not a big Elon Musk fan, everyone knows that. I don't think he should get as much of the benefit for Tesla's birth as he gets him because he wasn't the founder. He did a fantastic job of raising capital. I would still suspect that your one versus the 999-elect fail is valid only if and when they would have happened anyway without the crazy innovation with cheap capital that happens with a Tesla, for example.

56:42So do BYD and Cherry and MG and, I mean, the new electric vehicle version, GWM, do they exist and thrive as EV makers if Tesla hasn't blazed a path? I would argue if, again, assert, I would assert with no evidence, maybe eventually because good idea is eventually. happen because, you know, would there have been the capital on scale? Nothing more powerful than an idea whose time has come, right? Would there have been the capital on scale for any EV maker to take on Ford and GM in a world where you're paying 9 % rather than 4 % for the money? Maybe. Again, I'm not even strongly asserting that I'm necessarily 100 % right.

57:17I think the very real risk is in that scenario, the moonshots that are the crazy ideas, there's just fewer funders and funding is more expensive for the crazy idea. And I don't, as to your point, maybe there's not even net a bad thing over how much money we burned, funny the other rubbish, but I do think there is a real and tangible impact, I will assert, that is likely, not guaranteed, in that world. And, again, I'm not saying that makes so many bad. We're just going to assert past each other here. Fair enough. What I would say this, though, let's say, again, back to first principles here. Yep.

57:54We have this wild system where these commercial for-profit enterprises can create money and then charge interest on it. So if we're going to do that. All I'm saying is I want a bloody good reason why we allow them to do that. And if the only good reason is I've got to, I'm not saying you, I'm saying the defenders of this, say I feel as though if I didn't do that, Tesla wouldn't exist. You're like, okay, why? I just think that. That's not a good enough reason to give someone a money printer. Kind of. I mean, there's assertions going both ways, right? I don't think you can say my idea is right. If you can prove it.

58:29If you can say definitely we are worse off without money creation. You can't prove the alternative either. That's what I'm saying. But to be fair, you're right about assertions, You can't say sell money is right unless you can prove it's wrong. It's what you accuse the status quo guys are doing. Well, it's interesting. Unless you can prove that my sell money system won't work, you have to accept that it's doable. I'm not going to accept any possibility that might be wrong, any argument I'm proving that I might be wrong. Unless you can prove it for sure, I'm going to assume I'm right. I can't prove it.

58:53I think that's equally wrong on both sides. What is very interesting and one of the areas you'll find yourself in when you start going down this rabbit hole, there's various historical periods. I've invoked the book Bitcoin is Venice before, and again, we're not talking about the B word here. You have to read that. Yeah, thank you. Are you really? It's so, it's really not about Bitcoin at all. It's about what we're talking about. And the authors in that talk about Venice in the 16th century was a hard money system and the incentives. And it was also a series of islands that was very easy to defend and hard to attack.

59:28So it had a power asymmetry and a sound money system and that was the absolute wealthiest, most prosperous place in the world. Living standards, quality of life was through there. We've also had periods in the early Roman emperor when they stuck to the gold standard. We had periods in the late 19th century which had a hard money standard. So we can at least refer to history and say, well, we've had various periods where we've sort of, and again, as to our first discussion, like there's no such thing as perfectly hard, until recently, there's no such thing as perfectly hard money and perfectly fiat money.

1:00:00But whenever we look at empires and societies in the past, the island of Yap was a great example. When they had a reasonably hard money standard, it turned out that it was a fairly egalitarian, prosperous society. When we, the rise of the Nazis was the failure of the money. You know, the late stage Roman Empire and the Greek Empire was a collapse of the money. The Byzantine Empire. Like, history is replete because people get into trouble. Because here's the other thing. Bad things will still happen in the world. There'll be cyclones. There'll be meteors. There'll be pandemics. Like, bads. There'll be agricultural blights that wipe out crops.

1:00:44There'll be black bubonic plagues. And bad stuff is going to happen. And it's always the spot. And I'm not saying it's great, right? But that's always the rationalisation. Well, let's just create some money until we get out the other side of it. and then it just makes compounds and then everything falls apart. So I guess you're right. I don't have any mathematical proof because it's not physics. That's right. But I will assert what I'm asserting and I will at least say that I think history is somewhat on that side. Anyway, let's not, I'll let people come to their own conclusions with that. So you're talking about GDP4, can we go back to, sorry, do you want to keep going?

1:01:24The point I was just trying to make was that hard money advocates would acknowledge that credit is more expensive and harder to get, but they would also say that people will still lend because people will still want to make money. And while GDP growth won't be as strong, and we're just measuring it year to year, quarter to quarter here, right? That's how myopically and short-term, and this is all part of the fiat incentive structure that's out there, but we would have a far more resilient and strong economy. Now, you've got to ask yourself, stand back and stop looking at your investment portfolio for a second, right, in the next five years.

1:02:01Right, even today versus society. Right, and say, I'm king of the world. What civilisation do I want here? Do I want something that's hyper-brittle that goes from boom to bust to boom to bust, where the boom means that the rich get all the upside and very little downside and the poor just eat a bag of poo every single time? Is that the system I want? We had a system when we had an epidemic, which in the grand scheme of things wasn't nearly as deadly as what it had been. The whole economic system broke down because it was so fragile, because we had just-in-time delivery. We had all of these things hyper, hyper optimised because we optimised the economy for growth and we didn't optimise it for resilience.

1:02:43And again, the hard money advocates would say, yes, the economic growth would be slower, but it would be from a very sound basis. One that when the pandemic, the meteor, the hurricane hit, we would have warehouses full of grain that we'd go, well, that sucks. Oh, we're all a little bit poorer. And guess what? This is the insanity of government to think that you can stop bad things happening by printing money. You can't. And the remedy becomes worse than the cure becomes worse than the disease. Yes, bad things will happen. But wouldn't you rather, if you're going to lose your job, would you rather be the kind of person who's just gone hand to mouth for the last 10 years and every single paycheck you've got you've just blown or you have built up a firm savings account.

1:03:28You know, who's the better? Who is the wealthier person? The one that can demonstrate a higher churn of income or we talked about stock to flow. The person with the higher flow or the person with the higher stock? I would very strenuously argue it's the stock that is the wealth and the flow just derives from that. I'm not saying I want a limited flow. Let it flow, but let it flow from a base of fortitude, of resilience and of strength, not let it flow in a way that we're strip mining our capital base to maximise the flow without any regard for the stock. And I'll shut up now. That's why I think it is, we can't say, oh, the economic growth would be slower.

1:04:18It's like, but we're growing to such an obscene amount at this point that we're absolutely destroying the oceans and the forests. Because of growth. Because we have to grow. And like, well, can we, is that good growth? Here's all the, look at all the growth we've had over the last 30 years. The average person who's graduating from school or university today has never had a more difficult road ahead of them. But what about all the growth? Maybe never, but not for decades. yeah well where's the look but all the growth it's like yeah because we've maximized stuff these people have very little hope is there is there any wonder there's such nihilism that's that's out there that's what fiat economics and money creation leads to and this is just gonna what what a sound money system would do is just realign um time preferences we'd have a far more better capacity for thinking long term we would still fund things but we would fund things with the recognition of the reality, even as unpleasant as it might be, that guess what?

1:05:12Our time, our energy and our resources are limited. That's just the reality of it. And so we might as well have a system that reflects that and then forces us to make difficult decisions. Because when we pretend that we can have our cake and eat it too, this is the world that we end up in. So I'm going to challenge that again, only as a question more than a statement this time. I don't disagree with the concept or the idea, but convince me you're not just a man with a hammer who says somebody fixes everything and it'll fix that stuff as well. In the context of, we just talked about the subprime crisis and we talked about how short the financial memory was between that time and the time we kind of went back to, again, rolling back regulations.

1:05:54Never would have happened under a hard money standard just quietly. Different topic. We're rolling back the standards already, right? We kind of went, oh, we made some mistakes, let's fix it. It's like three, five, seven years later, oh, no, we could probably be, no, we think we overreacted. Let's go back to it. And then economic history or the economic memory or the whatever fades real fast. And I am sceptical of someone who says we will change human nature if we just have sound money or hard money. That somehow the person who's living hand-to-mouth will stop living hand-to-mouth and start saving silos of grain just because we don't change the dollars.

1:06:24We talked about the fact that, you know, inflation forces people to save and invest to try and keep their purchasing power. If anything, that would suggest a higher need to put money aside rather than spend it for all those reasons. So you've got something, you can earn something, there's some value in it. I am very, very, very sceptical of undoing what I suspect is thousands of years of human nature, not just decades of human nature. Hundreds of thousands of years. It wasn't like there was no poor people in the streets of London in 1815 when we had a sound money standard, right, or a gold standard.

1:06:54Oh, yeah, of course. Were people more likely to save then than now? I don't have the numbers, Matt. I don't have the answers. It's a genuine question, but it's a slightly jaundiced question. It's not changing. If I've suggested it would change human nature, and I probably did. No, you talked about we would start saving more and our time preferences would change. And I'm very, very, very sceptical of that argument personally, but I could be wrong. Well, because of the incentive structure. So to understand this, let's go forward from this as well. Now, again, we live in an environment where we're told that inflation is not only good, but it's necessary.

1:07:35So Michelle Bullock will get up with a dead straight face. She believes it. So she's not even lying. Any central banker will. So why would you believe it? Yeah. And it's like, it's exactly George Costanza, right? Like, it's not a lie if you believe it. And they will say with a dead straight face that we need 2 % inflation. You go, well, why? Now, again, the five whys of the Toyota CEO. Was it Toyota? Yeah, Toyota. Yeah, it's great. It's great, right? And it's exactly the kind of question, if you've got kids, they'll go, Mum, why is it great that I lose 2 % of my value each year? Well, sweetheart, if that didn't happen, you wouldn't buy anything.

1:08:13I wouldn't? No, you wouldn't. Why wouldn't I? Well, it's like we need to engineer your loss of wealth to encourage you to spend now. So I'm spending now so the effects of you robbing me are less painful overall. Yeah. And that's good how? If you spend it, I can't devalue it. Well, because your spending is someone else's income, okay, and they're going to do the same. Yeah, yeah, yeah, yeah. So now think about that for a second, right? And the great example is the classic example and it's the one that the other side always glosses over because we have a beautiful example in the modern era and it's called modern consumer electronics.

1:08:57Yes. Smartphones, flat screen TVs, computers, they have all precipitously dropped. Not a little bit. Not like precipitously dropped in price. Real terms. Inflation adjusted terms. And particularly think about the features, not just the, it's not just the size of the screen. It's like to have a keyboard in front with some keys on it. So the price has come down and I'm getting a squillion percent more value feature speed. My 4K TV. Yeah. is a fraction of the price and multiples of the quality than it was a few short years ago. Now, what happens when Apple releases a new iPhone? Do people go, you know, it's a hard money system, so I'm not going to spend, I'm not going to get there.

1:09:41Of course, you're going to buy it. You're going to buy it right damn now. Why? Because it has incredible utility and because you want it. You know what else I'm not going to defer? Housing, because I like to live in a house. You know what else I'm not going to defer? Food. because I like to eat, right? I can't do it. Even if I deferred it, then there's a frameshift argument because I go, oh, hard money standard. I think that's the argument that appeals to me is the frameshift. I think there's definitely a frameshift. At some point I've got to scratch that itch. Okay, I'm not buying it as immediately as I otherwise would because I'm actively being debased and gaslit into believing that's a good idea.

1:10:15So I'm going to be a little bit more prudent with my money because here's the other thing under a hard money standard. It's not that you have inflation. You have deflation, and I'll get to that in a little bit too because that's a big nasty boogeyman that you can't possibly have and is always economically calamitous. But I'm still going to, okay, I bought it a year later than I otherwise would, but now all of that purchasing is happening then, and of course I'm going to buy stuff. And here's the other thing. Humans want it now. When do you want, we always talk about the time value of money when we talk about stock valuation.

1:10:47You know, it's true of money and it's true of things. Do I want a Ferrari now or in 10 years' time? I'll take it now, please. Why wouldn't I do that? And so it's a fallacious argument. It's demonstrably and empirically and historically wrong, but that is the core argument as to why we need a central bank who needs to not only tell you that it's good but engineer the monetary system to target it. We target between 2 % and 3 % because it's good for the economy. Now, I'd love you to push back on that because I can't make any sense of that argument. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

1:11:35So I think I will push back on a little bit. And again, this is assertion upon assertion. We don't know. Robert Schiller advances the case that the Great Depression was longer than it would have otherwise been. Because people were deferring consumption for exactly that reason. Yep. So he argues in hindsight. He's probably right, to a degree. Yeah. And so I take your broad point, I think, and we won't get to this today, and we kind of argued, I've been asked about it before in a previous Malbag episode, which is how does the change happen? I suspect when a population twigs to the fact deflation is ongoing, it absolutely changes enough behavioural decisions to cause a two-plus-year GDP recession.

1:12:22Because it's not – I don't defer shelter and I don't – so I don't not buy shelter and I don't not buy food. Yeah. But I might actually go, honey, look – We don't need the new car. Well, Andrew has told us that – Andrew is the new high priest of the Treasury. His first job was to – You're welcome, Will. First rule was get rid of the RBA. Second rule was to say, so everyone, good news, somebody's better. Bad news, I'm just going to tell you what's going to happen in the next couple of years. Forever, aren't we going to have deflation? Okay, cool. And I sit down with my wife and go, honey, Andrew just said we're going to have ongoing and permanent deflation.

1:12:53And that's really, really good for the economy, right? Andrew was 100 % I agree with him. Wait a second, I hate prices getting cheaper. Right? That sucks. I like it when prices go up, obviously. I wish you'd pay more next year. Yeah, I've always been really annoyed. That's why sales are such a terrible thing. That's why Black Friday sales don't work. Oh, wait a sec. No, they work really well because people like it when prices go down. So we sit around the kitchen table and say, look, here's the thing. We need to pay the mortgage and that hasn't changed. We'll get to that. We'll get to that. I don't think we will.

1:13:24We're a long way in. So I'm still going to pay the rent because I have to, right? That's fine. I'm going to put food on the table because I have to. I'm not going to put off buying cereal for my kid for six months because it's going to be cheaper. I'm going to put cereal on the table, right? But we kind of go, look, I bought a new standing desk recently in the Black Friday sales. I was going to buy that new standing desk. The current one's okay. It's going to be a bit cheaper next year, a bit cheaper the year after that. I might just try and make this last a bit longer. And I know you really wanted the new car to use your example.

1:13:51We haven't bought a new car in. I've bought a new car a long time ago. I haven't bought a new car in forever. I'm going to buy a used car, but that used car is probably going to get any value because the new ones are going to get cheaper over time anyway. And so the longer we wait, the better we are. I suspect grossed up, given how... I mean, economic growth is 2.1 % in the last year, the last data we got, and 0.4 % in the last quarter. I suspect there are more than 0.4 % of purchase decisions that are deferred for an extended period of time until we discover that new normal, which is lower GDP growth but quality growth.

1:14:23And again, these are not arguments against it. These are unfortunate outcomes that just suck but are less bad than what we currently have. Yeah. You're going to get a hangover when you stop drinking, man. Right. I can't sugarcoat it for you. It's going to suck. But you're going to feel a lot better once you're on the other side of it. And that's my argument. So is deflation bad once we've hit the new... No, it's beautiful. The new business... What's the word? The new normal. If the new normal is a hard money deflationary based system, it's wonderful. Right. It's wonderful. And why is it wonderful, Andrew?

1:14:57Because things get cheaper. Yeah.

1:15:03some things it's like I don't even know where to go with that because if I have to explain to someone that cheaper is better like of course it's better now the argument against it is because again we're in a debt-based system right so in a debt-based system your mortgage when you pay off your mortgage in 25 years time that last component you're paying it back with money that's incredibly deviled, like the value of, we often joke about when we were kids how a millionaire was a really rich person. You know, a millionaire's a dog box in Blacktown. He's not even. Like it's$3 million, right? Put it away, mate.

1:15:38My parents paid$38 ,000 for a house in 1978, house and land in southern Sydney. Yep. And obviously we're now more than, well, more than 30 years later, but 30 years after that, it would have been a 25-year mortgage, by the way, so even if we go with that, that's 2003? No, 2000. No, no, no. Yeah, 2000. Whatever. 2000. What they're paying back is, in real terms, is a fraction of the value. Well, maybe not fractions. Everything's a fraction. But, yes, meaningfully lower because wages will have increased over that 25-year period meaningfully. So the money you borrowed back then and your ability to repay it now, just inflation alone plus whatever pay rise or promotions you get, the last payment is always far, far, far, far lower as the percentage of your income than the first payment.

1:16:21That's kind of the broader idea. Let's do the maths on that. 3 % annual inflation, I can't compound in my head, so let's do it in a linear fashion. That means after 10 years, it's about 30 % loss in real terms. You probably call it 35 % with a bit of compounding if we're generous. Over a 30-year loan? Right. That's why I've changed my business. It's going to be wage increase rather than inflation. Sure. Because it doesn't matter what price it's got if your wage doesn't go up. But you can use wages for the same thing, in my view. I've talked on the pod before about the fundamental mistake I made, one of many fundamental mistakes I've made in my life.

1:16:53was trying to reject debt and buy things outright. And I've told you my experience with housing. I completely got it bummed backwards or completely backwards because it's just like what I didn't recognise, because I naively assumed that the money wasn't a melting ice cube. So I thought this makes incredible sense to do it this way. No. And that's why I flipped on it. It's like take out as much debt as you can comfortably service because you'll be what you have to, you might be, whatever the nominal value of that debt is, What you actually pay back in real terms will be a very small amount. This is why the rich is one of the components of all of that kind of stuff.

1:17:28So let me just frame this up. So we'll see what would happen. But let's assume that we do go into a world of deflation. Can you explain for us why it would be a world of deflation? Would that be okay? Oh, yeah. That's important. There's a wonderful book called The Price of Tomorrow by a gentleman called Jeff Booth. He's a tech entrepreneur and he just really makes the case for it. He lays it out. I'm going to butcher it but I'm going to try. He lays out the case like this. So every year because we're clever monkeys, we figure out how to make things better. We always love the chainsaw analogy. You start off with a tomahawk and you go to a chainsaw.

1:18:09You start off with a bit of rock and then it becomes a tomahawk and then it becomes a chainsaw. Thor, you know, and now I've got a still, you know, fuel-powered chainsaw. My one, and human time and energy is really the base layer of everything here and human agency here. Me as an individual can go buy a chainsaw and I can probably chop down 100 trees in a day. If I was doing it with a tomahawk, I could probably chop down one, maybe two if I was good, right? Let's be generous, five. Now, for the same investment of time, I have produced so much more. So all things being equal, and again, on a hard money standard, what happens to the prices?

1:18:49Because what really am I pricing? What is money ultimately priced? What's at the base layer of everything? It's my time and energy. If I can produce 100-fold more from the same investment of time and energy, then those things must get cheaper. It must get cheaper. So we can now, I was watching something on YouTube the other day, Like the Chinese, is it BYD? They're churning out a car every three minutes. That's mad, isn't it? It's crazy. It's like Henry Ford, you're harder. BYD saw more EVs by the end of last year, we're going to, than Tesla sells. And Tesla sells half their cars in the US. BYD is effectively blocked from the US because of tariffs.

1:19:29That's how big BYD is. I think I've even got it wrong. So they're effectively twice the size of Tesla outside the US. I think it's probably something. Maybe I've got it. Oh, Google it, right? By the way, it's stupid to you. Keep it up. They can, and think about, I really like Musk's framing on this. It's just like, stop thinking. A rocket is just aluminium, some hydrogen fuel, some petrochemicals, some plastics like that. And if you add up, if you look at a car, and I was to buy that aluminium on the spot market, and I was to buy the rubber, and I was to buy all the base commodities, there's probably like 200 bucks worth of raw materials there, right?

1:20:04And so what really matters is what is required to take that raw material and turn it into a Porsche? And it's the same material that's in a Toyota that's in a Porsche. Right, right, right. It's how quickly I can put it together. So if I'm Porsche and all of a sudden I've come up with a new radical manufacturing technique that allows me to take the same inputs for half the energy and time investment and turn out twice as many Porsches, what happens to the price? The price goes down. Unless you convince people to keep paying more, which is Porsche does very, very well, but I take your broad point.

1:20:37Brilliant. And you know what? Of course, because I'm the only one who can make Porsches. But then after a while, someone goes, Lamborghini goes, well, maybe we'll take a little bit. It's all Jeff Bezos, your margin is my opportunity. I mean, it's BYD in general. BYD has done exactly that at Tesla. Tesla's really, people love them and apparently they're really cool. We can make one that's kind of similar and a lot cheaper and it might not have the Tesla badge or Elon at the head, but someone's going to buy the car. So prices, if you think technology will improve, prices will get lower. That's why all the idiot economists, they're sort of, they're right, but they kind of just miss the basic point here.

1:21:14Everyone's talking about productivity. Productivity, productivity, productivity. And even the idiot mainstream economists will say it's super important. Productivity is the base of everything in terms of growth. It's the only thing. It's the only thing. Population aside, productivity and population are the only two things that grow an economy over any length of time. So, in real terms. Demonstrably, what we can make now with the same raw materials and the same inputs is orders of magnitude greater than we could have 20 years ago, let alone 100 years ago. So it gets cheaper. Can I just quickly throw this really simple point to illustrate that?

1:21:50Which is bad, apparently. We think about labour most of the time, right? It's a chance to run the tomahawks. We're using a different tool, even stupidly, and this is a really stupid example, but it's really useful. Do you remember, I'm sure you do, remember Coke bottles back in the day? Mm-hmm. The glass bottles? No, the plastic ones. Oh, okay, yeah. I really think they had the rocket bottom with the black thing stuck on the bottom. Yep. The amount of plastic in a Coke bottle has been reduced phenomenally over the past, I was going to say 15 years. I don't think I'm betting myself too badly. Thank you, engineers.

1:22:20Thank you, technology. And so we kind of think about it. And I use that example only because we talk about productivity or efficiency as in I can have a machine, I can do something quicker and better. That's probably most of the productivity thing. But applying a bit of know-how to what if we could just simply reduce the amount of packaging in a Coke bottle? We could make it cheap or make some more money. But they had to figure out how to do that. Right. So that's my point. I'm agreeing with you 100 % by saying. Even process can be productivity. That was Henry Ford in the production line. It's just like you just do that and you just do that now.

1:22:51We can talk about the fulfilling nature of that work. Ways of working as well as new inventions. And so, yeah, it was just because we think about tools a lot and we think about automation, that's really important. Just something really simple like what if we could just re-engineer a bottle to use? And it's probably 50 % less plastic, something stupidly large. So it's better for the environment too. Right, exactly. You know, and so this is the weird thing. There are some things you find yourself like pounding the desk and screaming into the void and it's like why am I trying, why do I have to convince people that things are getting cheaper and that I as a human being in our society can work less and get more.

1:23:27And some idiot in Canberra is going to tell me that's a bad thing. We are being gaslit, dude. And it's like they cannot explain it except by reference to the current system, which is like the alcoholic saying, we can't stop because it'll suck for a little bit. Yes, it will. Yes, it will very much suck. And you know who it's going to suck for? It's going to suck for the people who have taken on I've seen the amount of leverage, made very, very poor investments and have done absolutely nothing that they're contributing towards society. If someone's going to suffer, I guess it's going to be you. And more to the point, even if the suffering is evenly shared, isn't the end state worthy of pursuit?

1:24:03And of course it is. But the trouble is, and even I recognise this is, until recently there's now an option that this might eventually organically happen, but it was never going to happen by government banks and central banks going, ah, you're right, you don't need us. Right, right. You're the king of the world, which is effective. You rule the money, you rule the world, right? I think it was Karl Marx who said if you want to control a country, control its money, right? And it's true. He understood that deeply, right? He's a Marxist, the Marxist. That's right. Quite convenient, really. Isn't that funny?

1:24:43I never connected the dots. But it's so true. And you kind of think, so it's like saying if we take away heroin and cocaine, the drug dealers are going to go out of business and we can't do that. The only difference is that the bankers have, for whatever reason, been elevated in society to these like really, to a force for good because, look, they let you buy your house. Oh, look, they gave you a credit card so that you could buy that thing. We have never been richer. Like this is how good technology and productivity is. For things like material goods, so like the plastic crap you buy your kids, in spite of inflation, it still got cheaper.

1:25:29Yes. In a hard money system, it would like be even cheaper still. You want to talk about food and clothing before? We talked about it quite a few weeks ago now. I showed you the data after the fact. But even despite that, clothing and food as a percentage of incomes has fallen dramatically despite all those things happening. So add in a sound money system on top of that. Oh, it's so hyperbolic. This is why I think people, it's hard to accept because it's so hyperbolic. It's so grandiose because here you are going, everything is better. Everything is better. It changes everything. We have better environmental outcomes.

1:26:05We have to work less. We can raise our own kids. We're not worshipping at the altar of GDP growth for the sake of it because we need to. You know, we're not having some central cartel of, you know, high priests deciding what the price of money to be purely on the basis of driving more GDP growth in a way that's like, and yet the average family can't even buy a house anymore. And then people go, oh, but we're richer than we were 50 years ago. I was like, yeah, but we should be like heaps richer and we should be far more equal. In this world, by the way, now we're going to run out of time, so there's 50 points we're not going to get to, So there's the one point that I want to make and I've touched on it before on the pod.

1:26:46In a hard money world, those people who are rich will be rich for a good reason and you'll be glad that they're rich. If I'm Elon Musk or I'm Jeff Bezos and I've got all the money in the world, I've got all the collateral in the world, if Elon Musk wants to go and buy New York, he's not going to sell his stock. He's going to go to a bank. He's going to load his stock and his assets as collateral and the bank's going to say, yes, Mr. Musk, here's a whole bunch of money. Back to our earlier conversation. Where did that money come from? They created it out of thin air. Why wouldn't he do that for?

1:27:22He can't lose because the money that he is borrowing in real terms he will pay back will be much, much, much, much, much shorter. I don't have to touch my assets whatsoever and now I acquire all of that. So in the current world, when you make money, however you make it, buy assets and sit on your bum. That's how you get ahead. Now, call me old-fashioned, but I kind of think that's unfair because there's someone right now in a very poor suburb with a very disadvantaged background who doesn't have the collateral, who'll never get the loan, who'll never get to do that. The only way they get money is to exchange their labour for money.

1:27:57And each year their labour is devalued by 2 % or 3%. Yes, after a lot of to-ing and fro-ing, they might eventually manage to negotiate a pay rise higher, but in the interview, look at the teachers' union. And they only just got through those pay rises after years of negotiation. And in real terms, they're still behind what they would have been otherwise. You know, it's just like, how is this a good thing for them? I get that there'll be someone out there with 18 investment properties right now going, it's great. I took risk and I did all this. But you're inside a system that is incentivizing you to put all your time and energy in entirely non-productive things.

1:28:30And you're being lifted by a tide that lifts all boats. Now, in my world, in the hard money world, for me to get ahead, it's because I just created something that everyone really wants. I've got my hoverboard. It turns out the world loves hoverboards. You know, I attracted a bunch of investment capital because everyone else thought it was going to be a good idea as well. We got the business off the ground. And the only way for me to make money is to convince someone else to give it to me. I'm not allowed to use violence. You voluntarily have to say, Andrew, here's some money that I have earned through my sweat and my labour.

1:29:03I want to give up. Can I please give this to you? I'm not being coerced in any way other than my desire to have a hoverboard. So we walk away from that transaction. I have some money. You have a hoverboard. You're very happy. I'm very happy. I want more money. I guess I need to sell more hoverboards. How do I sell more hoverboards? I make a really great bloody hoverboard that everyone wants. And now I've got my massive pile of money that's sort of sitting there. Now, remember to our earlier conversation, it all feeds back on itself. It's like, what do I do with that money? Well, I can't just get money by putting it at a bank.

1:29:37or, you know, I have to put it at risk because if I do put it at a bank, for me to get an interest rate on it, the bank now has to lend it out, which means they have to expose it to entrepreneurial risk or some asset kind of risk. So, again, our incentives are now far more aligned. So what I'm more likely to do is I'm probably, let's say I'm an idiot entrepreneur, I just got lucky, I invented a hoverboard and I made a billion dollars and I gave it all to my stupid, you know, unthankful kids. It's like they're going to bleed through all of that money so they're going to have the most hedonistic lifestyle in the world.

1:30:12It's going to go. Or if they want to maintain the family fortune, they have to invest it into productive enterprises that enriches society. And it's, again, like how could you be against that, right? To your point, though, it's even more than that because if there is deflation, holding the same amount of money improves your purchasing power over time anyway. So you don't actually have to. Yes. You don't have to go and do anything with it. Just by holding it, your purchasing power improves over time because the oranges are 1 % cheaper than it was last year because we got better at harvesting oranges.

1:30:46All the productivity gains accrue to the money. They accrue to the assets at the moment. Yeah. They accrue to the money. And even then. Explain that, mate, because I know you know exactly what you mean, but accruing to the money feels weird. I'll go back to your Island of Yap, episode one on this. Island of Yap. you said that there was 100 yapstones and that reflected all the wealth on the island. Yes. Now let's say that someone on that island, there was a Newton and an Einstein and a Marie Curie and they just ushered in a new scientific revolution. And all of it, Andrew Page. And all of a sudden the amount of coconuts and chickens and houses just exploded.

1:31:24Yeah. Now there's still only 100 yapstones there. Right, yeah. But now my, you said before, I'm a poor peasant, I've only got half a yapstone. Yeah, but you now own your proportional ownership of the real economy. Money is just a ledger, right? Bitcoin is not backbiting. What does it do? It does that. It keeps a record of things. We almost didn't say that word. We almost got an hour and a half in, unbelievable. But this is why you get so triggered by these stupid, asinine arguments. And it's like, yes, but your proportional ownership of the economy goes up. That's why deflation is good. And that is why just holding the money is good.

1:32:00but I'll make one more point and I've made this before on the pod too. You go, well, that's unfair. Just by doing nothing, you're accruing value. It's like, well, no, I still have an opportunity. For that, to be exposed to the aggregate productivity gains of society, I have to take my claim of ownership, which is the money. The money is a claim of ownership on everything. I've got this massive claim of ownerships, gift certificates out the Wahoo. And I'm going to accrue value as productivity if I don't spend it. So now it's sort of like this is why I'm saying it realigns time preferences and it really makes sure that you only spend on the things that matter.

1:32:41You only invest in the things that you feel as though has got a good chance or that you want to sort of see brought into this kind of world. It's sort of like the billionaire with a billion units of hard money has definitionally, by the system that we have outlined, put more into the economy than they have taken out. I've walked into the village, I've given everyone food and I've asked for nothing in return except some little beads and shells. You go, that's unfair. And they're like, yeah, but I can't eat the shells. I can't do it. All I can do is claim someone else's time and energy by giving them the shell.

1:33:17But if I'm hoarding my money, as the Keynesians like to say, it's like I am saying I have been a net, definitionally, a net additive to society and I have taken out, because I've got money. I've taken out less than I have put in. And how do you begrudge that? What an act of incredible selflessness that you've created so much for society and not redeemed all those tokens for your own consumption. I guess a little too religious for me. I want to finish off. You can see why I'm passionate about it there, right? Like it's a big idea and it is all of our, not all of our problems, so many of our problems are downstream of this.

1:33:56And when people just like, they get so myopic and silly and narrow-minded and stupid and it just sort of like, I'll just make the point, I'll mention this word once, it's not so much that I'm for Bitcoin, I'm just against fiat. Yeah. Unsound fiat. Yes. Which is fiat, dude. I know. It's important because I think it does, and probably because language matters so much and because the inference of the definition definitions that the people are taking. I just want to draw that line because it's, you know, you've said many times about Bitcoin. All that needs to happen is for a country to stop printing money and Bitcoin goes away as an idea because it's not necessary anymore.

1:34:37It doesn't solve a problem anymore. Right, exactly. And that's kind of just, you know. Two thoughts on deflation. You stole my idea on Yap a little bit, so I'm going to go back to your first thing. Sorry, I thought you were asking. I didn't know you wanted to answer it. No, no, no. In the context of, I wanted to juxtapose it against the last week's episode example. If you've got 100 Yap stones and they're all, everything that's, you know, that's the wealth of the island measured in the ledger of yapstones. Use your word again from last week. So go back and listen if you've missed that one. And you add another 100 yapstones.

1:35:09Yeah, right. Right, which is what we talked about. Which is what we do. Yeah, right. So that's when the person who's got a yapstone all of a sudden only buy half as much with their yapstone as they used to because prices rise over time, both in the short term, the cantillon effect, but over time. So we talked about that. This tips on its head, right? Yes. Because if you think about it, there's 100 yapstones except this is the deflation thing. Productivity means they're now twice as much stuff on the island. So now there was 100 yapstones and 100 yapstones worth of stuff. Now there's 100 yapstones and I'll say 200 yapstones worth of stuff.

1:35:38It doesn't measure that way. But think about productivity doubling, right? The island produces and owns twice as much stuff as they used to. They're still measuring it with 100 yapstones. So all of a sudden you're getting twice as much purchasing power. Your yapstone buys you two chickens rather than one chicken. It buys you a house and a cow, rather just a house or a cow. And, again, apologies for the, you know, stereotypical kind of islander stuff, but that was a long time ago. That actually was the condition. There wasn't a chip fabrication plant on the island of Yale. Yeah, I'm not being...

1:36:08They weren't launching satellites, right? No, there was the rest of the world. No, there was anywhere else in the world. Yeah. So, you know, that's why I wanted to raise that because it puts the two quite nicely together in stark contrast. Now, there is a world where there's only 100 Yapsons or we don't have any productivity, at least nothing goes backwards. But the reality is, as a society, we've never not been more productive over time. And so the most likely scenario was we find more stuff. What would be worse is saying, hang on, now we've taken 100 yapstones worth of stuff on the island. We've doubled our output.

1:36:39It's like, oh, great. Now there's three times as many stones, which is kind of what we do now. That last version is the now, right? So we talked about adding inflation, describing inflation by not increasing production or output of wealth or store of value, whatever you want to call the resources that we have. We said, just what if you add some stones? Then we said, what if you don't add any stones, things improve? That's the sound money version. The current version is actually none of those. The current version is you actually do have productivity, which is wonderful, but we throw so much more money at it that prices tend to go up over time, even with that productive benefit that doesn't accrue to the owners of capital.

1:37:14One more point. Go for it. I can't make that promise. Another point. When you look at inflation data, and again, and we use this basket sort of approach to it. Yeah. But you've seen the charts on Twitter, I'm sure, right, where it's sort of like when you look at consumer electronics, clothing, various consumer goods, there's actually been deflation. The thing where there hasn't been deflation is where there's a relative scarcity. And house prices, it's just so hard. I don't mean to bring it back to houses, but it's just such the perfect example. Yeah, that's it. Houses aren't perfectly scarce because we can always build more, but they cost a lot to build.

1:37:49It takes time to build. there's a big delay, ask the government, right? There's big delays in building houses. And so when you tease apart the inflation dynamic there, the things that have really been egregiously inflationary are the things that are most scarce. You know what else is scarce? Access to medical resources. There's only so many doctors. I can't press a button and make 100 doctors appear tomorrow. I've got to take some smart kids. I've got to put them through, gosh, what are we up to now? Eight years to be a GP. A GP, sorry. JP is another thing. You know, and so like, and not everyone's got the desire or the capacity to be a doctor.

1:38:29Correct. So healthcare goes up. Scarcity, this is why certain adherents to a certain monetary protocol like to talk about the scarcity, really go on and on and on and on about the scarcity. It's like that's kind of the killer app here because without scarcity you get these distortions, you get that ruler that is always sort of changing length. That's the point. And it's such a, it's so, and I will admit, for years I dismissed it. I couldn't get my head around it because it's very hard to get your head around it because we live in a world where that has never been true before, where there's never been a scarcity of money, right?

1:39:06In fact, you want some money and you've got some money, here's some more money, right? And it's sort of like you look downstream of all this, and we're going to have to end it here, but I'll just try and push people in a certain direction. Do you care about the environment? Look into sound money. Do you care about wealth inequality? Look into sound money. Do you look into corporate, are you against corporate malfeasance and greed and regulatory capture and monopolistic practices and antitrust bastardisation? Like, look into sound money. The real fear that I have is that, and you said it yourself off air, is like we are headed to a world, here's the path.

1:39:42We're either going towards fascism or socialism and not the nice, warm, fuzzy socialism that people like to invoke of Norway. The communistic socialism in which everyone is poor and we're all waiting in bread lines. And again, it just feels like an assertion, but open up a history book here, right? Go to Cuba, go to North Korea, go to any of these places. And the funny thing is I love how we get this argument with my friends when they point to the Nordic countries. It's like, guess what? They're really capitalistic. They've got socialised service in certain narrow domains, healthcare being the classic example.

1:40:18It's just the economy in Australia. It's just they're over-indexing those areas. They're allowed to own stuff. They're allowed to trade stuff and they have a very hard money. Oh, my gosh, wow, what a prosperous society that they have. So it's like we're all on the same page here and it's why these, like, socialism and capitalism are just useless terms at this point because they miss everything here. And so we've got to stop blaming billionaires. We've got to stop blaming politicians. It's going to be politicians, right? Oh, here's one more. You're against war? How hard is it? Imagine how hard it would be to send our kids overseas to kill other people if your taxes had to go up 30 % to fund that war.

1:40:54The prevalence of war in a fiat money system is far, far more likely because look at the submarines we're buying. Where did that money come from? It was magicked into existence indirectly and temporally displaced by the bond market mechanism and the economic backstopping of the Reserve Bank and all this kind of stuff. But we created that money out of thin air to do that. And what have we got for it? A nuclear sub has really good use when you need it. But in all other times, it's complete waste of resources because you can't do anything with it except kill other people. And so, again, I'm trying to find someone who is pro-war, pro-massive wealth inequality, pro-consumerism and hedonism, who is pro, like, let's destroy the environment.

1:41:38And it's like we're all on the same, we're all on this, the average person is all on the same team here. And we talk past each other at the surface level discussions of capitalism versus social. It's a stupid argument. The only people who are in favour of the current system are the contillionaires. And the contillionaires are the people closest to the money speaker. And they are for it, even if they can't articulate why. Because things fucking, sorry, really good is really good if you're a rich person with lots of assets, right? Like, what is the problem here? I've got to shut up. I've got to shut up.

1:42:14But pull at that thread and I'd be really interested as to where our listeners get to. And as Scott said at the start, I would really love the opportunity to, if you've got follow-up questions or you've got pushback. And there'll be a lot of good, I've heard it more before, right? But there'll be a lot of good pushback. I'd love to hear the argument just so we can destroy it for you and peel back the veil. There is a brighter future in front of us, if we can fix the money, we can fix the world. And they say it's not a religion. I hope you've enjoyed our two-part series on sound money. It is a fascinating conversation.

1:42:55So fascinating. And I think even if, here's the thing, pulling back the veil, to use your phrase, Ram, gives people a really nice opportunity to see how things are working. And whether it is a binary current system or sound money is going to be something that will evolve over time, may or may not be brought on. Let's mention the B word at the end. Bitcoin is the most likely driver of that sort of outcome because there's not a lot of intent among politicians and so-called civil society, the elites. I don't mean that in a lizard people kind of way. I just mean people who make these decisions to move in that direction, partly because they benefit from it.

1:43:31But I think to Ram's point, mostly actually because they don't think there's a problem. If you don't acknowledge the problem, you don't try and fix the problem. And that doesn't require you to be a horrible person. It's just like, well, actually, my life's okay. Yeah, they don't see it. That's what I was like, you said it's a burning platform, I don't see it's a burning platform. Right. And that's not unreasonable because it's life. Like everything in life, a bit of self-reflection, a bit of looking beyond ourselves I think is a useful thing to try and do. And actually do your job because we give you, these people are elected to serve.

1:44:00I mean, everything's backwards, right? Like you're there to represent our interests, right? And if you can't see the problem, then at least, Why aren't you even looking at it? You know, again, tax the billionaires, put up tarot, all this stuff. Here's Trump, a conservative. Right, exactly. On the Republican Party. Yes, yes, yes. Doing everything opposite of what I'm advocating for. Right? And you think the Liberals here are going to be any better? They're all as bad as each other. We need a new politic. We need an orange party. But what I was going to say was even if we don't get to that, and Rand would say hopefully do, I'm a fan of moving towards the sound money standard.

1:44:33I don't care whether it's Bitcoin or it's just a sound of theatre. But what I was going to say is, and this sounds like I'm being a bit wishy-washy, and if it is, then so be it. If there was enough knowledge of the issue, just being less bad would be a really good start. Yeah. You know, like, do I want to move towards no money printing? Yes. If we got to a situation where inflation was 1 % and that was the target, that'd be much better than 2 % to 3%. It wouldn't solve the problem. It wouldn't make everything go away. It would just recognise that even if those people convince themselves that some degree of inflation is necessary and useful and positive and good, and as I said, the short term, I actually think some money printing, as long as it's offset by money removal, money deleting, money shredding, I don't know, you can make that argument.

1:45:14Even if we don't get there, even if we just get to a situation of, why did we choose 2 % to 3 % just because we did? Well, I've said on Twitter, even before the Sam Money conversations we had, just I'm not, I can't, if you believe that money supply should grow, that's fine, but less than now. If you heard us and going, no, Sam Money sounds stupid or I can't think about it or I don't want the deflation or not, So even if you can't agree that it's a better system, hopefully you've at least realised that what is being done is sometimes the right reasons, sometimes for blind reasons, sometimes for selfish reasons, it is more destructive than doing less of the stuff that we're doing.

1:45:48I'm drinking a queso beer a day. Right. Maybe just I'll go to a six-pack a day. It's not great, but it's better. And again, it's not wishy-washy kind of like, oh, let's do something in between. I'm not trying for a compromise. I'm just saying if you've heard nothing else other than what we've talked about, you're like, that still sounds tinfoil hats. extreme and I want to do it, hopefully it would at least made you think about 2 % to 3 % inflation. Is that really something we should aim for? Or maybe would a bit of a more circumspect conservative, not capitalistic conservative, just conservative money supply actually be a better thing?

1:46:17I think hopefully we've at least made that case. If you can't get on board, if there's more than half a dozen people who are like, I heard you talk for three hours and 15 minutes, two weeks, I can't at least understand the problem. If that's as far as we got in the last couple of episodes, well, hopefully, right? And then, again, as I say, it's a small audience. We have no delusions of grandeur here, but if it's helped you think, if it's helped you understand, if it's opened some eyes or opened some ears or just given you a sense of context, then hopefully that's been useful and gone. You can be the annoying people, the annoying person at your family and friend gatherings that spreads the word, right?

1:46:53We didn't deliberately do this one after Christmas, but your relatives will thank us for it. I also think I really want to double down on what you said there because I think that is absolutely right. But also, too, I think it'll help frame up some of the political discourse for you. That's good point. Because it's very, I rail to you all the time, I can't listen to the news because any problem just is, let's throw more money at it. The government should throw more money at it. It's like, that's not to diminish the role that there are chronically underfunded, you know, public services. I'm not saying that.

1:47:22But it's just, again, if you think that printing money solves anything, then you're just as likely to be convinced that printing degrees increases average intelligence. It doesn't do it. So there are problems and the world has got some really big problems at the moment and people are doing it really tough out there and a lot of the time people are really coming, like their heart's in the right place. Look at those poor people. We should give them some money. And it's like I get it. I get it. And I'm not even saying, and by the way, you could entirely have a very, very generous welfare state under a hard money system.

1:47:57Yes. That is not just a question. Right, exactly. Yeah, I mean, it just means that government is held to the realities of account. Yeah. And so when a politician is up there promising you to fix your problems by taking money off that person and giving it to you, it will help you. Yes. For a very short period of time, and then it will make things very bad for you. And that's the last, that's what's happened since 2007. In fact, arguably back to the dot-com boom, in fact, arguably back and very strongly, arguably back to 1971, when Tricky Dick took us off the gold standard, right? And just quickly, too, it doesn't also mean you can't run surplus and deficit budgets sequentially when you need to.

1:48:40You just do it within the constraints of not using money printing as a solution. What does that mean? It means you've got to borrow a bit more, and that's going to cost a bit more, as Andrew said. So you know what you're probably going to do? You're probably going to save a bit more during the good time. So you're not actually necessarily having to borrow. Remember, debt is different than a deficit. Yes. You know? You can still have debt in a hard money system. Absolutely. But obviously you don't need debt, right? So my argument is at some point, you mentioned the time preference stuff, right?

1:49:02Some people say the fridge broke, I'm going to borrow the credit card, I'll pay 20%, but at least I've got to replace the fridge. That's fair. And you pay the credit card off and you're like, you're fine. Others will say, I'm going to put together a rainy day fund. And I'm going to have some money put aside so when the fridge breaks, I can replace the fridge. No interest incurred. And then I can replace this rainy day fund. So when we talk about structural balance, we talk about deficits and surpluses, we kind of talk about borrowing in the bad times and then kind of paying it back in the good times.

1:49:30You can do it that way. Or you can say, I'm going to save in the good times and draw down those savings in the bad times. And both are reasonable. And you can choose some combination of both. It's just a reminder. You don't have to. You can just use the debt. The debt's more expensive. You think, well, hang on, that's bad. Yeah, it's more expensive for the taxpayer, so governments might be more prudent. But it doesn't even have to be that. If you decide as a society, let's put a couple of years' worth of buffer aside just in case we need it. That's why we save. That's why we invest. That's why I have.

1:49:55And now, Andrew made the point about the investment returns, different to that. Why do I save and invest and put money aside for my future? Because I want to have it there when I don't want to work anymore. When I'm a drawdown phase, there's no reason a country can't do that with its budget and still run deficit budgets in those years it needs to. This doesn't undercut that. It doesn't remove the social safety nets. It doesn't remove the automatic stabilisers. It just means they are funded appropriately and sustainably. You mentioned the environment, and I think the word that comes to me with the same money is sustainability in all its forms, right?

1:50:24That's what it's about. Financial sustainability, economic sustainability, environmental sustainability. And again, it's not a magic bullet. It's not going to solve all the problems. No. But it will meaningfully realign the way we think about what we do without this whole, you know, no one ever has to turn the tap off. Yes. And so there's no hard decisions that would need to be made because all we do is put money to fix the problem. And no one, here's the other thing. We don't think that way. And as much as I said, I don't think you change human nature, I don't think you do, the reality is we aren't forced to think about the alternatives because we have not had those consequences.

1:50:54Yep. And I don't think it's going to change human nature. But what I do think it might change is some policy settings because what's super? Super is a response to human nature. That's a great example. I think that rather than saying people eventually are going to say if they're in retirement, we don't need super anymore. It's like, no, they won't. 25-year-olds are 25-year-olds. 12-year-olds are 12-year-olds. You're not going to change that, right? Well, I don't think you're going to change that. What you can do is change the policy settings of people who are responsible for this and say, we probably should allow for the fact that in a hard money world, this is a thing.

1:51:21Yeah. And those policy decisions done at arm's length in advance, the so-called nudges of behavioural economics, that's the stuff that starts to really come through, I hope, in that sort of scenario. It's even, you said that so well. And it's not so much about, sometimes we put these qualitative judgments on, you know, good or bad, but I really think it's more about, it's more about just reflecting reality as it is rather than you would have it. Because we live under a system where we genuinely, like at the very base of it, we have a philosophy and economic system and a monetary system which says you can have your cake and eat it too.

1:51:57That's what we're saying. And then a lot of the sound money advocates, particularly if it's being promulgated by a libertarian or, you know, someone from a particular political band, it always comes across as really brutal, laissez-faire capitalism. And you asshole, how could you be so cruel and crushing? And it's like, it's just acknowledging the world as it is. And the world is a brutish, difficult place in which all of us, governments, households, businesses, we're always faced with very difficult decisions and lots of opportunity costs. I'm not saying it's great. I'm not saying hard money is going to usher in a utopia and that there will never be a sick or hungry child in the world.

1:52:33But I'm saying we're at least going to operate under a system in which we can see reality for what it is. And once we know and we are forced to reckon with reality, we're just going to make better decisions. Including our safety nets you talk about. It doesn't mean – you mentioned the hard and brutish stuff, and that may sound to some people like you're just going to suck bad luck, get on with it. Who cares? You're not saying that. What you're saying is the circumstances where we're the circumstances and the way society can make decisions to help those who are hurt by circumstance rather than pretending those circumstances don't exist or papering over them.

1:53:02And that's – I just want to make that point because you sounded a bit of a hard nut there. I was like, no, I'm just going to suck and bad luck for those people. You're not saying that. You're saying life will suck and so we can help those people, but within the constraints and the opportunities that we have and the allocations we have rather than papering over between those circumstances don't exist. We're trying to, we just have a tool that allows us to account for and measure and trade the very real resources that we have. Money, whether it's Bitcoin or Aussie dollars or, it's all made up, right?

1:53:35What's it backed by? What's the utility? It's a tool that allows us to coordinate at scale. So let's at least coordinate within the confines of reality as it is. Do you want to give everyone in the country a universal basic income? Great. I'm not against that. I think in a world of humanoid robotics and artificial general intelligence, we're probably going to have to get there. But at least let's make sure that the way that we account and economise for all of that stuff is reflected in reality. So you want to give everyone 20 % of their annual current pay in welfare? Great. Where are you going to get it from?

1:54:10Yeah. Where are you going to get it from? Not because I'm an arsehole, because I can't print food. I can't print medicine. I can't print houses out of thin air. And we need a monetary system that reflects that reality. And, like, look at what we have done with this power. You know, we had a pandemic. And what you like to say, and you're right, you know, there's a lot of, you know, egregious kind of things that kind of probably needed to happen. I don't think we needed to give Jerry Harvey a bunch of money. I don't think we needed to give Qantas a bunch of money. Why would we do that? At least in a hard money system, the politician would say, hey, listen, electorate, we're going to bail out my mate Joyce and his horribly run airline, which was overly leveraged and had absolutely no balance sheet capacity to deal with any kind of perturbation that the economy might throw at him because he knew he was going to be bailed out.

1:54:57Anyway, we need to bail him out. So I'm going to increase your taxes to do that. The Qantas levy. See you later, politician. No one votes for you ever again. Correct, correct. Now you might say, well, businesses need to close, we need to quarantine. We need to all this. Like, oh, geez, this sucks. Let's make some hard decisions. Where's the money come from? Who are we going to give it to? And, again, we can be super, super, super generous, but bad things are always going to happen, pretending that they're not going to happen, and trying to think that making extra zeros and ones in a database can ever fix this is the height of lunacy.

1:55:34Oh, shut up. You know what I love? Because I've said I'll shut up about 20 times. No, no, no, no, no. It wasn't about you. I just love the fact we said we only did two episodes. So what did we do? We're in the second episode, two hours long. We still scratched the surface, man. The question we're going to get is what about my share portfolio and my asset prices? Because they're probably going to go down in any transition. So we'll leave that for another day. There's a cliffhanger for the next episode. Because up until this point, maybe we won over a bunch of people. It's like, what? but... Yeah, that's right.

1:56:07Yeah, the price will come down. Let me pull the rug out for one of you, people. I'll just say very shortly, the price will go down, but your wealth will go up. That sounds like a topic for another day. I'll let that hang there for you to think of what. Mate, thank you for your passion. Thank you for your expertise. Thanks for listening. If you've got it to this point in the podcast, then God help you. But thank you for spending some time with us. If you... Look, as I said at the beginning, Rab's in the middle. I'll say again at the end. If this has raised any interesting questions for you, topics, disagreements, whatever, throw them at us.

1:56:33We'll think about how we might respond to it. We hope you've enjoyed it. I really hope this doesn't be too self-indulgent on our behalf. You can hear the passion. You can hear the interest. You can hear why we think it's worth. Every podcast is self-indulgent. Let's be real. I hope that makes it okay. But I take you, Brock. So we're going to sign off. We're going to come back on Sunday with a mailbag because that's what we do on Sundays. I did get a recent question, Andrew. I haven't actually talked about your feats of endurance or strength recently. Okay. It's all I'm saying. You have to come up with some ideas.

1:56:55It's all I'm saying. I've been asked. The question was, has he stopped doing it or has Scott lost interest? Both. both is the answer. Until Sunday. Leave you with that thought and full on. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services Licence 400691.