THE GREAT RESET Financial Documentary
A Look At The Possible Global Financial Future
A documentary that explores the current state of our economy and the impact a new monetary system like Bitcoin can have on the world
The Great Reset and the Rise of Bitcoin
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00:06
The governing council decided the following:
00:10
First – We will continue to conduct net asset purchases
00:15
under the pandemic emergency purchase program with a total envelope
00:21
of €1,800 billion, until at least the end of March 22
00:28
and in any case until the governing council judges
00:32
that the coronavirus crisis phase is over.
00:39
Morning Joe, you have the European Central Bank
00:42
doing what economists thought they were going to do.
00:45
They added to their pandemic emergency purchase fund by €500 billion.
00:49
By my count, that takes it up to 1.85 trillion total.
00:58
It is an absolutely historic,
00:59
both in terms of the speed of FED purchases
01:02
and of course, the magnitude.
01:04
Here’s a chart that shows
01:05
what’s happened since March, the last three weeks
01:08
have seen this huge ramp up in a ways that you’ve never seen before.
01:13
And let’s look at what’s changed here
01:15
since the FED last met, we got to $1.9 trillion in relief
01:19
enacted by Congress, signed by the president.
01:20
Senate Democrats have just released the text of their $3.5 trillion budget resolution.
01:26
Can you characterize everything that the FED has done this past week
01:30
as essentially flooding the system with money?
01:33
Yes, exactly.
01:34
And there’s no end to your ability to do that.
01:37
There is no end to our ability to do that.
01:39
Simply flooded the system with money.
01:43
Yes, we did.
01:44
That’s another way to think about it.
01:46
We did.
01:46
Where does it come from, do you just print it?
01:49
We print it digitally.
01:51
So we, you know, we as a central bank, we have the ability to create money digitally.
01:56
And we do that by buying treasury bills or bonds
02:01
or other government guaranteed securities
02:03
and that actually increases the money supply.
02:05
We do believe that inflation numbers in 21, which we will see rising.
02:11
I can’t find any period in history
02:14
where monetary and fiscal policy were this out of step
02:18
with the economic circumstances, not one.
02:20
In six weeks last spring.
02:25
We did more QE, more purchasing of treasuries
02:29
than we did the entire time in a 9 year period from 2009 to 2018.
02:34
And if we ever get into inflationary psychology, like for instance,
02:38
we did when I was in my twenties
02:41
back in the seventies, if we ever get that again.
02:45
And if you ever got retail actually nervous about inflation,
02:50
then the one thing that leads inflation, which is commodity prices,
02:54
it’s the easiest tautology there is,
02:56
those things can literally scream double or triple with no problem whatsoever.
03:02
And valuations for both interest rates and stocks are at,
03:08
if you combine the two, they’re so overvalued,
03:11
they’re at 100 year highs.
03:13
I don’t know what you do.
03:14
I am so afraid of democracy
03:18
getting the idea that you can just print money to solve all problems.
03:23
And eventually I know that will fail.
03:25
In the end, if you print too much, you end up in something like Venezuela.
03:31
It’s mathematics.
03:32
The fiat currency is now the error term that solves
03:36
the growth in the numerator, which is your total global debt
03:41
versus the denominator, which is total global GDP.
03:45
And we have reached a point of no return where the numerator
03:49
is going to outstrip the growth of the denominator
03:53
under any plausible scenario, which means you need to print money
03:58
to solve that debt spiral.
04:13
We’ve all heard of our economic cycles and how according to most modern economy books,
04:17
it is normal to have a period of very quick growth and expansion,
04:21
followed by a period of contraction and economical crisis,
04:25
as described in 1946 by Arthur F. Burns, former counselor to the president
04:29
of the United States, and Wesley C. Mitchell, American economist.
04:34
Business cycles are a type of fluctuation found
04:36
in the aggregate economic activity of nations.
04:39
A cycle consists of expansions occurring at about the same time
04:43
in many economic activities, followed by similarly general recessions.
04:47
This sequence of changes is recurrent, but not periodic.
04:51
History, though, shows us that before the 20th century,
04:54
financial crisis arrived because of external events.
04:58
The most popular being war.
05:15
There had been only one financial crisis
05:17
not attributable to external events, and this was the panic of 1825,
05:21
where around 70 banks went bankrupt due to risky investments.
05:25
And because of this man, Gregor McGregor,
05:27
that had pulled big investments
05:29
into colonizing a country, that didn’t exist – Poyais.
05:35
If we look at history, what turns out, what we find out is the fact that
05:41
this cycle really started about 100 years ago,
05:45
and there’s an important factor to that.
05:47
It’s the fact that in the year in 1914, every big nation in the world
05:53
just started leaving the gold standard.
05:56
Now, the gold standard is the fact that all of the money
05:59
that a central bank has, controls or produces
06:04
is only based on the amount of gold that they hold and the price of gold.
06:09
Therefore, the amount of money
06:12
supply available is relative to the gold that is held.
06:15
This was dropped.
06:17
And this is what led to a lot of financing for the first World War
06:21
and even following the second World War,
06:23
because governments realize that they have this huge power
06:28
that is, get rid of the gold standard and we can just print money
06:32
as much as we want.
06:33
And in fact, this happened many times in history and was often the reason
06:38
why governments, countries or civilizations were simply dropping.
06:43
The Roman Empire is a great example of that.
06:45
From the moment we dropped this gold standard,
06:48
so around the year of 1914, the UK was the first country to do that.
06:52
This is the moment where we started seeing
06:55
these short term and long term cycles, particularly the short term cycles.
07:01
We are now over 100 years after leaving the gold standard,
07:04
and it is a fairly accepted fact that our economy works in cycles,
07:08
based on a period of inflation, followed by a period of deflation.
07:12
The fact this only started 100 years ago
07:14
should tell you that our monetary system has flaws
07:17
all while being the reason for the unmatched growth we had as a species
07:20
in the 20th century.
07:30
This inflation is due to our reliance on debt and credit.
07:33
According to modern monetary theory,
07:36
debt is the driver of economic growth, not productivity.
07:39
Ray Dalio explains this well in his video –
07:42
How The Economic Machine Works.
07:43
Over time we learn and that accumulated knowledge raises our living standards,
07:48
we call this productivity growth.
07:52
Those who are inventive and hard working raise their productivity
07:55
and their living standards faster than those who are complacent and lazy.
08:00
But that isn’t necessarily true over the short run.
08:03
Productivity matters most in the long run,
08:06
but credit matters most in the short run.
08:09
This is because productivity growth doesn’t fluctuate much,
08:12
so it’s not a big driver of economic swings.
08:15
Debt is, because it allows us to consume more than we produce
08:19
when we acquire it,
08:21
and it forces us to consume less than we produce
08:23
when we have to pay it back.
08:25
And as stated by Dylan LeClair in his great article –
08:28
The Conclusion of the Long Term Debt Cycle and the Rise of Bitcoin.
08:32
Although productivity is the most important aspect
08:35
of any economic system over the long term, not productivity
08:39
but the forces of debt
08:40
are the main driving forces in volatile economic swings.
08:44
Coming back to the cycles, Ray Dalio describes the long term and the short
08:48
term debt cycle and how they relate to human productivity.
08:51
Debt swings occur in two big cycles.
08:55
One takes about five to eight years and the other takes about 75 to 100 years.
09:00
While most people feel the swings, they typically don’t
09:03
see them as cycles because they see them too close up.
09:06
Day by day, week by week.
09:09
The short term debt cycle can be observed
09:11
by looking at different metrics, including the debt to income
09:14
ratios and interest rates set by the central bank.
09:17
Yes, the central bank essentially sets the rules that allow our economy
09:21
to expand into unreasonable debt and later decides when it can break down.
09:26
This is the so-called boom and bust cycle.
09:28
The most recent ones being the global financial crisis of 2008
09:32
and the dot com bubble of the year 2000.
09:35
The long term debt cycle is made of multiple short term cycles.
09:40
While our economy goes up and down during each of these cycles,
09:44
it does bring growth in the long run.
09:46
And with each cycle, our economy continues accumulating debt
09:50
indefinitely because we prefer borrowing than repaying debt.
09:55
There reaches a moment when there is more debt to pay than income.
09:59
Historically, this is when the long term debt cycle shifts,
10:02
people stop spending and start repaying debt.
10:05
And instead of growing, we go down.
10:08
We see recessions, increase government support,
10:10
devaluation of currencies, social unrest and so on.
10:14
There comes a time when our economy has sufficiently de-leveraged
10:17
and the economy starts growing again
10:19
following the short term debt cycle again.
10:23
During these de-leveraging events,
10:24
three strategies are adopted by central banks.
10:27
First – Lower the interest rates.
10:30
Interest rates are set by central banks and they set the
10:35
rules as to what is the cost of borrowing money.
10:39
If they lower it, then it’s cheaper to borrow money.
10:43
Therefore, people will be more inclined to borrow this money
10:47
This leads to the spiral of just wanting to borrow more
10:50
and more and more because it’s just easier to borrow.
10:53
And right now, if you look at the numbers the central bank,
10:57
central banks all over the world have been doing this for years now
11:01
because we work on a standard that is mostly based on the US dollar.
11:03
What matters is what the U.S. central bank does, and if they lower interest rates,
11:10
then everyone else will also lower their interest rates.
11:13
This increases the value of assets and makes it easier to get credits.
11:17
This is the first strategy used.
11:19
Today, these interest rates have already dropped drastically
11:23
for the main economies and have turned negative in many.
11:26
If interest rates drop to zero,
11:28
then there is no logical financial incentive to lend money.
11:32
It can continue for a while until it doesn’t.
11:37
Second – There’s quantitative easing, also called money printing.
11:41
What this guy was talking about, it allows the central
11:44
bank to buy debt securities and financial assets.
11:47
It places cash in the hands of investors but doesn’t help citizens,
11:51
asset prices skyrocket, usually creating inflation,
11:54
which makes asset holders that tend to be the wealthy, richer
11:58
and the poor, poorer as their savings lose value.
12:02
This is the case today, with real estate skyrocketing globally
12:05
and other raw materials skyrocketing too.
12:10
Third and last, is increased welfare spending
12:12
or other instruments, such as stimulus payments.
12:15
If there is any kind of crisis, well the people that bought their house,
12:19
they’re not going to try and do any more financial
12:24
schemes and things that would allow them to
12:26
to protect their investment
12:27
because they just don’t have the knowledge or the skills
12:30
and even the instruments to be able to do that.
12:32
So they’re the ones that lose the most right
12:34
because investment banks think they know what’s coming,
12:36
they know how to deal with it and they’ll get out of it.
12:39
But this creates basically a gap between the rich and the poor.
12:44
And this is a lot due to money printing because this money
12:48
gets distributed into the economy,
12:52
but it doesn’t get distributed into the hands of people.
12:55
It gets paid to banks, it gets paid to investors,
13:00
and it just gives them another business.
13:01
And it gives them more cash to be able to take on more positions
13:05
and themselves invest in to many different assets, whether it’s the stock exchange,
13:09
it can be gold, anything.
13:10
The poorer people don’t have these options and they don’t have this money
13:14
directly attributed to them.
13:16
So it means that like, while
13:17
all of this is happening and people are getting rich,
13:19
others are getting poorer
13:20
because the savings that they have in the bank are losing value
13:24
because of this money printing and because of that,
13:27
what governments need to do is they need to help their citizens more.
13:31
Because of course, no one wants the wealth gap.
13:32
I mean, it’s not because you’re, you know, part of this elite,
13:36
let’s say, that is in a better position financially,
13:40
that you want the poor people to be in a bad situation
13:44
like everyone has to be elevated in society and these people need
13:47
to be helped directly through financing, whatever form it takes.
13:53
And in fact, if you look at the numbers, it’s
13:55
since the crisis of 1929, which was the first big financial crisis
14:00
after getting off the gold standard that I was mentioning at the beginning
14:04
that this welfare spending has increased so much.
14:07
And now in France, for example, there’s about 30% of GDP
14:11
that goes to welfare spending.
14:13
France is quite famous for that.
14:14
It has one of the best medical systems,
14:16
but it also goes with how you support people that are unemployed.
14:20
Different stimulus payments help for home allowances and this kind of thing,
14:26
that is, of course, good for people that need it, but is only necessary
14:29
because of these actions that are taken beforehand.
14:32
More recently,
14:33
we know social spending has increased due to the COVID crisis,
14:37
so we can only presume that the chart now looks more like this.
14:43
We are seeing another measure increasing quickly – the monetary supply.
14:47
Monetary supply is the total amount of one currency
14:51
that is currently available in the economy.
14:54
The more government creates new money, the more the supply increases.
14:58
This money supply is directly correlated to the devaluation of our currencies.
15:03
Many like to inverse these charts in order to show this devaluation.
15:07
Because the more a currency is produced, the less it is scarce.
15:11
Therefore, the more it loses value.
15:14
We have all heard stories from our elders
15:16
saying, money had a different value back then
15:19
and have seen archive images illustrating this.
15:22
Like this McDonald’s menu from 1972 that had a Big Mac for $0.65.
15:28
The increase in money supply is the reason why this happens.
15:32
In 2020 alone, the money supply has had a big jump.
15:36
This is the money that was printed in order to finance the war against COVID.
15:40
And in the U.S. since the beginning of 2020,
15:43
we have seen an increase of over 30% in the amount of U.S. dollars in circulation.
15:49
Although this isn’t felt instantly in the economy, the long term
15:53
effects will be felt by the population that have zero allocation in assets
15:57
such as real estate, stocks and so on.
16:01
The long term consequences of this are very wide.
16:04
To illustrate, take technology
16:07
by definition, technology should drop in price
16:10
because it becomes more efficient and easier to produce.
16:14
Yet, due to inflation, prices are not going down,
16:18
essentially making it harder to develop new technologies.
16:22
Governments use many reasons,
16:24
including climate change, as an excuse to print trillions.
16:27
But down the road,
16:28
this printing can lead to adverse results
16:30
because of the effects this new monetary
16:32
supply can have on the development of the right technologies
16:36
that could help us transition to a more renewable energy consuming world.
16:40
But the central banks will have a different message.
16:42
This is in order to avoid the spread of panic
16:44
concerning the financial markets and their currencies,
16:47
which could lead people to rush to banks to withdraw their money.
16:50
This obviously would be unsustainable for the economy.
16:53
A nation in which faith in a currency is lost will see recessions
16:57
and will take decades to recover.
16:59
Instead, central banks use the consumer price index,
17:02
also called the CPI.
17:04
The CPI is a flawed indicator, yet is the most
17:08
commonly accepted indicator to measure inflation and its effects on prices.
17:13
The CPI follows the price
17:15
of a basket of products that are consumed by people.
17:18
This, in essence, is the way an indicator like this one should work.
17:22
But the CPI is flawed because of the way
17:24
this basket of products is selected.
17:27
It is selected based on what people choose to buy.
17:30
So every year, new products will be added to this basket
17:33
while others will be removed.
17:37
But what they choose to buy depends on the price of the product.
17:40
If inflation goes up, people will change their basket
17:43
of products in order to accommodate for the price increase.
17:46
This essentially makes it a new basket of products.
17:50
The CPI will not track the price of the previous basket of products.
17:53
It will track the price of the new basket of products after
17:57
the consumer decision has been made in response to price increases.
18:01
Saifedean Ammous illustrates this properly in the Fiat standard.
18:05
Imagine you earn $10 a day and spend them all on eating a delicious rib-eye steak
18:10
that gives you all the nutrients you need for the day.
18:13
In this simple consumer basket of goods, the CPI is $10.
18:18
Now imagine one day hyperinflation strikes the economy,
18:21
and the price of your rib-eye increases to $100
18:24
while your daily wage remains $10.
18:27
What happens to the price of your basket of goods?
18:30
It cannot rise tenfold because you cannot afford the $100 rib-eye
18:35
Instead, you make do with the chemical shitstorm
18:37
that is a soy burger for $10.
18:40
The CPI magically shows zero inflation.
18:44
Remember that governments will never show us the true
18:46
inflation numbers, and they will not attribute it
18:49
to the increase in our monetary supply because of their management.
18:53
If people actually understood this, they would never be re-elected.
19:00
We’ve talked about debt so much, it is time to look at these numbers, too.
19:04
We can see the sharp increase of the global debt even in just the most recent years.
19:09
To add more context,
19:10
here is what this debt represents as share of global GDP.
19:14
356%.
19:17
We have 3.5 times more debt than actual created value.
19:22
Now, this debt bubble could be stopped or at least be slowed down
19:26
if the central banks were to increase interest rates,
19:29
making it more expensive to borrow.
19:31
Giving a breather to the entire system.
19:33
But today it’s likely too late.
19:36
The U.S. central bank (the FED) attempted this in 2018
19:40
because they believe the economy looked
19:41
to have recovered from the global financial crisis of 2007.
19:46
Ten years have now passed since the depths of the financial crisis,
19:50
a painful part of our history that cost many Americans their jobs,
19:54
their homes and for some, their hopes and dreams.
19:57
In addition to holding interest rates low to support the recovery,
20:01
we have also taken many steps to make the financial system safer.
20:05
I’m confident that the system today is stronger
20:07
and in a far better position to support the financial needs
20:10
of households and businesses through good times and bad.
20:14
They decided to increase these interest rates, and because of that,
20:18
the entire market dropped in the space of a couple of weeks, and NASDAQ
20:24
and the S&P 500 dropped over 20% in just a couple of weeks.
20:29
Only because the markets were reacting to these actions that were done by the central bank.
20:34
The DOW is moving back towards the lows of the day.
20:37
All 30 DOW stocks are now in the red,
20:41
and the DOW’s gains for the year are gone, a distant memory.
20:45
The S&P 500 has fallen into correction.
20:48
That’s a drop of 10% or more from recent highs.
20:52
All sectors and this is key, are in the red at this moment,
20:55
and the NASDAQ is now at a seven month low.
20:58
Look at the CNN Business Fear and Greed Index.
21:03
I know you don’t want to see it, we got to give it to you.
21:04
It measures volatility, momentum and demand for safe havens.
21:08
It’s pointing to extreme fear.
21:11
So as soon as it started dropping, the central bank
21:15
came publicly and said, OK, we’re going to stop this.
21:19
We’re going to go back to normal level of interest rates.
21:23
And from that moment on, by the end, in 2019,
21:28
they started again offering these interest rates
21:30
and they lowered them from all the way 2.5% to 0.25%,
21:36
according to a lot of finance books and what people study at university;
21:40
the scenario we’re in today with negative interest rates
21:43
is impossible, right?
21:45
So what happens then?
21:46
It’s hard to say, no one really knows.
21:49
We’ll have to find out because anyway, central banks have no other option.
21:53
The only thing they can do is print more money.
21:58
In reality, the only thing that the central banks can do is print
22:02
more money and cover for all this debt that is never being paid back.
22:06
They will work with governments to continue increasing taxes,
22:09
welfare spending and de-valuating currency.
22:12
This isn’t to say that these people are ill intended.
22:15
They use the tools that are available to them
22:17
and have simply reached the point where their backs are against the wall
22:20
and they’re forced to abuse these tools.
22:29
And they’re looking for solutions to take the entire economy out of this situation.
22:34
Although these solutions are not necessarily in the best interests
22:37
of citizens and their personal freedom.
22:40
It isn’t without reason that the World Economic Forums initiative is called
22:44
the Great Reset, the name that inspired this documentary.
23:02
Part of their plan is the creation of central bank digital currencies – CBDCs.
23:07
This would allow central banks to have a new monetary system
23:10
that they can detach from the current one,
23:12
allowing people to transition into this new debt free system
23:16
and slowly de-leveraging and dropping the debt from the previous one
23:20
without adding risk to their currencies.
23:23
So central bank digital currency is coming alive.
23:27
It’s not going to happen today.
23:29
I think they have a twelve month experimental period that
23:32
they want to go through before they actually launch for good.
23:36
The status of it is we’re working hard on it right now.
23:39
But let me tell you what it is, really.
23:40
We’re going to address digital payments broadly.
23:45
So that means stablecoins, it means it means crypto assets,
23:48
it means a CBDC.
23:49
That whole group of issues
23:52
and payment mechanisms, which we think are
23:56
really at a critical point.
23:58
Would you say that the corona crisis has even revealed more
24:04
the need to have a digital central bank currency or currencies?
24:10
Well, yes, I think the corona crisis has accelerated very much technical change
24:19
and use of digital innovations across the board.
24:24
I mean, it’s not only in financial transactions,
24:27
but in e-commerce and the show business.
24:32
I mean, there are so many examples that, you know, bu yest, it is a fact.
24:37
Pretty much all central banks are thinking about this.
24:41
In the last few weeks of 2020, the People’s Bank of China
24:45
rolled out a pilot program in the eastern Chinese city of Suzhou.
24:48
They had to download an app and have it on the phone.
24:52
In a macro way, you have a sense of how money flows through the economy.
24:56
On a micro scale, and this is something
24:58
that many in the West would probably not be comfortable with
25:00
and many in China frankly, would not be comfortable with
25:02
is that it would allow authorities
25:04
to be able to track precisely how you or my neighbor
25:08
or the person down the street is spending the money on.
25:10
They’re spending the money on buying things they shouldn’t be buying.
25:12
Whatever, however you define that.
25:14
Are they gambling with their money?
25:15
Are they doing this or that with the money?
25:17
They say it’s just to replace physical cash,
25:19
but of course, this could just be the first step.
25:23
Adoption will come for these CBDC’s.
25:25
In fact, it will be forced adoption.
25:28
The government will start supporting citizens in need by only giving them stimulus payments
25:32
through a wallet controlled directly by the central bank.
25:37
The central bank will essentially be able
25:39
to eliminate commercial banks that are currently the middleman
25:42
between the central bank and the citizens.
25:45
For governments, it will simplify many things.
25:47
If they decide to change interest rates,
25:49
they will be able to act on it directly rather than wait
25:52
the several months needed for commercial banks
25:54
to implement this in their systems.
25:56
They will also be able to control directly
25:58
the interest rates based on a person’s profile or a business’s profile,
26:02
and will be able to set expiry dates on people’s money,
26:06
forcing them to spend and not allowing them to save.
26:10
Raoul Pal describes this well.
26:12
You see, central banks want to be able to give people money directly.
26:17
Direct monetization.
26:19
They can’t do that right now.
26:21
Right now, they print money,
26:22
it goes into the banking system, the banks hoarde it
26:24
because we’re going through a credit crunch.
26:26
It’s also a way for them to kickstart universal basic income
26:30
because the central bank can underpin
26:34
the poorer parts of society by giving them money directly.
26:37
It doesn’t go on the government balance sheet.
26:40
Now, central banks now believe they’re omnipotent,
26:43
that they can continue to expand balance sheets forever.
26:46
MMT seems to be the prevalent thought,
26:49
and this is just an extension of this.
26:51
This is kind of Keynesianism gone mad.
26:55
Central banks can also change entirely
26:59
the structure of how money and monetary policy works and fiscal policy
27:05
because they can give it to different people in different ways.
27:09
So they can credit the restauranteur, but then penalize
27:12
with negative interest rates.
27:14
The Baby Boomer Saver because they want to release their
27:17
money back into the economy.
27:19
They can give students a positive interest rate to help them save.
27:23
They can change everything.
27:26
This is the rise of behavioral economics and incentive systems.
27:30
So, governments essentially using big data
27:33
can find who they need to stimulate at any time and adjust accordingly.
27:37
They can do it dynamically.
27:38
This is a structural, massive shift to everything
27:43
we understand about economics, particularly macro-economics.
27:47
Nobody’s prepared for this.
27:49
None of us know what this means.
27:51
It means and it will be sold on a lot of good things.
27:55
And I think there’s a lot of good things that come from this.
27:57
I think it is an elegant solution to some of our problems.
28:01
But elegant solutions in governments and central banks
28:05
lead to unintended consequences.
28:08
The issue is here, is to have this new system,
28:11
you’re going to give up your freedom.
28:14
You are going to have every transaction you’ve ever done and ever will do recorded,
28:20
There is no cash, there is no way of tipping the gardener
28:24
unless it goes by cash.
28:26
It means that they can tax you at every transaction level.
28:29
Now that’s great.
28:30
We could get rid of the IRS
28:32
and all of the tax collection agencies because it could be done directly.
28:37
That’s good.
28:38
But again, you’ve lost your freedom to transact in anonymity that cash gives you.
28:55
These central bank digital currencies, as I said, they’re not,
28:59
they’re not an invention from governments and central banks.
29:03
In fact, they’re inspired by other digital currencies like bitcoin being the original one.
29:09
And other altcoins that have been created after that.
29:13
In reality, they’re more similar to other altcoins
29:17
such as Ethereum or others that simply allow the addition
29:21
of programing that allows you to add functionality to them,
29:24
whereas bitcoin is only there for these monetary transfers.
29:29
Bitcoin is a payment network, right?
29:33
Where this is… think of it as a log of transactions,
29:37
a transaction that I can do to you.
29:38
The Bitcoin network will take some information.
29:40
So my address, your address,
29:42
the amount of bitcoin that I’m sending to you.
29:44
And with this information it’s going to create a hash.
29:47
It just goes through a simple hashing algorithm
29:49
that makes the code out of this information.
29:51
And this is added to this log.
29:53
Whatever amounts that happen
29:54
within these ten minutes, it basically is considered a block
29:58
and there will be miners, so, computers, that are connected
30:00
to the network to verify these transactions.
30:04
So they’re just going to be there really to confirm
30:06
that I do have this bitcoin, and yes, I can send it to you.
30:10
And then after that,
30:11
I no longer have this bitcoin and you have the bitcoin.
30:14
So very simple kind of work.
30:16
But all of these computers are connected to the network
30:19
and they’re in competition fighting for who confirms the block
30:25
because whoever confirms the block and verifies these transactions
30:29
will be rewarded in bitcoin
30:31
from two sources,
30:32
There will be a transaction cost;
30:34
simply, if I send your bitcoin, then I pay a certain fee,
30:38
to the network, this fee will be redistributed to miners.
30:41
And also, right now there is an emission of new bitcoin.
30:48
Today it’s at 6.25 bitcoins per block.
30:51
And if I as a miner, I’m able to confirm this block,
30:55
I will receive 6.25 bitcoins.
30:57
It won’t happen every time because there is
30:58
a big competition of miners.
31:00
6.25 bitcoin per block every ten minutes.
31:03
That’s quite a bit, especially if you think of the price of bitcoin today.
31:06
Bitcoin is built in a way there is an entire incentive scheme that has been thought out
31:10
by the creator of bitcoin that goes all the way to the year 2140 or so,
31:16
which is that the amount of bitcoins
31:19
that are produced will be divided every four years by two.
31:22
So if I’m a miner today, I make 6.25 bitcoin per block
31:26
that I confirm; four years from now after the next halving,
31:30
it’ll be half that – so, 3.12 bitcoin.
31:34
This is an incentive for people to be as efficient as possible
31:40
when running their bitcoin mining business,
31:43
and also an incentive for the price to stay above a certain certain level.
31:47
Because miners simply will either run out of business if the price is too low
31:53
or will decide not to sell bitcoin because he’s not covering
31:56
for his operating expenses.
32:01
In the bitcoin protocol, changes can be made in two ways.
32:05
There’s a simple way called a hard fork,
32:07
where someone essentially makes a copy of bitcoin,
32:10
makes changes to the protocol and releases it to the world.
32:14
Miners need to connect to this new network and choose
32:16
to use this new network over the original Bitcoin network.
32:20
This was done by projects such as Bitcoin Cash
32:23
and Bitcoin Satoshi Vision.
32:24
That were trying to solve what the founders
32:26
thought to be problems in the bitcoin network.
32:29
But there was a scaling attempt
32:31
to allow bitcoin to continue to be money for the world.
32:33
And it was called the SegWit2x agreement, where SegWit,
32:36
which is if you’re deep into crypto, you already know what that is,
32:38
if not, don’t worry about it.
32:40
And the block size were going to be upgraded
32:42
from one megabyte to two megabytes, which would,
32:45
if you do both those things you’re going to get more
32:46
than double as many transactions available on the Bitcoin network.
32:49
If you do just the 1 megabyte to 2 megabyte, you double.
32:52
At SegWit t’s a little bit more on top of that anyhow.
32:55
For whatever reason,
32:56
the SegWit portion of that agreement was activated first.
32:59
When that 2 megabyte upgrade eventually was aborted,
33:03
I had to look around the world and say, OK, well, if I want a tool
33:06
that can enable every human being on the planet to be able to send
33:08
and receive any amount of money with any other human being on the planet,
33:12
bitcoin can’t do that.
33:13
It’s not going to do that with one megabyte blocks.
33:15
It’s impossible for bitcoin to do that.
33:17
So there’s a whole bunch of other cryptocurrencies out there.
33:19
Which one do I think is the most likely
33:21
to bring the most economic freedom to the most people
33:23
around the world in the shortest amount of time?
33:25
And I looked at all the different cryptocurrencies out
33:27
there, and Bitcoin Cash was the one that was at the top of my list.
33:31
Since their launch,
33:32
these projects have failed compared to bitcoin
33:34
losing value against the first cryptocurrency
33:37
because the people that are positioned in bitcoin didn’t want to transition.
33:41
This reluctance was mostly due to one reason – decentralization.
33:46
Decentralization in bitcoin is the fact that no one controls the network.
33:51
It is an open, secure network,
33:54
controlled and improved by every participant.
33:57
In projects like Bitcoin Cash, the number of participants
34:00
being much lower than in bitcoin lowered the security.
34:04
Bitcoin satoshi vision is a great example, as it was the victim of a 51% attack in 2021.
34:10
A miners performance is based on the amount
34:12
of computational power they have,
34:14
and this is usually referred to as hash rate or hashing power.
34:18
The mining power is distributed over different nodes across the world,
34:22
which means it is not in the hands of a single entity.
34:25
At least it is not supposed to be.
34:28
But what happens when the hashrate is no longer distributed well enough?
34:31
What happens if one single entity is able to obtain more than 50% of the hashing power?
34:37
One possible consequence of that is what we call a 51% attack.
34:41
Also known as a majority attack,
34:44
a 51% attack is a potential attack on a blockchain network
34:48
where a single entity or organization is able to control the majority
34:52
of the hash rate, potentially causing a network disruption.
34:55
In such a scenario, the attacker would have enough mining power
34:58
to intentionally exclude or modify the ordering of transactions.
35:02
They could also reverse transactions they made while being in control,
35:06
leading to a double spending problem.
35:09
A successful majority attack could also allow the attacker
35:12
to prevent some or all transactions from being confirmed or to prevent
35:16
miners from mining, resulting in what is known as mining monopoly.
35:20
The second method to make changes is called a soft fork.
35:24
In a soft fork, changes are made to the protocol and need to be accepted
35:27
by the majority of miners.
35:30
To do so, miners simply decide whether they want to upgrade
35:33
to the new protocol and update their machines,
35:36
and eventually, if approved by the majority of miners
35:39
at a predetermined block number, the changes will be made official.
35:43
And this is how miners will verify blocks from that point on.
35:47
Unlike many other protocols, every change
35:50
that is made to the bitcoin network needs to be backwards compatible.
35:54
This means that if someone holds bitcoin,
35:56
their bitcoin will still be valid after the changes.
35:59
Other networks may be easier to change,
36:02
but won’t be backwards compatible and will often require holders of the coin
36:06
to transfer their coins to platforms that will accept the changes
36:09
before a certain date or risk losing everything.
36:13
There will be a maximum
36:15
and this is hardcoded, a maximum of 21 million bitcoin
36:19
produced by the year 2140,
36:22
and there will never be more of it.
36:24
So we can’t afford to lose some bitcoin simply based on a bug fix,
36:33
functionality implementation, it’s just something that cannot work.
36:37
Therefore, every change has to be backwards compatible,
36:39
and this makes it so much more difficult to change
36:43
as opposed to other projects that don’t care much
36:45
because they have a management team that is there that will decide
36:49
what new vision they have for this coin
36:51
and will make updates regardless of what the community thinks,
36:56
because they think it’s what’s in the best interest of the community.
37:00
The fact bitcoin is so difficult to change
37:02
is one of the reasons that make it a great asset for the long run.
37:05
Buyers know what they’re buying, and they know that the asset will
37:08
remain the same.
37:10
No other assets in the world provides this level of security.
37:14
Other cryptocurrencies have been created,
37:16
but were created by a group of people that still control
37:19
the network and will make changes to profit themselves.
37:23
Ethereum, for example, the second biggest cryptocurrency
37:26
by market cap, is still controlled by the same team that created it.
37:31
These people control the network and promote the network
37:34
in order to bring inexperienced and non-technical investors
37:38
that don’t understand what a lack of decentralization means
37:41
for the future of cryptocurrencies.
37:45
The Ethereum network aims to change the way the protocol works.
37:48
These changes will allow miners to mine
37:51
only if they have logged 32 ether beforehand.
37:55
Anyone can mine bitcoin, but to mine ethereum
37:58
you will soon need to be part
37:59
of the few in the world that can afford to buy 32 ether.
38:03
This will make Ethereum just as good a currency as a fiat currency
38:07
because the decisions of the few will impact the masses.
38:48
If you think of bitcoin, the asset and the network as the layer one,
38:53
the other layers that are being built around it,
38:55
they’re called layer two’s and also layer three’s.
38:58
But the the fastest growing layer to for bitcoin is called the Lightning Network
39:03
and it’s a different payment system
39:06
that to use it, basically, I need to take some of my bitcoin and,
39:10
you know, actually put it on to the Lightning Network
39:15
and I need to open channels.
39:17
If I open a tunnel with you, for example,
39:18
it means I can transfer money to you.
39:20
And the fact that I have this channel open with you
39:22
means that I have access to the channels that you have open yourself.
39:27
And it scales very quickly in the sense that if we both use the Lightning Network
39:30
and we have a channel open between the two of us,
39:32
then you have access to all of my contacts and you can pay them.
39:35
And I have access to all of yours and can pay them.
39:37
Payments that I do
39:38
will go through the channels of maybe multiple people
39:42
in order to reach its destination.
39:45
And this allows for payments to actually be instant.
39:50
Instant settlement.
39:51
This doesn’t exist in finance until now.
39:54
And they’re free or almost free in most cases
39:58
just because of how the network is built and only once.
40:03
I would bring this money out of the Lightning Network
40:06
and back into the Bitcoin Main Network
40:08
is a transaction actually done inside of this main network,
40:12
which means that you can do
40:14
a lot more transactions, much faster and cheaper,
40:19
but still having bitcoin as the settlement layer
40:22
that will confirm that all of this happened basically.
41:06
The adverse environmental impacts of the computing activity used to mint
41:13
many of these digital currencies in the first place.
41:17
Bitcoin consumes more energy than entire countries
41:22
and it is projected to consume as much energy
41:27
as all the data centers in the whole world this year!
41:33
One bitcoin transaction.
41:35
A single purchase, sale or transfer
41:39
uses the same amount of electricity as the typical U.S.
41:43
household uses in more than a month.
41:46
Bitcoin’s main layer is described as being very energy consuming,
41:51
and it is a fact that at its highest in May 2021, the bitcoin network
41:55
was using as much energy as what the entire country of Sweden uses.
42:01
Although this seems like a lot, we need to break down what this energy is
42:05
where it comes from and how this trend is evolving,
42:08
including where the big miners
42:10
are transferring to in order to lower their cost and environmental impact.
42:15
first of all, it is important to understand
42:17
how a miner business is set up.
42:20
These miners are businesses.
42:22
The more important ones today,
42:24
being international companies listed on stock exchanges,
42:28
setting up a mining business requires the purchase of hardware.
42:31
The ASIC computers needed to tap into the bitcoin network and start mining,
42:35
as well as real estate to store all of the miners.
42:38
Wherever miners are around the world, the prices for these two elements will often be similar.
42:43
Of course, better deals can be negotiated.
42:46
But given the price of electrical components and supply chain costs,
42:50
this isn’t where miners will often gain an edge over their competition.
42:53
What matters most to miners is energy.
42:57
The third factor and this is the most important one is the energy
43:01
that they spend in order to make their mining rigs turn.
43:05
The prices vary between countries,
43:07
they vary between region and they vary on the source of energy that they choose.
43:11
The cheapest source is right now, always renewable energies or nuclear, but nuclear is a bit
43:18
killed by governments.
43:20
So these companies, by default, they have to direct themselves
43:26
and push for the development of these more renewable
43:31
energies because it will cost them cheaper in the long term.
43:34
Cheap energy can be found from two sources;
43:37
green energy and wasted energy.
43:41
The energy we produce is always in excess.
43:44
We never consume 100% of the energy produced by power plants
43:48
because it would put communities at risk of having blackouts.
43:52
In the US, it is estimated that 5-6% of the energy produced is lost when it is in transit,
43:59
which is around 211 terawatt hours.
44:03
This amount alone is close to double
44:05
what Bitcoin was consuming at its all time high.
44:11
Nowadays, governments are pushing for the adoption of solar and wind power
44:16
and decide to crack down on nuclear.
44:19
Unfortunately, although on paper this sounds positive, there are adverse effects to this.
44:25
With our current technologies, the energy produced cannot be stocked.
44:30
Therefore, the energy from solar and wind
44:33
can only be produced when it is sunny or windy.
44:36
This makes it very unreliable and requires backup power plants to be
44:40
present and active on a daily basis to cover for this lack of energy.
44:45
This really is an adverse effect because Germany, for example,
44:49
the biggest adopter of solar and wind in Europe,
44:52
is now back to producing the same amount of CO2 levels
44:56
as it was producing 20 years ago.
45:00
Green policies around the world have stopped the adoption
45:03
of nuclear power plants and have indirectly forced the world
45:06
to consume more natural gas than it used to.
45:10
Natural gas comes with its own set of problems,
45:14
just like other energy sources.
45:16
Natural gas is produced more than that is consumed, which leads to flaring.
45:21
Flaring is simply the excess gas that is extracted that needs to be burned.
45:27
It is a standard and a necessary habit in the industry.
45:31
In 2019 alone, it is estimated that 150 billion
45:36
cubic meters of natural gas was flared in the world.
45:40
This is the same amount as Japan and Korea imported that same year,
45:45
all gone, in the air, producing approximately 300 million
45:49
tons of CO2, the same as the total annual emissions of Italy.
45:57
In order to lower their cost and energy, miners are directly connecting
46:01
to these sources of energy that until now were inaccessible.
46:06
Because bitcoin miners can be placed anywhere in the world
46:09
without the need of being close to communities,
46:12
they are already tapping directly into this energy
46:15
because of the attractive prices they can negotiate with the producers
46:19
using energy that would otherwise be flared
46:22
or would be lost due to transit.
46:25
They also have access to more distant natural
46:27
sources of energy that cannot be used by communities.
46:31
This is the case of hydropower plants,
46:33
geothermal energy and even new ideas that are being studied,
46:37
like getting energy from volcanoes.
46:40
The more time passes and the more these businesses grow,
46:43
the more likely they will transition to these sources of energy
46:47
in order to increase their profits.
46:50
Other businesses are working on innovating our energy production
46:54
to service miners, allowing them to have clean and cheap energy.
47:00
The long term positive effects the adoption of bitcoin could have on
47:03
our energy production is largely underestimated
47:07
and even silenced by governments and other mainstream medias.
47:11
They may use this as an argument, but it is so little if you compare it to
47:17
what energy is actually used around the world,
47:19
and if you compare it also to the energy used by our traditional
47:24
financial services, banks and so on, they use way more energy
47:29
because each of them need to create their own settlement infrastructure
47:36
separately, of course, because they don’t
47:37
share this information with anyone.
47:39
Whereas bitcoin is just one place where all of this happens,
47:43
in an uncontrolled and so on.
47:45
So it’s a little bit of energy consumed for
47:49
huge impact in terms of
47:53
financial freedom and freedom in general, actually.
47:58
Bitcoin was created by a person or a group of people
48:01
under the alias Satoshi Nakamoto.
48:05
They wrote the white paper, built the network, released it
48:09
and exchanged in discussions on many forums before one day disappearing.
48:15
A genius, unknown person
48:17
put together technologies and encryption protocols in a new way,
48:21
forming the ultimate currency, and then did the most noble
48:25
and important step of all – disappeared.
48:28
After creating it, talking about it publicly on forums,
48:33
promoting the idea, discussing it, making improvements,
48:36
setting up the original miners, there is just a point in time
48:40
when the community also started to take over it;
48:43
that this person, Satoshi Nakamoto, just disappeared,
48:47
stopped answering on any kind of forums, stopped writing anything
48:51
and even since that point, the creation of bitcoin never touched
48:56
the bitcoin that were on these original wallet addresses
48:59
that were created by him.
49:01
So completely let it go to the community
49:04
because the whole point of it was to get rid
49:06
of the control of our current financial monetary system
49:10
and let it be opened to the people.
49:13
So bitcoin is said to have been created by the people for the people.
49:18
Because of that, because it’s controlled by a community, not by a central authority.
49:23
Anyone can participate in improving the network,
49:26
whether it is through translations, code reviews or by building
49:29
applications that add functionality to bitcoin.
49:33
But only the bitcoin core team can actually make changes
49:36
to the bitcoin network.
49:38
And I think a huge part of governance in the bitcoin ecosystem
49:43
are the bitcoin core developers.
49:46
Now before I met them and I’ve had the pleasure and the honor of meeting many of them.
49:56
You know, that was a part of this ecosystem
49:59
I didn’t understand, but actually getting to sit down and talk to them;
50:04
If I have a learning curve need, it certainly is on the technology side.
50:10
But in terms of talking to them about economics, economic theory,
50:15
failed monetary regimes historically, they know economic history,
50:21
many of them, better than anyone I’ve ever met.
50:25
So that gives me a great degree of confidence that,
50:29
you know, they do believe that they’re on a noble mission.
50:33
They could be paid a lot more than they’re being paid right now
50:37
if they worked at Google or Facebook
50:39
or some of these other areas. But they’ve chosen.
50:41
But they’ve chosen, you know, this sense of purpose for a noble goal,
50:47
and they have incredibly strong technology backgrounds.
50:52
So as well as a good understanding
50:56
of economic history, especially monetary history,
51:00
and it gives me a great deal of comfort
51:03
as I think about the governance of the ecosystem, much, much more so
51:08
than I think we would find in other financial ecosystems.
51:14
Gold was considered always the what is called hard money.
51:18
In fact, the word hard money comes from the fact that gold is physical and hard.
51:23
Just like sound money comes from the fact that if you hit gold
51:26
There’s sound, right.
51:27
So it was always considered the hardest money.
51:31
Now, bitcoin follows the same rules, but they are strictly enforced by the protocol,
51:38
which makes it a better form of gold.
51:40
So not only a better form of money, but a better form of gold.
51:43
Gold has been controlled by governments.
51:46
I’ve mentioned this at the beginning
51:47
when it comes to removing the gold standard,
51:50
but gold also then and during the second World War,
51:54
for example, in the UK, people were not allowed to hold gold personally.
51:59
The same happened in the US in the seventies.
52:03
You had to sell your gold to the government
52:04
because the government needed to increase its reserves.
52:06
This has happened historically and if any bad situation
52:09
were to happen like it has happened in the past;
52:11
the same thing would happen.
52:13
I mean, we’re here today in Poland.
52:15
Whatever purchase of gold you do in Poland,
52:19
your personal information has to be given to the government
52:22
saying how much gold you own, so that they know where they can come.
52:25
knock at your door, if ever they just need to increase their gold reserves
52:30
and don’t have the cash to buy it themselves, it’s so much easier
52:33
to confiscate it.
52:34
In the past seven years
52:36
there have been an average of one international monetary crisis every year.
52:40
Now who gains from these crises?
52:42
Not the working man, not the investor, not the real producers of wealth.
52:47
The gainers are the international money speculators
52:52
because they drive on crises they help to create them.
52:55
In recent weeks, the speculators have been waging
52:59
an all out war on the American dollar.
53:03
The strength of a nation’s currency is based on the strength
53:06
of that nation’s economy, and the American economy is
53:09
by far the strongest in the world.
53:12
Accordingly, I have directed the secretary of the Treasury
53:15
to take the action necessary to defend the dollar against the speculators.
53:21
I have directed Secretary Connally to suspend temporarily
53:24
the convertibility of the dollar into gold or other reserve assets,
53:29
except in amounts and conditions determined to be in the interest of
53:32
monetary stability and in the best interest of the United States.
53:37
Bretton Woods established an arrangement whereby
53:40
supposedly from 1945 and the end of the war onward,
53:44
all currencies were convertible to the dollar and the dollar to gold.
53:49
At that time gold reserves were the final mechanism for settling
53:55
balance of payments deficits, but Bretton Woods forestall this process
53:59
by permitting the sole reserve currency, the main reserve currency,
54:04
to be considered as official reserves for foreign central banks.
54:11
Such that they could settle all their deficits in dollars as opposed to gold.
54:16
That’s the fundamental difference between the classical gold standard
54:20
and what is called the gold exchange standard,
54:23
which Bretton Woods enshrined in law and in treaty.
54:27
In 1971, both Britain and several other countries decided to in-cash
54:32
their huge accumulations of dollar reserves under the Bretton Woods system for gold.
54:38
And of course, President Nixon, in his own way decided to trump them.
54:48
George says as long as we do not have convertibility,
54:52
he says the Europeans can’t do all that much to us.
54:55
They can’t, because he says when we have convertibility,
54:57
then they had a right to lecture us about what we ought to do.
55:00
But without convertibility, that is not the case.
55:05
If these countries had the right to claim gold,
55:08
to redeem their dollar reserves.
55:11
It would put the United States in a position of insolvency.
55:14
We just shouldn’t get all that excited about
55:16
the fact that they worry about our budget, is that your view?
55:19
– That’s exactly right.
55:20
They can’t do one cock-eyed thing.
55:21
and they’ll say, “Oh, we’ve got to maintain our relations”
55:25
We’ve asked them to hold dollars.
55:26
And I said, no, we didn’t ask them to hold dollars.
55:28
They’ve held dollars.
55:29
It’s been in their interest to hold dollars.
55:31
And I said to hell with them, I’m not worried about them,
55:34
I’m worried about us.
55:36
1960s was filled with financial crises
55:39
that involve the dollar, but the total collapse came in 1971.
55:43
He issued an executive order on August 15th, 1971,
55:46
and said, I’m sorry, we’re not paying our debts.
55:50
We’re certainly not paying our debts in gold.
55:52
To our friends abroad, including the many responsible members
55:56
of the international banking community who are dedicated to the stability
55:59
and the flow of trade.
56:00
I give this to assure, the United States has always been
56:05
and will continue to be a forward-looking and trustworthy trading partner.
56:11
In full cooperation with the International Monetary Fund and those who trade with us.
56:16
We will press for the necessary reforms to set up an urgently needed
56:20
new International Monetary system.
56:24
To this day, gold can only be traded on the markets during weekdays
56:28
because some people have decided this.
56:31
With bitcoin, no one can make such decisions.
56:35
Individual exchanges could, but would be losing against their competition.
56:40
Governments have no way of knowing whether people own any.
56:44
It is the safest way to hold wealth that is native to the internet.
56:49
Therefore, it is available always, everywhere.
56:53
No assets in history has ever been this easy to acquire.
56:57
Allowing anyone with an internet connection to tap into the network anonymously
57:02
and be able to access their assets
57:04
the same way, regardless of their geographic location,
57:08
again anonymously.
57:12
This is scary to governments.
57:13
They understand that if people step away from fiat currencies,
57:17
new debt, that is necessary to generate inflation and to devaluate
57:21
currency’s won’t be created following the same rules.
57:26
This puts their and their elite friends entire status quo at risk.
57:31
That’s why they’re afraid of it, and that’s why they try to kill it.
57:34
In fact, in China just this year, they banned any bitcoin mining,
57:39
and they closed any kind of exchange.
57:42
which is, if you think as a totalitarian government
57:46
is a great strategy, if you think of freedom for people,
57:50
it is not, and they’re not the only ones.
57:51
This year, also the UK has been attacking hard.
57:56
They’ve banned a lot of bitcoin ads on buses or on the subway.
58:02
Just all of these ads that were promoting bitcoin
58:04
have been straight off banned by the government.
58:07
They have put pressure on commercial banks as well
58:10
to block transfers from UK citizens, UK bank accounts to crypto exchanges
58:18
so that they cannot basically leave the British pounds and buy bitcoin instead.
58:24
So not only are they scared, but they’re actually taking action
58:28
to later implement their own central bank digital currencies.
58:31
If you don’t have bitcoin, they give you this alternative.
58:35
Well, you go for this alternative. You have no choice.
58:37
The reason they want to ban bitcoin
58:39
is because they know the power that it has,
58:41
and they know that it would take this power away from governments.
58:45
As long as governments control the money, they can make decisions
58:48
that citizens don’t agree with or don’t realize
58:51
will have an impact on them, whether direct or indirect.
58:55
As long as governments control the money, they can continue their monopoly on violence.
59:00
Bitcoin was created twelve years ago after the global financial crisis
59:04
as a solution to the financial problems
59:06
that exist in our economy and to eliminate entirely
59:10
the abuse people can have on our monetary system.
59:13
Saifedean Ammous says it –
59:15
It’s important to understand
59:17
that the fiat system was not a carefully, consciously
59:21
or deliberately designed financial operating system like bitcoin.
59:25
Rather, it evolved through a complex process of compromise
59:28
between political constraints and expedience.
59:32
Bitcoin is a real asset, and it is here to stay.
59:36
And its maximum cap of 21 million makes it the scarcest
59:39
asset on Earth and ultimately the most attractive asset.
59:44
Listen to all the money managers that praise it.
59:47
If we’re right and companies continue to diversify their cash
59:55
into something like bitcoin and institutions,
60:00
institutional investors start allocating 5% of their funds.
60:07
We believe that the price will be ten fold of where it is today.
60:14
So instead of 45,000, over 500,000.
60:17
I think it’s an asset that should be in every investor’s portfolio
60:25
The number one thing that I would recommend to people is
60:27
have some defensive things in there.
60:29
I personally think bitcoin is a long term hold.
60:32
I have a certain amount of money in bitcoin.
60:35
It’s a small percentage of that which I have it in gold,
60:38
which is a relatively small percentage
60:40
of what I have in my other asset classes and so on.
60:44
And I think that that has the merit.
60:46
I like bitcoin as a portfolio diversifier.
60:50
Everyone always asked me – What should I do with my portfolio?
60:52
My employees say, I say, OK, listen, the only thing that I know for certain
60:56
is I want to have 5% in gold, 5% in bitcoin,
61:01
5% in cash, 5% in commodities at this point in time.
61:06
I don’t know what I want to do with the other 80%.
61:11
I do own some of it, it’s gone up a lot since I bought it.
61:15
Obviously, the tone of this asset class is changing.
61:18
Well, I think it’s worth considering all the alternatives
61:22
to cash and all the alternatives to some of the financial assets .
61:27
And so bitcoin has, is a possibility.
61:32
We had 26% more dollars in circulation than over the past 244 years.
61:38
If you put the whole stimulus in, which it will happen,
61:42
that’s another 16% more dollar formation.
61:45
So you’ve got a 40% increase in dollar volume
61:49
that’s going to show up in asset prices.
61:51
I started my professional career in 1981
61:54
The peso was at 20:1, today we are at 20,000:1
62:02
Don’t tell me about it
62:05
And this is here in Mexico but if we do it in Venezuela
62:09
or in Argentina or Zimbabwe, numbers loose all proportions
62:13
So, the fraud of fiat is an inherent thing to the system
62:19
And we are seeing it happen right now in the USA.
62:22
The monetary emission is gone to the moon, you understand?
62:25
The US dollar as hard money is a joke
62:29
When facts change, I change.
62:30
I mean, you know, I’m an investor.
62:33
The environment is changing.
62:34
And what really turned me was moves made by regulators in Switzerland,
62:39
where I’m an investor.
62:40
France, Germany, England and then Canada opened up.
62:44
They now have seven different financial instruments
62:46
trading on their exchanges that holds crypto
62:49
as the underlying, which is a complete reversal of what’s occurred.
62:53
If you really understand bitcoin, you’ll recognize
62:56
why places like Morgan Stanley are coming into the space.
62:59
It’s a scarce asset,
63:01
and as we were talking about last time, I was on the show
63:04
that supply demand imbalance, plus the impregnability of the blockchain
63:09
is going to make that asset very attractive in a world
63:12
printing money like this.
63:13
It’s an amazing accomplishment to have brought it from where that programing occurred
63:18
to where it is and take the test of time.
63:21
They’ve done this unbelievable marketing job, it’s been around 13 years
63:26
and particularly younger millennials, look at it the way I’ve always looked at gold.
63:31
I like bitcoin, right?
63:33
Bitcon is math and math has been around for thousands of years,
63:39
and two plus two is going to equal four and it will for the next 2000 years.
63:44
So I like the idea of investing in something that’s reliable,
63:49
consistent, honest and 100% certain.
63:53
For me, the finite of Bitcoin, the 21 million
63:56
Is the key to the whole topic.
63:59
That’s why I was saying this about Ethereum
64:00
because as long as they don’t have a finite amount of emission,
64:05
I don’t trust them.
64:06
They can emit more and your asset depreciates.
64:11
So bitcoin has appealed to me because it’s a way for me to invest in certainty.
64:19
There’s countries that use Bitcoin. There’s regions in Switzerland where you can pay for your taxes in bitcoin.
64:23
There’s just this, all of this adoption and acceptance
64:28
that is happening around the world now, even by governments,
64:31
which just changes the rules and makes it more and more robust,
64:37
the community makes it alive
64:40
regardless of political, geopolitical and so on situations.
64:45
The fact that governments are themselves
64:48
allowing the use of this in whatever form or way
64:52
confirms it.
64:57
My name is Nayib Bukele and I’m the President of El Salvador. Great ideas are beautiful and have great power.
64:59
But like most beautiful things, they can also be more fragile than we think.
65:04
When I was a kid, we thought about the future
65:06
and we were delighted by it’s possibilities.
65:07
We couldn’t wait for it to happen and be part of its creation.
65:11
But now ask almost anyone what they think about the future,
65:14
and they will say something along the lines of nuclear war,
65:17
climate catastrophe, hunger, pestilence, the death of life.
65:21
We didn’t took care of the beautiful idea that we create our own future,
65:25
that we, as humanity can do almost anything that we imagine.
65:29
Our ingenuity. What separates us from other species.
65:33
In El Salvador, we are trying to rescue this idea and have started the design of a country
65:37
for the future using the best ingredients that makes us who we are.
65:41
While using sensibility
65:42
to find the best examples of ideas from history and around the world.
65:47
I believe bitcoin could be one of these ideas.
65:49
That is why next week I will send to Congress a bill
65:52
that will make bitcoin a legal tender in El Salvador.
65:55
In the short term, this will generate jobs and help provide
65:58
financial inclusion to thousands outside the formal economy.
66:05
Lawmakers in El Salvador broke into applause
66:08
after voting to approve bitcoin as legal tender on Wednesday,
66:13
making the Central American country
66:14
the first in the world to fully adopt the cryptocurrency.
66:19
Bitcoiners around the world,
66:22
the time has come.
66:24
We are ready.
66:29
This is an important step for our country,
66:32
a step for technology, a step into the future
66:35
to bring us financial inclusion, investment, tourism, innovation
66:39
and economic development to our country.
66:42
Buchele has even more ambitious plans for bitcoin,
66:45
saying later on Wednesday that he wanted to use renewable energy
66:48
from the country’s volcanoes to offer bitcoin mining facilities,
66:52
which generate new units of the cryptocurrency and instructed
66:56
state owned geothermal energy firm LaGeo to come up with a plan
67:01
to make it happen.
67:02
The objective seems to be making using bitcoin as a actual medium
67:07
of payment, medium of exchange, much more frictionless in the country,
67:10
eliminating all capital gains taxes, which is, you know, of course,
67:14
a big impediment to actually using this thing as a currency,
67:17
you know, potentially in service of making, you know,
67:21
bitcoin based remittances cheaper and less frictional, for instance.
67:24
So that seems to be sort of the main thrust of the law.
67:27
What can we extrapolate then,
67:30
as far as what the future holds beyond El Salvador here?
67:33
Do you think we’ll see other, I guess, legitimate countries
67:36
like El Salvador embrace this and other larger countries?
67:39
We know that bitcoin cryptocurrency stablecoins
67:43
have very high penetration in places like Colombia and Argentina.
67:47
You know, Latin America is certainly no stranger to sovereign defaults
67:50
or, you know, periods of high inflation or monetary repression.
67:53
So we see high penetration there.
67:55
There’s certainly a class of policymakers
67:58
that see an opportunity to gain favor by signaling their affinity.
68:03
And, you know, we’ll see what happens.
68:05
But this is the first.
68:07
El Salvador is the first non pariah state to really legitimize
68:11
and legalize bitcoin usage in sort of its intended way.
68:16
So, you know, it seems like a big sea change, frankly.
68:19
Banks as opposed to governments, banks are businesses,
68:22
they sure have their own personal interest at hand,
68:25
but they will adapt to what their customers need.
68:27
They’re adapting now, actually.
68:29
They realize that they need to be able to offer some new financial services
68:34
that will be around crypto
68:36
because they’re going to be left behind completely
68:39
because a guy like me, a person like you, just won’t need their services anymore,
68:43
because all of this already exists
68:45
in a completely decentralized and uncontrolled way.
68:47
According to crypto firm NYDIG, hundreds of U.S. banks are asking for bitcoin
68:51
planning to allow customers to buy, hold and sell the digital currency
68:55
through their existing accounts as soon as this year.
68:58
For more details, let’s bring in CNBC.com banking reporter Hugh Son.
69:01
Hugh, what had to happen behind the scenes in order
69:05
for people to be able to access bitcoin in their banks?
69:09
Hey Kelly, nice to be with you.
69:11
So there’s a company called FIS,
69:13
and so FIS is one of these back end providers to banks
69:18
they actually have about 300 million
69:20
checking accounts through their thousands of bank clients.
69:24
And so they’re a tech vendor that serves a bunch of banks.
69:27
And then there’s also a crypto, a bitcoin custody company called NYDIG.
69:32
And they’re one of companies like sort of a Galaxy, so, NYDIG has a deal
69:36
with Morgan Stanley, for instance, to offer institutional funds
69:39
to their wealthy clients, so you have some nascent players
69:42
joining some established tech vendors, you know,
69:45
FIS is a $95 billion company, market cap.
69:48
And they basically said,
69:49
you know, we’re going to make it easy for people to actually own bitcoin.
69:53
It is, after all, a financial asset and they want,
69:56
they’ve done studies that said, basically,
69:58
if people have the ability to own bitcoin through their existing
70:02
financial relationships, through the portal that they deal
70:05
with their other money, you know, their fiat money,
70:09
if they’re able to do that, you’re going to have greater adoption.
70:11
So basically, what they’re going to have is
70:13
as they turn this on, you’re going to have access to
70:16
the clients, the customers of these community and regional banks that sign on for this;
70:20
They’re going to be able to go there via their bank app
70:22
and actually look inside their bank app and see crypto
70:26
right next to their other deposits and their savings.
70:29
Well, we want to be in the middle of any movement of funds,
70:32
and we don’t try to decide what’s going to take off or not take off
70:36
and we don’t pick winners and losers.
70:38
We just get ready to enable whatever could possibly happen.
70:41
And I think crypto is an exciting trend.
70:43
There’s crypto currencies, which are kind of the digital gold.
70:47
Think of bitcoin and there what we’re trying to do is create utility,
70:52
which first of all, making sure that our
70:54
visa cards are used to be able to purchase bitcoin.
70:57
And then when somebody wants to convert their bitcoin into a fiat currency,
71:01
to use a visa credential, to go shop at our 70 million merchants around the world,
71:07
so we’re trying to create that utility.
71:09
So we’re working with 35 of the biggest crypto wallets
71:15
around the world, making sure that these various digital currencies can be converted
71:21
into a fiat currency, and that money can then be spent
71:25
from a visa card in a wallet,
71:28
again at any one of our 70 million merchants around around the world.
71:34
We’re at a point where markets are at all time highs.
71:39
Any kind of ratio is screaming that we’re at the top of our cycle.
71:45
We have companies that are failing even now starting in China.
71:50
And what happens is that all of this money will have to exit
71:53
the financial market, where there’s huge amounts of money now, way more money
72:00
digitally in these assets than exists
72:03
in the pockets of every single person in the world, right.
72:06
So this money, what tends to happen when there is a, you know,
72:10
top in the market and the market is going to drop,
72:12
of course, there is loss of value.
72:13
So all of these investors, they need to get their money out, right?
72:17
They always do that because they don’t want to lose money.
72:19
Their job and their mandate towards their clients is to bring profits, not losses.
72:26
So they’re going to get their money out of the financial markets.
72:28
This, of course, will lead to an even sharper drop
72:31
but this is standard, it happens at every cycle.
72:34
Now what tends to happen, though, is that most investors
72:38
at that point will get into bonds, which are government obligations,
72:45
and these have interest rates that are paid by the governments.
72:49
But these interest rates follow
72:51
the interest rates that are set by the central bank, right?
72:54
So nowadays, a lot of these bonds are negative yielding,
72:58
which means that if me as an investor, I want to have a certain return
73:03
per year, even call it 1%, today if I buy a bond, a European bond,
73:09
I will not have that because it’s had a negative interest rate.
73:12
So in fact, it costs me to buy this bond, which until now was a secure
73:19
position for my money, but would at least bring me some returns.
73:23
Now, even this fact isn’t there, right?
73:25
So in a scenario where the money is pulled out,
73:29
it cannot go to bonds because it is not
73:32
logical for it to be there because there’s just this trust
73:34
that is gone from this value that governments used to be able
73:38
to hold in the long term.
73:40
With this being gone, this money, where is it going to go?
73:43
Right?
73:44
It can go into gold, but gold we’ve just seen,
73:48
can be controlled by government, has been controlled by government
73:51
and in the past ten years
73:53
hasn’t increased in price, it’s at the same price as ten years ago.
73:56
So, sure some money will go into gold because it’s a
74:00
typical kind of protection asset and money will transfer into gold.
74:06
But there is this entire new financial market
74:10
that is being built at the same time that is led by bitcoin.
74:13
But all of these other cryptocurrencies as well.
74:16
Bitcoin is the first time ever in history of finance,
74:19
That an asset reaches this level of valuation so quickly.
74:23
On top of that, it is the technology
74:26
that is the most quickly adopted in the world.
74:31
So before that, it was the internet that was adopted.
74:35
Just, I mean, we’ve never seen anything adopted so fast
74:38
in terms of adoption of technological progress.
74:41
Right now, the world of bitcoin and cryptocurrencies is accelerating
74:45
at a faster rate than the internet, which I think makes sense
74:49
because it speaks to so many people, particularly younger generations
74:54
and rather than the people that are in power that are of older generations.
74:58
And so this market of bitcoin and cryptocurrencies
75:01
and I want to really emphasize bitcoin here because bitcoin is
75:06
the safe one that has all of these applications
75:09
that are being built by other cryptocurrencies
75:12
now also built on the bitcoin network, meaning that for all of these funds
75:18
that have serious money and long term objectives,
75:21
buying bitcoin is one of the best trades that they can have.
75:24
And given the volatility that it has and the hedging options that
75:28
they can have represents a lower risk for them
75:32
than the traditional assets that they’re used to.
75:35
So this is why I think and I’m not the only one in thinking so,
75:39
bitcoin will be the black hole that will swallow a big part
75:44
of all of this money that will be escaping the traditional markets
75:48
because there will just be no more value there.
75:52
No other assets like this one has ever existed before,
75:55
that marries our technological progress with our financial systems.
75:59
It is time for people to have a currency
76:01
that is as open and anonymous as the internet.
76:05
With bitcoin, the control of money is taken away
76:08
from governments and given back to the people.
76:11
This removes huge power from governments and their leaders
76:14
that have had countless issues with corruption, abuse of power
76:18
or limiting our freedom.
76:20
We’ve seen that our financial system needs a reset.
76:23
And the only solution governments have is to print trillions more.
76:26
Devaluating our currencies in the process.
76:29
Along the way, they will continue to make people
76:32
more dependent on governments because welfare spending has
76:35
to increase to cover their irresponsible money management.
76:40
This provides governments with a snowball effect loop of inflation,
76:44
leading to a poorer population, leading to more welfare spending,
76:48
leading to increased government control.
76:51
Bitcoin is the way out of their controlled system
76:53
that favors only the wealthy and the elite.
76:56
It is also the first time due to incentives
76:59
these people have for bitcoin to never succeed as a currency,
77:02
that average people can front run them and grow
77:05
their personal wealth first before these people
77:09
that consider themselves the elite have a chance to do so.
77:13
Bitcoin is slowly taking over the world and will absorb
77:16
a large amount of the money currently stuck in our legacy financial system.
77:21
Do you really want to be left behind with them?
