From The Godfather to the Blockchain: How Easy Money Seduced Wall Street (and the White House)

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1:29David McWilliams: To understand the economy, you have to understand human nature. This podcast is powered by Acast. How are you doing there? It is time for the podcast. And we are going to talk today about the Godfather. Oh yeah. Marlon Brando. Don Corleone. Are you going to make me an offer I can't refuse? Of course I am, and I always make you offers you can't refuse. We're going to talk about that in the context of cryptocurrency and what I learned this week about a man you mentioned two weeks ago, Jamie Dimon. Yes, indeed. All sorts of network issues going on here, links, interlinks, all sort of connections.

2:13David McWilliams: So we'll talk about that in a second. I am looking at John. He is rocking his Robert Plant look. It's all full-on cock rock. He's got the tightest jeans you've ever seen. Leather strides, man. These leather strides. He's banging it out. The old Zeppelin head that he is. John, you are at Robert Plant in France, I believe. Oh, my God, Mac. I've been looking forward to this for six months. I booked these tickets for myself and Sheena about six months ago. And it was one of the best gigs I've been at for a long, long time. Just to set the scene, I'm not going to bore everyone with this, but just to set the scene, it was part of the Carcassonne Festival.

2:55David McWilliams: and you know carcassonne festival it's you know lots of people go to the dunlairi festival of world music but you go to the carcassonne oh yes totally yeah yeah but it was and if you know it was held in carcassonne castle which is one of the the biggest and best examples of medieval castles and it was fantastic i'd love to see it i've never been down there but i'd love to go down yeah it's really really lovely but they have a venue there which holds about 5 000 it was robert plant and Susie Deanne and the band was Saving Grace. This is Robert Plant's new thing. So the musicians were just incredible.

3:34The arrangements were kind of bonkers, but ingenious. But the music was, it's kind of based in bluegrass, folk rock, but it has everything from kind of North African to to South Delta Blues, to Eastern European folk music, to country and Western. So it has everything just thrown in. But the thing about Robert Plant, I'd never seen him live before. And I wasn't sure what to expect. But then he came out, 76 years old, and still one of the coolest men alive. He had all the Led Zeppelin poses, which were just fantastic. but they were just all a little slower and not quite as dramatic. But I absolutely loved it.

4:25Absolutely loved it. But, you know, it's funny you mentioned Led Zeppelin. Apart from being probably the greatest exponent of white men playing black music, which they were, they were also one of the most sued bands in the world for plagiarism. Did you know that? I well I know there was a couple of cases One of the most sued really Yeah there is a litany A litany of cases Taken by other musicians So I think what Zeppelin were so good at doing Was taking bits Which most musicians do Well that's the nature of folk music And blues music is about Reinterpreting these songs Dylan Dylan swiped songs from everybody

5:11David McWilliams: Well I mean it's nothing to say that the great artists borrowed the the really second rate was just steel yeah yeah but i was looking you mentioned delta blues i don't know where i read this a fella called willie dixon does he yeah yeah mean anything to you yeah willie dixon wrote a song from muddy waters yeah which had you've been fooling she's been schooling i'm not fooling that at lulan and Robert Plant just robbed it. For all of the love. And eventually, Willie Dixon and his estate sued Led Zeppelin. Right. And eventually, Led Zeppelin did say, fair enough. Jimmy Page threw Robert Plant under a bus because Jimmy Page said, Robert Plant at this age was 20.

5:55David McWilliams: Jimmy Page was about 24. And he said, yeah, yeah, yeah, yeah. Maybe Robert did steal some of that sort of stuff. But you know, then the funny thing is that, you know, You look at any of the rock bands that followed Zeppelin, they were all stealing from Zeppelin. But they can never quite get it because Zeppelin had a chemistry that was those four individuals created something bigger than themselves. I tell you, John, there's a very good podcast. Before we get on to our own podcast, it's called One Song. It's called One Song. It's an American podcast, and it goes through the history of songs. Now, if you're moosing around and just going for a stroll, right, have a look at it.

6:33David McWilliams: Have a listen to it. because it's really interesting about all these things of where the music came from, what the guys were doing. And of course, there's no doubt that the thing about Led Zeppelin, it was the transformative. Led Zeppelin took, you know, blues and turned it into their own genre and their own vibe. And of course, out front was, you know, Mr. Typants himself, Robert Plant. Yeah, yeah. Anyway, let us get on, John. So Jamie Dimon, once a severe critic of crypto, which he called a fraud, suggested this week that JP Morgan, the most possibly influential investment bank in the world, might accept as collateral for loans clients holdings of crypto, which in a way gives crypto yet more credibility because it allows crypto to be used for collateral.

7:28Now, notwithstanding the margin calls that might happen

7:32David McWilliams: as a result of the price of the collateral falling, so we'll talk about that in a second, but it shows a shift, right? And the shift is very simple. It is the same shift that the Corleone family made going into drugs that the investment bankers are making going into crypto. Right, you're going to have to explain that one. Okay, so I'll tell you, I'll take you back. The Godfather, right? You can play the signature tune there, John. Yes. The Godfather, right?

8:11Love that tune. There's an amazing scene where Don Vito Corleone, played by Marlon Brando in The Godfather 1, is deliberating about getting into this new business. So the racketeering, gambling, that was the old Corleone mafiosi business. And then in the 1960s, the mafiosis in Italy start importing heroin into America. And they begin the process of going from gambling to drugs.

8:49David McWilliams: Don Corleone, believe it or not, suggests that this is anti-Catholic. He has a moral stance. He's a man who kills people. He has a moral stance against drugs. He doesn't have a moral stance against anything else. But eventually, and there's a great scene where he's talking to, there's a great subplot. He eventually gets assassinated. There's a hit in his life, et cetera, et cetera. But he's talking to the guys who are urging him in the five New York families to switch to drugs. And he's saying, look, this is not what we do, et cetera, et cetera. Now, fascinatingly, later on, his sons get into the drugs business, right?

9:22And the mob get into the drugs business. Why? Because that's where the money is. But is it also the fact that perhaps that Vito didn't understand the drugs trade? He understood gambling and racketeering, but he didn't understand the drugs trade. Similarly, Jamie Dimon, a couple of years ago, didn't fully understand crypto or didn't quite get the connection with crypto. Well, I think it's more not the understanding. I think it's more the lure of easy money. Right. OK. The U-turn that Jamie Dimon has made

9:56David McWilliams: and the U-turn that Donald Trump, remember Donald Trump, called crypto a fraud and a scam. They have both made a U-turn exactly like the Corleone family simply because there's too much money at stake. And it's the easy money in crypto and the lack of questioning. And so what they've done is they said, look, in my bones, I know this is a bit of a scam, but you know what? I'm in for the ride. Yeah. Because if I don't get money, somebody else will get money. And if I don't get on top of this, even if I don't really believe it, and even if I have moral qualms about it, I'm going to get in. Why? Because I'm going to be enormously enriched by what is in effect a massive boom-bust cycle in assets that have absolutely no income and assets that have absolutely no...

10:48David McWilliams: Like, so for example, if you buy a share in a company, what you're buying is a stream of income, a stream of innovation. You're buying a sense that there's going to be some innovation created, okay? And you're grabbing onto the coattails of that. If you buy a government bond, you say, well, okay, at least I know that the tax system of this country stands behind this and the stream of income is going to be actually generated by the tax system. If you buy crypto, it's just pure speculation. You think, okay, over time, this is going to go up and up and up and up. So what I want to talk to you today about is the crypto world in general.

11:23And I want you to look at it, not through the perspective of the crypto world.

11:28David McWilliams: And I'm going to lump them all in together. Crypto and Bitcoin, even though the Bitcoiners won't go, because at least for most non-crypto people, Bitcoin is in the crypto family. It has different characteristics, which is that it has a fixed supply, But it's broadly based on the notion that a new money is emerging around the world based on the data revolution. That's the idea. And it's broadly based, therefore, on the supposition that over time, crypto will take over from the dollar as the world's reserve currency. That has to be their bet. That's just the bet. But I think a really good way of looking at crypto is not as a currency, but rather as a very well financed lobby group.

12:14Lobby group? Yes. So the people who own crypto and Bitcoin, particularly the whales, the early investors who own lots of it, are very, very well financed. And they are trying to lobby the United States regulator to try and make legitimate what started as illegitimate, which is a parallel currency to the dollar. And what you've seen over the last two years is an enormous amount of money going in to pay off senators and congressmen to enlist them into the crypto lobby to change U.S. regulations to make the U.S. regulatory environment much more crypto friendly. There is no reason, economic reason in the world for this

13:02David McWilliams: because the currencies that we have are functioning quite well. The dollar is functioning quite well, the euro. It is simply a solution looking for a problem. So most innovations, John, are a problem that seeks out a solution. There is no problem in the international financial world that is going to be solved by crypto. But it doesn't matter. It's actually entirely a get-rich-quick scheme for holders of the assets, one of which now is the President of the United States. Okay, so when you're talking about the lobby group and they're paying off senators and congressmen and the whole lot, are they paying them in dollars or Bitcoin?

13:49They're paying them in dollars. This is the hilarious thing. This is the hilarious thing. That's what I thought. That's what I thought.

13:54David McWilliams: Yeah, they're not paying them in crypto. Even ISIS demands its ransoms in dollars, John. That is how universal the dollar is. So ISIS, which thinks America is the great Satan, demands its kidnapping ransom in dollars. But let me ask you this then, Mike, because I've been reading a lot. I think I mentioned it before on some previous podcasts, but this so-called Genius Act in America, which is basically paving the way for stable coins that are, now I don't fully understand these, but they're coins that are linked to a fixed value, such as the dollar or gold or silver or whatever. And that has now kind of been enacted.

14:39So can you explain this? Because I'm quite clear on this. John, this is the anatomy of a shakedown. This is a heist, right? Stable coins are nothing more than money market funds.

14:52David McWilliams: Money market funds are funds that are offered to investors, John, which would say, we're going to get a basket of currencies. Each of those currencies has its own risk. Each of those currencies has a weighted average against the dollar. And each of those currencies has its own interest rate. And you are going to buy that basket of currencies, and that is going to be your money market fund, and that's an investment. So that's a traditional idea. Stable coins are nothing more than a tokenized version of a money market fund. What I mean by that is, I mean, I really don't get this at all. And when you don't get something and you kind of understand the background, you're thinking, okay, what's going on here, right?

15:29What's going on here is a stable coin is allegedly a token that makes trading in currencies and basically closing out deals in currencies quicker because it's on the blockchain ledger and not through the banking system. Right. That's all it is. Now, what is the utility value in making trading quicker for the average person?

15:52David McWilliams: Zero. Because the average person doesn't trade these. So, of course, what it's trying to do, it's trying to create the impression that there is an overwhelming demand for something where there is none. Right. Yeah. Stable coins are called stable. Why are they called stable? Because they're actually fixed to existing currencies, which are stable. and the implication is the CRISPR world is unstable. So this is kind of like going back to a kind of a gold standard kind of thing. It's like going back to a gold standard exactly, except the standard isn't gold or Bitcoin, but the standard is the dollar itself.

16:33David McWilliams: So it's creating a derivative on something that doesn't need to be a derivative. And it's saying that the derivatives have their own intrinsic value. It's all a bit meta, isn't it? Never supposed to have it. Look, John, I'm just telling you, as somebody who's written books about this, thought about this, this, from where I'm standing, right, doesn't stand up to an ounce of critical thinking. But what it is, it's a get-rich-quick scheme. And that's always been incredibly seductive. No more seductive thing exists in the world than easy money. Because easy money is the sort of money you get from not working, right?

17:11David McWilliams: Who doesn't want money you get from not working? Nobody. Yeah, yeah. So this is easy money. Now, of course, this has seduced in the president of the United States and Wall Street. Now, think about crypto. Crypto started as the anti-Wall Street currency. It started in 2008, 2009. I think Bitcoin was 2008, right? After the financial crash, when the credibility of institutions and banks was on the floor, they were corrupt, the bankers got bailed out, all that story. And the idea was that crypto would be a new, unimpeachable, ledger-based currency that would democratize finance and crush Wall Street.

17:55David McWilliams: Now, crypto and Bitcoin, and I'm putting them together so you crypto and Bitcoin lads can jump up and down, happy to do so. I'm just doing it for ease of understanding and communication. they are now enlisting the very wall street firms like jp morgan that they started on the basis of hating and they're going to crush they're enlisting them into their game now how are they doing that and why are they doing that they're doing that because nothing so underscores a financial bubble they're getting more and more people involved in it because then you have more and more converts and you have more and more people with a stake in it yeah who say it can only go up yeah so how do you do that, you create the environment where you can create all sorts of products that are crypto related to allow people buy into them easier.

18:41Now, how do people buy into them?

18:43David McWilliams: They've got to be sold by something because you can't buy something if somebody's not selling. There's always a seller. Now, who are the sellers? The sellers now are magically the investment banks who are actually pushing this stuff onto investors and savers. The very people who were supposed to be corrupt and venal are now part of the gig. And why? Because the US regulator has been infected by the virus. And how have they been infected by the virus? They have been infected because the top man, Donald Trump, and his incredibly genius, you talked about the Genius Act, his genius sons, have got large positions in shitty crypto that they're making up called Trump coins, and other coins like that.

19:24Yeah, yeah, yeah. They're like the Continental.

19:27David McWilliams: This is a heist, John, of monumental proportions. And it's happening in plain sight, in open daylight. The reason Trump this week is having a go at the Fed all the time isn't about interest rates. Yeah. That's the mirage. That's the spin. it's attacking the last institution that will stand up for the dollar. Because the regulator is in his pocket, the president is enriched, Wall Street is enriched, the last institution run by public servants, and you can criticize the Fed and you can talk about whether they're good or bad, they're too slow, they're too quick, blah, blah, blah. But it's the last institution that's mandated to preserve the integrity of the dollar.

20:21But in order for crypto to grow, the dollar has to recede. And that's what you're seeing. So all this stuff about attacking the Fed, about building, you know, new buildings, etc., as was this week. It's all about undermining the one institution that can prevent this racket from gaining even more hold than it is. And that's when I come back to the lobby group, John. So basically, the lobby group are the crypto owners who are trying to create a story that crypto is essential when there's absolutely no financial, monetary or economic reason for it. As I've said before, it is a solution looking for a problem.

21:10Yeah. You know, you said before that everything pretty much that Trump is doing is undermining the dollar and the dollar is certainly going on a downward trajectory. But let me ask you this. You know, if Wall Street are coming on board and regulation is changing in America and probably, you know, there'll be a lag time and it might start happening here. At what point does Bitcoin, for example, or one of the cryptocurrencies get to that kind of critical level where people start not just hoarding it, but actually using it in terms of day to day payments? But before we answer that, let's do a bit of this.

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23:44So the question you asked there is, is there an inevitability that things like crypto will replace normal currencies, and particularly the dollar? and I would say this will never happen as long as we have democracies and the reason I and not even democracies but as long as we have governments that run countries money is a public good not a private good money the history of money has been the history of fraudsters and counterfeiters and also people always trying to make private what is public, which is money. So going all the way back, John, to the Lydians, they were the first people to put the stamp of the emperor on money, which was to solder money to the regime, the authorities, the government, the king, whatever.

24:44Fiat money, which is what money we use now, is made whole by the fact that it's backed by the taxation system of the country. So what is legal tender in Ireland or Britain or let's say in the euro or America is made legal tender because underpinning this is the tax system of the country made real by the fact that in the United States, for example, you cannot pay your tax in crypto. You've got to pay your tax in dollars, right? You cannot pay your tax in the United States and sterling or the euros. You've got to pay it in dollars. That's what gives the dollar its strength. So money is a public good, and the history of money has been, one part of it is smart, clever, rich people trying to wrestle the control of money away from the state, from the public, and into private hands.

25:32David McWilliams: Now, why would they do that? They would do that because if you have your own private printing press, John, you get very rich because you print the shit. Yes. Yeah, yeah, yeah. Everybody else goes out to work for money, but you just print it. So obviously, there's a massive, massive upside in acquiring that license. I want that, Scott. Yeah, yeah. But that's why central banks have it, and central banks are answerable to governments. Yeah. Right? Otherwise, we'd all have little private printing presses in the basement, printing out dollars and euros, and then going down the pub. Yeah. So the essence of the crypto smash and grab exercise, which is why it's a lobby group trying to, and I believe it's a very seriously deleterious lobby group, is it's trying to grab and wrestle the power of the printing press away from the state at its most fundamental.

26:19Basically, it's a private, old-fashioned printing press for the TikTok age. That's what it is. But you said that if people need to pay their taxes in dollars or in euros or whatever. But if Trump, for instance, decides, okay, you can pay your taxes in Bitcoin or in Trump coin or whatever. Then the dollar's over.

26:41David McWilliams: Then the dollar's over. Then he is the president that destroys the most significant part of the United States arsenal of influence, which is the soft power of its financial muscle. Yeah. You know, if that were to happen, and I think all these fights with the Fed and all this stuff, it's all going down. I mean, we are talking about extraordinary revolutionary times in money, in finance, in financial architecture that people aren't focusing on with the level of alacrity and seriousness that should happen. Why? Because it's actually happening in plain sight. It's a very, very traditional playbook.

27:20I mean, you know, Bitcoin, lots of Bitcoiners. And again, I always say, we don't offer financial advice in this podcast. You can buy whatever the hell you like with your money. If you think Bitcoin's going to the moon, grab hold of it, okay?

27:32David McWilliams: For me, it's like a financial Pokemon card. Do you remember Pokemon? I do, yeah. People say, why do the kids think Pokemon is valuable? These are Pokemon cards. And there was a complete craze. This is the financial equivalent of the Pokemon craze, right? And because Pokemon's had a fixed supply and because Bitcoin is a fixed supply, it's regarded as a digital token that is like gold and it has an asset value and yada, yada, yada. It's Pokemon. That's all it is. It's Pokemon for people who don't understand economics. And that's why it didn't work in El Salvador when they tried that experiment. It just didn't work.

28:05David McWilliams: Of course it didn't work in El Salvador. Yeah, so then they went into another mafia game, which is imprisoning people. That's true. That is true. It's true. Yeah. The printing press game, we want to get this a mafia game. Okay, the drugs business, printing press business. Why don't we just go into the business of you give me all your prisoners and we'll imprison them, and that's our new gig. Yeah. Right? But I get back to the point before we go, John, is that we are looking at something very, very serious here. because wherever the president goes, Wall Street follows because money and the purveyors of money always follow the path of least resistance.

28:44And if there's money to be made, like Don Corleone and Michael Corleone and the Godfather 2, what you do is you put your scruples to one side, you hold your nose, and you get involved because the lure of easy cash is far, far too seductive. Yeah. Investment banks are now in the business that they once dismissed as fraudulent. The president is in the business that he once dismissed as a scam. The history of money suggests these moments don't end well. If you would like to have an idea of where we might be going, there's a great chapter in the book called Money, the story of humanity about John Law, who basically did something broadly similar.

29:28And what this is basically is this, If you go back to our Godfather example, John, this is life imitating art, imitating life. Fiction and fact are blurred. And in Trump's America, that unfortunately is becoming commonplace. We'll leave it there.

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