Today I am talking with Tuur Demeester, who recommended Bitcoin as an investment to his readers at $5 back in 2012. I would say Tuur is a philosopher with a greater perspective and an historical approach to today’s developments. We discuss his findings in his paper “The Bitcoin Reformation”. Published that at the end of 2019 he is drawing comparisons between the Dutch reformation in the 16th century and the emergence of Bitcoin in this century. This bring us to discuss COVID-19 and Tuur’s thoughts on the impact of this crisis on the Bitcoin reformation and he tells us which assets will stay liquid and accessible.
A Crash Course on Economics, Interest Rates, Debt and Inflation
“I think that the long tail of cryptocurrencies is going to be small. I think that the Bitcoin market cap is always going to be 80 or 90% of total.” – Tuur Demeester
“If you really think about what interest rate is, it’s just the price of money, like the price of liquid capital in the economy. Now when we’re talking about 0% interest rates, it means that the money is incredibly cheap. But that’s not natural because this interest rate is set by the central bank.” – Tuur Demeester
“It’s kind of a great excuse for governments and economists to blame everything on the pandemic, like people are losing their jobs because, because of the lockdown. But like if you look at the 1918 Spanish flu, there was no mass unemployment like there is today. It wasn’t as bad at all because people had actual savings and they could weather things like this. It’s kind of making everything happen that was already going to happen, but it’s just making it happen faster.” – Tuur Demeester
“What assets are going to be liquid and accessible? My analysis so far: I ended up with gold and bitcoin, I think those are the two likely assets that will still retain their value. And be actually usable.” – Tuur Demeester
- The similarities between the Dutch reformation and Bitcoin
- Who is profiting from the current financial system
- The Catholic church and Central Banks as rent-seeking monopolies
- Differences between the schools of Keynes and Austrian Economics
- Bitcoin lending
- Attacks on Bitcoin, Bitcoin Cash
- Money as a language
- The growing risk of hyperinflation
- Interest rate is the price of money
- His take on liquid and accessible assets in the future
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ShownotesRecording Date: April 28, 2020
Hello Tuur. It has been a year since we met in New York at consensus week and although I prefer to do my interviews in person, but as we all know, that's not possible this year. Uh, so I'm happy and glad that you found the time to be here online with me. Hi, Tuur!
Good to be here.
I really appreciate the work you're doing and also your tweets.
I think they are very thoughtful, well-balanced, and for me as I do not have a financial background, I can learn something new every time. Please bear this, uneducatedness in mind as I might be asking newbie questions in the following minutes.
Yeah, of course then, and I'm really glad to hear that. Like, you know to an audience who is, who is not like, you know, full time economists or analysts that, you know, what I put out is, is still accessible enough. And I mean, for me, like I always try to learn more. Um, so, so it's. It makes sense to, I mean, maybe that's why like I try to explain things to myself as I learn, so maybe that's why I've managed to stay accessible.
That's great. And I would like to talk with you about your paper. That's called the Bitcoin reformation. You published that at the end of last year, and you are drawing comparisons between the Dutch reformation in the 16th century and the emergence of Bitcoin in this century. This will bring us, I guess, of course, to the single most top topic at the moment, COVID 19 and your thoughts about the impact of this crisis on the Bitcoin reformation. But before we get into this, please tell us your story. What's your background? What is your profession?
Oh, well, I guess I, I've always wanted to kind of be a writer somehow and weirdly, that has worked out like early on. Of course, it's really hard to. To make a living writing. And so I would just like, I guess I went to university and I dropped out a few times.
I tried different things. I tried like philosophy and African studies and, even political science briefly and economics and none of that really stuck for me enough to want to pursue it to the end. So I dropped out. I did translation work. I translated, a big book about, the business cycle from English into Dutch.
and then also on the entrepreneur side, I did, a few things. I cofounded two little private schools, separate schools and one in Belgium and one in Holland. And then I also, cofounded the Rothbart Institute. So that was, an academic, oriented, organization, like, not very big. Obviously it was all very small, but we did publish a number of books and organize some events, and it was all very Austrian economics, philosophy of law, uh, focused.
Um, and so eventually I, I, as I was learning about the history of banking and finance, I just got. Fascinated and worried about the current environment. Cause that was 2005 six, seven and so in 2007 we did start seeing some trouble on the horizon. So I really started working on like, how can I be financially independent?
How can I use some of the knowledge that I've gained? And so eventually that culminated into a financial newsletter. I found, or I launched that in 2011 and so that was just a subscription based newsletter. People would just pay me a an annual fee and then they would get my newsletters in the mail and I would respond to their questions.
So that was in Dutch. It was called macro trends. I really enjoyed that. Lived a really kind of, put a lot of my research focus into that and also help myself in the process cause I was paid full time to do research. Um, and so one of the focuses that I had was really to find investments that are robust against the financial crisis.
Cause I was worried about inflation down the road. I was worried about market instability, um, because of, you know, the previous work that I had done in economic theory and translating all these. Histories, um, of, of the financial world. I was really worried about the stability of the financial system. And so that's how in 2011 I was actually doing research as well in Latin America.
Cause I wanted to know more about how to. You know, how do you stay as an individual, robust in an environment that's very economically chaotic. So I went to Argentina, I went to Uruguay and some other countries, and so I did discover Bitcoin in Argentina in 2011 and then eventually in 2013 I decided to go full time Bitcoin.
I made a few, um, you know, um, um, angel investments in this space and I've been just publishing research mostly and, uh, enjoying myself. And I find that, you know, by sharing a lot of information, uh, sometimes some doors open to me that I am able to make a, make an investment here or there or something like that.
Or I just get. You know, good information about timing the markets. And so I've been able to be independent this whole time and I feel really, really blessed. That's been the case.
That sounds great. Yeah. And also you have a very interdisciplinary education. To me, it seems like many people do have that in the Bitcoin space.
Yeah, it is. I mean, yeah, it's hard if you're very specialized in one area and, uh, it's hard to really grasp. Bitcoin. I mean, of course you can, but you really need to kind of cultivate that natural curiosity. And because there's so many analogies possible to understand the coin, um, but none of them fit one-on-one.
Like they only fit for certain dimensions of Bitcoin. Um, and so I just feel like it is really a plus if you already have like a natural. Uh, if you just have natural joy in, in, in dipping your toes and different types of waters, um, that, that really helps. Um. Kind of thrive in in Bitcoin.
You said you translated to Dutch.
Do you have a European background?
Tuur Demeester: Yeah, I grew up in Bruges, in Belgium. I lived there most of my life. I lived also one year in Norway. I lived about two years in the Netherlands, so yeah, until 2014 I lived in Europe.
Anita Posch: do you miss Europe in a way, the way of life or living here?
Tuur Demeester: Yeah, I do. I mean, there's, there's a lot of things that I.
That I really enjoyed. Um, like I enjoy just, you know, drive, riding my bike everywhere. Um, uh, I, I, I enjoy like, just kind of going to the countryside. I could just take my bike and like bike to the ocean. Uh, it was like a half hour bike ride from where I lived. Um, there's like the, the, the, everything is historic.
That is just. Always interesting that there's this kind of context, like you live in history, like you can just see a building as 500 years old and another one is a hundred years old and, and, and so there is something to that. Um, uh, but of course there's things that I absolutely love about the United States.
And so, uh, to me that the balance is, is. Uh, on the side of the U S all in all. But yeah, for sure. There are things that I miss about, uh, about living in Europe, the museums as well. There's just so much, um, you know, just things to, to enjoy there.
That's your background. Maybe has something to do with that.
The idea of the Bitcoin reformation, like drawing that historic, uh, comparisons.
Well, I mean, yeah, part of how I started or how I kind of. Stumbled into this history of the reformation, like the Protestant reformation is, I, I've always been quite fascinated by the difference in culture between the Netherlands and Flanders because we speak the same language.
But, um. But somehow the cultures are extremely different. Uh, th there is some research that actually validates that, that, that, um, of all the countries, the neighboring countries that share languages, uh, the difference between Flinders and the Netherlands, culturally speaking as one of the widest, it's an incredibly.
Wide gap. And it's weird because you can just take the train and cross the border very, very easily. I mean, growing up I would just ride my bike across the border. Um, uh, it's like a one hour bike ride and then it would be in the Netherlands, uh, but is, there's really a lot behind why the cultures are so different.
And that goes back to the reformation. So it was kind of this, I thought I was sidetracking and I was just kind of. As, as a hobby. I was kind of researching the history of my country, and then I stumbled into this incredible rich and fascinating and dramatic and very scary period of time of the 16th century.
And, uh, it's just. Yeah. It still fascinates me. I feel like I missed out not learning about this earlier.
Can you maybe walk us through the paper? Like you, you have a part with, uh, four preconditions and then, uh, you draw conclusions in a way or comparisons to Bitcoin today, or the emergence of Bitcoin. Can we maybe start with the preconditions and you explain what you mean with it?
So to me. When you think about like revolutions in thoughts or revolutions in society, you can look at like, Oh, you know, this happened at the time, um, you know, this, you know, whatever. Like Franz Ferdinand, who was assassinated, and that was the start of the first war. But those are like the superficial. And analyses where it was like something happened, and then everybody pointed at that as like, Oh, yeah, that was the start of this big change.
And so, you know, for the Protestant revolution, it's kind of like, Oh, yeah, Martin Luther, he, he, he, um. Nailed his 95 theses to the church door. And that was the change of everything. It's like, well, it's not that simple. So I'm always trying to see like, what, what are really the catalyst that made this change possible?
And so, um, to me, the whole religious debates is, is of course important. Um, but, but it's not necessarily getting the essence of why the Protestant reformation happened. And so to me, um. What really was the preconditions for the Protestant reformation was the fact that you had this giant monopolar cystic service provider, uh, which is a Catholic church.
And, uh, and they were rent seeking, which means that they were probably overcharging a lot for their service, but because there was no competition, they could just do that. Um, and then. At the same time, there was this technological revolution that was happening, like people were, uh, discovering ways to travel the world and get back.
Cause it was always possible to cross an ocean and to find new territory. But the tricky bit was, was Hattie, how do you find your way back home? Uh, and so you needed a better campuses and tools to do that. And that's just one example. The printing press is another one. And there were several of those. And so because of this.
This technological revolution, all of a sudden change became easier and society, it was easier for people who had different ideas to spread those ideas. It was easier for people who had a different mindset to make a new, a new life for themselves. Like you didn't have to be. No ability to, to kind of, uh, end up being wealthy.
For example, there were new ways that you could become a merchant and trade and things like that. Um, uh, also city cities would start specializing across Europe, um, in particular industries. And so then. You could become a very specialized, um, individual, like, for example, in, in flutters, in Antwerp, it was a huge hub for a painting.
Like the Flemish painting is still famous. And so if you were very talented, you could travel there and, and make a career. Um, and so, and, and, and so there was this new emerging economic class, um, and I think that. Group was also important for the reformation, that they had some kind of common identity.
They had something, the freedom, they love that they loved, that they wanted to, to have their own beliefs and, and, and, and doing things without having to ask permission, uh, to everybody else. So that was important. And then finally, I think that the, the fourth precondition is really that, um, these people also needed to, you know.
Doing a revolution. It's like either you, you have to have nothing left to lose, which is like, you know, the French revolution where there was just terrible hyperinflation and so much suffering that people were just like, screw it. I'm just going to go into the street and we'll see what happens. Um, or you need credible strategies to defend yourself or to escape.
And, um, and so. That I think applies to, um, the people in the lowlands in the 16th century, 17th century is that not only were they under threat because the Spanish wanted to annex the Netherlands, they, they, they sent us huge army, um, from Spain by foot, which is in itself an incredible story, but they sent this huge army to just.
Um, conquered the Netherlands and make it Catholic, uh, and, and also prosecuted and burn a lot of the heretics who were Protestants. Um, but also they, they actually had a real option because they, they had, you know, they were reigning the oceans with their. With their boats. Their seafaring industry was huge.
And so they had a big fleet. And so you could always, if you were somewhat, you know, even if you had little means, you also have the option to flee to the UK, for example. I mean, at the time it wasn't called the UK, but you could fly to England or to other places. Um, and so I think that was also important.
Um, and, and you could use water as a defense mechanism, which they did, which is you could flood. Um, the countryside, you could just open the sluices and flood the countryside. And that way a marching army, like the Spanish army would be severely slowed down or even stopped. And so I think all those things put together.
It gives a better picture of like, why did the reformation happens? And I do think there are parallels with today, which I'm sure we can get into.
Yes. And I would like to start with the first one because, um, I think it's one of the things most people never think about or we don't have the education. It's like the system works actually.
I mean, the monopolistic rent seeking service provider. You state today is the international monetary and financial system, uh, and you say this controls wealth and pensions. How does this work and who is actually profiting from the system? Because I think it's not the people like me.
Yeah, that's exactly right. The, the international, uh, monetary and financial system. And I have that definition actually from the BIS, the bank for international settlements and basil. Um, and because it's similar to, you know, the Catholic church, like you, you know, when you say that it encompasses a lot, like it wasn't just the Vatican, it really was this multinational organization that had branches everywhere, and churches and priests and bishops.
And so similarly. Um, you know, uh, the international financial system today is not just the federal reserve or something like that. It's really this network of banks and, and S. And, and of course they do provide services. And that's part of the tension that we see in society today. Like some people are pointing out like, yeah, but they actually.
Do important things and they make sure that you can get loans and this and that. And so the argument is that, yes, of course that's true. They do that, but they are still a monopolistic service provider. Like there was only one money or one monetary system. And that's centrally decided. And we have, you know, not only central banks, but also central bank of central banks such as the IMF and the ECB and, uh, sorry.
And the BIS. Um, and so who profits from all this? You know, they have the monopoly on issuing money. They can just issue debt and issue money and, and really nobody else can, like, I can not just create new money. I guess I could, you know, we could launch an ICO and, and, and, but that's, that's new, like that.
We can do that. Um, um, but people have tried to issue, um. You know, gold back money, for example, privately, and they really got into trouble. You can read some of that and, and uh, you know, there was the Liberty dollar and some other initiatives. And so if you challenged them monopoly of money, you can really get into trouble.
And who profits from it is, is the people that issue. Uh, that are the debtors basically. Cause you know, if I save in euros or in dollars, and I have a thousand or a million of it in my bank account, if somebody else issues more money than my supply of money gets diluted, and over time it'll lose value. So I lose.
If I'm a saver, I lose. But if I'm a debtor, I owe somebody else a million dollars. Then actually, um, if that, the value of that debt decreases over time, that's good for me. So the biggest debtors, they are the ones profiting from the system. Basically, governments who like to issue debt, uh, banks often have huge amounts of liabilities on their balance sheet.
So they're often, you know, they're in the debtor class as well. They owe the deposits to their customers, for example. Um, and then of course there are, um, you know. Large companies, blue chip companies and things like that, but that's, that's more secondary. I'd say the first ones are the banks and the governments.
We already have Bitcoin lending, isn't it quite the same? I mean, I could borrow someone, my Bitcoin. Okay. I can't create more Bitcoin out of thin air, but I can gain interest from it. Where is the difference here?
yeah, so the difference is that when you lend out Bitcoin, you run a real risk that the other person or entity is not going to pay you back.
And if they don't pay you back, there's nothing you can do if they went bankrupt or whatever, there's just, you lost your money. Uh, and so in a way you get. The interest that you earn is a real compensation for the risk that you're running. Uh, lending out that Bitcoin, whereas a commercial bank today. When they lend out money, that money is not there.
It was not on their balance sheet. Like they're able to borrow that from the central bank. Um, and then so when they run into trouble, they can just borrow more. And that's part of what these bailouts are. Like. They get these giant loans created out of thin air from the central banks, and the central bank then has an entry on their ledger that says, Oh, this bank owes me so much.
Uh, but really if the bank is big enough. It doesn't have to pay the money back. So, so do you see the difference where like there's really no, no existential risk for the bank when they, when they don't run their business very well, they are going to get a bailout and that's why they call the central bank, the lender of last resort.
Like you can always knock on the central bank store and get more loans. Of course. Only if you are a bank yourself, like you and I as individuals, we can't go to the central bank and get a 0% loan.
Exactly. So the parallel with the Catholic church is the separation of state and money. Now, now, because we have the separation of state and church, at least on paper in Austria, and now Bitcoin would be the separation of statement money.
Well, I guess as a new one you could argue that. Um, but I, to me it's more. Like the fundamental change that happened back then was freedom of religion. Like of course, in the long run, because it was a slow change and it was not applied equally. But like that's why I, I bring up the example of New York city at the end because the reason why New York city was so incredibly such a success story is that it was not founded as a, as a, um, a religious outpost.
Like a lot of these early, uh, colonies really were like. Religious based projects where it's like we are going to proselytize and expand our territory and convert and all that, and Manhattan Island was just a trading post. It was not at all religiously focused. It was actually profit focused. And because you know, religion really gets in the way, religious doctrine gets in the way of free trade.
That's why they, they said, okay, let's make. Let's not, let's be tolerant for any kind of religion. Then at some point they allowed Jews in and they allowed Muslims in, et cetera. And so it became this melting pot. And, um, and of course, since like, you know, the most successful trading hubs in the world have freedom of religion, of course, cause cause you want talent no matter the religious backgrounds.
And so I think that. For Bitcoin, the ultimate for this reformation, the ultimate outcome is going to be freedom of money, monetary freedom, so that you are not constricted to only the Euro or the dollar, but you can really, truly freely choose in which money you save and which money you pay taxes in which money you incur debt.
Any of that. Does that make sense?
Yes, sure. Do you think that we will have a lot of different currencies in the future? Like to have a freedom of choice, or will it be Bitcoin only?
So like, like some people think, I think that it's going to be a long tail still, like I, because of it's so easy to just launch a new coin and all that.
So I think that there's going to be. At all times from now on, cause we've had at all times we'll have a thousand old coins. But the question is, of course, how much are they going to be worth? And so I think that the long tail of cryptocurrencies is going to be small. I think that the Bitcoin market cap is always going to be 80 or 90% of total.
And then we'll have all kinds of other experiments that go on for, you know, which is good and healthy. I love that. Let a thousand flowers blossom. But, so that's how I see the longterm. And then of course, I think that currencies are not going to disappear overnight. Um, just like, you know, the Catholic church is still around.
We had the reformation 500 years ago, and of course it declined in power, but it's still around. Um, and so. Yeah. I think that governments are going to keep trying to issue currency and, and have their own projects and initiatives and, and that'll also be part of the monetary world. And I think that also the most successful.
Economic trading hubs aren't going to be the ones, maybe like Panama today is one of the few countries that does not have a central bank as far as I know, they just like allow other currencies to circulate, and I think that kind of model is really going to be the key to economic success in the future.
Precondition is the youth, millennials, young people who have a. Different views on the future who have lived with the internet from the day on. They were born, and you are citing a survey by Facebook that says that only 8% of millennials trust financial institutions for guidance. Do you think that they will trust Facebook and Libra more than Bitcoin?
Yeah. Well, I mean, I think everything will depend on. Performance. I mean, if, if, if Libra manages to keep its purchasing power and, and, and do the job in a good way, then yeah, maybe people will trust it. Similar to the merchants in the Netherlands of the 16th century and in founders, some of them were successful in their, in their activities and other ones weren't.
And so to me. Just this simple act of moving away from the field system and doing this kind of monetary heresy, uh, is that, is. The essence of this revolution. And so whether people make the right decision in, in, you know, cause some, some of these merchants made stupid decisions and they lost all their money, but there was still part of the reformation.
And that makes sense. And so I think similarly, you know, I could have my idea about where Libra is going to go and somebody else has a different idea. But I think what matters is that. People start asking, demanding for all alternative paradigms.
Then in the next step, you're talking about, uh, the new financial economy, Turing era formation that was formed, uh, starting with banking.
Can you talk a little bit about that please? And the parallels to today?
Yeah. So that was just so interesting. Is that how. You know, not only were they able to like break free and do it their way, but all of a sudden because there's dogma was lifted and like anything was possible, uh, all of this innovation happened.
It was just incredible how much innovation, um, happened financially in that era. Um, so, you know, obviously you had, um, a hundred percent reserve banking with the bank of Amsterdam, which was just. Uh, an incredibly respected institution. So the next 200 years, and, uh, there was also the first, uh, IPO, the East Indian trading company did a public offering because like, they couldn't rely on the good old network of, of, you know.
The nobility, providing them with money, or, you know, in the past you would go to the King if you want it to fund your startup, basically. So this was a startup that did not have a court to go to, to get money. And so they went to the public and said like, Hey, do you want to finance our, our initiative?
We'll give you a certificate and you can become part owner of this enterprise. Um, and so that was the first IPO that happened. And then over time, those shares, uh, were used as, um. Were used as collateral for borrowing, which was also a historically very important, and that allowed the interest rates in the Netherlands to be one of the lowest in Europe because this company was so strong and reliable and did so well that it was just excellent.
Collateral for, for all this economic activity. So those are just a few examples of, of really the, the innovation that happened. Also insurance, the insurance industry, which I, you know, it's Europe wide. Like there was some Venice, there was some of the other, um, uh, trading hubs. But important innovation also happened in the Netherlands about, because you were going on these long expeditions.
And so. What do you do if, if, if something goes wrong and you don't want to lose your entire investment, so maybe you're willing to give up a little bit of upside just to, to be made whole in case the ship parishes or something. And so that's kind of where the insurance industry emerged from. So just really, really interesting.
Uh, also, um. What's it called again? Um, these contracts that are kind of the predecessors to the insurance industry. Oh, yeah. Annuities. Uh, so an annuity is where, um, you pay a lump sum today, and then, uh. Over your lifetime, you are paid an income from, from the other party. Uh, and so that's kind of a predecessor to a life insurance policy.
So it's just all this stuff happens. And, um, and I think it's, it makes sense that it went together, that it was the freedom that allowed for the innovation to happen, but also the, the constrictions of, you know. They couldn't rely on the good old way of doing things. They had to do it in Holland where it was being, you know, there were lots of floods, there was lots of threads.
There's just so, so many constrictions that it really forced them to, to be innovative. And I think we're seeing similar things in the Bitcoin industry today. Like you can't just, you know, go to the central bank and get a big loan. You have to be innovative. And so, for example. I dunno, like BitMax has their own insurance phone.
Like if they get hacked, they have some Bitcoin to spare to then to then pay out the people that would have lost money otherwise. So that kind of stuff.
Oh, that's what you mean. We've self-insurance in the form of a reserve fund. Because I didn't know what you mean by that out. Okay. Understand. Then you also say it's hard to insure a Bitcoin because there are so many risks, and one of this is given how globally salable Bitcoin is, even nation state attacks cannot be ruled out.
Do you mean that nation States could buy so much Bitcoin or that they still can overtake the miners and try for 51% attack?
Yeah. There's different kinds of attacks possible. I mean, technically, of course, like, yeah. What is it now? I don't know how much you would need to pay for a 51% sustained 51% attack, like probably like a couple billion dollars at least.
So yeah, that is, that's always a threat, but I think that the 51% attack is quite misunderstood in terms of what it can do. Like there's, there's really some limitations. It's really. The network is really governed by the economically important nodes, uh, not really by the minors. And we saw that with Bitcoin cash, which was in a way you could argue an attack by the miners.
They started mining this fork and then basically you could split off. You know, you could basically decide to follow the miners and go into Bitcoin cash, but because them economically important nodes decided to stay with Bitcoin, all the wealth or almost all the wealth stayed in the Bitcoin network. And so eventually.
Those miners just shot themselves in the foot. They were just mining an economically unimportant coin, and eventually most of them just went back to mining Bitcoin and kind of falling back in line. So, so yeah, nation state attacks are possible, but, but I think just. It's kind of doomed to fail most mostly.
Um, but, but of course, nation States can also attack, um, exchanges. They can try to hack things. Uh, there are, um, you know, North Korea is, is kind of infamous for trying to hack into accounts of individuals and exchanges. So that's already happening. So it's just something to keep in mind that like, th the threats are.
You know, not insignificant. Uh, these are, these are serious matters. And of course, if more nation States get into financial trouble, we can probably see this escalate where we really get kind of a cyber warfare happening.
And they try to build their own currencies, their own cryptocurrencies, mostly, uh, permissioned currencies.
Yeah, exactly. They are for sure. They will try that. And, and some of them will even force their population to use them, which I think is only going to. Ruin the economy more. I mean, that's one of the worst things you can do if you want to, if you want your country to fail economically when you do, is you create a horrible currency and you force everybody to use it.
It's just like, you know, it's, it's making everybody poor almost instantly. Um, and so that also means that tax revenues go down. The more you try that we've seen it in, of course, it's in Baba Venezuela. Um. And eventually what happens is that they come, there's a new generation of politicians and they're like, okay, we want a bigger economic pie, so we're going to dollarize the economy again, or allow for monetary freedom again.
So it's just one of these, one of these sad. You can't even call it experiments because it's, it's so clear that it always fails, but it's one of these sad phenomenon that you see happen over and over.
And I really saw that in Zimbabwe. I mean, you're completely right. This is exactly what's happening there since 40 years now.
That's very sad and it's, it's so painful and it just, you know, eventually all I hear from. Fit as well as well as like people would just say, I wish I had left earlier. Like it's like an economic death sentence.
Interestingly, you do not mention the possibility of Bitcoin being used as a medium effects change in the report.
It's all about Bitcoin lending, underwriting, initial exchange offerings. Why.
Oh yeah. Well, because to me, that's the last phase of, of the, the process of, of an economic good, becoming a money. It's like the first phase is just, uh, you know, it's, it's a collectible. The second phase is, is a store of value. Um, the third phase is medium of exchange.
And then the last one is, is, um, is really becomes a standard. And everybody refers to everything else that's being expressed in that money. So for me. It's just a bit early and I feel like there's just been. I kind of want to, maybe it's like I'm grinding my teeth a little bit because I feel like a lot of people have jumped to that much, much too quickly.
Like it's going to take a lot of time for Bitcoin to become a medium of exchange, and there'll be, it'll be very mature by the time people really recognize it that way. Uh, so I didn't feel like it was necessary. That's why also like. To me, Bitcoin visitation is not the final stage. It's really that monetary freedom that I think will matter.
What's the timeframe you're talking about? Like the different phases?
Yeah, it's, it's hard because it's kind of like, to me, Bitcoin is just, it's just the better technology, like compared to the traditional. Financial system, and I'm not talking about all these intricate functions. Of course, the financial system is very mature and has the Riveters and all kinds of like things that are not existing in Bitcoin yet, but from a basic foundational point of view, by enforcing digital scarcity, Bitcoin clearly is the superior technology.
Um, and so I think it will win in the long term. But then how fast is more. To me, it's almost a question of how fast can the traditional system fail. Um, and so it's kind of similar with the Protestant reformation is that you had this, these accesses that were happening, like just way overcharging people.
And then if you combine that with an economic crisis, then people start to rebel. And so, um. So to me, to the barometer of how fast Bitcoin is going to grow is weirdly, you have to look away and look at the traditional financial system. And so I see these accelerating bailouts as really a Canary in the coal mine.
I think it's really a sign that the system is deteriorating pretty quickly. We're talking about airdropping people thousand $200 in their bank account. We're talking about. Platinum coins that are, that are worth a trillion dollar each. Uh, like these crazy ideas all of a sudden are becoming taken seriously.
And so as the inflation accelerates in the traditional system, I think it could be in the next. 10 years to work could look extremely different. 10 let's say 20 years. So in our lifetime, I think in our lifetime, the monetary landscape is going to change absolutely radically. But it's very hard to predict how fast, because you know, that's the problem.
Also, when you talk to people who. Whose currency collapsed is kind of like, you know, how did it happen? You asked them like in Mexico with the pace of crisis or, or, you know, you talked to them and they were like, well, everything seemed to be going fine, and then all of a sudden everything changes. So that's, that's a very common pattern is that you think like, Oh, the inflation is slowly going to increase.
And we'll kind of see it happen. It's like, no, no, no. It's like a hockey stick. It's like a pandemic. It's like boom, like all of a sudden, like March, 2020 is the month where covert 19 happened. So similarly in the monetary sphere, inflation usually happens almost overnight. I think that moment will happen in the next 15 years, but I don't know when exactly.
You were talking about scarcity, like the 21 million caps a supply of Bitcoin, and one argument always is, uh, and economy needs the possibility to control and manipulate the money supply, otherwise it can't grow and it will not flourish. Is this true? It seems many Bitcoiners say there's another way possible.
How can this work. What's the argument on the other side? What could I answer these people?
Sure. Yeah. Yeah. It's, it's, uh, to me it's, and this is Keynesian economics really. It's, it's, it's what John Maynard Keynes was famous for. This, this metaphor that like the economy is somehow is an engine and that, like.
You know the, the money supplies like gasoline or lubricant is like, yeah, if the engine is not running very well, you have to just throw more gasoline into it and then it'll like start to run faster. But that is just a very, very dangerous and wrong analogy. That's because really what money is, is a. Like you mentioned a medium of exchange, right?
So it's, it's kind of, it's almost like it's, it's like a language that's a much better analogy. Like money is like a language that allows us to communicate. It allows the entrepreneur to identify whether he's doing well or not, whether he's making a profit, which means he's doing well, his business is sustainable or not.
He's making a loss. So, so accounting is just so important to the economy. Even. You know, for us individually, like am I, are my finances healthy? While we need money to measure that? And so in a way that what the Keynesians are suggesting is like, but what if we just create more money? Right? Then we can.
We'll have more activity in the economy. It's like, no. What you do with more money is that you give people the illusion that they have more money. Like, you know, money is artificially rendered cheaper because you flip the system with cheap loans and then everybody thinks, Oh, you know, the interest rate, instead of being 12%.
It's only 2% so now with my income, I can have a much bigger debts. And so everybody starts going into debt because the money made artificially cheaper. And then eventually, of course, we see the debt crisis where the, their income starts to decline because of other circumstances and they cannot pay back the debt.
And then the lies revealed, like everybody was fooled into thinking that they were much richer than they were actually. They actually are. That's one of the big criticisms of Austrian economists when they criticize other schools analysis of the business cycle is that Australian economy economists, and I feel kind of self-conscious talking to you because you were Austrian, but I mean the Austrian school of economics, you know, the Austrian analysis is that.
The seed for the bus. The seed for the crisis is sewn in the boom. So the boom is really where like the 1920s the boom of the 1920s that was an artificial boom. It was because of money creation. Central banks had only. You know, we're brought into life in the U S and in 1913 and so cheap credit was injected in the system.
And for 15 years, there was this economic, um, um, massive economic activity, but it was that fuel there was not sustainable. And so then you had the great depression as a result. Um, and so when you, when you have the opposite of just healthy money. No intervention, then the communication can happen smoothly.
And of course there, there will be times when there is some problems, but recovery is a lot faster because, uh. The economy as a whole is not fooled because the interest rates are actually communicating the genuine amount of savings and debt in the economy. And I think it's maybe important to just like, just kind of touch again on the interest rates because you know, it's a thing and the central, we hear about it and Oh, the central bank is lowering interest rates of raising interest rates.
Like it's staying at this lever that they're using to, to manipulate the economy. But if you really think about what interest rate is, it's just the price of money, like the price of liquid capital in the economy. And so when you talk about an interest rate of 10%, it means that, you know, um. There is maybe not as much.
There is not as much capital available to lend out then if the interest rate is at 2% and so right now when we're talking about 0% interest rates or very low interest rates, it means that the money is incredibly cheap. Right? So, so. But that's not natural because it's the, this interest rate is set by the central bank.
They are pushing new money into the system for a very, very cheap, because they want everybody to keep spending and keep borrowing. Um, but that's very unhealthy. Uh, and so that's why. There is going to be an interest rate shock. Eventually we're going to go back to normal, and that means that first we're going to have a period of extremely high interest rates because there is no genuine saving in the economy like most people are in debt.
Like most people don't really have, if you make the balance of all their liabilities and assets, they are, they are in the red. And so without the help of central banks, there's hardly any real money to lend out. And like we talked about earlier, if you lend out your Bitcoin, you run that risk that somebody's going to run away with it and or they won't pay you back.
Um, so I think, you know, thinking about interest rates is really important to understand. The, you know how weird things are? Like right now, the interest rates are the lowest they have been in a thousand years. I'm not exaggerating. So this is, this is just a sign of how unhealthy the economy is.
I mean, yesterday you tweeted about the fed buying the depth of cities and countries.
How can this work? I mean, does the fed then own a part of the cities or,
yeah, I mean, well, I mean, so far it's just that it's not really, you know. Equity, but of course, it means if you, if you are indebted to the federal reserve, then of course you, you kind of have more political loyalty to the federal reserve because they are your sugar daddy, or they're the ones who are bailing you out.
Uh, so for sure there is a political significance to this. Um, you know, similarly, if the fed. Buys other things that you kind of, there's a, there's a power element to it. Um, but ultimately, you know, I don't think they will ever force these cities to pay the fed back because why would they defend, can always make new money like there.
Why would they force austerity on everybody else? This is just going to continue, in my view, they're going to bail out more and more and more people until eventually. It's like the economically strong nodes in the Bitcoin network, like people who are holding onto dollars and who believe that the dollar has value.
Those are the people ultimately in control of the dollar, not the federal reserve. Right. Because if those people. Sell their dollars and like, look, I'm sick and tired of you just printing more trillions. I'm just going to sell all my dollars. I don't care. I'll have gold, I have Bitcoin, I'll take care of myself.
Well then the fed is powerless, and then it's clear that the emperor has no clothes because everybody's sold their dollars and they're worthless. So yeah, I mean, it's, it's weird. It's just like, just this. This common illusion that we all have, that the federal reserve has, has the power.
Yeah. And I think it's a private company or, I mean, and also I've read that, uh, black rock is like consulting, uh, the fed very intensely.
Isn't that a little bit weird? I mean, are you concerned about those constructions?
Yeah, it's, it's inevitable, right? It's, it's like the Vatican who, you know, the Vatican was like the fed of, of, you know, way 500 years ago. They had so much power. And then there was, of course, nepotism where, you know, for example, there was this big vanity project in Rome where the st Peter's cathedral, which was extremely expensive to build.
And so. Um, they just decided to, um, raise a new tax on, um, people of faith. And so that in order to get into heaven, you had to pay the special tax, and then that would go to st Peter's cathedral to that construction. So, you know, it's similar, right? I mean, they, they are now levying a tax on the entire.
Dollars saving population in order to then funnel the money to BlackRock who is then gonna invest it with their buddies and whatever. So yeah, it's nepotism. It's, it's inevitable in any kind of monopolistic system.
It's interesting that you say that because I think that's one of the reasons why I am an atheist, because I never wanted to belong to this monopolistic, um, uh, your rent seeking company that the Vatican is in a way. Right?
Yeah. I mean, institutionalized religion, they have a strange power over their constituents, like they, you know, it is. Um, and I think it's, they are losing some power because people have more access to information elsewhere. Even if you are spiritual or religious, like you don't. You know, you can get your, you don't need a priest to help you find the information you need.
Or there's many different ways to get that, even if you're a person of faith. And so similarly, you know, with Bitcoin, it's like all of a sudden like, Oh, well, in order to get financial services, you don't necessarily need to go to a bank. There may be alternatives.
Yeah. Thanks. That was a great talk, I think a great chat.
Do you want to add anything. What's your expectation? Where are we going in this year or in the next year with Bitcoin? And also, you are one of the first ones, uh, who canceled his, uh, travels, uh, due to the virus. What are your expectations now?
So to me, this pandemic is like. It's like a catalyst, like everything, it's, it's kind of a great excuse as well for governments and economists to blame everything on the pandemic, like, Oh yeah, people are losing their jobs because, because of the lockdown and this and that.
But like if you look at the 1918. The Spanish flu, there is not mass unemployment like there is today. Like, you know, it wasn't as bad at all because people had actual savings and they could weather things like this. And so to me, this pandemic is just a catalyst. Like it's, it's kind of making everything happen that was already going to happen, but it's just making it happen faster.
And so there's unemployment was going to happen regardless of the shutdowns, I believe. Um. Because simply the debt was unsustainable for governments, for companies, for individuals, there's just way too much debt. Uh, and the money printing was also going to happen. All these bailouts that was already in the cards.
And so for me, the big story, of course, I'm trying to stay safe and, and, and, you know, I do think they will, they will come up with some, some real medical answers to this, this crisis. Um, but to me, the real concern is. Is inflation. Like I'm really, really worried that the, the pace of how fast everything is happening and how many trillions are being just printed.
And also because of the pandemic, people's spending window is much more narrow, like they spend in a much. You know, more precise way and a lot of money goes to food and maybe some rent and like a, but it's a lot more limited than before. And so I think that could really lead to food inflation where a lot of people are bidding on the same stuff.
I mean, I'm writing a piece on the parallels between. The French great inflation of the 18th century and today, like the great inflation of France with the Arsenio has led to the French revolution. And I'm afraid that that is just so much. Like the debates are no longer about should we bail out or not?
Should we print more money or not? It's more like how much, how fast. That's the only debate that's left. And that was also the case in France in the 18th century. And, um, of course in Germany in the 1920s, everybody thought the German government was so strong. The German Mark was such a widely used currency so they could get away with it.
And I feel like similarly people just feel like. The fed can get away with it. Of course, all the central banks around the world are now doing the same. This is going to be unprecedented. Global inflation is going to happen, I think in our lifetime. It's not going to be fun, but I think a lot is going to change, and so to me, that is where people's focus should be already.
It's like you should prepare for a lot of inflation to happen, and I think the work that you're doing by visiting Zimbabwe and studying that is probably very, very valuable.
Thank you. Yeah, I think so too. And uh, so what would be the advice that you could give our listeners?
Well, it's hard because it's kind of like a doctor who's trying to prescribe medicine for a disease that he's never seen before.
Uh, or at least the scale or the, the dimension of disease are just so much bigger. But in general, what, what works is that. You try to be a, Nick Sabo has said this as well. You try to prepare yourself for many, many scenarios, and so that's why rather than saying, I'm going to spend all my money buying this one plot of land and this one location, and I'm going to build my fortress there and I'll have everything that I need.
I usually, isolationism doesn't work very well because as the economy breaks down, also basic services tend to be disrupted and so all of a sudden you're in the middle of nowhere. And you can't get gas or you can get medical services or things like that. So, so I think flexibility is really important to also have that mindset of like, you know, could I move like, am I, am I ready to move if I need to?
Cause I don't know how the world is gonna look like in five years, but I know that I want the flexibility to choose. What's best for my family. So I think that's important. And so that's why also investing some time and energy and identifying like what assets do I think in an inflationary environment are going to retain their value and are gonna still be, am I still gonna be able to sell when I need to?
What assets are going to be liquid and accessible and my analysis so far as I ended up with gold and Bitcoin, I think those are the two likely assets that will still retain their value. And. Be actually usable. And so if you have that, then you can cross the border. Or then you just kind of keep your options open.
And of course, frugality, I think is important too. Like you try to not overspend and, and, and try to be a saver to savers are in the minority right now. If you can try and be a saver, you should be able to do quite well in a period of inflation. Um, and then also just prepare for a political change. Cause like people go crazy, like really scared during the time.
It wasn't on ever. Inflation. It doesn't last forever. It usually lasts between two and five years, like a serious hyperinflation. And in the West it tends to go over a bit sooner. It's, it's usually between two and three years. And then in Latin America and other. Uh, second, third world economies, it's usually a bit longer, like three, four, or five years.
Um, so yeah, like that's a period, like it's like a war. It's like financial warfare and you just have to weather it and things are going to be crazy. And so emotionally I think you need to prepare for that as well as that. Like, just try to really understand that this won't last forever. There will be another side to this.
This is just a difficult period of big change. And you can get through this. I think the emotional, psychological aspect is really important too.
Oh yeah. Thank you very much for your insights on that. Please tell us where can people find and follow your work?
I would just say Google my name. I think the first result is my Twitter account, so I'm, yeah, I'm always just a.
Doodling and just sharing, um, what comes up. And then probably number two is, uh, sometimes I post things on medium, so I have like a medium.com blog.
And are you working on a book because you first said you want to be a writer?
Yeah, I have several projects in the work. I am not ready to like. Share publicly, but like a, they, I guess the general topics are like, one project is about philosophy.
Then there's one about, um, I guess you could call it history and popular culture and then, um, I guess very vaguely. There's also, I guess I would like at some point, I think. Write a book about like the culture of Flanders, which I just, I'm fascinated by, but, um, that's really down the road. That's not what I'm working on right now.
And then also have a, a pretty beefy article in the works about, um, hyperinflation.
I'm curious about that and count me in. I'm going to buy your book.
Thank you. I'm flattered. Then maybe they won't be like, I mean that's one of the things, it's like the being like out there. It's, it's nice cause I, I'm less reliant maybe on a publisher, like maybe I'll find some kind of audience if, if I put it out myself.
So I guess that's another way. I'm just trying to be self-reliant as to. You know, build your own email list and things like that.
Yeah. Maybe I can give you a hint. I mean, there's this guy, he's called Derek Sivers. I'm not sure if you know him. Um, uh, he was the founder of CD baby in the nineties. Uh, a, uh.
The seller of CDs and online seller, and, um, he's doing exactly the same thing. He's writing his books and now he's going to self publish it. And he's completely self-reliant also with his website and all the tools he has. So he's an interesting guy.
I will look it up. Thank you.
Okay, so thank you very much again to her and, um, yeah, I hope, uh, we'll hear us again soon and, uh, stay safe. And thank you.
Tuur Demeester: Y
Yeah, you too. Thanks so much. Happy to talk again.