In this episode, Jason Hartman interviews Saifadean Ammous, author of The Bitcoin Standard. Saifadean explains the three basic functions of money and shares how Bitcoin is similar to the central banks’ settlement layer. They discuss whether the government would make Bitcoin legal as well as the difference between time preference and inflation.
Announcer 0:01
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Announcer 0:11
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Jason Hartman 1:00
It is my pleasure to welcome you Saifedean Ammous. He is the author of a fantastic book that I just finished and really, really enjoyed it was one of the best economic books I have read. And it is entitled the Bitcoin standard. And he’s got a new book coming out with a fascinating thesis as well about fiat money, and really what it does to our culture and to our thinking, and how it maybe impacts morality. I’ll let him tell you about it. But it’s a fascinating thesis. So Saife, welcome. How are you?
Saifedean Ammous 1:33
I’m very good. Thank you for having me.
Jason Hartman 1:35
Good. It’s good to have you on. So Saife, tell us a little bit about what brought about the book, the Bitcoin standard, you know, it seems as though you really spend maybe the first half of the book, talking about what is money explaining economic concepts. And then the latter part, you talk about cryptocurrencies. But in the beginning, you know, let’s just give people some background, because there are some interesting fundamentals that I think are just really important to understand to grasp this entire concept.
Saifedean Ammous 2:08
I think the book came out after having spent several years looking at Bitcoin and thinking about coming up with ways of analyzing it, which had gotten me some very small degree of prominence in a very small circle of Bitcoin Twitter users. And essentially, you know, I had developed all these ideas about what Bitcoin means and the significance and the economic meaning of, of Bitcoin over time. And then, you know, I was arguing about people with on the internet all the time. And then, really, my wife told me, you know, you shouldn’t be doing something more productive than just arguing with people on the internet. So I decided to write this down into long form, you know, every time I would, I would be tempted to answer someone online and just decided, you know, what, let me just go write a couple of pages in the book. And in that sense, I just kept on developing this, until it became a whole book. And it became a full vision of how I understand economics of Bitcoin, and the title came towards the end, but I think it was quite fit in title, because the whole book is what the book makes a lot of analogies to gold and the gold standard. And so the point that I’m trying to communicate is that Bitcoin is effectively our new gold standard, it could have the potential to be our new gold standard.
Jason Hartman 3:32
When you look at money, I mean, money really is supposed to. Well, there’s also distinction, of course, between money and currency. And maybe you want to go into that. But money really has sort of three basic functions, right?
Saifedean Ammous 3:46
Yeah, generally, people think about the three basic functions of money as being the medium of exchange, a store of value and the unit of account. In my book, I focus the analysis on the function of a store of value, because in my mind, I think this is the one that ends up giving monetary choice, a monetary role, that ends up deciding the monetary role just because of how economics really works. If you store your money in a thing that is easy to produce, then that thing will lose value over time, and you won’t have a lot of money. And so the money that is stored, and things that are hard to produce, on the other hand, will hold its value quite well, and will maintain its value. So over time, it will stay the same or increase. So the net result is that over time, money and wealth tends to concentrate that accumulate in the hands of the people who are holding the hardest money. And eventually everybody else learned that lesson and so you end up with the hardest money dominate. And that’s generally been the history of money.
Jason Hartman 4:48
So of course, paper, fiat money, dollar, bills, euros, whatever, in paper form, especially, are very easy to produce. It’s simply running the printing press and gold is hard to produce, right? It’s hard to get gold out of the ground, it’s very costly to do it. It’s rare. And then of course, Bitcoin is mathematically rare, right?
Saifedean Ammous 5:13
Absolutely. I think the most interesting monetary property of Bitcoin that I discuss in my book is that this is the first thing that we’ve ever invented. That’s a liquid asset, but also strictly scarce. There’s no way of making more of it, there’s no way of making more Bitcoin than what the Bitcoin code stipulates. And that’s why over the last 12 years, Bitcoin has grown exactly according to the schedule of of the supply as it was laid out before, then there’s not been any single person anywhere who’s managed to find a way of making more Bitcoin than what the schedule has. And I think that’s absolutely unique, because it’s the one supply Who is the one good, whose supplies completely responsive to demand, you know, no matter what happens with demand, the supply of Bitcoin will not respond, it’ll just always produce the pre programmed amount that needs to be producing
Jason Hartman 6:05
Our client, Keith Gibson referred you to the program, and I’m very thankful to him for for asking you to come on the show. And he had a question. He said, could you explain how Bitcoin acts as a base layer money, similar to the central bank settlement layer? And how that ties into the criticisms of bitcoins low transaction per second, compared to say MasterCard or visa? So, you know, or PayPal? So you talk in the book, and I remember this, about how Bitcoin is actually inefficient. People like to talk about how the blockchain is efficient, but you know, it’s really not very efficient. Right. But it’s very, that that’s one of the things that makes it very secure. I think, maybe I’m not saying that
Saifedean Ammous 6:53
Reliable, not efficient.
Jason Hartman 6:54
Yeah. Good. Tell us more about that. And this base layer question that Keith has,
Saifedean Ammous 6:58
Yeah, I think, you know, before, before my book was published, there was a, the predominant view on Bitcoin was that Bitcoin was some kind of new PayPal, new visa, new MasterCard, new Western Union, it was going to disrupt banks, it was an alternative to banks, you can be your own bank, you can have your bank in your own pocket. And this was, you know, this was generally how people viewed Bitcoin. And based on this, people thought that you know, the, the, the limit, the main criticism of Bitcoin and the main limitation of Bitcoin was that, well, Bitcoin can only do so many transactions, but you know, Visa does 5000 times as many transactions as bitcoins maximum capacity. So Bitcoin has no chance of competing with visa. And my book made the case that Bitcoin does not compete with visa, Bitcoin, you know, Bitcoin, and these are like petrol and cars, and they’re, they’re not competitive goods, they need each other to function. You can’t have cars without petrol. And so my point is that Bitcoin is not a payment network, it’s not comparable to PayPal or visa. Bitcoin is more comparable to central bank’s settlement layers. Bitcoin is more similar to the national central banks and the national currencies that Visa, MasterCard, PayPal, used to settle their transactions with others, with other financial institutions or with their clients. So,
Jason Hartman 8:20
Would those be the SDR, the special drawing rights?
Saifedean Ammous 8:25
Well, I mean, mainly it’s national currencies. It’s what Bitcoin replaces. So the subtitle of my book is that the Bitcoin standard, the decentralized alternative to central banking, and that’s the point is that it is, you know, Bitcoin does not compete with banks, and it does not compete with payment processors, Bitcoin will need banks and payment processors built on top of it. Bitcoin competes with the settlement layer behind banks and payment processors, but it offers companies like PayPal and like visa and like MasterCard, it offers them a monetary standard that they can use without having to resort to central banks. It’s it’s the only alternative that financial institutions around the world and individuals have to central banks, because you can now settle payments internationally without having to go through a central bank, which means it’s no longer a political question. It’s just a purely technical question that you need to solve. It’s, you know, you put in the private keys and your money travels across national borders, which is something that could not happen before, you know, before the invention of Bitcoin. If you wanted to move money internationally, you have to go through central banks, that was the only mechanism for money transfer Bitcoin offers offers as an alternative to that.
Jason Hartman 9:43
Okay, so I think that’s a good segue to just maybe telling you a little bit about my evolution in this because I think it will address some of the skepticism that people have out there. You know, I started hosting a show called the crypto cast several years ago and expressed some of this skepticism very openly. So I learned about Bitcoin when it was $74. And, of course, have many regrets now. So I’ll be the first to say that. And, you know, for a long time, I just didn’t get it right. I didn’t understand it. And I, you know, some of my skepticism that still remains is this. I believe the two most powerful forces in the world are governments and central banks. They have standing armies, they have their cartels, they, they just run the world largely. And, you know, their product is currency that is their widget, right? Just like if, you know, I’m in business, and I have a product I sell and you know, someone else’s in business, they have a widget they sell, and they don’t like competition. Right. So why would they let this exist? And I know, you may well say there’s an argument that they can’t do anything about it. Okay, great. I, you know, and I’ve always said, safe, I’d love to be wrong about this, because my libertarian side says, I would not love nothing more than to see a decentralized currency controlled by the people, not the the central banks and governments flourish. Because so much of our lives are controlled by the fiat money, we’re all we all become puppets on the strings of inflation, deflation, velocity, etc. and capital controls an economic Berlin walls. So I don’t like any of that. But you know that that’s kind of my evolution. Now, when I got I purchased, I bought into the market when it was about $800. And then I bought a lot more when I saw Michael Saylor. And mass mutual getting into it and putting hundreds of millions of dollars and I thought be institutions get into it. You know, the big governments and central banks probably aren’t going to screw over the institutions, but they’ll screw over the little people. Right. That was that was kind of my thinking. So there’s a lot for you to chew on there. But what do you think?
Saifedean Ammous 12:04
I mean, I think that was that was also my initial impression about Bitcoin. The reason I was like Bitcoin is that I spent a lot of years just thinking, Well, you know, I don’t want to be holding it when they crack down on it and start throwing people in jail for it.
Jason Hartman 12:19
Yeah, maybe they make it illegal, right?
Saifedean Ammous 12:21
Yeah, make it illegal, or, you know, it’s not something you want to do. You know, there’s a lot of people have gone into jail for it. Doing things that threaten banking monopolies. So it’s, it’s no joke, you would think that this would be far more seriously persecuted. But by 2013, it became clear that there was something a little bit different about this, there’s just not going to go after it very directly. And I think, in my mind, the turning point was when the Silk Road website was shut down, and its owner was arrested, or its alleged operator was arrested in 2013, early 2013. In my mind, this was going to be the end of Bitcoin. And in my mind, this was the scenario that I had for why Bitcoin would end, you know, they wouldn’t find a website like that. And they shut it down and then say, Well, this was enabled by Bitcoin. And so if you hold Bitcoin, you are a criminal, you know, then everybody’s going to dump their Bitcoin and the price of bitcoin is going to crash. And that will probably be end of the experiment, because a won’t be able to recover because they know the damage.
Jason Hartman 13:31
It’ll have this bad perception that it’s used by criminals and terrorists, which interestingly, and you aptly point this out in the book, that it’s actually a terrible thing for criminals and terrorists, because it is not private. Contrary to popular belief, it is traceable on the blockchain, right? So, you know, we should dispel that myth that some still believe but go ahead.
Saifedean Ammous 13:54
It’s, it’s quite easy to make mistakes that make you easily trackable, it’s not very easy to not be tracked. It’s not easy to be anonymous on Bitcoin, because not an anonymous network. It’s synonymous network. And it’s always possible, somebody couldn’t. Well, not always possible, but I mean, it is possible that your identity could be identified. So I think what what was interesting was that after that website was closed down number one, Bitcoin did not crash. In fact, Bitcoin recovered and rallied from that for afterwards and over the next six or seven months, if it went up tenfold and price after what should have killed it in my estimation of that time. And the other thing, which I found extremely interesting was that there was no direct prosecution of Bitcoin. In fact, in 2013, is when Bitcoin started going mainstream, and US companies started offering it as a service. And it became legal. You know, it didn’t become legal. It was never illegal, but it became increasingly mainstream. I mean, obviously nowhere near as mainstream as it is right now. But up until 2012, you know, you could have you could have been forgiven for the any of the Bitcoin was mainly for people to buy drugs online, because that was the thing that most people had heard about when it comes to Bitcoin. But by 2013, that hadn’t begun to shift a little bit. And then obviously, it has shifted much more. But what I think is interesting is that in 2013, and 14 is when this idea started to occur to me that you know what, maybe they’re not going to manage just because this is just a far more advanced form of technology than what we have. And, you know, I’m sure some individual governments will ban it, but I started thinking of it as Bitcoin is like gunpowder. You know, when gunpowder came out, gunpowder was massively destructive to the existing armies. If you had an army that did not have gunpowder, and then another army had gunpowder, well, your army is basically no more because the other army can just take them a lot from long range, before your army could even take out a single sword. So, you know, when gunpowder came about governments didn’t that government sought to get it and I see something similar developing with Bitcoin, in that once people begin to understand the value proposition of Bitcoin, rather than want to attack it, they start wanting to acquire it. And so, one interesting, I think, turning point, where is that the prosecutor in the Silk Road case or the investigator in the Silk Road case, they could have taken the path of recommending that, you know, we go after Bitcoin itself, instead, they ended up becoming bitcoiners themselves and even work in the Bitcoin space right now. And we see this over and over and over again, once you get a taste of bitcoins incredible potential. It’s almost like Bitcoin caught off to do its purposes, you know, suddenly you have just been bitten by the bug. And now you’re just like all the other Bitcoin? victims, you’re just you know, thinking about it and thinking about how to serve Bitcoin and how to further Bitcoin? Because that’s it. You’ve been, you’ve been bitten.
Jason Hartman 17:09
You got the bug? Right. Well, there are certainly there’s no shortage of gold bugs in the world, right? It’s a similar concept, I guess. But, um, okay. So you don’t think that any government can shut it down? But they could make it illegal? Right? I mean, you know, like, what, the example I used over the years many times, in interviewing crypto experts is, is look, you know, cocaine is a commodity, right? It’s a it’s an illegal drug. It’s a commodity, right? People trade it, but it’s not traded widely, because it’s illegal, and people are afraid of going to jail. So you know, but it is a commodity nonetheless. If they said Bitcoin is illegal, because you’ve got a US fed coin, for example, their their cryptocurrency that they’ll eventually make, and they want to control velocity and inflation, and so forth. Couldn’t that displace it? And really hurt that the store of value?
Saifedean Ammous 18:10
I really don’t think so. I mean, first of all, let me just be clear, you know, governments can do all kinds of things.
Jason Hartman 18:18
They can do whatever they want. Yeah.
Saifedean Ammous 18:21
Well, within the realms of the laws of physics and economics, yes. But, I mean, I think the the way that I see it is that ultimately, any, any kind of action against people can hurt with one but it can’t eradicate with that, that’s the difficult thing about it, it’s, it’s almost impossible to eradicate Bitcoin, because Bitcoin can shrink to the size it needs to shrink to in order to survive, you know, if you restrict people buying, and when you restrict people mining it, the mining declines in volume, and the price of bitcoin commodity declines in volume enough for it to be essentially able to run at a very small scale that is hot, very hard to detect. So it fades into insignificance, but it doesn’t die. But then the fact that it doesn’t die, will likely spur rebirth, in a sense. So we always have this, the fact that it’s not easy to eradicate it means that you don’t you don’t want to pick a fight with it because you don’t want to undermine your authority and credibility by taking a flight and then losing it. And then also the aspect of preferring to us now, I think you’re correct in that central banks can introduce their own digital crisis. And in one of my recent podcasts, I discussed this in the Bitcoin standard podcast. But I think ultimately, these kinds of crises are really an advertisement of Bitcoin more than they are competition that one because what they do is they really serve to illustrate the Bitcoin value prop position, because when they show you is the, you know, the national currencies that will be linked to the central bank, the reason they’re doing them is that they want to control monetary policy. And the reason they’re doing is that so that they can have full surveillance or financial transactions. The two main value propositions of Bitcoin cannot exist in a central bank currency, because that’s the whole reason we have a central bank is because we want to have financial control over financial flows. And because we want to have control over inflation, so if you introduce a central bank, digital currency that offers the central bank, the ability to survey all transactions, and to unilaterally an arbitrary arbitrarily set monetary policy, discretionary monetary policy, then all that you’re doing is just providing a much more efficiently illustrating the superiority of Bitcoin, you’re telling people, you know, you can have your digital currency, which is connected to the central bank and the government and that is being devalued every year at anywhere between five and 20%, depending on your luck. Or you can have Bitcoin, which is being divided every year exactly of this percentage, which we know exactly for going into the year, and we stick to throughout the year. And you know exactly how much is going to be devalued over the next 100 years. Whereas with national currencies, you have no idea of what what’s going to happen in five years, or maybe even one year, last year who have any idea that right away and look.
Jason Hartman 21:27
Right. And when those national currencies start coming in digital form, as they inevitably will, that it will become extremely convenient for the powers that be governments and the central banks that issue them, and extremely negative for the population. Because they can be control. So many things they can control. You know, undoubtedly they’ll come on your phone, they will control where you spend, which merchant, which merchants and businesses can accept the currency, how far they can be from your home. If there’s a lockdown or quarantine, for example. They may have expiration dates on them. So they can increase or decrease the velocity of money. They can devalue over time, maybe overnight, whatever I mean, they can just do whatever they want. It’s
Saifedean Ammous 22:19
The possibilities are endless.
Jason Hartman 22:21
They can, they can do it already with dollars, some of those things, but they can do so much more and so much more conveniently with the digital currency. Right?
Saifedean Ammous 22:31
Absolutely. And really Bitcoin is I mean, I think people missed the point of Bitcoin when they think that the point is that it is digital, and that these currencies are digital, well, national currencies are digital, too, you know, and then the vast majority of dollars is not out there as dollar bills and coins. It’s digital, it exists on bank ledger’s the physical dollars are a tiny little fraction of the total supply of dollars. So the digital aspect is not something unique or interesting about about Bitcoin more about central bank digital currencies. What’s unique and interesting about Bitcoin is the fixed monetary policy.
Jason Hartman 23:06
Absolutely. So as a segue to your new book, which is a really interesting thesis, talk to us, you You talk a lot in the Bitcoin standard about time preference. And can you explain what time preference is in what it has to do with currency time preference?
Saifedean Ammous 23:28
In, in the Bitcoin standard spent significant chunk of the book talking about time preference, because it’s one of the most fascinating, the most fascinating public and economics for me, and when I was at university, every class that I would teach every course that I would teach, I would always sneak in a lecture on time preference, whatever the topic of the course, I’d always have a lecture on time practice, I always tell students, you know, this might not be the most important thing for your exam, but this is going to be the most important lesson you’ll learn in this class, and probably in all of university. So, you know, wake up a bit attention to this one. And because I really think it’s the most important thing economics teaches you, time preference refers to the degree to the extent to which the extent to which you discount the future compared to the present. So your time preference is a measure of how much more money would I need to give you one year from now, in order to take away a sum of money from you today? So if you have if I owed you $100, that I needed to pay us today, what sum of money would you accept, for me to pay you the $100 plus interest next year? So the answer is a 105. That effectively means that you discount next year by 5%. So you value $105 next year, as much as you value $100 today, and so the higher your time preference, means the more you discount the future, the less value attached to the future, compared to the present. And the lower the time preference means the less you discount the future. So keep Attaching more and more value to the future. So it seems like a very simple concept, but it’s actually quite powerful in understanding individual choices, and all manner of important questions in economics. So in, in, for instance, in the Bitcoin standard, I, I focus on this because in my mind, it’s really the most important economic question in all of economics and the trades that you do with your future self on more important than you do with anybody else, you know, you trade with your employer or your supermarket, a once a day, or once a month or once a week, but you make trades with yourself, one of the 1000s of times every day, every single decision you make every day is a trade with your future self, you know, when you decide whether you’re going to have that cheesecake, after lunch, you’re making a trade between you know, you today being happy with the cheesecake, and you tomorrow, or next week being unhappy with your shape or with you being out of shape.
Jason Hartman 26:00
That’s the old saying, you know, 30 seconds on the lips, 30 years on the hips.
Saifedean Ammous 26:06
Absolutely. Exactly. So it’s, it’s a really, really, really powerful analytical tool to start thinking about automated decision because you see that it applies to everywhere, you know, the example I like to get to university students is how you study for an exam, if you come into a course and you start studying for the material, day by day, then, you know, you’re constantly keeping a low time preference and prioritizing the end of the semester throughout the semester, and you get to the end of the semester, you review the material and you get a good grade. Whereas if you have a high time preference, then you discount the end of the semester very highly. So you spend all semester partying around, and then you need to cram in the last couple of days, and it doesn’t work. And it applies in all manners of things in our personal life. And in my mind. And the reason I bring this up is because I believe that money is instrumental in determining time preference. And I’ve discussed this in depth in the Bitcoin standard, as well as in my next book that we are standing and in the economics textbook, which I’m running right now, which is Principles of Economics, the way that I see it is, if money is hard, then you expect people to effectively or begin even a step earlier, the reason that people hold money in the first place. The reason people use money as a technology is because it is it protects us from uncertainty, you know, he’s there was no uncertainty about the future, you would not need any form of money, because you can just simply make it so that all of your earnings come at the same time that you need to get your expenditures, and you don’t need to hold any money. So you know, your your paycheck comes in, and it pays off your bills at exactly the right time.
Jason Hartman 27:41
Although you wouldn’t need the of the three components, you wouldn’t need the store of wealth component of money, right?
Saifedean Ammous 27:48
Yes, because you could, if there was no uncertainty, then you can just store your wealth in capital, you know, you can just own stocks and companies and businesses instead of actually owning cash instead of owning cash is anyone old cash is because the future is uncertain, you don’t know, the future. And so money is our way of hedging against the uncertainty, it’s our way of providing for the future. The harder the money, the more we are able to provide for the future, and the less uncertainty we have about the future. So if we’re able to provide more for the future, and if we have less certainty about the future, well, then we have, we have less reason to discount the future. So our discounting of future declines, and so our time preference drops. So we now have a lower time preference. Basically, this is how I think money affects time preference.
Jason Hartman 28:36
Okay, so what does that do to us is, well, before I asked what it does to assist people, I want to ask you, is there a distinction between time preference and the time value of money that we’ve all heard of, which is just inflation, right? Is there a difference between those two?
Saifedean Ammous 28:54
I mean, the kind of related but yeah, they’re distinct concepts. And I guess the, the time value of money is how much you’re discounting money over time, which is determined by time preference. Yeah.
Jason Hartman 29:09
Yeah. Okay. So what is time preference? Do it really messes with our heads? Doesn’t it safe, it really sort of causes bad decisions? And it has huge knock on implications for culture and society, doesn’t it? Tell us about that? Which which by the way, I believe is the subject of your new book. So feel free to talk about
Saifedean Ammous 29:32
Yes, but first I need to I’m sorry, I have to drop this one that you’re going to laugh at. My wife just sold the chair in which I’m sitting so
Jason Hartman 29:44
That is so funny. This is like an economics lesson right here. I love it.
Saifedean Ammous 29:49
Yeah. No, you don’t understand the running joke about people selling chairs to buy bitcoin is going on and bitcoins. I’m telling Mark about this.
Jason Hartman 29:57
I love it. This is great.
Saifedean Ammous 30:00
Got a replacement.
Jason Hartman 30:02
Okay. That is fantastic. Okay. Okay, so going back on now.
Saifedean Ammous 30:12
Well, I think you know, the the impact of time preference, I think money shapes it, um, but many other factors shape and time preference, really the lowering of time preference is the process of civilization. You know, as we become more civilized, as we become more human more cultured, we become more future oriented, we start providing more for the future, we start accumulating more capital, and we start discounting the future more, we start becoming more future oriented, become more civilized, more peaceful. And, you know, that’s essentially the process of civilization. And I think it’s inextricably linked to our ability to provide for the future, by holding money for the future. And by providing a Mumbai saving for the future and reducing the uncertainty. So when the money that we use begins to lose its value, and when it starts becoming easier rather than harder, when money starts becoming less reliable as a mechanism of transferring wealth into the future, then money becomes the then that reduces our ability to provide for the future, it increases the uncertainty for the future. And that makes us discount the future heavier. But I’m not just in economic affairs and everything. And I think you see this reflected in all manners of economic and non economic decision making that people do in everything. And one, my favorite example maybe, might be art, you know, you look at art under the gold standard, you look at the golden era of art, artists would work on a masterpiece for years, and then the thing would be expected to survive for centuries. And much of that art continues to survive for a century, you look at 20th century art. And you see that people spend, you know, 15 minutes of scribbling a bunch of lines, and then they make up a story about how it represents something or the other. And
Jason Hartman 31:56
I love how you talk about that in the book, by the way, I resonated with that heavily. My favorite is the Impressionists. Okay, so that’s, that’s where I like, but when you talk about the Sistine Chapel, and Michelangelo, and then you look at a stupid banana with duct tape on a wall, and that’s somehow art, I mean, give me a break. It’s just
Saifedean Ammous 32:18
Yeah, and I think, you know, it’s the excuse that we blown up.
Jason Hartman 32:22
But clearly, I don’t understand how to interpret that banana on the wall. And
Saifedean Ammous 32:29
Of course, we’ve spent our life basically being gaslighted, by art industry that wants to tell you that, you know, the reason you don’t, and the reason you don’t see the banana is because the problems with you, you’re not artistic in your culture, then maybe that is the case. But you know, why is it that those people that produce those things cannot produce anything that requires a little bit more time and attention? Why can’t they make a Sistine Chapel in between all of their bananas? You know, why is it all of bananas and scribbles and random stories on empty pieces of Canvas, rather than anything that requires actual time and effort?
Jason Hartman 33:03
So what it sounds like what you’re saying, then, is that when we have a low time preference, we become more civilized. And the craftsmanship improves, is that is that correct?
Saifedean Ammous 33:18
Ver much so. Craftsmanship is one part of it, it’s just in my mind, the you know, the the ability to hold wealth that you can trust, which is what people had under the gold standard, that you knew this coin was yours, and it’s going to hold value into the future, that security in my mind is what is necessary for people to be creative, to be creative, because the you know that they have the security and they’re producing because they want to produce. And it’s very different from the kind of creativity that you need to do when you’re on the treadmill, where you know that the money that you’re holding your hand is like a melting icecube it’s losing its value, it’s not going to be there for you. And so you’re constantly having to continue producing more and more on that treadmill. I think that’s really the difference. And dynamic reflects and craftsmanship in art. I think it also reflects in innovation, you know, people, people think of 20th century as being the century of technology. But really all of the things that we think of as 20th century technology were actually invented under the gold standard, and were popularized and commercialized and they spread all over the world in the 20th century. But the main and most important innovations came in the 19th century. In fact, in the 20th century, we saw some regression in many of those things. So aviation, cars, the Telegraph, communication, telephone, so many of the most important technologies that we’ve had 24 hour electricity, supply all these things that completely revolutionized our life. They can’t remember the gold standard. I don’t think it’s an entirely it’s entirely coincidental of what the gold standard allowed the world to do was to have a large global market Where everybody trades with everybody else, and you have the ability for everybody anywhere in the world to save, you know, anybody could make returns that meet inflation effectively. And inflation at that time was negative one negative 0%. So you just holding money, he allowed you to have appreciation, you didn’t have to be an expert investor, you have to study real estates,
Jason Hartman 35:21
You didn’t have to take inordinate risk.
Saifedean Ammous 35:26
Exactly. You know, the same coin that you got paid in as a child or as an old man or as a worker, that same coin, you just have to keep hold of it. And that’s it. That’s your savings account. That’s your portfolio.
Jason Hartman 35:37
Right? And it was good as gold, if you will. And I don’t know, we’ve got to wrap it up here. But this is so fascinating, because, you know, when I think about that I definitely buy into this. However, it kind of strikes me that does the common everyday, Joe sixpack, think about that? Or is it so sort of just in the air, if you will, that it just influences everything? And we don’t even know it’s like a subconscious thing. And I almost wonder if it has a knock on effect even to relationships, in business, in love in romance, you know, divorce rate, I don’t know, how much does this really affect?
Saifedean Ammous 36:23
Oh, I think so. Absolutely. I think it’s highly pervasive everywhere, because it shapes, you know, time preferences there. And everything in any decision involves a short term versus a long term outcome. And so, family I think is an excellent one. As people’s time preference rises, they are less likely to think about their future and more likely to think about their present. And I think you see this with time, you see that, you know, people have been people have developed a world in which they are far more likely to have many more temporary and short term relationships, rather than a fewer and much more long term relationship, which was the case a long time ago. And obviously, there are many other reasons they are the you know, the the contraceptive pill, and the sexual revolution. And the female introduction to the workplace, all of all of that, of course, plays into it, but I think I’m an important factor in it is that the move away from hard money to easy money has two economic impacts. Number one, it reduces the family’s ability to save for the future. And so reduces the incentive that parents have to provide for their children in the long run, or for children to provide for their family in the long run. And it reduces the incentive that people have to invest in a family, because it’s less likely to pay off in the long term, and also increases the emotional investment in the government or in the state as a replacement of the family. Because you know, that devaluation, your savings are being devalued, because the government is effectively taking that extra money. And with that money, the government has so much more power that it can provide the family with a growing list of things. And so over the 20th century, over the century of government money, we’ve normalized the idea that it is government’s role to provide things like health care, and education and, and, and dietary guidance, and all kinds of different things that, you know, the government is supposed to solve for you and provide for you which, you know, historically, these are the kind of things that family was there for?
Jason Hartman 38:19
Well, you know, there’s this whole movement of men, and it’s, it’s really, sadly, a kind of a big deal, called men going their own way, where they’ve just, they’ve just kind of given up, and they just don’t care, they don’t care to start families, they don’t care to find the love of their life. And they would say, the government has become the new husband. You know, it’s, it’s, it’s like, well, since when was the government supposed to have this role of interfering in every area of our life like this, you know, people view relationships and culture in a much more disposable manner. When they have a, what a short time preference, just want to make sure I’ve got this great high time preference versus if they have a long time preference, you’re, you know, they consider their reputation to be more important. And those relationships, I don’t want to burn bridges, that person might be useful to me in some way, in the future, I’m going to act in a more proper way, because I’m going to value the future more. Whereas, you know, everybody just kind of becomes a hedonist and values the now if they have a short time preference, and it almost at first to me, but I’m really starting to see the connection seemed like a bit of a leap to say, Well, that’s because of the currency. Right? I can see your point.
Saifedean Ammous 39:40
Yeah, I mean, yeah. A lot of people have the inclination to just laugh initially, but
Jason Hartman 39:45
It’s so funny. When you think about it. It really, really matters.
Saifedean Ammous 39:48
A lot of people have started to laugh and think.
Jason Hartman 39:51
Well, sure. Because it’s instant gratification. Thinking it’s hard work.
Saifedean Ammous 39:58
Yeah, exactly. And I’m particularly no Thinking in particular that needs to involve several chains of reasoning when you know, right? Well, this happens. And then that happens. So one of them, we take that as a thing. And then what is the implication of that? That kind of reasoning is very hard for most people who you prefer to just get to laugh at the things that their theory tells us to laugh out.
Jason Hartman 40:19
Sadly true. And, you know, we see on social media today, it’s it’s very apparent that we have at least a couple of generations of people that lack critical thinking skills. So you know, and you know, thinking is hard work. It’s not instant gratification. So I would agree, it’s safe. Thank you for spending so much time for us wrap it up with any closing thoughts you have, give out your website, tell people where they can find out about your new book, whatever you like.
Saifedean Ammous 40:44
Yeah, you can go to my website saifedean.com, or my Twitter as @saifedean. And that’s spelled s a i f e d e a n, and on seventeen.com, you can subscribe to receive weekly chapters of my forthcoming two books, the Principles of Economics and Fiat standard, you will get a new chapter every week alternating between the two books. And the two books should be finished should be published in 2021 this year, so you’ll be getting a sneak preview of the chapters as they are being finalized. If you sign up, you’ll also have access to my four online courses in Austrian economics.
Jason Hartman 41:21
Excellent, good stuff, Saife. Thank you so much for joining us.
Saifedean Ammous 41:25
Thank you so much for having me. Jason. Have a good day.
Jason Hartman 41:32
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