Why Did Bitcoin Crash Again? The Scam That’s Been Around Since Dante

0:00David McWilliams: Coming up on the podcast in a couple of minutes time, it's Bitcoin, it's crypto, is Bitcoin money? It is not. Spoiler alert, even Saylor alert. It is not. We'll talk to you in a couple of minutes.

0:30Michael Saylor: We'll be right back.

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1:50to understand the economy you have to understand human nature

1:56Michael Saylor: This podcast is powered by Acast.

2:02David McWilliams: How are you doing there? It is time for the podcast. I woke up this morning. And I saw something that I hadn't seen for many weeks, John.

2:17Michael Saylor: A blue sky.

2:19David McWilliams: No clouds. Yes. Even a slight. Now, I'm not going to overestimate or over-egg this, but slight evidence that there was a sun somewhere in the sky. Rumours. And there was an element on the sea that looked like sunshine. Rumours, Mac, rumours. I know, but I think it's the worst might have passed.

2:39Michael Saylor: Well, this morning was the first time, as you say, there was a bit of blue sky and it wasn't raining. And I opened the door and I was just hit with birdsong that I haven't heard in ages. And it just felt like all the birds are kind of going, yes, come on, let's get out and party while we can. And they did. And it was just beautiful. I just had to stand there for a few minutes and soak it all up.

3:03David McWilliams: Dear listener, you do know that John, amongst his many talents, he really, he spends a lot of his time sneaking up on birds in unusual places. And he calls it bird watching. I just thought it was very odd. He is what they call a twitcher. A twitcher is a subsect of humanity.

3:21Michael Saylor: Yes.

3:22David McWilliams: Very unusual. Usually geography teachers.

3:25Michael Saylor: I actually wanted to be a geography teacher at one stage.

3:28David McWilliams: I know. This is called the self-exposure episode of the Dave McWilliams podcast. John, the geography teacher. Anyway, we won't talk about geography teachers, twitchers. We're going to talk about another exotic creature, John.

3:43Michael Saylor: Yes.

3:43David McWilliams: That has had a difficult week. That creature is Bitcoin. We're going to talk today on this podcast about Bitcoin, crypto, what's going on there. And the next podcast on Thursday, we're going to extend it by talking about monetary policy, money, the dollar, gold, the new Federal Reserve chairman. Oh, yeah. And what this all means for you, the listener. What actually does it mean? What actually does the central bank do? It's going to be a little slightly wonkish primer on what does the central bank do and how does it control the money supply and what does that do for the rate of interest? What does that do for the rate of mortgages?

4:24David McWilliams: What does that do for the rate of inflation? And what does that do for the way in which your pay packet can actually buy things? So it's going to be essential. That's on Thursday. That's the second one. But today we're going to talk Bitcoin because I know you're a Bitcoin fan.

4:38Michael Saylor: I'm chomping at the Bitcoin. Yeah. Okay. So let's start with that. Let's start with two things. One is Bitcoin didn't collapse, but it dropped significantly and is now$67 ,000? Dollars per Bitcoin. Yeah, as of recording. But, Mac, four years ago this week, we interviewed on the podcast one Michael Saylor. Mr. Bitcoin. Mr. Bitcoin of MicroStrategy. And I was a little bit bamboozled. Let me just play one little bit from the interview. Money is technology for moving energy through time and space. And this is a big idea. If money is energy, then, and it is, like I have a billion dollars. I can buy a billion dollars of electricity with it.

5:33Michael Saylor: I can buy a billion dollars of horsepower. I can burn it into labor. I can burn it into products and into matter. I can convert the property back into money. So money is technology for moving energy through time and space. But the more important issue, Dave, is we don't have a good way to move a billion dollars of energy through time from now to 100 years from now. That's the profound challenge that human race has faced. Moving energy through space is merely inconvenient and inefficient, very inefficient. But moving energy through time is impossible until we actually invented Bitcoin. And with Bitcoin, we finally have a network to move energy through time and space in a thermodynamically sound fashion with de minimis power loss.

6:25Michael Saylor: That is the profound invention. So, Dave, how do you move your billions around?

6:32David McWilliams: Through time and space. It's thermodynamics. It's de minimis energy loss. Look, John, that is gobbledygook, right? Yes. There's an expression that we have in the podcast, is what is important is rarely complicated. And what is complicated is rarely important.

6:47Michael Saylor: Well, that was complicated.

6:49David McWilliams: That was complicated, and it's not important. Okay? Right. So what we want to talk about is, again, if you want to play the Bitcoin game, if you want to punt it, this is not a financial advice column, nor is it an agony ant for people who lose money on shitty ideas, right?

7:05Michael Saylor: Yeah.

7:05David McWilliams: But what it is is an economics podcast based largely on monetary economics, which is what we've been doing for many, many years. The point is, Bitcoin is a long line of a rich history of frauds trying to pretend that they are money. And this was the first iteration of Bitcoin, was that it was going to be a new money. Not only was it going to be a new money, but it was going to be a reaction to the corruption. of financial elites, the corruption of central banks, the centralization of power in the hands of central banks who were unelected, and their lackeys in Wall Street who were unelected, all of which contributed to the global financial crisis of 2008.

7:52David McWilliams: And lo and behold, Bitcoin was seen as a decentralized, democratic... Kind of revolutionary. Revolutionary.

7:59Michael Saylor: Yeah.

8:00David McWilliams: That was the pitch. Yeah. So let's now disagree. It kind of sounds sexy like that. But when you hear what Saylor just said, it sounds like God believe it. Yeah, exactly. Okay, so let's explain, right? We go back to history, John. There have always been forgeries, counterfeiters, frauds, and people who try to explain to others that there is a new form of money and that new form of money is going to change the world, right?

8:27Michael Saylor: Yeah.

8:28David McWilliams: We always start with a divine comedy, John, as you know, right? Every morning. Let's go back to the original and possibly the first universal, I want to say universal, I mean across Europe, reserve currency, which was the Florentine Florin, which was introduced in 1272 in Florence.

8:46Michael Saylor: Right.

8:46David McWilliams: Now, in the Divine Comedy, which was written and finished at around 1315, back in time, Dante reserves one of the most ghastly punishments for the crime of forgery. This is the Bitcoin of the 13th century, right? Now, in Canto 30 of the Inferno, a counterfeiter called Adam, who was actually in real life an English man, he did exist, okay? Okay. He is condemned to the eighth circle of hell by Dante for the crime of forgery. Now, the eighth circle of hell is just one circle above Lucifer. Now, this is how despicable Dante thought the forger was. Now, what is going on? So in the Divine Comedy, for those of you who are about to embrace one of the finest books ever written, right?

9:42David McWilliams: Dante and his mate Virgil, the Roman poet. Virgil is Dante's wingman, in effect, during the whole pursuit of the Divine Comedy. And they make two falsifiers, one of whom is this guy, Adam, right? And Adam, in reality, lived in a city called Brescia, which is a city in Italy. The Brescians were competitors to Florentines. And in real life, in the late 13th century, so in about 1290, a counterfeiter was burnt at the stake in Florence. That was the guy, Adam. So actually, Dante got all his befoulments and horrible crimes and punishments from what he saw as a child. because medieval cities were brutal places.

10:29David McWilliams: You know, people were burnt at the stake, people with their hands chopped off, their heads chopped off.

10:33Michael Saylor: It seems so extreme for a forger.

10:35David McWilliams: That's exactly the point. Yeah. So not only was he burnt at the stake, but in the Divine Comedy, Dante put him together with a guy called Sinon of Greece. Right. Sinon of Greece was the man who persuaded the Trojans to open the doors of Troy, to let in the wooden horse of Greece. And he said to the Trojans, don't worry, it's only a gift. And we know what happens. The Greeks jumped out of the thing and they destroyed his civilization.

11:04Michael Saylor: Matt Damon came jumping out.

11:06David McWilliams: Matt Damon came, except for Brad Pitt. Poor Brad Pitt was in talking apparently, trying to shoot a movie in the rain. He was, anyway, that was last week. So the question is, why did Dante put the forger not only in the eighth circle of hell, but also put him together with a man who destroyed civilization, who lied to the Trojans and allowed the Greeks to destroy Trojan civilization. And the reason is that Dante understood that money, sound money, is essential for the foundation of civilization.

11:44Michael Saylor: Right.

11:45David McWilliams: And what Dante saw, that if you mess with the money of the Florentines, so basically what Adam tried to do was he tried to put copper into the Florentine coin, which was pure gold, and pass that coin off as pure gold, but it actually had been debased by copper. He would have looked and felt and maybe even weighed the same. It wasn't the real thing. So he was a debaser. He was taking the Florence, he was minting them, he was then adding copper to it and passing it off as the real deal. Some operation. Some operation. but again that was at a time when that's what they did that's what they did they minted anyway so the question then is how was he busted was it a raid like now it's very interesting John now you've got me going oh god you know what's going to happen now Archimedes go on Archimedes right do you remember the story of Archimedes in the bath right Archimedes lives in Syracuse sorry dear listener we're gone I know it's Saturday morning we've gone a little trip

12:52Michael Saylor: I'll bring him back in a minute okay

12:53David McWilliams: So Archimedes, the greatest mathematician of the Greek world, was actually killed by Romans in Sicily when the Romans invaded the Greek colony of Syracuse, number one. Syracuse, beautiful. You've been there. I haven't been there. We'll do a podcast with Syracuse.

13:12Michael Saylor: We will.

13:13David McWilliams: Number two, one of the great inventions or discoveries of Archimedes was when he was trying to figure out, Do you remember he went into the bath and the amount of water displaced by his body in the bath, he was trying to figure out density. Right. And he went into the bath and he realized that his weight would push the water down, would displace the amount of water. Yeah, yeah. And he was trying to figure that out. But how did he actually come about? Why was this useful? because copper and gold have different densities. And the way in which he figured out that they could catch forgers in the old days was dropping the coins into water.

14:05David McWilliams: Oh, okay. If the gold coin displaced more water, it was pure. And if it displaced less water, it was tampered with.

14:14Michael Saylor: Right.

14:15David McWilliams: So you ask the question, John, and lo and behold, We go from Dante to Archimedes. There you go. We go to Greek civilization. But we actually explain how basic physics was related to basic forgery. And basic forgery was exposed by finance, more importantly, by money.

14:35Michael Saylor: Right.

14:35David McWilliams: So that gets us down because your man Saylor was talking physics, but I'm not sure he knows much about Archimedes now. Yeah. But let's go back, right? Yeah. So the question is, all through history, all through history, there have been people trying to pass off tokens as money. And Bitcoin is the latest one of those. The fact that it goes up and down is also quite important because money should always be quite stable. Right. But we've talked about it before. Adolf Hitler tried this. Lenin tried this. Nero tried this. Henry VIII. We talked about this even a couple of weeks ago. Right. that there has been a long, long history of people trying to print their own money, in effect, and pass it off as real money.

15:19So Bitcoin started in 2008.

15:23David McWilliams: So we go back to the start of Bitcoin. So it starts in 2008. It emerges. A guy called Satoshi is apparently the guy who comes up with it. And the idea is that Bitcoin is going to be a liberation for the average person, crypto in general. Like, there is, within the crypto world, schisms. It's like a religion. It's like a cult. You know what I mean? Cults always have schisms, right? Yeah, yeah, yeah. Okay, I've always said that, you know, some people I know up in Northern Ireland are in the fifth Presbyterian church in the village. I always say, what happened to the other four? And the other four disappeared because there was a schism, right?

15:56David McWilliams: They were like looking at the scripture and all that. So it's a bit like a cult, right? But the basic idea was that Bitcoin, crypto are part of the same family, even though they disagree with each other, right? But the promise, the promise was that it was going to basically take the place of this corrupt money, right?

16:19Michael Saylor: Yeah.

16:20David McWilliams: Okay? And Bitcoin. Fiat money. Fiat money.

16:22Michael Saylor: Yeah.

16:23David McWilliams: Okay. And fiat means in Latin, let it be done. Okay, and I'll explain that to you in two seconds. That's what fiat means, right? So it's just making it up with some background, institutional background behind you, right? But the enthusiasts promoted it as kind of the future of money. It was going to replace the dollar. It was going to replace official currencies. The promise was it was going to be democratic, egalitarian. It was going to be an honest form of money. It's kind of manifesto, as you said, a kind of revolutionary appeal. It was going to smash the establishment. And it was going to open up the world of money beyond Wall Street.

16:56David McWilliams: All that good stuff. And that really resonated in 2008, 2009, as it should have done. Yeah. Because Wall Street was the epicenter of a global financial catastrophe. But the problem is it never happened.

17:09Michael Saylor: Right.

17:09David McWilliams: Right? Bitcoin never, ever replaced the dollar or any other currency.

17:15Michael Saylor: For good reason.

17:16David McWilliams: Now, exactly. But the basic idea was, you know, rather than being issued by kind of dodgy governments and corrupt elites, et cetera, et cetera, these cryptocurrencies were going to be governed by what they call incorruptible algorithms. so there was going to be x amount of bitcoins there was 19.6 million of these coins issued yeah and they had in in effect a sort of a self-destruct algorithm within it which is what we call bitcoin mining right which is basically in effect a very very large remember those slot machines years ago yes right you pull the yoke the slot machine you hope for the three kings to come up right so imagine that bitcoin mining is like a very high density slot machine right and they're expending loads and loads of energy trying to pull this lot, ding, ding, ding, ding, ding, ding, ding, and then you get the algorithm and away you go, you get a Bitcoin, right?

18:04David McWilliams: The problem is Bitcoins use on average, it costs in terms of energy about$96 ,000 to mine one Bitcoin. It's now that it's 60. Bob's your uncle. Bitcoin ain't profitable even to mine. Oh, hang on. That's interesting.

18:20Michael Saylor: In order to, what, the amount of energy and time and effort. Energy, energy, electricity.

18:27David McWilliams: It costs 90? They, on average, cost about 96. Now, because of Bitcoins, there's very, very few left.

18:34Michael Saylor: Yeah.

18:35David McWilliams: So you're having to expend far, far much more time in actually trying to solve, in effect, an algorithmic puzzle.

18:42Michael Saylor: Yeah.

18:42David McWilliams: It's thought to be costing between 90 and 96 thousand dollars. Wow, I didn't know that. That's why Bitcoin mining happens in countries of very cheap electricity.

18:50Michael Saylor: Right, okay. So, because the essential cost. See, it's interesting the parallel between that and, say, oil. So a lot of oil that's hard to get at. It's so expensive to drill for that you just, you don't bother.

19:06David McWilliams: You don't bother. And at this stage, so Bitcoin has to be of a certain price around$90 ,000.

19:12Michael Saylor: Right.

19:12David McWilliams: For it to be profitable at this stage. For new mining to be profitable. Yes. But that's only that's inside. Okay, yeah, yeah. So let's go back to the idea. That's interesting. So what we had was this notion that Bitcoin would then be used to solve massive problems within the monetary system.

19:32Michael Saylor: Like moving Michael's billion dollars.

19:34David McWilliams: Like moving Michael's billion dollars through time and space. In fact, he's just, he's actually just described there as interest rates. I'll explain that in a second. Yeah, we'll come back to that. Interest rates actually were being used by the Sumerians 5 ,000 years ago. These are not, this is not a new idea.

19:48Michael Saylor: Right.

19:48David McWilliams: And the reason the interest is because the interest is the price of money.

19:51Michael Saylor: Yeah.

19:52David McWilliams: And so if you want to borrow for 30 years to buy a house, you get a mortgage. That's moving money through time. It's not hard, right? Okay? It's not fucking rocket science, all right? If you can get a 100-year bond, and some of them have been issued, the Dutch were issuing perpetual bonds in the 17th century, which never, ever were repaid. They were money into perpetuity.

20:19Michael Saylor: You were saying this before that, if you can still claim those.

20:22David McWilliams: If you find one of the reasons. But the Dutch were issuing money into perpetuity, into the infinite future in the 17th century. This is not new shit. This is old shit, man. Okay. Everyone knows it's called... That's big thinking, isn't it? It's called the rate of interest, right? Moving money through time and space, okay? Now, let's get back. Dave. Dave, right. Okay, let's get back to the point, right? Now, there was a great promise about Bitcoin, John. And that promise was that it was going to change the world. Now, that is why Bitcoin attracted the attention of a whole host of people who were fed up with the establishment, people who thought the world was corrupt, people who would see the Epstein thing now and say, look, there, I told you so, the elite is corrupt.

21:11David McWilliams: Actually, they have a point. I mean, there is a world beyond the clouds, the Epstein world, of people who really are rich, influential, powerful in movies, banking, in celebrity, in politics, who are, in effect, a dark force. There's no doubt of that.

21:30Michael Saylor: Yeah. But I'm not sure Bitcoin is the solution to Epstein. Unless Epstein is... Satoshi. Satoshi.

21:37David McWilliams: That, oh, I love that. You see that rabbit hole opening up in front of us. jump in and away we go the david mcwinner's podcast has just gone 21st century in we go now but my point is let's come back to the economics right is that the last week or two have seen a collapse in bitcoin's price yeah but it has been going on since october but the other side of the coin is has been rising also up until october so if you're a bitcoiner you can say well look this is just volatility and i think you have to accept that right yeah yeah as a speculative asset but what we need to nail here is the notion that bitcoin is not money that's the key yeah yeah what it is is a speculative asset that has garnered the attention of many many millions of people who believe that it is a form of saving that it will be what they call digital gold even though what we know is that digital gold hasn't performed like gold at all.

22:39David McWilliams: The problem for Bitcoin is people, Bitcoin has said it is going to be a hedge against uncertainty. But what has happened is when uncertainty increases, it's an amplification of uncertainty. So when, for example, the dollar is tanking, when, for example, you have the risk of geopolitical conflict in Greenland, Iran, Venezuela, take your pick. When you have tariffs, Bitcoin's price doesn't go up, it goes down. And why is that? Because I think it's a liquidity trade. That basically it is a sign of good times, not bad times. So when times are really good and there's loads of money flushing around the place and there's zero risk, when there's what they call risk-off in markets, the price of all highly, highly risky assets goes up.

23:25Michael Saylor: Right.

23:26David McWilliams: Whether they are speculative tech equities, whether it is Bitcoin, whether it's cryptocurrency. In fact, they're the opposite of a hedge. Right? But we can come back to this. Right.

23:35Michael Saylor: But it's interesting. I was reading a lot this week about and looking at the Bitcoin bouncing up and down. And I see a lot of Bitcoin commentators saying, well, this is part of the plan. It's all working. And by 2030, it is going to be valued somewhere between half a million and a million per coin.

23:58David McWilliams: And the great thing about it is nobody knows. Well, sure. But it's a bit like Ireland going 20 points down against France and Sam Pendergrass saying it's all part of the plan. Yeah. Right? Yeah. Okay, don't worry. We have a dastardly plan for the final quarter. Game on. Game on, right? Okay. You know, in effect, when people start to look at adversity and suggest that this was all planned, you should run a mile as a general rule. But let's come back to the basic idea. So the basic idea of Bitcoin and crypto was that there is an incredibly inefficient financial market out there, which is profoundly corrupt and has been driven for and used by a tiny elite to enrich themselves.

24:50David McWilliams: And this is going to solve that problem. And that sounds great. It's almost like the proclamation of the republic. It's like Porrick Pierce outside the GPO. It's like Lenin talking about communism. It sounds great. It's a manifesto. Manifestos sound great, but the devil is in the detail. So how did or how does or how will Bitcoin and crypto change the world? The first idea, they say, is that the world is profoundly inefficient, right? The financial system. But is it? I mean, what is the difference between blockchain and just credit cards clearing?

25:30Michael Saylor: Yeah.

25:30David McWilliams: You know, when you tap a credit card, does it take five hours to clear? No, it takes about two seconds to clear.

25:36Michael Saylor: Yeah.

25:36David McWilliams: Right? When you use the dollar or the euro or any currency, can they be cleared in a minute? Absolutely. So where is the great inefficiency? I don't see it.

25:45Michael Saylor: Right. So what you're saying, again, crypto at Bitcoin,

25:49David McWilliams: and I know they're regarded amongst the schism of crypto Bitcoiners as different. They're part of the same broad family. Seems to me to be a solution that is now looking for a problem to fix.

26:02Michael Saylor: Yeah.

26:02David McWilliams: But what I'm saying is that, yes, there are inefficiencies. Yes, the global financial system could be tweaked better. But it's not some extraordinary inefficient system. Because if it was, it means we're really stupid. Like money has been working pretty well around the world.

26:19Michael Saylor: Yeah.

26:20David McWilliams: You know, if you go out, you change. But it is, though, the banks taking their little cut every time. It is the banks taking their little cut. And there's no doubt of that. In the same way, crypto exchange takes a little clip every time you actually deal crypto. Well, that's true.

26:35Michael Saylor: It's the same thing.

26:36David McWilliams: You know, there's no difference. It's just a very different brokering system, right? But the key thing is that for money, the claim that Bitcoin is money is patently not true. And this is what I want to nail here. Because as I said, you can do whatever you want. If you want to spend your money, do it. I don't care, right? But from an economics podcast, right? The key characteristic necessary for money to be useful is that money is stable, or relatively stable. So your money today has the same value as your money next month, more or less. More or less, yeah. And this means that money must be managed by a central bank.

27:19David McWilliams: That the variations in the value of money must be smoothed over by what are called open market operations by central banks. We will discuss this on Thursday, John, how central banks run the monetary system. Right? So for everyday transactions, the problem with Bitcoin, it's unusable in practical terms because the price jumps all over the place. So if you had Bitcoin three months ago, it was worth$120 ,000. That's worth$60 ,000. But the problem is if it jumps around this instability in the price, and this is the key thing, comes down to one basic, basic economic rule, which is the rule of supply and demand.

27:56David McWilliams: So what the Bitcoiners say is one of the key characteristics that makes Bitcoin fantastic is the supply is fixed.

28:05Michael Saylor: Right.

28:06David McWilliams: Whereas the supply of fiat currency is issued on a daily basis by central banks.

28:11Michael Saylor: Right.

28:11David McWilliams: So this fixed supply is one of its key characteristics.

28:14Michael Saylor: This is what makes it kind of similar to the gold standard.

28:19David McWilliams: Gold. This is what makes it similar to gold. The problem with gold, gold has an elemental value called jewelry. Yeah. Bitcoin doesn't.

28:27Michael Saylor: Yeah.

28:28David McWilliams: So gold is ornamental as well as physical. But let's be the same way. But it's fixed. So that's one of the things you hear at Bitcoin, it's fixed. Yeah. Now let's be a little bit intellectual, right? A little small bit. Not time and space and term of a little small, but right. As Bitcoin became popular, more and more people bought it over the last five years. That means the price rose too quickly. Why? Because the supply is fixed. Economics 101. If you have a fixed supply and an increase in demand, price will rise dramatically.

29:01Michael Saylor: Right. Like our houses here.

29:03David McWilliams: Exactly. Yeah. Exactly. Because we've, in effect, a fixed supply. You know, we've 30 or 40 ,000. That's the max we can do every year. Our... Maybe housing demand is 60 ,000, 70 ,000, so price rises go up. So the basic idea, that is what has happened to Bitcoin. But this, of course, militates against it being used for transactions. Why? Because when the price goes up, people hoard. Yeah. So it moves from being a currency to something you hoard, right? Now, Bitcoiners say, as the price goes up, that's evidence that it's money. It's actually the opposite. Yeah. It's evidence that it's not money. Now, why is this, right?

29:46David McWilliams: It's because why spend Bitcoin? Because the ultimate objective is money. You've got to spend it if it's going up in value against everything else.

29:53Michael Saylor: Especially when they're predicting half a million or a million. Yeah, so you've never spent it. I've got to hang on to this. So definitely it can't be money.

29:57David McWilliams: So due to the fixed supply, it can't act as this medium of exchange. And thus it ends up being hoarded for capital gain. Yeah. Rather than functioning as money, because what gives money its actual value is its usability.

30:11Michael Saylor: Yeah.

30:12David McWilliams: We've always said that money is like language. For money to actually work, it has to be like the English language has to be used by everybody. And this is the ephemeral nature of money. Because on the one hand, it has to have value. But on the other hand, it can't have sufficient value that it's hoarded. So it's a mercurial balancing act between value and currency and spending and saving, right? And the reason we save money is that it is relatively stable. But if it becomes too unstable, and as you said, it's going to half a million, then you'll never spend it.

30:46Michael Saylor: Okay, Mark, the other side of this, I know it's slightly different to Bitcoin, but maybe you can explain this. Stablecoin, what's the dealio with that then?

30:57David McWilliams: Well, stablecoin, the trick isn't the word. So at some stage, the crypto bros realized that the instability of Bitcoin and other cryptos was bad for usability. So they came up with a thing called Stablecoin. Now, what is Stablecoin? Stablecoin is a token issued by a private company tied to the value of a basket of currencies or a currency. Right?

31:26Michael Saylor: Right.

31:26David McWilliams: Now, I know you're looking at me blindly, and the reason is you should.

31:30Michael Saylor: Yes.

31:31David McWilliams: So what it is, in effect, is a derivative on another product. Okay. So it's nothing. It's horseshit. Right. Why have a stable coin tied to the dollar when you can have a dollar?

31:43Michael Saylor: Where is the innovation? But also as the dollar is depreciating. It's not that stable.

31:48David McWilliams: Usually, yeah. So in finances, things called money market funds and a money market fund is an aggregate fund. Let's say, for example, you want to save in a bit of dollars, a bit of euros, a bit of yen, a bit of Swiss franc. Because you think, remember we came back to our friend And we're talking about diversification. So you think diversification works. Okay, so you have a little bit. There's a thing called a money market fund. You can buy a money market fund, right, which is a little bit of all those things together in one unit. That's a stable coin. They've been around for years and years. This is all hype.

32:25David McWilliams: Basically, what I think crypto is, is an extremely well-financed lobby group that is trying to lobby the American regulators to inject into the American system a whole host of bullshit currencies. Why? Because they print them. And if you print these things, you're going to do well. So, of course, the Trump family, which is at the apex of what we know to be a criminal enterprise when it comes to money, right? And all the sons with their various shades of white teeth and big hair, they're all in on this thing. And what has happened, the interesting thing about crypto was supposed to be the great innovation of Donald Trump.

33:07David McWilliams: He was going to make America the Bitcoin capital of the world. In a way, crypto is related to Donald Trump. And as his star rises and falls, crypto jumps up and around because there is the bang of the Trump family off it. But that's not only, that's not only, that's just a little bit of politics. To come back to the idea, stablecoin for me, in a world of dollars, makes no sense at all. And in a world of euro dollars, which are in effect dollars created by the American banking system, not created by the Fed, it makes even less sense. Unless, of course, you realize that there is a massive movement in American finance to deregulate everything in order to enrich largely billionaires who are printing or minting these tokens called stablecoins in and of themselves.

34:07David McWilliams: There's no logical reason for these things to be in existence. And they are not an innovation in money which is pushing forward what I call the great story, as I said in the book, of financial innovation, as far as I can see. So that's the stablecoin thing.

34:23Michael Saylor: Okay, that's stablecoin. I get that. And yes, it is as confusing as Bitcoin. But does then Bitcoin and crypto have any use as a way of saving and hoarding, you know, like as an asset?

34:41David McWilliams: Okay, well, let's come back to that after a bit of this.

34:49Michael Saylor: OK, Mac, so we're talking about Bitcoin and crypto and the volatility of it all. The vibe. The vibe, the volatility. But the question is, does it have some use, like as an asset? Happy birthday, Rafa! Sopla, sopla! Bring the bag, they're 45! When you're 45, you have to touch a lot of candles and examine you against the colon cancer, because when you're in a early age, it's more treatable in 9 of every 10 people. Use the ColoGuard test in your privacy and send it back to your home to get your results. The ColoGuard test is an option with a recital to detect the colon cancer in people of 45 years or more with average risk.

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37:07David McWilliams: Yeah, well, listen, again, I'm very aware, John, that hundreds of millions of people have, particularly at the retail end, small scale, have bought into the story. The story of Bitcoin stroke crypto being an alternative to money, being pure, being slightly revolutionary. In a way, a bit of escapism from the world as crypto and Bitcoin in particular rose in price that validated the notion. I think it is more like a cult than something that we can analyze. Cults are always very difficult because when you go against the cult, they get very upset.

37:49Michael Saylor: They do.

37:50David McWilliams: Look, it's not, you know, discussing crypto is not like discussing the dollar.

37:53Michael Saylor: Yeah, yeah, yeah. Or sterling. Yeah.

37:55David McWilliams: Or the Irish punt as it was. There is a cultish nature to the attachment to. It's a very closed shop. and they've spent the last 10 years telling everybody who's slightly skeptical like me that we're stupid, that we don't understand money, we don't understand economics, we don't understand finance, all that sort of thing, which is why I think now every time crypto falls, you get a sort of a collective pylon against crypto folk, right? But what worries me is that a whole generation of particularly young men have been galvanized to hate central banks now, to hate the establishment. And there's a sort of a sweet spot between anti-establishment, both left and right, and crypto and some conspiracy theories about the world.

38:46David McWilliams: When you're living in a world of Epstein, all this seems, you know, quite logical. You think, okay, well, fair enough.

38:53Michael Saylor: Yeah, yeah, yeah.

38:53David McWilliams: But what I want to do is look at the idea, is it an asset? So again, a little bit of thinking about investment probably raises another red flag, right? An asset should have a stream of income that flows from it to pay you for your investment. So for example, a bond or an equity, unlike a bond or an equity, cryptocurrencies generate no cash flow or no income. So when you put your money into Bitcoin, it is purely speculative. So for example, there's no legal claim on anything when you invest cryptocurrency. Whereas if you buy a share in a company, right? Back to your asset thing. What you're buying, you're buying a bit of a real company and you have a legal claim on that company.

39:39David McWilliams: When you're buying a bond, you're buying essentially a claim on the assets underlying the bond, whether that be government borrowing or corporate borrowing. So you're buying into a system. So you have a legal claim. Bitcoin, you have a legal claim on absolutely nothing, right? So crypto doesn't contribute to any idea of a capital formation. So for example, if you buy a share in a company, let's say you buy a share in Ryanair, right? What you're buying, you're buying Michael O 'Leary's business acumen. You're buying into his vision of airline. You're buying into a notion of incomes. People in Ireland and Britain and Europe, they will fly.

40:19Michael Saylor: Extra-bucket space and buying.

40:21David McWilliams: But you're buying into something real, right? And what you're hoping then is the share price will rise and the dividend that he will pay you every year will rise. So your money is going into a company. It's being used to buy it in our equipment or finance expansion to a new market. And then you hope from that a word that we should reintroduce called profit. It's an old-fashioned word. So what you're hoping then is from then that those companies will make a profit. That will be a stream of income. You're buying that flame, right? And the prospect of the investment will depend on economic activity and business ability and all that sort of stuff.

40:58Trading on sentiment alone, crypto is, by contrast, the ultimate speculative punt.

41:06David McWilliams: Because there is nothing. What you're basically is... It's down to the whim there. It's a gambling contract. It's a tradable gambling contract. That's what you're buying. So it's not an asset. because an asset is something that we recognize as buying a legal claim into something real.

41:22Michael Saylor: Yeah.

41:23David McWilliams: Right? So what you're hoping in crypto is the greater fool theory that some eejit coming in behind you would pay you more for the stuff that you bought yesterday, tomorrow. It's called the greater fool theory. And the greater fool theory works brilliantly when there's lots of fools. Yeah. And the price continues to rise. And it's like a Ponzi scheme. So what drives the price at the top are the amount of new retail investors coming in at the bottom, all of whom are driven by FOMO, all of whom are driven by it's going up, number go up, as they say, right? When numbers start to go down, which happens, the plentiful buyers yesterday seem to disappear.

42:10David McWilliams: and they turn into sellers. And there are no buyers, which is why Bitcoin has gone from$120 ,000 to$57 ,000 back up to$60 ,000-odd, wherever it is now.

42:20Michael Saylor: Yeah, yeah,$67 ,000, I think.

42:21David McWilliams: Like, in conclusion, John, I'm not going to say that the end is going to be the eighth circle of hell, right? In Dante's Inferno. But what I am saying is that this stuff is a punt. It's problematic. It doesn't stand up to any intellectual or financial analysis. and if you're involved in this world, just realise you are in a speculative game. And if there's lots of other people in the game, there's always the madness of crowds. You could end with Isaac Newton. Good place. Start with Dante, end with Isaac Newton, did a bit of Archimedes. Absolutely. This is like a science podcast. What's not to love?

43:03David McWilliams: What's not to love? Isaac Newton, maybe the cleverest man of his generation. Apples, gravity, all that Newtonian physics, all that sort of stuff. He said, after he'd lost his shirt twice on speculative mania in the South Sea bubble, he said, I can understand the movements of the planets, but I cannot comprehend the madness of crowds. And that's where we'll end.

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