Rahim Taghizadegan: Money Is a Spontaneous Order Measuring the Cooperation of People


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Rahim Taghizadegan is an economist, book author and principal of the Scholarium, an independent learning enterprise based in Vienna, Austria. He studied physics, sociology and economy and is an expert on the Austrian School of Economics. His recent book is called “The Zero Interest Trap”.

We discuss:

  • Differences in tackling COVID-19 in Singapore and Austria
  • How to be prepared for crisis
  • Loss of trust in politics
  • Privacy aspects of health data usage
  • Social unrest and wealth inequality
  • The Worgl experiment and regional cryptocurrencies
  • Demurrage and velocity of money
  • The correlation of Bitcoin to other financial assets
  • Universal Basic Income
  • Socio-economic consequences of the current crises

“According to the view of the Austrian School of Economics, money is a spontaneous order, which is really linked in bottom up cooperation of people. The only thing for sure is that today’s kind of rigged game with complex interventions doesn’t make sense as a kind of spontaneous order it doesn’t make sense that it really be measure for cooperation, voluntary cooperation between people.” – Rahim Taghizadegan

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Recording Date: June 23, 2020
Location: Scholarium, Vienna

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    Anita Posch [00:04:42] Today I have here with me Rahim Taghizadegan he's an Austrian economist, book author and principal of the Scholarium a learning enterprise based in Vienna in Austria. He studied physics, sociology, and economy, and is an expert on the Austrian school of economics. His recent book is called the "Zero interest trap".
    Hi Rahim.

    Rahim Taghizadegan [00:05:06] Hi, thanks again for having me.

    Anita Posch [00:05:08] Yeah. It's the second time that I'm a guest in the Scholarium offices in Vienna. The first interview we did together was in November 2018. And I'm tempted to say that back then we didn't think that we would come together again after 10 or 12 weeks of lockdown that has been lifted in Austria recently. Or did you expect something like that to happen?

    Rahim Taghizadegan [00:05:33] Yeah, strangely enough. Yes, I, I did, because right at the breakout of the pandemic I was in Asia and actually in Singapore. So I was quite worried early on because there's a, I mean, a real modern risk in having this kind of pandemic dynamics going on. And it was taken very seriously in Singapore.
    And, I thought there were reasons to take that seriously. And then I realized that I was a bit surprised how little attention was paid by media and politics. So then I thought if in the beginning you tend to ignore something. I think later on you'll react by panic. So I think there was then a kind of overreaction since then.
    So I am a little bit expected it and I did more than my usual amount of survivalism and try to prepare as best as possible. And that was a good call. Yeah, just, no, I'm not, I'm not a survivalist on my own. No, not a prepper in that sense. I mean, of course more prepping than most people, but that's easy to do. But I don't think it makes sense to fallback from a modern society to kind of shack in the woods lifestyle. So I'm not prepping for that.
    And I think, having liquidity is one of the best preparations you can have. And, but prepping in a sense to be prepared for potential outcomes and dependencies you have as a modern being and not going to the supermarket and everyone else going to the supermarket and things like that.

    Anita Posch [00:07:18] And how did the authorities in Singapore react to the virus?

    Rahim Taghizadegan [00:07:23] I was positively surprised. Yeah. I have to say I'm not a big fan of politics in general. And of course, Singapore, is a bit paternalistic in the sense that I don't really like that much. But I thought I was surprised by observing politicians how they argued how they really tried to explain what they were doing.
    And that was a big contrast to what I'm used to in Austria and Europe, in the West in general. So it seemed like the, you could take them serious. I mean, with all the uncertainty you have, I thought that it seemed like intelligent people, really giving convincing arguments and being very transparent and open about the uncertainties as well.
    So it was a quite positive impression I got from Singaporean politicians.
    Tracing very early testing, very early and not much of a lockdown. So it was maybe surprising. So using technology as the lever to keep track of what's going on, and then selectively protecting facilities.
    And in general, of course they are much better prepared. Because there are some modern, they have so much technology. The health sector you can't really compare. So all the processes are much better, if I go in Austria to a hospital, which has already a high standard, of course, you have always spending a lot of time in closed rooms with lots of people and not being sure when will your turn be and things like that. So it's really not efficient processes, but there, they have efficient processes. So they had early on of course screening when you're entering gatherings on lots of people indoors, you have those screenings.
    And of course in Asia in general, you wear masks if you're very close to other people, which you tend to be more frequently than in Europe but generally that was observed. And it was a lot of like just people observing it voluntarily and not much imposition. So I didn't feel any force of being forced to do something.
    Of course there were inconveniences then later on, but it seemed more reasonable.

    Anita Posch [00:09:29] So people there are much more used to

    Rahim Taghizadegan [00:09:31] wear masks.

    Anita Posch [00:09:34] And what about privacy intrusions? Like if you have everything, digital, your whole life and also the tracking of the tracing, how is this handled there?

    Rahim Taghizadegan [00:09:45] Well, I think it's a trade off and most of us would like to have the convenience of this kind of big data life, but are not willing to bear the full cost. So I think there's a bit of hypocrisy in the West, because I mean, there's always a difference. Is it likely that your data will be abused and there.
    I am not that distrustful of private companies, where I have the choice to offer my data as a convenience. And of course it makes life more convenient and in Singapore this lifestyle is developed even more that it's just using an app. You can do lots of things, almost everything, and it's much more integrated and much more convenient to use than in Vienna, where we are only getting started with Uber and a lot of obstacles, there are legal obstacles and so on, but this smartphone-based database kind of life is I think what most people voluntarily choose. So I think it's hypocritical if you choose to share all the data, the heavier half, then just think you somehow need to be protected.
    So I'm not at all a fan of regulation about data or the way Legislation thought they could somehow handle the problem because they are the major problems or the real data leaks. I'm worried about usually is of governments using data because they don't have an interest to serve you better. They have an interest to classify you and that's where it gets dangerous.
    But in Singapore, I didn't have the impression that, of course there's surveillance going on, but, I felt free. I have to say it didn't feel like authoritarian society, where every step is traced in order to control you. But you are traced in order to serve you better to have convenience. And it doesn't seem impossible to just opt out of that to a certain extent, of course.

    Anita Posch [00:11:37] So the basic is that we, as people should be able to choose who we show, which data

    Rahim Taghizadegan [00:11:44] Yes. But of course data will be important part of modern life.

    Anita Posch [00:11:48] Hmm. Okay. So. You think that here in Europe, maybe we panicked a little bit or the authorities, politicians panicked.

    Rahim Taghizadegan [00:11:56] No, not only the authorities. I think in general politicians in particular, democratic politicians are just following trends. They are not really trendsetters. So I think there's a panicking going on in society and in the media. So then politics doesn't seem to have much of a choice.
    And we see that almost everywhere. Very similar policies were adopted a bit of a difference in a few weeks early, or if two weeks late and then in the details. But generally there was a panicking going on, then people realized, Oh my God, we are so unprepared, so you have a lot of private shutting down of processes, changing processes, fear breaking out.
    And then I think some people in the media and in science, when they realize people tend to ignore a risk that may be a real, they overplayed it a bit. So I think lethality rates fairly early on it was obvious that they are much lower than the high estimates that were conveyed by the media and even some scientists in particular, those in epidemiology or modeling and so on.
    And I think that's a generally a very bad sign that a lot of people in media and in science, they think they have to somehow educate the population. And it's a kind of over, over reaching, because they turned out to be wrong on almost every epidemiological model. And I've been following them closely, it was wrong and some incredibly wrong, so I did not like this.
    And it was a kind of overreaction then to really overplay the kind of lethality rates and so on and used that to make people afraid so that you then go for some kind of resistance, you potentially have.

    Anita Posch [00:13:45] But letting it loosely run like the US or Brasil for instance, I mean, that's the other side of the spectrum.

    Rahim Taghizadegan [00:13:54] Yeah, but, usually it's the wrong choice to go on black or white on the spectrum of course so I think it's something to be taken serious and of course there's some contrarians who think it's all a hoax, I don't buy that. I think it's a very, it's not even a black swan for me, it's like kind of evident modern risk, with this kind of pandemics.
    And we never know for sure in the beginning, what lethality will be like what the infection dynamics will be like. So I, I think in a certain sense it's good to play safe. So I played safe, myself and, it made a lot of sense to try to protect, and we knew early on who to protect, so you protect the elderly, you protect those with a bad immune system.
    And, I didn't think that, this contrarian approach of just going for herd immunity and just protecting the elderly in the sense of locking them down, made a lot of sense. So I see how that also means that you take precautions, even if you're young and you've a good immune system. You try to bring down this infection dynamics.
    So I think that made sense, in particularly in the beginning when there's lots of uncertainty, but I think that's how most people reacted. I think most people due to this uncertainty and then realizing, okay, that it's really something. Going on voluntarily, they changed the behavior and it's really, it's not much of a big difference.
    I think it's differences over estimated for example, Sweden and Austria. I think that the difference is not that huge because most Swedes, voluntarily changed the behavior as most Austrians changed their behavior and that we know for now was the biggest impact, because there's not so much difference I mean No, there's a difference, but the difference is not as huge as expected in the outcome and the lethality rates.
    Which of course right now we don't know for sure. It's still, there may be a second wave and so on. but generally I think there were some bad decisions made by politicians, but I wouldn't put too much blame because as I said, I think they are following suit of societal trends. But I would put some blame on media, augmented scientists.
    So I think, they overplayed their hand and that is bad because it will destroy trust even more. And we really have a big trust issue in society. So now more and more people in particular in Austria and Germany, I'd say where it seems like we have the dynamic under control. Everything seems fine.
    People are not afraid anymore. Life has gone back to normal, more or less. I think more and more people come to look at it as a kind of hoax played on them or hypocracy and that's really bad because that affects trust within society. So it's, yeah, it's better not to overplay your hand to be open about the uncertainties and then really put the focus on trying to understand what's going on and what's happening.
    And I I've got the impression that the politicians did not do that. Because they just kept with the same measures going without really having a deep interest in conveying what we know and how to put the focus on. I think most data that was published in the media was absolutely useless because we know by now these R figures and so on those are useless abstractions, it's really about concrete dynamics of infection happening.
    And that makes a big difference if it's among, what's the, the median age of the population that's infected firsts and where, and how they are infected that is the main difference and then is much more important than measures taken much more important than what political regime you have at hand and so on.

    Anita Posch [00:17:30] Yeah. And in the end, politicians lose their trust again, which was left, you know, because when they say, in the first phase, no masks, then masks, now it's masks in the public transport, but not in a restaurant. I mean, I don't understand that, you know, I mean, this doesn't make sense.
    This is a bitcoin podcast so let's circle back a little bit or move ahead to the economical effect the crisis has, I was talking with Tuur Demeester a few weeks ago, and he thinks that the Corona crisis is a great excuse for government and economists to blame everything on the pandemic and that everything would have happened anyways. Maybe not so fast. What's your opinion on that?

    Rahim Taghizadegan [00:18:14] Oh, I totally agree but that is no surprise, I agree to most things that Tuur is saying.

    Anita Posch [00:18:20] Okay so I can also remember, or I reread it in our last interview you said, that the bubble is so big that it has to pop anytime, but we don't know when. Has this now, gone faster, I mean, was this, the big bubble that popped?

    Rahim Taghizadegan [00:18:38] Well, the bubble is still there and getting bigger. The question is, what's the trigger.
    And that's what people are interested in, but I'm not that interested in because then you can really predict, you always need a trigger usually to pop something because, and the trigger is just uncertainty arising, unexpected things happening. That's when you have drastic re-evaluations on markets, it's when suddenly some expectations change. And that's what most people look at, but it's really hard to predict what's the precise trigger. So it's much better to look at the systemic state an economy is in and there we have already seen in 2019, there were, I think, three successive lowerings of interest rates within the Euro sphere.
    And that is of course a sign that there was a correction potentially looming and central banks did everything as it has become the new normal to avoid any kind of uncertainty arising about the intervention of central banks. So that's what they try to do. So now "everything it takes" is the big mantra and that of course, I think obviously creates an economic structure that's not sustainable and can't be sustainable in the long run. Then it's the question, what triggers it? What triggers this downfall, increase in uncertainty and I think, yeah, obviously if it wasn't triggered by this pandemic, something else would have triggered it later on. Even this oil price thing was not really directly related to the pandemic, it could have been another demand shock, then amplified by geopolitical considerations and so on. So there will always be in a complex word, something that triggers a reassessment of the future. and then if central banks are not fast enough or are limited in their way, there's a kind of gap, where you have this potential fear for crash going on and potentially even the deflationary crash happening until inflation takes up again the lead.

    Anita Posch [00:20:39] So they're still pumping money into the system. On the one side, creating it, like writing it in a ledger and the other side with a new benefits and such but who's profiting from that in the end until now I mean, as I see it, it's the wealthy, the money goes where the money is.

    Rahim Taghizadegan [00:20:58] Sure, the holders of financial assets.

    Anita Posch [00:21:00] Yeah. So the riots in the U S with black lives matter, I mean, that they come now is a sign also of this gap in between the society. Would you say so, or.

    Rahim Taghizadegan [00:21:14] Yeah, it's a symptom. I think of course those tensions in society and a lot of people having, I mean they experienced this kind of economic dynamic where there's more tension for them. It seems more and more difficult for people to live the American dream, to take that example, but yeah, not much different than in Europe. For Europe it's like the, the bourgeois lifestyle of a European sometime it's quite similar, I think. Yeah. Having a car, having your apartment or house in the suburbs. And so it seems further and further out of reach if you're not already a holder of those kinds of assets or you inherited them and so on. And obviously that creates tension, but then this kind of mob violence breaking out that's just something looking for a trigger and the trigger is quite arbitrary I'd say it's, it's repeating what had happened many times in the past. I think the last time was 2011 with Trevor Martin and the George Zimmerman case. And then before in 1994 in LA the big riots, Rodney King, and it's really repeating a same script book.
    So it's a kind of convergence within parts of society, to perceive something as a trigger and then you'll always have people either being willing to use the kind of mob violence and hide behind it because they just have very I would say high time preference and just making use of the chance to be part of a mob and then you have some ideological instigators as well. So I don't take it serious as a sign of that it's really about racism and it's a way to cope with or discuss, or have a debate about racism. I don't buy that to be honest. No even, I mean, even those around it, to try to use that, to make a case, I don't buy it.
    It becomes more and more ridiculous because it's not the first time it happens. So it's like, it's a rerun script, but it gets weirder and weirder every time, that's why I'm skeptical. I'm not buying it.

    Anita Posch [00:23:22] I don't understand now what you're not buying. I mean, the thing that the police is mis behave, not misbehaving. How do you say that? In English?
    Yeah. There's a
    Abusing. Yeah.

    Rahim Taghizadegan [00:23:35] but that's not, no, I, I don't think it's a discussion about police violence. I don't see that case, because then you would really look at the data and the problems. And I think there generally is a problem with violence with police, and the main problem is there are too many interactions between regular citizens and the police because the police is used to police traffic and so on. But in the U S you have to bear in mind that the risk for the police is much higher than in Europe. So it's quite easy to judge. And I think that that's very misleading to think that like, U S police forces are inherently more violent, no they have for very bad reasons, too many interactions with the population.
    And the risk is higher. Of course, people are armed in the U S to a higher degree so the, and if you look in the data, it's much more risky to be a policeman, in the U S and we'll really have to look if it's really about like different levels of violence for different populations, you would really have to look at the data.
    And if you do look at that, it's a paradoxical in a certain sense, or I don't think it's really about it because there's very little interest in really like looking at the root cause it's very easy to talk about a racism, which I don't buy if race is really the issue. I mean, apparently it's about the color of your skin, which doesn't make too much sense that's I would call lookism and sure there is lookism, that's an intuition which is a very hard to fight against and it's bad for interactions. I think generally it's not a good idea to judge another person by his or her looks, but and I think the U S is not among the most racist places on the planet.
    I think it's one of the least, the least lookist places in the sense that you are less jugded by what do you look like? Because it historically was an open society. So if you compare it to Europe and then compare it to other places around the world, if you've really traveled, and if you really been trying to understand how people live and how they perceive you you'll be shocked how much lookism there is and how in Asia people talk about non-Asians behind their backs, and how it's really about looks and about our long noses and so on. And that is shocking in a sense, but I mean, you're only shocked if you're really don't know that much about people and the diversity of people. I think it's a general intuition, so it's not something that has to be explained. What's more interesting is how that can be reduced. And it's interesting, you know, it's not that there is obviously there, it's something that's easy to fall for, and so on. So I think the whole thing is not about it. It's, it's triggered and it's a kind of media attention thing and the ideological thing being triggered where people really wait for something like that and they're looking for it. And then of course the other side as well and it's a lot of party politics playing into it, a lot of ideology playing into it and so on.
    So that's why I don't take it serious as a really kind of, paying attention to issues that are there. And if you're paying attention to issues, then I think, yeah, you would look more into monetary policy. So I agree and come back to your point, then you try to find out, okay, why are tensions increasing?
    Why are things like seem in some parts of our society not getting better as almost everything else is getting better? Why not that kind of like classes and problems and challenges. And then I think the best explanation we have is that these torsions are by monetary policy.

    Anita Posch [00:27:21] Which is not stopping. I mean, they are doing it over and over again. And do you think that a thing like universal basic income has to come now because like give the poor people also something, because up until now, since 2008 only the financial system, the banks, the stockmarket et cetera was funded in a way. What will be next? I mean, this can't go on forever.

    Rahim Taghizadegan [00:27:48] Yeah, I think, I mean, as a rationalization to continue that kind of monetary policy, for sure you need to get a buy in of more people.
    And generally, politics is based on the illusion that everyone thinks he is kind of benefiting more from the whole system than everyone else. That was Bastillas (?) big insight. So I don't even, I mean, basic income, if you look at it, I think it will be a ploy, as helicopter money is in the U S and it's basically a kind of universal, basic income already happening.
    So you give some money for which the relations don't hold anymore because become absurds of those trillions and trillions. So it gives some money to everyone, to keep them happy, but it doesn't make a big difference because of course it's not about the money being distributed it's about, purchasing power productivity and so on, and that cannot be controlled by politics. Politics cannot create wealth like that. It can try to re-distribute in a way and keep the median voter happy with this illusion that on net he is benefiting from it. But, yeah, I that again, I don't take too serious those kind of ideas to just by distributing money. Once you have really, I mean, we have lost the relation between the taxation on the one side and government spending.
    So it's really just, you produce fancy numbers and you hand them out to the population and it may seem more fair if you hand it out to everyone, but then of course, it's always the question in markets, how, and who is anticipating that and who is anticipating what happens after that? And the more you have new schemes for a kind of money distribution, the more complicated it gets.
    So my prediction is with universal, universal, basic income, like all central banks and political regimes go for that you will have a reverse regression in distribution. So I think the holders of financial assets and of those, the minority who are really good at anticipating central bank policy will be even better off than they are today.
    So that's the kind of paradoxon of those monetary interventions it's always those are benefiting that are best at anticipating. And then of course, having the assets ready that make them able to benefit and then, in a sense, really benefit from the knowledge and the capacity to anticipate this kind of central bank policy.

    Anita Posch [00:30:28] What does the Austrian School of Econonmics say here, is there a way we could do it better? Is there a better money, for a new kind of financial system that could be more fair to everybody.

    Rahim Taghizadegan [00:30:43] According to the view of the Austrian School of Economics, money is a spontaneous order, which is really linked in bottom up cooperation of people.
    And so that's like not a clear cut answer because every kind of spontaneous order is a process, which you can't really anticipate in the beginning how it ends up as a kind of convergence, but the important thing is the link to real cooperation between real people. And then of course it's complex in a modern society so I think it'll be quiet hard to figure out what could enhance cooperation between people in that kind cause it depends a lot on what kind of people and what circumstances you would want to cooperate. But the only thing for sure is that kind of rigged game with complex interventions doesn't make sense as a kind of spontaneous order it doesn't make sense that it really be measure for cooperation, voluntary cooperation between people.
    So the more and more you continue playing that game the less and less what's the dominant form of money will be a functional and useful form of money for most of the population. So an ever smaller minority will take advantage of this distorted field, so in a sense we need to experiment with new forms of money and other cooperation enabling technologies.

    Anita Posch [00:32:06] Bitcoin is one of these new forms of money that could be an experiment or maybe even a working experiment.

    Rahim Taghizadegan [00:32:13] For sure. I mean, it's not even a prognosis, that's just describing what's going on. So yeah, of course.

    Anita Posch [00:32:20] In our last interview you said something about that, cryptocurrencies, or Bitcoin is interesting if it can be a counter-cyclical asset that's not correlated with classical financial assets. What has happened in the meantime?

    Rahim Taghizadegan [00:32:36] Oh, the correlation has gone up now and it has been going up, so that would look like a bad sign, but, no,

    Anita Posch [00:32:44] It's not a bad sign.

    Rahim Taghizadegan [00:32:45] It is really complicated. Now once this kind of central bank policy where it's really no matter what we do, we do what we do and we have no limits anymore then of course, what does correlation mean?
    It means if money is produced like that prices of assets rise. So would it be a good sign that within these circumstances, your asset is not rising in prices in Euro or Dollar, if Euros and Dollars are produced like crazy, then of course, I mean, you can't help, but be correlated. And it's the whole problem.
    That's of course, why more and more assets are correlated. And for the investor, of course you want to be first in an still uncorrelated assets. You want to be early in the more correlated it means the more the rising prices have already bought in, the acceptance of more and more investors that it may be an asset that helps you to preserve some purchasing power.
    So I'm ambiguous. I think it's a good sign of more mainstream adoption, the increasing correlation. Yeah. In the long run, it may be a bad sign. We don't know, because a correlated asset also means it's some high-risk speculative asset for more and more people, then the only reason they go in is because they expect prices to rise.
    And that's not a very interesting case of investment I'd say, and then you have the cyclical features, and that of course is always frustrating. Yeah. I mean, a kind of cyclical is normal, stability would be unnatural, but those kinds of extorted, distorted cycles that what you want to get away from in particular, if it's about investing in the long term, Yeah, this kind of volatility, which we have accepted be normal on the market is just crazy for most people.
    And if it's crazy for most people, it means they are shut out of financial markets. And we see that, I mean, in Austria there is a minority that goes for a stock exchange, even though it's the most conservative asset out there that still helps you prevent the loss of purchasing power. So most people go for all the bad way of keeping the money in the bank account, which of course means they are losing purchasing power and an amount that they are not aware of and that's really bad. Yeah. And I'm really feeling bad for those people. So that's a general problem and of course in a world like that it's very hard to have just good news. It's all complex and we don't know and people are different so yes, even though, correlation it's going up, I would not see it as necessarily bad sign because I think within these circumstances, it's very unlikely not to be correlated.
    And then it may just mean that you're fighting the Fed. Which doesn't make too much sense that, I mean, if you're really fighting it in in terms of off speculating that they'll stop producing that kind of FIAT currencies, it's not that likely, so I I'd be wary, so it's really hard to misunderstand the issue of correlation So for a long time, I've said, and it was last time as well, yes, you, as an investor, you're looking for uncorrelated assets, but if they correlate it doesn't mean you drop them. Now that's another question then again, and correlation may just be a sign of mainstream adoption and that of course is good for you.
    If you're already an investor, if you're not an investor yet. Take precaution in the sense that you have to ask yourself, am I only buying it because prices rise and I'm looking for another correlated assets or do I see really a future use case that may be even contrarian in a sense that if I think that this kind of monetary policy is unsustainable in the long run, what will come then and may Bitcoin somehow be part of an alternative. So that's another, I think the more sophisticated investment case for Bitcoin and, but, yeah, that you have to bear in mind. Why am I investing in it other than just holding onto it?

    Anita Posch [00:36:55] What do you think of other cryptocurrencies? I mean, there are about 3.000 of them.

    Rahim Taghizadegan [00:37:03] I love experiments. I think it's great that we have thousands and thousands of them. I think that's important. I think usually, you need to be realistic that for something new to emerge, there are thousands of experiments and almost all of them fail in the end. So I think obviously there is little value in most projects.
    But the value is in having this kind of experimental landscape, is that you just, you don't argue forever about something it's fairly easy in the crypto space to just fork or do your own thing, do your own project. And I think that's great. I think it's a sign of innovation, innovative cycles. It doesn't mean that I'm a, that I see a lot of value but I think it's very important part of it to have those frustrations as well, to realize while we've got an infrastructure, but it's not really used for useful things. Why is that the case? And then you learn more about it, the whole sphere of the digital app, smart contracts and so on.
    It's frustrating in a sense that it looks like such a promising infrastructure technology and there's so little practical use really out there. So that's, you learn and I think that's great. And I think it's really great that those projects are out there and people are pursuing them, even though it doesn't always seem to be the best investment case.
    So you also lose nominal value a lot of times, you have a lot of volatility. But in the sense, if you're interested in the technology, you don't care too much about that.

    Anita Posch [00:38:33] Now you said the word experiment, there was the Worgl experiment in the 1930s, in Austria, in the Tyrol where the community tried to boost the local economy, through stamp scrip, local money. And, it worked. I mean, in this one year up until it was forbidden, of course, by the Austrian national bank or by the Austrian government it worked very well. What do you think of regional cryptocurrencies? Can they work and why would I need them when there is Bitcoin?

    Rahim Taghizadegan [00:39:08] Yeah, this a good question now first I need to go back to Worgl I think it's great that this community tried this experiment. I think it has not been correctly assessed. I think it worked in a certain sense. It increased a local identity at a time in history where that was really important where there was a lot of uncertainty and people learned that their neighbors are not that bad. And that there is still the case for corporation even if you have that kind of uncertainty going on. So it was a kind of ledger even, where you trade with your neighbors basically and that I think is a good thing, but it cannot replace a modern order of economics. So it's by no, absolutely impossible I think that you have anything approaching modern wealth and most people are not aware how much they depend on this kind of extended order they are really part of. So what happened in Worgl was not the kind of miracle. It was a bit of a miracle in lifting the mood. That was a, maybe a miracle, but it's not really a miracle.
    It's like people realizing, Hey, we can do something about our situation. Let's hang in together. And that was really, I think, a major impact of the thing. It was a great impact on it. Yeah. People traveled to Worgl and it was really great for the population that there was international interest for what they were doing and really lifted the spirits. And maybe that's the most important thing to lift the spirits, but on the economic side, if you look at, what really happened and what they built, it was misallocation of capital. Yeah, of course. I mean, what they did is they renovated the mayor's office and they built a skiing slope, for jumping. Yeah. At a time when no tourism was coming. So it was really misallocation. It was like, it was no value creation out of that and you could also see, I am pretty confident, that if the central bank would not have been as stupid as it was as always to forbid, it, it will have failed by its own on its own, just for a reason that, that, that the speed increased so much, that people try to pass it on as soon as possible.
    And the main reason it got working is because they use tax credits. So it's kind of people owe taxes to the administration, but they don't have the liquidity. So you use this kind of debt titles in taxes to be paid and make them liquid. So that's the major economic innovation maybe there, but it's not really economic of course, because taxes is not that large of a part of value creation.
    But there was some things that people were supposed to pay those taxes. And so they could pass on this tax debt within each other. And if you make that transferable yeah there is some case to be made that that makes sense, but not the whole ...... idea. You don't need that. You don't need the stamp scrip part of it.
    You don't need that. That was, I think it's an economic illusion or error happening there that you really need to make people pass it on faster than they would.

    Anita Posch [00:42:11] So the velocity of money thing was a misconception, because that was also one question I would have had, like it's called demurrage

    Rahim Taghizadegan [00:42:21] Oh,

    Anita Posch [00:42:22] loss, the depreciation of money.

    Rahim Taghizadegan [00:42:25] the term.

    Anita Posch [00:42:25] and I, I always thought to myself, maybe Bitcoin would need that so that people also spend it and that there will be a circle economy in the Bitcoin space.
    And not only everybody using it as a store of value.

    Rahim Taghizadegan [00:42:39] Now every story that goes the way people should, and one should is usually a sign that it's not really, I mean, offering people real choices for what they want do. So it's always better to understand why are they holding onto it? What's the reason for that? Are they really stupid? Okay. Then I try to educate them first, but let's assume that I know everything about those people.
    They may have very legitimate reason. That's your hold onto something for a longer time than you think is efficient or make sense. And so on.

    Anita Posch [00:43:12] You're so right. I would also like to touch a book I'm reading at the moment it's called sacred economics, by Charles Eisenstein. And of course, you know, it, I should have known that, you know it and I mean would you also say that one of the reasons for this crisis at the moment the financial problems we have that this is also a reason why, as I understand it, he says, that the growth is just limited earth has run out of resources and, the system we have which, creates money out of debt. So you have to work more and more and more produce more and more and more and commodify, basically everything. And that we've run into an end now. And so we need a new kind of money or a new kind of financial system.

    Rahim Taghizadegan [00:44:03] I think it's wrong. But it's partly right. It's in the sense right that growth does not match the voluntary preferences of the population. So in a certain sense, you have too much growth. I don't think it's real qualitative growth that I would take serious as an Austrian economist because we have a totally different perception of wealth and growth.
    And so on it's much more subjective is much more personal and not so much about building stuff that no one really uses or cares about. so in that sense, yes, there's this kind of growth dynamic, which over extends the capacity to really support it in ecological sense. Yes, there some case to be made, but more profoundly because the preferences of the population are not aligned with that, because I mean, you see ecology is also a phenomenon of wealth that you really care about your natural surroundings. It's not something universal. So then of course you observe that in usually wealthy western countries that people really start caring about this kind of surroundings and want to make the trade off in a different way. And if they can't do that, they feel a kind of tension like the are forced by the dynamic of economics, but I don't think the problem in the West is too much dynamics in, it's a kind of wrong growth in wrong aspects. And you see that all around, like surrounding seeming to become more ugly. Uglier. And, and, so in a that, if you contrast that to the nature and the bounty and plenty of nature's kind of homogenization of your surroundings, if you're really long for that, because you're missing it.
    I don't think it's an ecological issue. Not for you. Then you really want to have more roads and more buildings because you need them and you don't want to live in the woods as your ancestors. But I think obviously the growth is not in accordance with our preferences and that's the main reason other than that, I think the real resources are unlimited, because it's not about, and it's, again, it's the view of Austrian economics it's not really about the material things too much. Economics is more a spiritual endeavor. And, once you have some basic needs matched it's not obviously always more of the same that makes you happy and even certain way it's sometimes to simplify that makes you happier and better off and so on.
    So this kind of subjective personal thing, which is much more complicated than just increasing your stuff, because in particularly if you see the trade offs of all that stuff, if you don't see the trade offs, of course, better to have more, than less. But if you really have the trade offs there, then, I think you wouldn't see that, So in a sense it's true, but it's the monetary policy and order we have, that's the basis of a wrong kind of growth a quantitative growth, which is not in accordance with the preferences of most people on the planet already because we not only have the distortion in the West, we have, I think, even worse distortions in China and going, growing out from there in large parts of Asia.
    And it's the same kind of logic. I think even a little bit more extreme already, this kind of debt finance growth, which is not in accordance with the preference of population, there's really redistribution going on and making people worse off and taking advantage of them. Not really understanding and being incapable of fleeing.
    You're kind of interventions and preparing for those interventions, that's really what's happening. so I don't think it's about the limitation of the planet because it's not necessarily by growing. It doesn't mean that you consume everything. growing means you make better and better use of nature.
    And that, of course there is no limit. I think there's always room for improvement and that's fundamentally human to go for that potential and increase it.

    Anita Posch [00:48:06] Hmm. So you're pessimistic and optimistic at the same time.

    Rahim Taghizadegan [00:48:10] Yes. Yes. Usually those are my kind of answers.

    Anita Posch [00:48:15] Okay.

    Rahim Taghizadegan [00:48:16] But more importantly, optimistic, what's more important, the long term focus and belief and kind of human potential for betterment.
    yes. But very realistic and down to earth about current structures, processes, even about human nature itself. I think then it's not optimism. It's a kind of being naive about the world and human beings. And I dislike to call that optimism.

    Anita Posch [00:48:41] What wilI be the socio-economic consequences in the mid term and in the long run from this crisis now from this coronavirus pandemic, what do you think.

    Rahim Taghizadegan [00:48:52] It's speeding up trends, good trends and bad trends. I am believer in the potential of technology. So I like some way how it has sped up things. Kind of being aware of the integration and this planet. And then of course, digitalization, automatization, really making better use because you have to, of technologies and processes and some kind of efficiencies that maybe were wrong.
    So you try to exchange that and try to be more resilient in a sense that has to be sped up. so are there things I like about speeding up and then of course, bad trends that are sped up most importantly polarization within society problems of trust and certain political trends as well.
    yeah, which are maybe not the best for Europe in general, but then I think it's usually better to have something that's inevitable and bad to come as soon as possible and quicker than just like pushing it always in the future. And we have this spiraling of course of monetary policy, which is becoming more and more absurd by the minute.
    And that's not such a bad thing. So I think sometimes it's better to accelerate something because you could have like Japanese way of decades, of just nothing really fundamentally changes. so I, I liked, but of course that that's a question. If you're fairly young dynamic, optimistic in the long run, then you would rather say yeah get over with it and let's go do something more constructive.

    Anita Posch [00:50:33] What would you recommend to people to do now? What's the best way to tackle this situation now and for the future.

    Rahim Taghizadegan [00:50:43] Yeah, I think one of the worst reaction is now that you're somehow you reduce the dynamics even more. In Austria for example, most people took it as a kind of Corona holidays. Which was okay everything stops so I got to stop and that's the worst way to react. You should really, you need to increase your speed a little bit.
    If you realize that you've been surprised by events that just, you need to ask yourself, okay, why am I surprised what's going on? Why didn't I learn? Why wasn't there enough innovation? Why do we depend so much on crucial insights coming from outside? I mean, Austria with the history, and then of course being such a wealthy place with so many scientists being funded on fairly high level, it's distorting how little really profound impact and insight there was.
    So if you look at paper cited, which I think is not a good metric, But it's in place of another metric and so on, you see that it's not really the part where it happens anymore. And so people are really in a way spoiled in that they don't really have to be innovative and productive anymore. And that's the worst reaction.
    So the better reaction of course, is to see that as an invitation to learn, to see it as a challenge and say, wow, okay that was something different about the world than I expected. What does it mean? What's true about it. What's wrong about it and yeah. Try to learn, try to innovate, be pushed a little bit.
    And then of course, on an individual level, once you start asking the question, what should I do? I think it's yeah, it's fairly late that you're asking that question. Or should I think about money? Should I think about investment? Should I think about my retirement? Most people don't.
    So if you now start asking, I would say while it's fairly late, of course always when there's a correction in the markets, people are really interested in getting advice and what to do now and then usually I say, yeah, it's too late, but it's good. Better earlier than later, it's good that you're asking.
    I can't save you. You've already potentially, if you have stocks, you're a minority, you potentially sold them when you really had were afraid. So now you lost me for your 30% of your nominal value of your investment. And if you don't have stocks, you don't seem to care about them. Let's look at how you really we will provide for your old age. And that of course depends if you're part of the boomer generation, which will go to retirement within the next 10, 15 years. And there'll be a shock then. And the earlier you start thinking about those demographic changes, dynamics, economic dynamics, geopolitical dynamics and so on, which means you take an active interest in the world.
    You don't just assume that everything will stay the same. And it's great that it stays the same because it's the peak of everything. And, that's a bad sign. So getting to life again, that I think would be a good invitation of the epidemic like that.

    Anita Posch [00:53:45] Yeah. So if you're young and listening to this podcast, do what Rahim says , if you are old, do it, too.
    yes. Oh,

    Rahim Taghizadegan [00:53:52] you're never too old. I mean, that's one of the great things about technological process, that really until very late in your life, you can be active and productive and change something. I mean, here at the Scholarium our mix of students is very odd because we have very young and very old people and it is really not the feeling that they have less to inquire about and contribute to the world. No it's the opposite usually.

    Anita Posch [00:54:21] I know you have written a lot of books is a new one coming? Which one the next one.

    Rahim Taghizadegan [00:54:30] It'll be

    Anita Posch [00:54:31] in

    Rahim Taghizadegan [00:54:31] German again, I mean, almost every book starts in German. Then if there's interest, maybe it'll be translated and, it was, it'll be called "Europe in intensive care" or Europe at the intensive care unit, someone like that.
    So it really, really treat, how, what it means for the future of Europe. What we can learn from what's happening in 2020, how people have reacted, how they should have reacted and try, I'll try to end with a positive note and see, I mean, what's out still in there for the West and, yeah. And what we can learn.

    Anita Posch [00:55:06] I will look into it. Thank you very much Rahim, where can people find and follow your work?

    Rahim Taghizadegan [00:55:12] Scholarium.at the website.
    Yes. Yes. I have a Twitter handle @scholarium_at.

    Anita Posch [00:55:21] Okay. So that's the best place to get in contact with you. Great. Thank you very much. And I hope I see you soon again. And, we can talk again. Thank you.
    Thanks.

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