Raoul Pal | The Fourth Turning: Generational Theory and the Future of Global Money


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and join our amazing community. With that, please enjoy this week’s episode. What’s up, everybody? I’m Demetri Kofinas, and you’re listening
to Hidden Forces, where each week I speak with experts in the fields of technology,
science, finance, and culture to help you gain the tools to better navigate an increasingly
complex world, so that you’re less surprised by tomorrow and better able to predict what
happens next. My guest this week is Raoul Pal, a former
global macro fund manager and a co-founder of Real Vision, a financial media company
that offers in-depth video interviews and research publications from some of the world’s
most thoughtful investors. Raoul talks, writes, and tweets about issues
affecting global markets, currencies, trade, politics, and the business cycle, but most
of this conversation deals with a theme captured in William Strauss and Neil Howe’s Generational
Theory, also known as the Fourth Turning, where the authors describe a four stage cycle
of social moods associated with recurring generational archetypes, which they call turnings. These include “the high,” “the awakening,”
“the unraveling,” and “the crisis.” The question we explore in this conversation
is are we at the fourth turning? If so, what does that mean for the type of
change we can expect to see in the coming decade? This leads us into a discussion about global
currency, Bitcoin, Libra, and the future of digital money in a multi-polar world where
the power of governments to maintain the global order is diminished, and where corporations
and the private sector may gain an opening to provide alternative forms of money in support
of global trade and commerce. Where does Bitcoin fit in this world? What about alternative protocols and currencies? Will governments even allow them? Can they stop them, or will they welcome them? Does this point the way towards a path that
will lead inexorably toward truly global money? As always, subscribers to our Hidden Forces
Patreon page can access the overtime to this week’s episode, which includes a continuation
of our conversation about digital currencies, but also a discussion about central bank policy
at the fed, the ECB, and the BOJ, as well as a discussion about economic indicators
and what Raoul relies on most for his own projections about where we are in the business
cycle. Lastly, nothing I say on this podcast can
or should be viewed as financial advice. All opinions expressed by me and my guests
are solely our own opinions. As is the case with all of my episodes, these
conversations are for information purposes only and should not be relied upon as the
basis for financial decisions. With that, let’s get right into this week’s
episode. Raoul Pal, welcome to Hidden Forces. Thank you. This is the first time you’re on the show. I know! We talked about it for a long time, but I’ve
not made it yet, but now I’m here. Yeah. It’s great. It’s funny, because you’re in New York City
a lot, but you’re out of it a lot. You’re kind of in and out. Yeah. Always. Always. Your schedule’s always packed when you’re
in town. Yeah. Ridiculously. Yeah. I’ve been following your tweets. We’ve obviously known each other for some
time, going back a number of years at least. But I follow your tweets, like a lot of other
people. I really enjoy how carefully constructed your
thoughts are on Twitter. You know? I try and think out loud on Twitter. So, for me people say, “Well, why do you do
this?” There’s a bunch of smart people, like you’re
on there, and you’ll have your objective. Somebody else will have their idea. To be able to think out loud and get feedback
from people that’s honest and real feedback, it’s super useful. Yeah. I also love that you don’t offer life advice. What do you mean? You know, there are fund managers and stuff
like that, that give big, sort of loopy, philosophical ideas that feel kind of incomplete and a little
self-gratifying. Oh. Like Ray Dalio. That’s a different topic I’m not going to
get into publicly. There are a number of people. Maybe he’s one of them, but actually there
are some other ones that I was thinking of. I appreciate that. This is sort of the pro and the con of the
thread. You utilize this new thread feature on Twitter
in a way that’s useful for most people, but there are people that go on and on. Yeah. No. It’s great. It really helps me, because I dip in and out
of this stuff. Right? We talked a little bit before we started about
how, on Hidden Forces, I’ll have an episode on politics. I’ll have an episode on Eve Ensler, all sorts
of different people. There are times when I’m not in it, I’m not
focusing on what’s happening. You know what I’m saying? So, it’s useful for me to have all this data. I’m trying to pull together a picture. Your stuff is actually very helpful in giving
me a coherent take on that data. You know what I’m saying? Yeah. I mentioned to you I watched a number of your
videos recently and some interviews you did. You have this thing that you call “the Doom
Loop.” Yes. You need the dramatic music after that one. Like I told you, I can’t do it like you. You cascade. It’s like a waterfall. Give me a sense, whether it’s the doom loop,
whether it’s whatever else, what is your view on markets today? That’s a big question. It took me an hour to answer it on Real Vision,
and I only got a small portion of my framework and where we are right now. It’s a really complicated thing. In its pure essence, we are at a reasonable
high probability of going into a recession. Global GDP growth is pretty much zero almost
everywhere. The US is a little bit higher, but not much. We’re trying to decide whether we’re going
into a recession or not fully. I think we are. If we do that, then it changes the last 10
years of what we know. Now, that’s okay, but there are some big banana
skins that are there beneath the surface. One is demographics, because you’ve got the
largest pool of people in history with the largest pool of capital in history, the Baby
Boomers, at 65 years old, at retirement age, which is the average age of a retiree, American. If you have a recession, the stock market
halves, and that would halve all of their life’s work in one day. Well, not one day, but one 18 month period,
let’s call it. That behavioral impact is huge in terms of
future consumption, or also in terms of how they’d act, because they don’t buy. Market dips, they become sellers, because
they’re desperately trying to- They’re rotating out of equities and into
bonds. They just want their final pile of cash to
retire in. If it’s shrinking every day, you panic more. Right? A 30 year old does the opposite. They should be thinking, “I could put more
money into the market.” So, you’ve got a very different behavioral
choice there. That’s a big issue. We’ve obviously got the debt issues that have
been going around the world, and the governments and the amount of printing of their money,
and Quantitative Easing and all of this that we all know about, but then we got this doom
loop, which is essentially the last parts of the rolling bubbles. We had the rolling bubbles, which was equities
in 2000, then we had the housing market, and financial debt in 2008. It’s the corporate debt market that’s so big,
and if you think about what happened, we’re supposed to be de-leveraging, that was the
story. But what’s happened is the corporate market
has leveled up and doubled in size, in terms of debt, since the last recession. So, we’re now the global corporate debt to
GDP’s something like 90-something percent, 93%? Which is enormous. It’s as much as household debt was at the
peak of the bubble in the US. In the US alone, it’s about, according to
IMF numbers, 75% of GDP and debt. That’s all well and good, but the fact is,
a, we’re about to go into a recession. Even if we don’t have one this time around,
it’ll come. Whether it’s this side of the election or
the other side of the election, but the problem is, all of this debt is triple B. So, 50%
of the market is one notch below junk bonds. So, that means you’ve got very weak holders
of debt, which is the pension system who would be forced sellers if anybody gets downgraded. And all of the concentration of that debt
is amongst five firms. Would they have to change their regulations? Well, can they? Should they? Right, no, those are two different questions. So, if it’s your mum’s pension, should she
be holding the junk bonds of AT&T? You’d say no. So, it’s complicated. But the junk bond market beneath it is $1
trillion, and the triple B market’s $4 trillion. So, if 20% gets downgraded, there’s no buyers,
in which case, the whole thing goes into spasm. And again, the problem is, with this, is most
of the bonds that are issued went to buy back shares. So, the share market, the bone market, they’re
kind of in this- The corporate debt issuance was, we used primarily
to buy back equity. Exactly, so companies issued debt. Well, firstly, the management issues themselves
share options. They may issue debt, buy back their shares. Their shares go up, they get rich, which creates
the 1% versus the 99, clearly, right there. Then, what happens is, after they buy back,
these companies get more and more levered as they’re buying back all the shares. Now, what’s interesting on the debt side of
the equation is who is the buyers of these debts. These are the bankrupt pension systems, like
Illinois. Now, Illinois doesn’t have enough money to
fund its pension system, because it’s got a big black hole, so they raised taxes. So, it takes in new taxes. It gives them to the pension fund manager. The pension fund manager buys corporate debt. And so that is the whole nexus. All of these retirees are owning this corporate
debt, and the equity market, which they also own some of, and both parts of these are legs
that are falling in the next recession. And so, it’s terrifying on a personal level
for the Baby Boomers, you know, on a human level, because this is actually terrible. But it’s also systemic in its size, because
the whole market seizes up and the pension system essentially goes bankrupt. And so, there’s that going on, and then the
other banana skin is the European banking sector, which is still part of the debt situation,
never got cleaned up. So, other than that, there’s not a lot going
on. And the thing is, also, of course, that’s
accompanied really crazy evaluations and a lot of malinvestment, right? I mean, you’ve got a lot of companies that
have equity valuations that are through the roof, and that doesn’t even begin to talk
about what’s happening in the private space. Exactly. Exactly. So, the whole thing has gone through the roof,
and a lot of that’s been driven by the same thing, is the Baby Boomers or the pension
fund managers on their behalf, have been essentially taking as much risk as possible to try and
get their pie. Get back the yield. Yeah, to make up the yield. To make it a larger pie, so they can retire. And this touches on the perversion, right? Because policy makers have their models about
what happens during a crisis and what you need to do in order to alleviate the crisis,
which is drop rates. They drop them to zero, then they begin to
buy back assets in order to create liquidity. But that actually had a perverse effect, like
you were saying. A perfect example is corporations. They could borrow in order to invest in plant
and equipment, but why would they do that? That’s riskier than just buying back their
own stock, right? Yeah, and they’re tax incentivized to buy
back their own stock over all other things. So, why would they do anything else? Also, again, if you think of it through the
law of the Baby Boomers, it’s one of the classic problems the central bankers did, is they
didn’t look at demographics. So, it’s great to cut interest rates on a
40 year old. It’s a disaster on a retiree. Well, you’ve done some great public work in
terms of communicating on the issue of structural demographics. You have a video that has, I think, over 1
million views online, is that right? How many is there? We have 1.3 million views on that. That video’s fantastic. Thank you. And we didn’t promote that. I believe it. Well, first of all, you can’t promote to 1
million views. But I completely believe it, because it’s
rhythmic, besides the sort of the visuals of the video and everything else, there’s
a rhythm to your explanation that I think is very helpful. I don’t know how else to describe it. But for those listening, we’ve done some work
on this before, whether it was with Lacy Hunter, I can’t remember. We’ve done a bunch of stuff on demographics. But what is the issue with demographics right
now, and how does that relate to equities and markets more broadly? Yeah, the issue is, people in the 1950s and
60s, the Baby Boomers, were told they didn’t need to save as much money as their parents,
because if you give the money to Wall Street in this thing called a pension, they’ll do
the saving for you. So, if you think of the classic old model,
it would be, “Save 20% of your income until you retire, and then you retire, and you generally
live in a multi-generational household.” That probably worked for, I don’t know, 2000
years, 3000 years? But then, suddenly- Because your savings was also your kids. Exactly. And it was your future investment. It’s a bond yield. Yeah, exactly. So, what you’ve got here, and some of them
had optionality, because if your kid became a doctor, which is why every Indian wants
their kid to be a doctor, it’s classic, and it worked very well. Well, I told you, Dr. Pal would have worked
better for you. So, anyway, the issue is, if you’re not going
to save 20% of your income, Wall Street told you a story. The story was, “Just give us the money. Give us 5%, 10%, and we’ll turn it into lots
more money, so you don’t have to be like your parents,” which was the austere generation,
the Great Generation. So, the Baby Boomers could reject austerity. Fantastic. So, they went on a debt spree as well, which
was the other thing that happened. They went on a debt spree and they put money
into their pensions. The 401(k) system and all of that kind of
accelerated that process. What happened in the end was, that was a lie
from Wall Street. They didn’t have as much money, in the end,
to retire on. Those pictures of the gray haired couple walking
on the beach, hand in hand, weren’t real. It was actually a pretty miserable existence
when you added up your financial savings and the interest rates that apply now. Yeah, that’s the big problem. They don’t have any money. So, you’ve got this massive shortfall. Okay. So, then, what happened was, the pension fund
managers started realizing this, as did the households. So, what was the answer after 2008? Actually, after 2000, was take more risk. It was the wrong answer. In Europe, they did the opposite. They started divesting out of equities, out
of riskier assets. But in the US, they doubled up, and it was
slightly younger populations. So, now you’ve got a maximum risk taking culture
at retirement age. Well, isn’t this also part of the problem
and the perversion of a model that tells you to lower interest rates in order to spur economic
growth, when people that need savings will end up maybe saving more when their savings
are yielding less? Yeah. I mean, the whole thing is a mess now. Now, it’s very easy to say the problem started
here or there. I don’t know. The problem was by allowing too large a debt
culture. Because once you allow too large a debt culture,
you become slave to interest rates, because you need low interest rates to be able to
service your debt, and if you don’t allow the right recession to come at the right time,
to over management of interest rates, you’ve ended up destroying that. So, it’s all well and good for these kinds
of central bankish, hawkish types, the gold standard guys, to say, “Well, they should
raise interest rates to proper level.” Well, you try raising interest rates to 6%,
where you might think it should be. The world will implode. So, it’s not going to happen. People say, “Well, that’s fine. It needs to rebalance.” Yeah, it will rebalance. We’ll know it’s going to rebalance, and it
just depends which kind of rebalance you want to get. If you want to create total destruction, you
could do that. I think we both know what kind of rebalancing
we’re going to get. There’s no way that the authorities are going
to let the system rebalance on its own. There’s going to have to be some kind of wealth
transfer. The governments are going to attempt to try
and manage, because we’ve spent the last 30 or 40 years financing a world that we can
no longer afford to live in. I mean, many people are wealthy because they
own the liabilities of people who can no longer afford to pay them. And there’s no way you’re going to extract
blood from a stone. So, I think, at some point, governments are
going to have to step in and try and manage that transfer, and the rest of us are just
trying to figure out how not to end up as part of the collateral damage. Yeah, but that transfer itself is a really
complicated game, because within it, I think, and I think you probably agree, is there is
implicit a new system that has to be built, because you can’t go back to the old system. So, I think debt jubilee is what happens. Yeah, exactly, and I think that’s what MMT
is about. Yeah, so a debt jubilee of, let’s say the
Japanese first writing off all of their debt, I.e., the central bank buy the debt, forgive
it to the government, so you’re debt free as a country. Okay, maybe they buy a bunch of corporate
debt as well, so they clean up everything. Okay. Now, there is an outcome. Even though the central bank can keep buying
debts, the debt market doesn’t implode. The equity market bubble’s doing extremely
well in that, but there is the currency market, and the currency market likely collapses. So, that’s very good for Japan if they do
it alone, because if you could halve your currency and write off your debt, you are
golden. You’ve got this whole population. Here you’ve got the robotics and everything
else. You have a productivity revolution. You are incredible. Problem is, nobody else is going to allow
them to do it. So, in which case, you have to manage a global
debt jubilee of some sort. These sound like crazy ideas, but we’re moving
closer and closer towards it. Oh, you’re saying that it would be managed
on a global scale. Has to be. That’s interesting. And it has to be a new currency and financial
structure. It’s the Neil Howe’s Fourth Turning theory. Everyone’s told me to read that book. I have not read it. You’ve not read it? Everyone’s been telling me to read it. It’ll resonate. Everyone’s telling me to read it. And it’s this. There is no way we’re going to, with a massive
transfer of wealth, we will not stay with the old system, because people will demand
a change of system. I agree with that, I just- That is what all this crypto. The whole world that we’re looking at, the
digitization of everything, is, I think, the new world. And it’s staring us in the eye. And this is why I’m super interested in what
Facebook had announced. Not on the levels that everybody else was,
but in a different, observational level. So, I do want to ask you about that. We’ll get into that. My hesitation about them, and other people
have expressed this about this period where the wealth inequality and the debt levels
become unworkable, and therefore, you end up having, effectively, monetization. Whether you want to call it a debt jubilee
or a wealth transfer, or whatever. The issue I have is that we don’t live in
a world today that has a strong global order. We live in an increasingly multipolar world. Correct. And I’m not so confident that nation-states
are going to be able to come together in order to put forward a solution. Because you’re making the assumption that
the rules-based global order system is what needs to prevail. My interest is the fact that regionalization
and polarization and bifurcation is actually what’s happening, so there is no reason, if
you were to have this set of opportunities, why would China not create a regional currency
block based around, again, I’ll give you loosely in terms of cryptocurrency, or whatever it
may be. It’s irrelevant for this point. We don’t know is the answer. But something different, a different monetary
system. I know a bunch of people would love it to
be gold. Maybe gold is a part of it. I doubt it. But maybe it has a small part. But there is that. And then there’s a US block. I don’t see any reason why you can’t have
a multi polarized world, with multiple systems, which we’ve had in the past. That seems more plausible. That’s interesting. So, that’s more what you mean. Yes. Now, can you have some form of global agreement
to allow this to happen? It would bloody help to avoid war, because
doing this, obviously, increases the probability of war. And there are a lot of forces that are driving
us in that direction as well. So, this makes sense now, what you’re saying,
and why Libra is interesting to you. The reason Libra’s interesting to me is because
what it does is clever. Every other currency has a denominator. A denominator for all currencies is basically
the dollar. Now, Libra doesn’t, because it’s dollar plus
all others. So, what you have is a currency that doesn’t
move as a currency. What is the denominator? Is it inflation? Is it money supply? One of those two? Are they the same thing? We can argue that all day. But what it is, it is a stable currency in
a true term. So, this is better than any of the central
banks have come up with, and a private sector could do it, and it could be managed. So, what it creates is, “Okay, the genie’s
out of the bottle. This is the currency.” Now, so that allows you as government A- What do you mean the genie’s out of the bottle,
this is the currency? Because the argument always was, “The governments
won’t allow it.” Yeah, but you are the US government, and you
want your taxes in dollars? Well, fine, you’ve got your dollars, but you’re
still part of this new currency, which is not dollars. Everything’s based on a global currency based
on a global interest rate” basket, because it was kind of global, two year rates, let’s
say, was that. So, what you’ve got is this whole currency
that only moves with the money supply overall. That’s very interesting because that looks
like a cryptocurrency, for starters. Mm-hmm (affirmative). Yeah, it’s not obviously. As you know, it’s not. No, it’s not a cryptocurrency. No. But, yeah, yeah, yeah. But it has the same kind of idea to it, which
is very difficult to massively inflate it or deflate it or change it or devalue it over
time. So, you have this thing. Because of the peg? Just, yeah, because of the multi-currency
nature of the peg. And there is no peg. It’s got nothing to attack, because it’s all
currencies, so it’s not versus the dollar. So, in itself, it’s quite unique. Now, why the genie’s out of the bottle is,
because governments can allow it because they’re part of it. So, you’re not changing anything. It’s like a swift payment system, essentially,
but all in this globalized currency, but it also means that everyone can set one up. And why governments like it, is I’m buying
your debt. So, I’m Facebook. I’m buying US government debt, and I’m buying
Australian debt and I’m buying Japanese debt, and I’m buying Chinese debt. So, I am actually not getting in your way. I’m working with you. So, that is intellectually interesting. Again, I’m not suggesting for a second that
this is the final outcome, but I’m suggesting that is a massive move forward that I’ve not
even seen anybody discuss before. Well, there are a number of project that are
trying to build or have tried to build stable coins. Yeah, but they do it against dollars. You’re right. So, you’re saying in terms of… Well, there is one project- Because you’re assuming the dollar is stable. Right. But what we’re saying, really, in the world
of a debt jubilee, the dollar is not stable. Right, right, right. So, what we’re trying to say is, “What is
stability in currency world?” Well, stability in currency world is a managed
supply of diversified risk, which what that would be if it was dollars and Yen and RMB
and Euros and pounds and Swiss francs, all in this basket, but it works perfectly if
you’re in Venezuela. People would adopt this as opposed to anything
else. And then you have currency stability. Maybe there’s no currency volatility left. Maybe it goes away entirely. Well, would dollar holders adopt that if that
basket of currencies is worth less than the dollar? It depends what attributes you want. It depends whether it’s stability or exchangeability. Because it doesn’t really need to be a stored
value. They’re all different things. Right, because I think we probably agree that
Libra’s real play is that it’s offering frictionless medium of exchange money, right? No, I think it’s bigger than that. I actually think it is the medium of money. The store value? No, because the store of value is a different
thing. I mean, it is stability. It is money with stability, and it is stable
in terms of it can’t collapse. Every country in the world would have to be
printing excess money for it to collapse in value, and obviously, you still have relative
assets of gold, real estate, commodities and all the other relative assets. But it could collapse relative to other assets,
right? In other words, if it’s still backed by fiat
money. Correct. So, it seems to me that the play for Libra,
as I’ve seen it, it’s a medium of exchange with a billion users. I mean, that’s sort of the play. Yes. And they’re banking on launching this thing
with all those users in place, and then they’re banking on all these developers that have
been developing on permissionless block chains that haven’t been able to scale to come over
to their product, who can help them build. That’s Facebook. I’m talking about Libra as a concept. As a concept. As a construct and a concept of what it is,
which is basically a basket of all the world’s currencies. That, itself, is, I think, more groundbreaking
than Libra as an exchange mechanism. I don’t really care about the exchange mechanism. I think India did a pretty good job with its
payment system. There’s a whole bunch of them out there. There’s a number of ways you can solve that
pie. But this solves, actually, something nobody’s
solved before. So, what backs the STR? What is the STR basket consisting of? Well, it depends what’s in the STR basket,
but the STR basket’s against dollars, right? Mm-hmm (affirmative). Essentially. It’s mostly the primary currency constituent. Yeah. And it looks like an STR, but it’s a private
sector STR, so anybody can issue it. It’s not run by the IMF. Anybody can issue it, because you’re focused,
again, it’s not on Facebook, it’s Libra. It’s not even Libra. It could be Amazon could start their own. Okay, so I think I got where you’re going. You’re saying what’s groundbreaking about
Libra is that a corporation can issue a currency that’s backed by all the other currencies
in the world. Correct. Okay, that’s interesting. Correct. That is stable, that is incredibly stable. Okay, I see what you’re saying. So, what does that mean for you? Where do we go from here, then? What does that mean? So, Libra launched. They put this out there. The genie is out of the bottle, as you say. Yes. A corporation can launch money that isn’t
just its own cryptocurrency, but actually is backed by the full faith and credit of
all the nations’ currencies in the world. Or the world’s strongest nations’ currencies. Correct, whatever it may be, yes. So, what’s the big deal about that? Explain to me why that’s significant for you. Because, then, anywhere in the world, you
have the same denominator, which is the global currency basket. Call it that. Call it Globex. Right? So that is the world’s denominator for every
asset. So, what you’re not doing is, then, if you’re
a Venezuelan, an African, you don’t have the disadvantage of your home currency or the
advantages of a home currency. What you have is the stability of a globalized
currency. So, is what you’re saying, if I’m following
correctly, that the largest companies in the world would sort of develop, either explicitly
or inexplicitly, a de facto protocol of creating their own currencies that are pegged to a
basket of all the major currencies, and that way, they’re able to conduct business without
the volatility that comes from exchange rates. And without the multiple payment system, without
anybody saying it’s a swift payment system. I can cut down swift. There’s nothing you can do. You’ve created money that doesn’t annoy governments. Now, again, it doesn’t mean that this is its
finalized form, but what it’s telling you, is anybody can create more types of money,
but that have different use cases. So, Bitcoin may have a store value use case,
which is superior to this basket, because with the basket, you’ve got the external influence
of every single country, what they do with the printing of money. Okay, so that’s what regulates it like it
is, let’s say, in Bitcoin. So, different types of money will have a different
type of money-ness. And different value propositions. And so, we go into, if we talked about a multi
polarized world, with multi-regionals and a tribal world, you can have a different currency
for everybody. But this kind of globalized currency ends
up as the denominator of all assets. It seems to me, I think I understand where
you’re going with that. It does seem to me, though, that it would
be problematic for countries that have currencies that are consistently depreciating relative
to this basket, right? If they’re engaged in relatively inflationary
policies. So, you still have policing of your own monetary
policy, but my guess is, many countries would abandon their own currencies, because if you
can have this stability, you’ve got perfection. That’s interesting. I need to think about your thesis more. It’s not yet a thesis, but it’s a developing
thought process, because when I looked at it, I always try and say, “What is the not
obvious thing?” And obvious things were, it’s Facebook and
I don’t want to give them my data. All of that stuff. Or Facebook, why should they be allowed? It’s going to be used for money laundering. I just looked and thought, “What’s actually
interesting here is the construction of the money itself.” That’s interesting. I mean, that’s a valuable insight. It’s not one that I thought much about, because
I am familiar with a number of other stable coin projects, but you’re right, this particular
twist is interesting. I have to consider it more. What I came away with, when I looked at Libra,
was I was basically looking at how the Bitcoin community was thinking about it, was, “This
is really bullish for Bitcoin.” Not just because it provides, perhaps, a medium
of exchange for an unscalable cryptocurrency, but also, it just proves the point that Bitcoin
is really uncensorable, because the only reason that Libra’s getting in trouble or getting
censored or all this shit’s happening, is because they’re a corporation. And you can send a letter to Facebook, but
you can’t send one to Bitcoin. I actually don’t think that’s necessarily
right. Yes, you can’t send a letter to Bitcoin, but
you can regulate the shit out of it. So, I think, for me, what’s more interesting
is asking the question, “Why did this happen now? Why such a strong reaction to Facebook?” Right? Yeah, a little bit because hating Facebook
is en vogue. But I think it’s actually because it would
work. I think the reason that Libra has exacted
the ire of the government is because it would actually work at scale. Now, it wouldn’t be a cryptocurrency to work
at scale, but it would work at scale. And so, that got me into thinking, “Is it
possible,” and I have to consider what you’ve said, because I actually posed myself the
question is it possible to create a cryptocurrency independently of the government without antagonizing
the government? And I came away with a temporary. Again, this is sort of a theory in progress,
that you cannot do that. If it scales. If it is strictly a cryptocurrency. In other words, it would have to be a utility
protocol. It would need to be along the lines of what
Ethereum has hoped to create, but has been thus far unable to, and I think will not be
able to, based on foundational scaling limitations of block chain in permissionless environments. Because you’re antagonizing the financial
lobby without a built in constituency. So, if you actually had, let’s say, a scalable
Ethereum, an Ethereum that actually worked, where you could do all sort of stuff like
identity at the station, and building decentralized applications that run on your protocol, a,
you begin to build a market for people that actually need this commodity, and companies
and everyone else, so constituencies. And also, two, your primary application is
not the currency. So, you’re not coming out in the street saying,
“I’m going to take your business.” Because I do think there is a path for utility
protocols, so that was sort of where I was I coming in from. And again, from what you’re talking about,
I don’t see it as a one coin or one solution fits all. Whether it is Hashgraph, block chain, and
a number of other things. Everybody ignores it, but India won the whole
bloody game in one go, by its authentication system. Using fingerprint or retina scans, you can
now buy a pint of milk in India. And the payment system’s extremely fast. It’s not using block chains, it’s not using
the same technology as everybody else. Now, is it as secure? It doesn’t matter. Phase one for them is they process more payments
than anybody else in the way that they did. It’s an extraordinary growth. So, I’m thinking that the world we’re moving
into, the new system, is a fragmented world, too. And different things have different values,
as you say. Some a utility, some a store of value. Some are just mediums of exchange, some are
just because they’ve been adopted. Some will be speculative, some will be non-speculative. Some will be stable, some will not be stable. It doesn’t matter, because right now, in this
world, you could have the Rottweiler owners’ currency, and the Chihuahua owners’ currency,
because anybody can initiate their own currency, and it’s valid. And corporations issue their own currency,
and then, as you digitize all assets, which is what’s happening, everything has a value,
and everything needs a value, and multiple kind of currencies is the only way you can
do it, because essentially what we’re saying is equities, that we understand the equities
and bonds actually become currencies, which is crypto. Mm-hmm (affirmative). Again, slightly long con, it’s a lot of conceptual
stuff. I think I follow you on some of those points. I think one area we definitely agree is on
Bitcoin. Mm-hmm (affirmative). I think that it really, ironically, is a result
of its scaling challenges. The narrative has shifted, and I think Bitcoin’s
value proposition is like digital gold, and as a hedge against systemic risk. I think that’s what its real value proposition,
but the question is, does it have that type of anti-correlation property. Because in the most recent dip that we had
in late 2018, I saw Bitcoin dropped right along with the broader markets, and it’s been
integrated more and more into the mainstream system. So, what role does it actually serve? Okay, so, again, I’m rapidly changing my thought
process all the time, and I’m surprised at myself at how much I’m having to think on
my feet as I’m learning new things and how fast this entire space is developing. I can’t quite get my head around it, but I
had a conversation on Real Vision that’s out, with Dan Tappiero. Dan is an old school macro guy, known him
forever. One of the smartest guys, worked for Druckenmiller,
worked for Stevie Cohen, he worked for Julian Robertson. He’s been at work for everybody, Michael Steinhardt. And Dan has gone 100% Bitcoin. He’s gone, “This is the biggest opportunity
I’ve ever seen.” Like, all of the macro friends of mine, one
after the other after the other, is going, “Okay, forget everything else, this is enormous.” And I sat down with Real Vision and said,
“Okay, well, everybody’s talking the wrong thing. Everyone’s trying to find a reference point
and an anchor point for understanding of a new system. Everyone’s anchoring on gold or store of value
or medium of exchange.” And he goes, “They’re all wrong.” I’m like, “Okay, what are you thinking?” He’s goes, “This is digital trust, and it’s
more ethereal. It’s a much larger thing.” So, he’s basically thinking it is a call up
on the new system. Now, as I said, I think it’s a multi-fragmented
system, but Bitcoin would be the one that would have to be the optionality of the entire
system. Ethereum has its own value and its own case
as things build, as does everything else. But his point is, “Okay, if this is what we
think it is, what is that worth?” And it’s not worth $100 billion, it’s not
$1 trillion. It’s not worth, probably, $100 trillion. The quality of what it’s worth. Okay, so if it trades like an option. It’s a great bet, is his point. Yeah, it’s a great bet, because it looks very
clear with the amount of human capital, intellectual capital that’s going into this space, the
whole, broader digitalization and digital value. In that whole space, okay, I’ve never seen
anything like it in my lifetime. I literally have never seen anything like
it. Most people get cynical because they read
a bit on Twitter and stuff about Bitcoin. They don’t really understand the amount of
intellectual capital that’s gone into this and capital itself. So, I know a lot of the things that are going
on in that space. I realize how much change it is. So, there’s that, then there’s another guy
called Plan B, and I’m just coming back to what people are thinking it is now. There’s a guy called Plan B on Twitter. $100 trillion USD. Why’s it called $100 trillion US dollars? Super interesting. What he did is bloody clever, and I’ve kind
of found out a bit of who he is. He’s anonymous. But what he did is built a very complicated
stock flow model of gold, silver, copper, diamonds, Bitcoin, Ethereum, and all these. I think he put Ethereum in. Basically built a stock flow model, which
nobody’s really done for gold, either, but he’s managed to create a linear regression
of evaluation of where this thing should go and how it trades, versus its stock and flow. So, you have this valuation matrix, and it
works perfectly, because things that have industrial uses don’t act like gold, so gold
is the most pure play. So, they act slightly differently then. And Ethereum acts like silver and copper,
which is more industrial, part precious. While Bitcoin trades exactly like gold. So, when you put it on this slide, again,
it’s deep maths in which I don’t understand any of, but looking at what he’s done, it
basically trends exactly where it should do. So, then he interpolated that onto a graph
to show Bitcoin fair value versus how much he’s mined. And what he’s got is this extraordinary model
that works almost perfectly to show what it should be worth, which is when it gets to
the last Bitcoin being mined, is worth $100 trillion. And that’s without it, then, having its value
in its own right as a currency. So, all of this- Is that a fair comparison? Because there is a physical limit on gold,
unless someone figures out the alchemical equation to create gold out of lead or some
other base metal. In terms of Bitcoin, it’s software. There is no fundamental limitation on the
supply in the way that there is for gold. There is a conventional limitation, but there
is no fundamental technological limitation. Well, there is within the… I had this argument. This is why I sold my Bitcoin. It’s like, when I saw the forks, I said, “Okay.” Back in the day. Yeah. Well, I saw the forks, and I’m like, “Okay,
this, to me, looks like dilution of money.” When you saw the forks, you mean Bitcoin cash
or you’re talking about the Bitcoin cash- Bitcoin cash and all the other forks that
were going on in everything. I’m like, “Whoa, whoa, whoa. I don’t understand this, but this looks like
dilution to me. This looks like fear.” But then, what happened is, they all got ignored. And I’m like, “Oh, okay.” And they actually got treated like dividends
in some cases, or free dividend payouts. And I’m like, “Okay, this is like a script
issue, and not a dilution. I’ve now started to think, “Okay, it actually
strengthened Bitcoin’s case. Bitcoin became the only one. Everything else fell to the wayside. I’m like, “Okay, that was super interesting,
not what I expected to come out of this at all.” So, I don’t really know that, but I do know
that this guy’s model looks like it makes total sense, and I think there is a finite
supply of Bitcoin, because of- Convention. Well, you can’t change the formula. Sure, you can. I mean, it’s software. I mean, you can change it. Well, you can’t, because then you don’t have
Bitcoin, so if you want the austere of value, everybody is incentivized by money to actually- I see what you’re saying. I understand what you mean exactly. It’s very difficult to not do it. I understand what you mean exactly. Absolutely. And I think that gets back to what is the
staying power of the culture in the community, because that’s what gives Bitcoin its value. Yes, and the larger it is, the more adoption,
the more it’s worth, the higher the power is. The behavioral incentives are now absolutely
enormous not to fuck around with it. So, what’s really cool about what you’re saying,
Raoul, is that it brings up the challenges inherent in trying to put a value on something
like this. It’s so new and so different, and the way
of thinking about what is the value of Bitcoin is so new. I understand that this model uses a stock
flow and it compares it to gold, but again, there are fundamental differences between
this and gold. Yeah, but the point being’s, he’s not saying
that. Forget our philosophical stuff. He’s saying, mathematically, it trades exactly
the same as gold. It uses exactly the same store of value, precious
parameters, a rarity value. So, that’s what he’s saying, and so he’s agnostic
when he comes into it. It’s us who’s now putting our anchoring, our
frameworks. Is it gold? It can’t be gold. But what it’s doing is saying it’s trading
that. So, if you say that, to go back to your point
is, what is it correlated with? Maybe we’re not yet at the price of where
it correlates with anything. It’s still going up to get to its $100 trillion
of value, whatever. And again, I’m not trying to throw out these
numbers. These are other people’s work. I’m not throwing out some random numbers to
sound sensationalist, but let’s say it’s still on its path to full acceptance of what it
gets to its value. Well, then, at some point, it’s going to correlate
to risk off, sometimes it’s going to correlate to risk on, but it’s just going its own way,
really, which is a function of general emotion, human emotion’s in markets, implicitly. As people get overly speculative versus the
amount of supply and demand. It collapses back again. It keeps rallying, and we just kind of keep
going on this journey, and we’re trying to patent fit it, because we’re humans and that’s
what we do. It has a been remarkably resilient. It’s been remarkable. You’re the expert on the charts, and it didn’t
drop below $3500. It pretty much just stayed steady after it
fell through the year, and it’s been rising up again. I mean, look, every time I thought I understood,
I haven’t. It’s clear that I have not understood it every
time I thought I had. I thought it was going to go lower, and I
really thought that folks were going to depress this whole value forever, and then suddenly
it’s changed again. I think we’re all still scrambling to understand
what it is. So, yeah, interesting conversation here. I have one more question for you on Bitcoin,
which was what role do you think, and this is an evolving understanding, obviously, what
role do you think it’s going to play? Let’s say we do get a recession and a renewal
in the bare market sometime this year. Or early next. What role does Bitcoin play during that time? Does it, for example, do what gold did? Drop 20% in the fall, during the beginning
of a collapse, and- No, and the reason gold’s dead was because
gold was collateral. That’s exactly the point of having collateral,
you sell it. So, gold is collateral. Bitcoin’s not collateral. And Bitcoin’s actually held by the people
who don’t have the money in the financial markets, so you’re unlikely to liquidate it,
but everybody like me will go, “I need to have some money in Bitcoin.” Because it is an option on the future system. And again, we talked at length today, we’ve
no real understanding what this new system is coming. We’ll understand there’s a lot of things that
are happening right now, and we need to understand, or try and understand. So, I think that is super interesting to me,
is the fact that it is an option on the future, and I think gold will trade that way, too. So, where does that leave gold? Gold is like your own personal reserve asset. People talk about gold as a central bank reserve
asset, and the STR versus gold, and all of this stuff. I’ve no interest. Gold is a perfect reserve currency for me,
for you, or anybody else who wants it. Now, yes, can some government confiscate it? Yes, but you can plan the way around it. So, gold works. It will always work. Nothing changes that. It has its own unique properties, it always
will have its own unique properties. But people who get into this argument of gold
versus Bitcoin, they’re barking up the wrong tree. Gold is a reserve asset for everybody, always
will be, always has been. So, move on, you know? Does Bitcoin fit into that world? Possibly. Possibly, but it also has optionality, which
gold doesn’t have. Well, gold does have some optionality, on
the future system. If we have to go through a systemic change,
gold’s going to be pretty useful to own in that transition period. So, of course it has optionality. Does it have as much optionality as an entirely
new financial system? No. So, let’s talk about, there were a few other
things I have here on my rundown that I want to discuss with you. And one of them is Europe, because you’ve
done a lot of work on the sovereigns in Europe and the European banking system. Tell me why you’re laughing. It’s just, I lived in Europe. I lived in Spain for 10 years, and- You grew up, also, in the UK, didn’t you? The UK, yeah. But then, living in Spain when the Spanish
banking system bailed out, and the ECB forced them to take the 10 or 30 billion Euros, and
if they hadn’t have done it over that weekend, the whole banking system would have gone in
Spain, I was there. I had to buy, and I cannot believe it, I had
to buy a generator, I had to have cash in dollars and Euros and pounds. You had to buy a generator in case? Yes, and food. Wow. Because Cyprus don’t forget was shut down. Your engineer here is from Cyprus. Cyprus shut down, and if that happened in
Spain- Depositors took haircuts. Yeah, but it shut down. So, if you think about it, gas stations have
huge amounts of currency, money in their bank accounts, but with very small margin, they
lost all their money, people with houses, insurance companies. It became a huge issue for the system. Now, Cyprus, that story was never properly
told, and if I had real vision, properly, then, I would have told the story of Cyprus. It was one of the most extraordinary stories. Cyprus was pretty resilient and recovered,
but it was a shocking thing that they did. And we thought that was going to happen to
Spain, and I was there at the time. So, I know how bad Spain was and still is,
and I have been shouting to everybody over the last five years, “Look at the chart of
these European banks, including the Spanish banks and the Italian banks and the German
banks and Swiss banks and the French banks. They’re all going down, and month in, month
out, they go down.” Okay, that’s interesting. They correlate to the European bonds, and
bond yields keep going lower. You’ve got a structural problem with the banking
system, and its illiquidity. They’ve basically given all of their assets
to the ECB to keep them afloat, but the fall of bond yields means that everyone’s returns
goes down, so banks have no profits. Okay, so the share prices keep falling. But they’ve still got a bunch of bad assets
on their books, so you’ve got a real problem across all of Europe, where the assets never
got realized. You’re talking about particularly the sovereign
bonds? No, I’m talking about the housing assets and
all of the bad loans and all of the private sector stuff that ended up on the bank’s balance
sheet, that basically the ECB has been taking off their balance sheets and trying to offer
them a collateral, and give them money, but they can’t inject money back in. There’s no velocity of money in Europe. That was a huge problem in Spain, but is that
also a problem in Germany? Well, no, Germany, I don’t know, necessarily,
what’s causing the problem within Germany, but something stinks badly that the entire
German banking system struggles. So, it is return on capital. It is profitability, but it’s also debt. Because if you have all the money, you tend
to lend it, so the Germans lent a lot of money to a lot of people, and you see the balances
between nations, and Germany’s the lender of currency. So, you’ve got that issue, and then you look
at stuff like Deutsche Bank’s derivatives book. Yeah, it’s $45 trillion or whatever the ludicrous
number it is. Okay, and everyone says, “Yeah, but they’re
netted off. The actual number is nothing.” Or whatever, a very small amount, but that’s
not true, because you don’t know what the collateral is. There’s a whole bunch of complications here,
and so I just look at that, I look at the European situation, and I say, “They’re going
to actually need to have a political solution. There is no ECB that can save this.” And this is why Christine Lagarde, I think,
has been put in. That makes a lot of sense. Because she is, at core, an IMF negotiator,
lawyer, and politician. What do you need to do, what do you need to
get? Fiscal policy across Europe. You have to get some sort of fiscal union
across Europe, some monetary union, which you’ve got, and you need to save the banking
system. You need Christine Lagarde. So, it is a great choice for Europe if that’s
what they want to do. Now, can she do it? Who knows. Will Europe survive in the format that it
is, or will some countries leave? Will Greece leave? Most likely. So, I don’t think it survives in its own way. It’s an interesting point you bring up, because
up until the crisis, these types of crises, this types of existential moments, were great
for Europe, because it was a work in progress, and the idea was, “We’ll use every crisis
to create an ever closer union.” But then, the political will for that ever
closer union broke down. But you’ve also made an important point, so
this will bring us, kind of, to where I want to go. Europe is actually still pretty popular with
certain countries. Well, look, I live there. The Spanish aren’t really arguing about leaving
Europe. No, neither is Greece. No. But countries like France and the UK and Germany,
maybe, may be more likely to, right? Yes, because there’s a different incentive
system. It’s great for Greece and Spain, because they’ve
been net beneficiaries. Greece has not yet had to pay the bad side
of the beneficial stuff, but Spain got a lot of, like Greece, new roads everywhere, new
rail system, new everything. That was Europe, thank you very much. Yeah, you mean borrowing the money. Yeah. Yeah, yeah, the low rates that allowed them
to do that. But not only low rates, but also actually
direct investment from the- Right, FDILs. Yeah, all from the EU itself. Now, direct investment in infrastructure in
southern Europe was a bonus. So, we all saw that. So, yes, there’s a bunch of people like the
Germans who paid for them. They wanted it, so it was their choice to
have closer integration. So, it’s complicated, but Europe is not as
unpopular in Europe as it is from Americans and Brits looking out. Yeah, that’s one thing I don’t think Americans
understand. Greece, for example, I don’t know how much
investment the bureaucracy, like the European Development Fund, or I’m not sure what institutions
would be investing in Greece. I know, for example, the German private sector
put a lot of money in Greece, right? And that’s obviously a lot of money that Greece
owes. But I know that, in the case of Greece, for
example, one of the reasons why being in Europe is so popular is because they don’t trust
their own government, right? They don’t trust their governments. That’s right. Right? So they want to be part of Europe. Also, Greece has security reasons to want
to be part of Europe. Well, everybody has security reasons, right? Because, again, it’s very difficult for Americans
to understand, it is within one generation that everyone was killing each other. And Greece has had its own problems within
that time period, and Spain, it wasn’t involved in World War II, but it had a civil war and
a dictatorship. So, people in Europe, they’re quite enamored
by the idea of stability. They don’t mind somebody saying, “Okay, look,
we shouldn’t necessarily splinter into small factors,” but there is still a splintering
going on. But they don’t want to leave Europe, so Catalonia
and the Basque country, and a whole bunch of places, want to split from the countries
that they’re in, but none of them want to leave Europe. That’s interesting. I mean, I think that’s a great point. I think the issues of civil strife in countries
like Spain or the UK differ, though, from what happens in some of these other, peripheral,
southern, eastern countries, right? Right. Which Greece deals with Turkey. It also deals with the migrants in Syria. Same thing with Italy, which has a lot of
problems, anyway, above and beyond that. And then, some of these eastern European countries,
which have to deal with Russia. Yup. Right? So I think that’s a huge thing. What do you think is going to happen? Or how do you break down the probabilities? The honest truth is, I have no clue. Yeah, I don’t either. I really don’t. I understand fragmentation is going to go
on. Is it fragmentation outside of Europe or in
Europe? I think it remains in Europe. Are some countries going to be either forcibly
ejected or kept, or choose to leave? Possibly. The UK showed that anything can change. But is the Euro going to collapse as a currency? I doubt it. And I think this brings us back to Bitcoin. This is bullish for Bitcoin, and I think it’s
bullish for… Without being specific, I think, if we can
imagine a cryptocurrency or a utility layer, a trust layer, like your friend Dan talked
about, that can actually scale and work, it would allow, theoretically, businesses, small
and large, to be able to conduct, in addition to being able to use the trust layer for all
sorts of new business opportunities, to conduct business amongst themselves without having
to worry so much about what’s going on in the rest of the world. Okay, so this is a question, this is an issue,
is what is sovereignty in that case? In a digital world, there is no sovereignty. And this is something that, philosophically,
I’m trying to get my head around, because you need a set of governance. Now, can you crowd source governance? Possible. Crows source governance looks like religion
to me. What do you mean, crowd source governance? Well, because in a globalized, digital world,
buy Bitcoin. You can’t vote against them, you can’t do
anything. So, how do you imply a system of governance
of stealing, theft, all these things. Governance is essential, absolutely, I got
you. Yeah, but you can’t have centralized governance
in a decentralized system. So, the only way of having centralized governance
in a decentralized system has, oddly enough, been stuff like religion. So, you need to create some sort of social,
economic societal noise. See where I’m going, right? Because somehow, if you were going to have
a cohesive, globalized, digital world, you’re going to have to have a new set of socioeconomic
norms. Because right now, and I’ve talked about this
at Real Vision, right now, if you’re a pedophile, you can hang around a pedophile world online
without any repercussions from sovereign states, because you’re basically in cyber world. Yes, if you’ve got a good secret service,
they might be able to discover that you’re up to no good, or a good police service, but
many aren’t. So, in which case, there’s no governance,
because it becomes a societal norm amongst perverts that they can hang around online
with pedophiles, and it becomes normal. So, what is a moral code in that situation? Yeah, that’s interesting. Right, because don’t forget, pedophilia, in
some societies, was never morally wrong. So, what you’re looking at is what is moral
code, how do you build a cohesive societal moral code in a digitalized world? It’s a really, really interesting topic. So, that is interesting. Let’s actually get less ambitious. Sorry, I’m throwing a lot at you today. Let’s get a little less ambitious, and stick
on money. Because I do have somewhat of an evolving
view on this. I think this breaks down to two particular
categories. I think, in the cast of digital gold and the
case of truly decentralized money, with the least amount of govern, is the most amount
of anarchy, it’s Bitcoin. I think Bitcoin has won that war, at least
for the time being. I don’t see any other potential competitor
in that domain. Again, what is money? Right? What we think of as money is a set of things. Now, the thing about cryptocurrencies, it
means we can separate all of those things. No, let me restate it. You’re correct. Only store of value. Bitcoin will never, ever, ever, in my view,
this is my view, and it’s based on I’ve devoted a good amount of time. I never speak out of my ass. But I could be totally wrong, and there are
all sorts of other people that could have better ideas than me. But I just don’t view Bitcoin as ever being
able to scale. It will never scale its base layer. The only way that it will ever manage to scale
is with second layer solutions, like Lightning, but that’s not Bitcoin. That’s Lightning. Those are two separate things, which means
they would have to build an entirely new financial system to run on top of this base layer protocol
that acts as digital gold, which is basically like the gold standard. So, therefore, it is the collateral to the
new financial system. That would be correct. That’s exactly what Bitcoin would be. That’s an interesting concept, right? Bitcoin is the collateral, and the layers
have yet to been built. Yeah, that’s totally possible. Absolutely. Yeah, that’s interesting. Yeah, yeah, yeah. So, that absolutely is, and I think that it
could have that role for all sorts of different reasons, and in all sorts of different ways. But I don’t think it’ll happen by the second
layer of solutions. It can still be, but I think that there are,
as you know, I’m an investor in Hashgraph. We’ve talked about it. I’m very bullish on Hashgraph, because I think
that their particular model addresses the second half, which isn’t just the fact that
it’s a utility protocol, and that it would actually be able to scale to provide the solutions
for a lot of the use cases that we’ve been told about for so many years, that we’ve heard
about. But also, it has a governance model that I
think is enterprise friendly, and that corporations would feel comfortable building on. It’s also, transactionally it has the throughput,
and the security to work as a medium of exchange, right? And I think, because of its governance, it
can function in all of those different ways. You could build a financial system using either
Hashgraph with Bitcoin as collateral if you really wanted to do that. Right? Because Bitcoin’s not going away now. I think we all kind of agree. Because in which case, it’s forming some part
of this future system. Well, it’s part. I’d go there. So, my guess would be, it wouldn’t even necessarily
be the collateral of the future system, but I do think, here’s the interesting thing. Gold had cultural acceptance and social status
independent of sovereigns, right? So, during the classical gold period, it wasn’t
just that governments decided to put gold at the center of global money. It sort of had value in and of itself, right? So, I think, first and foremost, Bitcoin has
established the fact that it has some value. I think it will continue to have value, but
I don’t necessarily think that it has to be the foundation of a global financial system. I think that there are opportunities with
alternative protocols to do that. Anyway, I think it’s super early in terms
of talking. Yeah, and true, I agree. I don’t know. We’re just observing, trying to attach probabilities,
but even that’s hard. Yeah. Well, I’ve said to you, this area, the reason
I got into this entire space about two years ago was because of what became a technological
fascination with the scaling problem. And that’s really been my focus for the most
part, because there was so much hype and so much bullshit. Right? So, I’m only now beginning to think about
some of these other things. I came into it the opposite way. I came into it thinking somewhere in this
was the answers to the financial system, so I got into this 2012, 13. 12 I started looking at it. $200 you said you bought in, right? Yeah, that’s when I first bought it. I’d written about it, because I wrote the
first article at [inaudible] I hadn’t realized, because I’m not good with the kind of maths
that Plan B guy did. But I basically said, I imputed the gold supply
and demand. Above ground supplies, blah, blah, blah, how
much gold was still yet mined. Did the maths into Bitcoins, and Bitcoin’s
worth $1 million if we price it like gold. And at the time, it’s worth $200. I said, “Look, this is a cool option.” I may be right, it may be wrong, but it’s
not worth $200. It’s either worth zero, or it’s worth 10x,
50x, whatever it was. So, that was then, but I also knew that somewhere
within this was the financial system. And I’m still sticking to that, but I don’t
know the answers. You’ve looked at much more of the technology
side than I have, and all I know is, yes, it’s flawed, but a lot of things are flawed. But it’s going up. Yeah. And it’s telling you, and going up in this
world, means adoption. Adoption in what terms? I don’t even know that. And more than just going up, it’s proving
itself to be remarkably resilient, flexible in its narrative. That’s also very impressive. It’s managed to shift the narrative. It’s going to be future money, it’s going
to be the medium of exchange, and it’s shifted now. What it is telling you, at a top down level,
is that digital assets have value. I’m really interested- And natively digital assets. I’m also interested in stuff like, because
once you can issue tokens and stuff, create currencies. So, you could issue one on yourself. You’re using Patreon right now. Let’s say you issued a currency in yourself. Now, we could all buy, and it could trade,
on your future expectations of earnings. That becomes incredibly interesting, and it
could be on the podcast itself. It could be on future revenues of the podcast,
or whatever it may be. So, we can slice and dice it, and we can fractionalize
you down to kids can buy a small fraction. They all want a piece of Demetri, well they
can. So, think of how that changes sports! Imagine is Christiano Reynaldo’s value in
a digital world. Well, it’s probably 50x what he is, because
you can buy a share of him. So, what we understand, and sorry I’m getting
philosophical again, is what we understand is shares in corporations, which was the great
breakthrough of the last 400 or 500 years, 400 years or so, we’re now about to change
that dramatically into digital fractions of anything, of absolutely anything. So, students can sell forwards on their income. You can buy coins. This whole thing is, basically, the fractional
private jet ownership was just the start. How we’ve done the same with the cloud and
storage and all of this stuff. The fractionalization, the digitalization
of the world. Everything could have a value, so all of these
things could trade. So, a stock exchange of the future has gazillions
of assets. I could trade French kids over Swedish kids,
because I think French kids get a better education, and so I could do one Paris trade. Incredible stuff of extracting value from
things. That can be done. Yeah, and you create business models that
don’t currently exist. You can run applications peer to peer in such
a world, and this brings it back to, again, my interest in Hedera is because it’s a scalable
base layer that I think can achieve these types of use cases, but you could, for example,
run applications that currently are server inclined. You could run them all peer to peer, but where
you need to rely on a trusted repository, you can use a distributed ledger. So, it changes the opportunities, and I think
all of those go on that side, and then there remains Bitcoin. I think they end up being split, because I
don’t think that you’re going to have multiple. I generally don’t think that you’re going
to have multiple utility protocols. I think you’re going to have one really good
one, is my view. But I think Bitcoin is here to stay. I don’t know for how long and I don’t know
what valuation, but I think it’s proven remarkably resilient. We’re just getting warmed up, Raoul. We’re going to switch to overtime. For regular listeners, you know the drill. If you’re new to the show or you if you haven’t
subscribed yet, head over to Patreon.com/hiddenforces, where you can subscribe to the audio file,
Autodidact, or super nerd tears, and get access to the Overtime, where Raoul is going to tell
you exactly where to put all your money, so you can get rich. I’m just kidding. Also, transcript of today’s conversation,
as well as a copy of this week’s rundown. Raoul, before we go, you are the founder of
Real Vision, among other things, and you also publish a daily newsletter. If people want to follow you on Twitter and
online, how do they do that? Yeah, so the easiest way, follow me on Twitter,
which is @RaoulGMI. So, that’s my writing business, global macro
investor. That’s where I write a lot of the macro economic
stuff. I then also have Real Vision. So, the easiest thing to check out Real Vision,
which is basically the Netflix of finance. It’s an incredible, incredible platform of
the smartest people in the world talking in depth about what they’re looking at in the
financial world. The opportunities, risks, threats, all that
kind of stuff. The easiest way is just go to the website,
realvision.com/free. There’s a whole free version of it, so check
that out first, so you don’t have to pay anything for anybody. So, realvision.com/free. And I should also mention to listeners that
Ben Hunt, last week’s guest, did an episode about a year ago with Grant Williams on Real
Vision, as have a number of our previous guests, Lacy Hunt, Josh Wolf, et cetera. And I believe, actually, Josh Wolf will be
doing one very soon with Real Vision. Yes, he is. Next week, so the week of the 24th. Yeah, so Raoul, thank you so much for coming
on the show, and stick around. Yeah, absolutely. Fantastic. Really enjoyed it. Today’s episode of Hidden Forces was recorded
at Creative Media Design Studio in New York City. For more information about this week’s episode,
or if you want easy access to related programming, visit our website at hiddenforces.io, and
subscribe to our free email list. If you want access to Overtime segments, episode
transcripts, and show rundowns full of links and detailed information related to each and
every episode, check out our premium subscription available through the Hidden Forces website,
or through our Patreon page at patreon.com/hiddenforces. Today’s episode was produced by me, and edited
by Stylianos Nicolaou. For more episodes, you can check out our website
at hiddenforces.io. Join the conversation at Facebook, Twitter,
and Instagram @hiddenforcespod, or send me an email. As always, thanks for listening. We’ll see you next week.

100 thoughts on “Raoul Pal | The Fourth Turning: Generational Theory and the Future of Global Money”

  1. I think Raoul is forgetting currencies value is derived by its purchasing power . Globalised currency build up in certain areas would be inflationary in areas of low production or fewer goods .
    Face book bank is just that , a disruptive service challenging the way we do banking , sure it offer the advantage to pivot into another fiat currency , but it's still backed by fiat and easily manipulated and printed Who decides and creates the demand for one currency over another of the basket of currencies .
    A debt jubilee wont solve the problem of the economic structure , the U.S will still be a finical counterfeiting industry posing as a financial economy . There would just be another jubilee in a few years time .
    Debt destruction is the only way forward , a good lesson if gold is the anchor in the new currency system .

  2. Why the concept that governance and monetary system must be entangled as a package deal? Bitcoin is among other things an expression by society of our desire for the separation of finance and state. Decentralized is the point and also the reason why hashgraph will likely not be adopted as currency or store of value or any fundamental aspect of the monetary system. Maybe it has a use case.. but money isn’t it.

  3. Facebook Libra is the new SDR i think. And yes i agree with Raoul that governments will like it. Its a new world currency for the world. Perfect new world order material.

  4. Boomers: an albatross around the neck of all ensuing generations. They never stopped being spoiled-rotten oxygen thieves. And their music isn't even that good.

  5. How sad. Should call this the Confused Alchemy Episode. Fake is real, freedom through slavery, trust through control, reward through irresponsibility fad over principle, wealth through debt, and on and on and on…

  6. Okay so if Facebook controls the global currency, what happens to it in the event it goes bankrupt. So insane that people are actually onboard with the most distrustful company in the world controlling your money

  7. Fiat transferred to fiat on a digital scale with zero inflation. Why didn't the fed think of that?🤣🤣🤣🤣

  8. Raoul Paul is a follower of the trendy new dollar liquidity school of pseudonomics. Harry dent deflation logic was some confusing monetary lingo sprincled in.

    he is going to be the Andy Hall of US tsy debt. The US dollar fell 14% against the Euro and 12% against the yuan in 2017 yet everyone keeps giving Raul all this credit for his perma dollar bull stance.
    And there's a new faux dollar bull out there who always thinks that they are the contrarian. Yeah right.

  9. The recent content of the Hidden Forces pods has been absolutely 1st class. And the thoughts provoked by one guest seem to be expanded on by another. Bravo 👏

  10. Great conversation. However, I think the transition to an alternative monetary system will ultimately be futile. In essence, it will be just another reset of the current system. What needs to happen in evolutionary and revolutionary terms is a move away from a monetary based system to a resource based system. That will address many of the issues and limitations and challenges our world is facing. A very good source of information on a resource based economy is the work of Mr. Jacque Fresco, who's YouTube channel is The Venus Project.

  11. Libra will fail for the same reason the dollar is failing, politics. If it's decided we don't "approve" of your thoughts or actions, you're cut off. The cuck Zuck is not Andrew Jackson!

  12. I feel like bitcoin is worth nothing. Only things gifted by the universe have value. Land, food, solar energy, resources.

  13. 14:00 minutes of the video: It's even worse than that. Everyone believes the government is going to take care of them in their old age so people don't/didn't save and now look what's happening.

  14. These guys cant see the future of BTC. in 10 yrs BTC will pay for transactions over $100M+, LTC will pay for the rest. BTC and LTC are the same code, with only the speed difference (at this stage). BTC will not scale ever, it does not need to, LTC will scale via lightning and have privacy features (maybe), now this important, LTC will be joined to BTC by a perfect conversion via an atomic swap. Pay in BTC get LTC in change. This is why LTC is trending with BTC, the informed know this marriage will work. Bitcoin is really LTC and BTC combined family. Just like gold (BTC) and silver (LTC) transactions over the last 2000+ years. It is just a digital format.

  15. The cryptocurrency market will experience a market optimism in 2020, as not only Bitcoin, but all the major cryptocurrencies will also experience an upward shift. The governments and the central banks will embrace the digital currencies; hence the demand should be more. So I want to purchase some more Bitcoin in advance… and bet on the side that always wins. That is a pretty safe bet, although I was able to increase my 2 Bitcoin to 30 Bitcoin in a very short amount of time with trades that yielded consistent winnings which was done with the help of Gérard Barrientos who is a Pro Trader and has been helping beginners in crypto investors showing them ways to trade their Bitcoin, he is down to earth and always ready to serve, I made profits, and it was worth it. I urge all of you to contact him now on for more assistance e-mail; gerardbarrientos6672 @ gmailcom. for your signals and tips on how to quickly create a work strategy to increase your portfolio and earn profit Consistent and consistent. Still a big fan and I like your channel but had to get this off my chest.

  16. Raoul Pal seems to have re-discovered Tim May, crypto-anarchism, and the cypherpunks. Read “Cryptoanarchy, Cyberstates, and Pirate Utopias” by Peter Ludlow.

  17. Libra is a trojan horse / scam. Not real crypto (they can receive subpoena's and thus be controlled by governments).

  18. Nice to do this, but was obvious, you didn't get what he was saying, all the currencies in one common basket they self regulate. The libra represents the value of that basket. STABILITY

  19. Libra, controlled by a corporate cartell (the Libra Council) sounds like the single most significant step toward a dystopian nightmare of total corporate control over every aspect of our lives. I can't imagine any worse idea.

    On the other hand, a decentralized version of a stable-coin based on a basket of currencies (and/or other assets) might do a lot to free everyone from centralized control.

    Edit: This all has to be viewed through the lens of "the end of cash." A world where literally every exchange you make (including giving your child their weekly allowance) is tracked, analyzed and a small fee is deducted is not something any sane person wants to see.

  20. Not only would Libra buy national debt but it would buy national control of governments that depend on it working. It is a dangerous idea that would lead to digital control of social media as well as the financial system, just like China. I doubt governments will allow such a challenge. Don't believe that FB will be more trustable than our government.

  21. My god guys. Its already happening. The new financial system is being built around the Interledger Protocol. The XRP Ledger is best suited for operating the internet of value.

  22. It would not be perversion if the government could write down the debt without adding to the current debt, in other words, assisted pinpointed public good creation!.

  23. The fate of the current generation fills me with sadness as I see the government stripping every hard-working citizen of their major asset which should be inherited by their children, their house for the payment of their care fees in old age! The government is actively stripping this generation of every single wealth asset they could possibly create for what is the point of interacting in the system if the end result is no ultimate gain for you and yours. People should be able and assisted by the government to create wealth and not stripped of everything they have. There is nothing to stop government supporting people in their old age if they will create pinpointed money for the "public good" backed by debt jubilee Steve keen economist style.

  24. government can tax everyone with the push of a button…….really? how about freedom, for a change? peer-to-peer currency exchange will provide this.

  25. Everyone wants to counterfeit the currency as coupons. No one wants to mine gold or do real work in the real world. All digital currency is a scam, counterfeited, as are stocks and bonds. Only gold is real money. Credits are not money. We are losing touch with reality in fantasy cities with digital subsidies and digital fake life. Elites are competing for global control with no risk, no work, no labor, for free slaves. The 99% will be free slaves working for computer credits. There is no value in digital currency. It's all fake, like images in a mirror.

  26. Please be mindful to speak less and allow your guests to educate us with minimal interruptions, from you? I feel like there's a little "showboating", and definitely interrupting Raoul, on your part. I would have enjoyed this interview far more, with less of your interruptions. Thank you!

  27. As we see in the Euro area, a single currency is not enough? A banking union and fiscal transfers are also required? Without these the Euro will possibly at some point cease to exist, at least in its current form? World money is a great idea in theory, but in practice some form of world government would be required? Is this likely in the near term? I am not convinced…but open to the idea.

  28. If you would like to support the show, subscribe to our Patreon for exclusive overtime segments, official transcripts, and show rundowns! https://www.patreon.com/hiddenforces

  29. Libra is the most evil concept since the creation of the B.I.S. and the Central Banks! Bitcoin is the most stable currency ever created. What is unstable is the U.S. Dollar. 21 million Bitcoin will be created. Limitless Dollars are being created.

  30. Chickens without heads also run in cyclical theories, $14T negative yielding debt, what could go wrong, "suckers have to get screwed so they know they've had a good time". What's on TV tonight? Pinot or Chardonnay. Sixth mass extinction Trumps Capitalism.

  31. just give face book an army and let them launch moon rockets and develop viruses to control world population. What could go wrong? heck lets just kill anyone who disagrees then nothing could go wrong….

  32. Buy gold and SILVER…Trump's trade war has accomplished nothing tangible because that is the point. The goal of the trade war is to act as a distraction and scapegoat for the implosion of the Everything Bubble.

  33. Gold and silver have been
    manipulated in price
    for MANY years by
    fiat – based governments.

    Bitcoin was created after
    the last crash – governments
    allowed it to trade without
    interference until it became
    a threat.

    Unless the world finally says
    no more to fiat currencies – nothing will change but starting the ponzi-scheme all over again.

    Paper money was used for
    convenience to transact, but
    allowed to convert to actual
    metal at will to show stability
    of the currency.

    I think crypto currency is the
    future, but it must be able to
    convert to actual metal – this
    made the US $ stable to the
    price of gold until the US FED
    was created and Nixon ended
    convertibility completely.

  34. You guys should take a hard look at EOS. It has by far the most dapp users. It has already secured a small bubble in online casinos. It has by far the world’s most liquid DEX (Newdex). It has the largest de-fi project (REX, which holds about half a billion in value via smart contract).

    The chain uses onchain governance for security, which isn’t perfect, but thus far it has worked. The network consensus has yet to breakdown. No block has ever been reversed. The release of voice.com will allow secure identity to be stored onchain and other projects like CHL and EVA already have geo-location onchain.

    EOS is growing quickly in China, and I think the western crypto community has just completely missed the boat on this

  35. Since July 29 when this was posted, Libra is being discounted and will not get off the ground. What a difference a day makes. There is no way the people in power will give up their power. Also… All Fiat Currency Which Libra supposedly would be pegged on, will be finished by the time they launch Facebook Libra. To even mention Libra makes me laugh.
    GOLD STANDARD COMING—Partnered with Bitcoin to eventually be completely Bitcoin as cap hits 8 Billion.

  36. We are digitizing reality. With the 5g network, human consciousness will be able to "move into" the internet/blockchain. This corresponds with the physical extinction of the species brought about by global warming.

  37. There are 10 Million People for each person in the financial lobby. Everybody has tried to stop it and failed.

  38. Nothing in this world is happening by chance. Military industrial complex controlled by the international banksters and secret societies had long planned for this digital currency conversion to refresh for their end game total surveillance personal and economic global control. Bitcoin is just a start towards that path. BTW what do you mean you can trade kids?!!!!! That didn’t sound right one bit!

  39. Excellent spectrum of content and freedom of thought.
    Libre coin is certainly not something that would attract die hard bitcoiners yet it will spark western adoption through a ready made medium such as messenger.
    Bitcoin however doesn't have the same challenges like Libre such as KYC, AML, 193 different regulations. It will never be allowed in China as they have their own state backed weechat, or North Korea and many other isolated States.
    Bitcoin is in a way better than gold as the world gold council estimates there is 193,000 tonnes in existence and another 50,000 tonnes yet to be mined and who knows what other mines they find as Antarctica exposes more uncharted land so its not really finite but will have value. Bitcoin has already produced 85% of of its 21000000 coins and when you start thinking in bits/Sat's that is 2.4 gazillion it has more than enough supply to consume the entire array of global currencies including precious metals and handle those IOT payments + see how far you get in an airport with your bag of sovereigns.

    In the new digital age our biggest import and export opportunities are IP share ideas globally production and manufacturing of everything locally and watch carbon emissions drop.

  40. This discussion strayed way too far. To assume that something entirely new would replace the existing financial system, something that can be created and live in the long run outside of existing institutions and power structures seems highly unlikely. The right to issue currency was taken from private banks first by the Bank Charter Act of 1844 in England, which exclusively gave that right to the government. Assuming that the small amount of $200b in speculative assets put into Bitcoin would reverse that seem ridiculous. Much more likely is a regulatory crack down. The trend is the other way where the banks could loose the right to create credit, which de-facto creates new money every time credit is granted. The 2018 Swiss Sovereign Money initiative (referendum) is a good example of this. While it did not pass this time the initiative seems to make a fair argument, saying that the public should be paid interest for the privilege of creating new money. Why are banks allowed to create money from nothing in the first place? I think Raoul is right that debt forgiveness has to happen at an international level and in unison, but still the path of least resistance seems to be for the different central banks to buy up this debt. Inflation is not a necessary bi-product if its done in unison, but the need to re-distribute wealth will be. The necessary ingredient for this is an upgraded political system as a prerequisite for revising the financial system.

  41. Bitcoin is the hardest money every created. It's a great way to preserve your wealth that you use your human time to earn. It's as simple as that. Bitcoin is hard money because it's hard to duplicate, hence the energy used to secure the network. The more energy used, the higher the hashrate, the better the security, better store of value, more people store their value, price rises because of demand, more miners join the network to profit, raising the energy and the hashrate and the loop-keeps-going. Bitcoin Is HARD money. Everything else is a byproduct (volatility, energy consumption, wealth concentration, hard forks, alt coins, transaction speed and cost) that doesn't matter if you understand this main value proposition.

  42. I am tired of all this bitcoin, smitcoin nonsense.
    GOLD has been used as a basis for currency since the dawn of civilization.
    After the next crash, the World will revert to that.

  43. Good insight, well said points of view. 53:25 exactly, been thinking this for years, hence why I think BCash & Ver has his argument all wrong. Just Buy Bitcoin 🤫

  44. Anyone who thinks the global order needs to prevail is either uneducated or sold out. That is if you think freedom is a virtue.

  45. The problem with any currency is often that it is not a reliable store of value. So unless it can be used AND disposed of simultaneously there will be an incentive for some members of a universal currency to inflate at a higher rate than the other members of any joint currency won't there?

  46. New structure… the internet and all infrastructure. New currency… bitcoin. Debt Jubilee and boom, new system. Buy Bitcoin.

  47. Libra: think "store credit" shared by a cadre of merchants. Motive: If they hold your money for you, they can use it as they want. Problem: they loan it out to get the interest, and then don't get paid back. Oops!

  48. The new economy will be a gold backed one. There is absolutely no doubt. Basil 3 making gold a tier one asset officially central banks and countries buying more gold in the last five years than they have in the last 55 combined it’s about to hit 1,450 bucks!! It could be 2000 by the end of the year
    it’s going up like a rocket right now …….think about it!
    The world governments will probably peg to a gold backed SDR digital currency for international trade, while individual countries will gold/ silver back their own currency for international trade.

  49. why cant you have centralised governments in a decentralised economic system? I wish he would have explained his thinking on that one a little more

  50. The problem is any and all challenges to the US $ will result in overwhelming legislative attack. The US have invaded all countries that have challenged the reserve status of the dollar. Are we suggesting bureaucrats in government will understand the Nuance of digital currency and give them the benefit of the doubt, I don't think so.

  51. I love that Bitcoin or digital currencies are not mentioned in the title, but is the core of the topic. Raoul touched a very important point about (central) governance in a decentralised system. Governance in crypto is a topic on its own. So far I only have seen one project that is focusing on the governance issue in crypto. Good show! I am subscribed.

  52. they said the same thing about the internet that it couldn't scale. bitcoin will scale as needed with technology and updates.

  53. I dont know why you talk so long about Libra as the overall world currency, when that's what the overall point of SDRs is. The world powers have been creating a basket of the major currencies that's representative of each of their weights. China and Russia stock up on gold, to back their own currencies and get off the USD. They then release the SDR not just to reserve banks, but as smaller bits to the population. So we all have SDR as the denominator, but can trade in our regional currency with Gold backing. Why bother to introduce private companies like Facebook into the system?!

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