A Once In A Lifetime Opportunity To BUILD WEALTH Is Here | Michael Saylor

the impact and the damage of the

lockdowns was much worse in Canada and

Australia and New Zealand because they

had strong centralized governments and

it was weaker in the U.S because we had

state governments if it wasn't for

Florida and Texas we might not have ever

reopened our economy

Michael Saylor welcome to the show yeah

thanks for having me Tom

dude I'm very excited to talk to you now

obviously things have changed

dramatically in the financial landscape

since we last spoke and I want to start

us off actually with something that you

said which is the world is going through

an unprecedented financial crisis the

greatest of our lifetime now I want to

know one why do you think crypto and

everything else has crashed and two is

there an opportunity in all of this

disruption for somebody to take

advantage of or not well uh if we look

at the past year

what you've got is a drawdown of all

Financial assets so the NASDAQ is down

about 22 percent over the past year and

so NASDAQ represents tech companies and

all the risk assets but on the other

hand if if you were to go and look at

like the bond

uh market and the bond portfolios

bonds are down like a b-o-n-d index the

long Bond index

it's down six almost 17 percent

in the year so for 30 or 40 years you

had the 60 40 Bond portfolio and the

idea ones were considered a safe space

the idea was if stocks work then uh then

bonds will be a low return and stocks

would be a high return but if stocks

trade down people will shift their money

to bonds and you'll you know the

interest rates will go down the bonds uh

prices will go up and you'll actually

get a yield on your bond portfolio

but of course that broke around uh March

of 2020 and the reason it broke in March

of 2020 is because interest rates got

pegged to zero so after we had lowered

interest rates from five percent five

and a half to five to four and a half to

four to three and a half to three to two

and a half to two to zero and left it at

zero then bought you know the debate was

can can they take interest rates

negative

if you can't take interest rates

negative then bonds don't act as a hedge

to stocks anymore I mean you're kind of

you're at the end of the road for bonds

and uh and what we saw with stocks is

the Federal Reserve printed a bunch of

money

pegged interest rates at zero and then

you saw all these risk assets explode

you know you saw the NASDAQ explode up

and the s p explode up you had a

k-shaped recovery

and in the k-shape recovery it's almost

like

the entire economy was in a train wreck

or in a car wreck and we got taken into

the hospital and they pumped Us full of

morphine you know and if you've ever

been in a bad accident and then first

you're in pain

and then they pump you full of

painkillers and then you actually feel

pretty good

and you're sitting there and your arm is

broken but you're high on morphine or

high on something you feel pretty good

about it and you're thinking why don't I

just go break my arm and do this all the

time and then at some point there's part

of your brain that says you know I'm

going to come home from the hospital and

I'm going to get off this painkiller and

I'm going to be in great pain for the

next three months or six months or

whatever it is so

I think what happened here is the the

FED just pumped tons and tons of

liquidity and we stayed high for about a

year year and a half

and uh I remember when uh when Jerome

Powell said

I'm not even thinking about thinking

about raising interest rates

and the input and said strongly that

it'll be till 2024 before interest rates

start coming up again

but here we are in 2022

and now instead of uh raising them a

quarter point you know each time now

they're raising them 75 basis points so

they're taking three steps at a time

multiple times so we took the cost of

money down faster than any time in

history and now we're jacking up the

cost of money faster than any time in

history

and the result is um

that all the traditional models are

broken

let me uh let me give you a uh a

two-year uh post-mortem

um

since we started uh dealing with this

issue

microstrategy had we had uh we had a 500

million dollars of cash

and we saw interest rates at zero

and we saw the stock market inflated in

the summer of 2020. and we said well

what are we going to invest in and we

looked around at everything should I buy

gold should I buy land should I buy art

should I buy some crypto asset and

what's going to happen next

so what we did is we decided to buy

Bitcoin and we bought 250 million

dollars of Bitcoin August 10th 2020.

and then uh September around September

10th or so of 2020 we bought another 100

uh

75 million dollars of Bitcoin or

something like that

and then we started buying Bitcoin more

in December and we we kept buying

Bitcoin we ended up buying nearly four

billion dollars 3.97 billion dollars of

Bitcoin over that time period so uh so

in terms of like our strategy

microstrategies just bought as much

Bitcoin as we get our hands on since

August 10th of 2020. and in that time

period stocks gyrated North they gyrated

South uh you know currencies have

changed so let me tell you what's

happened

microstrategy stock

our stock is up 93 94 since that day

well

Bitcoin is Up 77 since that day

the s p index is up about 18 percent

the NASDAQ index is up seven and a half

percent

gold is down 16 percent

the bond market if you just bought bonds

they're down 18 percent bonds are down

80 and silver if you think silver was

better than gold

it's down 32 percent

now if you go on and say okay well fine

let's just buy big Tech

if you had bought uh the the greatest of

the big tech companies is Google

Google is up 41 apple is up 39

Microsoft's up 22 you might have won

those were all better investments in the

s p

much better than NASDAQ much better than

gold not as good as Bitcoin not as good

as microstrategy

but

if you bought Amazon you're down 18 that

was overvalued in the summer of 2020.

like you know a bunch of 20-somethings

were just buying Amazon because they

thought well we're all ordering Amazon

stuff so it must be good

well uh when you buy something that

everybody else understands to be good at

the same time they all agree with you is

normally bad yeah Facebook is down 41

since then

Netflix is down 54 since then so half

the big Tech got shellacked the other

half did pretty good

and now last Point what if you bought

enterprise software we compete against

uh companies 100 times as big as us

Oracle sap

Microsoft

um it Oracle is up 39 IBM's up six

percent sales force is down nearly 20

sap is down 45 percent

so

summary for us microstrategy strategy

wise buy as much Bitcoin as you can and

buy it with equity and debt we borrowed

money we borrowed 2.2 billion dollars at

a blended interest rate of like two

percent or one point eight percent so we

borrowed cheap money while money was

cheap and we bought Bitcoin now people

are saying that's stupid because Bitcoin

was trading up and then it traded down

at the end of the day if your time

Horizon is a decade or longer if you can

borrow if you can borrow the money for

longer than five or six years and you

can hold it through the volatility

then uh raising cheap money

grabbing billions of dollars at low

interest and then investing in a scarce

desirable asset that's got sort of a

technology appeal and holding it for a

long period of time that's going to be a

good strategy that's why our stock is

outperforming Bitcoin that's why that's

why we're out performing all the

enterprise software companies all the

big tech companies and the reason

bitcoin's outperforming all the other

asset classes

is because it's scarce it's desirable

it's technical

you know no one's going to write a piece

of software to make gold better you're

not going to put gold on a billion

iPhones whereas lightning is a protocol

that's been rolling out lately uh you

know square cash app or blocked cash app

put lightning right into Kasha

it means that you can send a hundred

dollars a Bitcoin to anybody in the

world on a Saturday afternoon for less

than a penny instantly peer-to-peer and

so I'll get to that though I want to I

want to make sure that we humanize this

for people that aren't as familiar with

a lot of this so one part of the appeal

of Bitcoin is also its volatility which

I've heard you speak about but I think

we have to build a few bricks before we

get to that

so I've been going on a journey myself

of really understanding and investing

and understanding what this all means

and so I get to play not play I really

am the sort of ignorant guy but smart

enough to figure it out that's been

going through this in real time with

people so I want to go back so the first

thing we do is we start lowering

interest rates now I want to understand

why they're doing that I have a thesis

let me know if this is actually accurate

the reason that they lower interest

rates is they're trying to Goose the

economy by making money cheaper so that

entrepreneurs and other people will go

and take that money or people that want

to build a house whatever they can get

cheap money they can do something that

creates activity in the economy so

whether you're buying Lumber to build a

house or you're you know taking on debt

to grow your business but you're doing

things is that accurate that's why

they're lowering the interest rate is to

try to get activity

so if you're trying to use monetary

policy

um to uh to counteract the negative

impact of fiscal and foreign policy and

domestic policy but what is the negative

impact is it people just pulling back

and not spending money it's going to be

important to to get where I think we

need to go it's going to be important to

understand why this stuff happens when a

government declares a war they basically

put public policy initiatives ahead of

the interest of the free market

right so if I declare a war I could just

draft every single every single adult in

the country put them in the military

send them off and if I lose the war

They're All Dead

right what's it do to the economy the

economy crashes

right what's it do the prices uh well

price of everything go up if you want to

create inflation you do it too a couple

of ways either you cut the supply

or you increase to cut the supply of the

product you want to buy or you increase

the supply of the money that's available

to buy it with

so if I uh if I make it illegal to

manufacture food

the price of food is going up okay

I don't even need to print more money

right I can create inflation uh just

ever in a war like in World War II we

have uh we have gas rationing you have

you have food coupons why because all

the gasoline gets shipped off to Europe

to put in tanks or to put in airplanes

or put in ships so when you have um when

you have policies that are declaring a

war on something

you divert resources so we had a war on

covid

we have a war on carbon and energy War

if I decide I don't want you to burn

coal or oil that I drive up the price of

energy if I decide I don't want you to

show up in your office I drive up the

price of uh production

if I if I decide that um

you know that uh

I want to fight uh this covid war and

I'm going to

going to change the way the economy

works if then I'm going to drive up the

cost of everything else so we've got

lots and lots of wars right you've got a

culture War you've got a war on office

work you've got a war on carbon you've

got a war in the Ukraine the war in the

Ukraine

has escalated right it's not just a war

in the UK and it's really a kind of a

quasi-economic war on Russia so when we

actually imparted Russian sanctions we

cut the amount of uh of

gasoline or or the amount of fuel

available in energy we drive up the

price of energy

so every single time you actually put a

a public policy in place you create

inflation

policy is inflationary the more policy

you have the more inflation you have I

think this is going to be one of the key

elements that uh people need to

understand so centralized control I

think is a core part of the thesis as to

why things are breaking so you have

governments coming in top down this is

going to be the way that it is and I've

heard you say it and I would agree with

this very much

let's assume that they're coming in with

good intentions but despite their good

intentions they're creating all kinds of

problems there's actually a do you know

Thomas Seoul

I don't oh my God I think you would

really resonate with him he's an

economist so you might discount him a

little bit for that but he uh says the

last 30 years have been marked by

trading what worked with what sounds

good

and I think that we're to your point

about wars let's take the one on energy

so we've got people doing a green War

great intentions they really believe in

that they want to save the planet but it

in trying to help the patient they are

putting forward measures that do feel

very warlike that are closing off a lot

of doors that are making energy more

expensive that are going to

disproportionately impact the poor not

just here in the U.S but around the

world and so that that top-down control

I know better I know what to do with

this knob instead of letting it evolve

or happen in the free market we're going

to prescribe behavior and that now I

would say and I'd love to know if you

agree is

if not the biggest certainly one of the

biggest contributors to what's happening

to the economy

yeah good the road to hell is paved in

good intent right people uh people uh

get into positions of power

and they want to do good

and so they do good by issuing edicts

executive orders policies regulations

and they think that the regulations will

make things better they believe that

that you know if you if you enter into

government and politics you believe the

political process is a way to make the

world better

so what you have is political

organizations centralized organizations

getting progressively more powerful

and as they get more powerful people do

things

right and I think if you roll the clock

back to Ronald Reagan he would say you

know government's the problem

government's not the solution

so

let's take nuclear energy

right the the cleanest form of energy is

nuclear energy it's it's the cleanest

probably the safest nobody died at Three

Mile Island uh you know we can't we

can't hardly trace a death from nuclear

energy in the U.S and yet we haven't

built a nuclear power plant since the

creation of the nuclear Regulatory

Commission

50 years ago and in Germany they shut

all theirs down

right and in Japan human psychology a

play like this feels another key piece

to the puzzle here as we look at why the

collapse how this happens how we get

back out feels like in is humans react

in a very emotional way to what happens

so it has yeah exactly and Euphoria so

you get these two competing things that

set something up weird so this is the

first cycle that I've lived through

where I was paying attention like uh

somebody interested in the financial

World till then I was just an

entrepreneur and just totally focused on

that and so I watched the Euphoria grow

in crypto and it was like exciting and

thrilling and it was so fun but

there were people like I had heard you

say a gazillion times guys you have to

be thinking in at least four-year

increments and any thinking less than

that is you're you're gonna get tricked

by the volatility and despite the fact

that you and many other people were

saying similar things the second the

price starts dropping people panic the

price starts dropping more people get

liquidated because they were in way over

their heads and now it's the sense of

Despair and it's never coming back and

it's over forever and so there's like

this this schizophrenic bipolar maybe is

a better way to think of it attitude of

like we're up and we could never lose

and I don't need to plan for a down

scenario we're down it will never be up

again and

how much of that do you think

exacerbates the problem if you're an

entrepreneur or you're an investor you

have to have a 10-year time Horizon and

not nothing great is accomplished

without a decade if you look at

Microsoft

the companies founded in the mid 70s a

decade later in their mid 80s you know

if you're not willing to hold Microsoft

stock for a decade you probably didn't

get to the point where they came Paul

White so a decade's a short period of

time for someone who's an industrialist

or or an investor I mean Warren Buffett

still owns Coca-Cola stock and he must

have bought it 50 years ago right

so I you know I think that anybody you

know that's a billionaire right all all

of these names the Sergey brins the mark

zuckerbergs the Jeff Bezos the Elon

musks of the world they didn't get there

without without holding an asset that

had technical potential

for a decade or longer there's no get

rich quick scheme so I think that uh

people want uh they want a an easy route

uh if you're trying to if you're trying

to get a quick uh a quick win with no

volatility with no risk doesn't make

sense and if you're actually trying to

be

successful in a hurry with volatility

that probably still won't work either I

mean ultimately success comes from

taking a a decade-long view

right Andrew Mellon John D Rockefeller

Jeff Bezos right we forget like Tesla

was founded 20 years ago like people

think it's an overnight success but it's

not an overnight success

um and with regard to the um the macro

picture we live in an a time of

unprecedented public intervention in the

Affairs of the economy

right uh unprecedented we never had a

never in the history of the country did

you have a government that told you you

couldn't have Thanksgiving dinner with

your family because they didn't want

family members to sit too close to each

other

yeah we arrested a dude on a surfboard

in the middle of the Pacific Ocean for

for for basically paddle boarding in the

middle of Pacific because that was

deemed as unsafe right that kind of

stuff so we have an unprecedented amount

of encroachment we have we have

politicians overriding the free market

they tell you what kind of energy you

can use they tell you you know how how

you how far you have to sit from someone

they tell you whether it's safe to be

sitting in your office at a table next

to someone lots and lots of encroachment

each of these areas right war is the

suppression of the free market uh

to the uh to the benefit of the public

or the public organization right the

government is suppressing the free

market so if the government keeps

suppressing the free market everywhere

what you do is you [ __ ] production

right yeah that's why we have tariffs on

uh on Chinese Imports right that the

driver prices up or down drives them up

right

you have you have a war on uh on uh or a

labor War right if everybody unionizes

and if everybody's afraid to go to work

and if everybody's a if everybody thinks

that their life is threatened to stand

next to another human being right and

and uh if we're afraid to trade with

each other and if we're afraid to talk

with each other

right if you if you have Capital

controls wage controls price controls

export controls manufacturing controls

right as those things happen they have a

chilling effect on the economy so what

we have right now is on one hand you

have a supply side problem

right you're we're not producing as much

the the degree of not producing by the

way is misunderstood uh the currency

weakened by 20 in the year after covid

if the economy measured in nominal terms

is flat that meant that the overall

economic output decreased by 20 the

overall economic output decreased by 20

or more in the last two years people

wonder if we're in recession we've been

in recession since March of 2020 but

what we have is a situation where all

the metrics are distorted right for

example how many people would measure

the Economy based upon GDP output

measured in dollars most is that the

correct measure no

right because the dollar is not worth

what it was 24 months ago right what if

you look at it you have to measure it in

real terms or measure it in the uh the

actual output of goods and services for

example

how many airline miles got flown right

if Emirates Airlines grounded half their

Fleet and decommissioned it after covid

now they're up and running the part they

did in decommission how is it possible

that the error sector could possibly

recover to the point where it was in

January of 2020.

if you've actually mothballed or

decommissioned half the airplanes

right I could double the price of a

ticket

if I double the price of a ticket I can

tell you that the size of the airline

industry is the same as it was in

January 2020 right

I get a card there's no recession but

the fact is everything costs twice as

much there's half as much of it

right I changed the way that I measured

it what is up my friend Tom bilyu here

and I have a big question to ask you how

would you rate your level of personal

discipline on a scale of one to ten if

your answer is anything less than a ten

I've got something cool for you and let

me tell you right now discipline by its

very nature means compelling yourself to

do difficult things that are stressful

boring which is what kills most people

or possibly scary or even painful now

here is the thing achieving huge goals

and stretching to reach your potential

requires you to do those challenging

stressful things and to stick with them

even when it gets boring and it will get

boring building your levels of personal

discipline is not easy but let me tell

you it pays off in fact I will tell you

you're never going to achieve anything

meaningful unless you develop discipline

right I've just released a class from

Impact Theory university called how to

build Ironclad discipline that teaches

you the process of building yourself up

in this area so that you can push

yourself to do the hard things that

greatness is going to require of you

right click the link on the screen

register for this class right now and

let's get to work I will see see you

inside this Workshop from Impact Theory

University until then my friends be

legendary peace out

GDP measured in nominal terms is a gross

Distortion and then CPI is a gross

Distortion if I if I have a hundred

things that you want and I pick 10 of

them and I measure the increase in the

price of 10 and I ignore the price and

the other 90 I can show you a CPI is

eight percent right eight point three

percent is the number this morning but

the actual inflation rate is higher but

it's it's inflation on something

like it's inflation something you want

but I'm not going to choose to measure

for example you know the 30-year bond is

is traded up to

350 basis points and it was 180 right

mortgages have doubled so mortgages have

doubled housing prices are up 35 percent

and that means in you know in theory the

cost for you to actually buy a home is

going to be 50 60 percent higher year

over year but I don't choose to measure

it

because we don't actually calculate CPI

that way I take a survey and I ask you

whether or not you think you could raise

your rent by something and if the owner

equivalent rent is up three percent and

I say that the inflation is three or

five so we have a set of metrics that

are that are just

manufactured metrics

and then we focus on them and then we

talk about them

But ultimately what you have is an

economy that's distorted there are some

things we produce more of

and there's and there are some things we

produce less of

and we have flexibility with what we

choose to measure

the uh the monetary intervention is the

government basically

if I put everybody under home arrest for

a year

it's going to be a problem for the

economy right I mean if I shut down they

did it in New Zealand they did it in

Australia they did it in Canada they

kind of did it in certain states in the

U.S if I do that that cripples the

economy so

while I'm doing that

then if I go ahead and I pump a lot of

money in the system

right then maybe I I create a wealth

effect and I can say well you know we're

recovering but ultimately

you never recover from the fact that

nobody went to school for a year and no

nobody you know went to work for a year

right you can't You've Lost That forever

you're just not measuring it you you can

you can change your metrics

right there's this there's a saying you

write the

the winners write the history books

so the Romans remember the carthaginians

have been as being like evil

right if if we win the war then we write

out all of the good that our adversary

did and we write up all the good that we

did and we suppress all the bad that we

did because we won the war we write the

history boxing

and so I think right now what you're

what you see in the economy is lots of

distortion of numbers lots of distortion

of metrics

right the fact that we have a debate

over whether we are in a recession or

not is is kind of laughable right

because we've been in a recession for 24

months if you were measuring the

production of goods and services all you

got to do is look at the variety of

things that were available to you in

January of 2020 versus the variety of

things available to you today and the

delays

if you've got one-tenth the selection

and it takes three times as long to get

it and it costs 20 percent more

how are you not in a recession yeah this

is what really is

um I find unnerving as I go down the

road of trying to figure all this out

trying to figure out where the

opportunities are is I'm looking at what

feels like and again I want to to give

that it will be it's being done with

good intention but you have a changing

definition of what a recession is to

match a thing that seems designed very

explicitly to keep people calm and uh it

seems the same thing with the FED right

the reason that they said we're not even

thinking about thinking about taking up

breaks they just want to keep everybody

calm so we're told things not

necessarily because they will be the

most effective long term or at least

that the outcome is that they don't end

up being effective but they're looking

at the short-term impact of I want to

make sure that people stay calm and I'll

admit if they were like oh my God the

world is burning and everything is bad

like then people are going to act like

it's 10 times worse and so that's why I

feel like if I'm if I start putting the

pieces together there's really three

pieces that I think give us the

situation that we're in as you have said

people just don't understand money and

so you said half of the problems that we

face as a civilization have to do with

the fact that we do not understand money

that was pretty interesting and then

you've got this top-down control so

centralized decision making which is

destined to fail historically just

looking at it does not work and then the

third thing is human emotion and so you

put these things together in a cocktail

and you get the moment that we're living

through so you've got people freaking

out you've got other people know that

you're going to freak out so trying to

control everything trying to say hey I

can make better decisions than you I'm

going to tell you sort of white little

lies to get you where I need you I mean

I I think back to the mask statement

right in the beginning it's like they

don't work actually you need to wear

them all the time uh they didn't work

when they wanted to save them for

hospital employees and suddenly they

started working when there was enough

for all of us to wear them and so it's

like I get it again good intentions but

without sort of a pathological fear of

doing this top-down control

you get this issue and then compound the

fact even if people wanted to think

through the process for themselves they

don't understand it and so I feel like

I'm just barely beginning to understand

how money actually works and I think now

we should get into

[Music]

um Bitcoin as a thing that exemplifies

some very powerful principles that will

begin to help people understand so the

the first thing that I'm gonna say and I

say this knowing that you will correct

me if I'm incorrect but here is my

understanding of what makes Bitcoin so

interesting that money is basically your

financial energy put into a form that

can be carried across space and time

some forms allow you to carry across

space and time easily some not so much

but getting people just understand that

I go do a thing that is my physical

energy my physical labor my time my

actual like turning uh oxygen and food

into ATP and I'm actually able to put

that into a medium right it could be

gold it could be uh fiat currency or it

could be Bitcoin but just getting people

to understand holy [ __ ] like there's

actually a way for me to do a thing

receive a thing that allows me to carry

that energy across time and if if you'll

bear with me it's like fat so I can eat

a bunch of food and I can store it on my

body as fat but if I'm really smart I

will eat a bunch sort of my body's fat

and it will give a bunch away because

I'm too full I can't keep eating I will

give a bunch away and essentially store

fat on their bodies so the next time if

I don't get food they do get food so the

idea of being able to transfer useful

things across time and space

in unique ways is really important so

Bitcoin comes along as

certainly the newest entrant and maybe

the best entrant of things that allow

you to Sock away your time and energy

into that and carry it across time and

space

have I understood that correctly I think

that's well said I mean

fundamentally money is an energy system

to transfer energy over time and space

right that's the right way to think of

it uh fat is an organic battery

it's it's it's your way to transfer

organic energy if you put 20 or 30

pounds of fat on your body you can live

for 90 days

right and if you don't you don't eat you

die so

fat was developed over the course of

millions and you know 70 million a

million years and it's a pretty

wonderful invention when you think about

it it's it's it's the reason that we

didn't go extinct or the reason you're

not dead

um

the the challenge with money is uh the

Fiat currencies that are used

communities money they're all broken

they all have a big hole in them and uh

and the big hole is inflation period end

of story or is there something else

the whole is we could call it inflation

but inflation such a Charged term

because most people think inflation is

CPI uh the defect in Fiat currencies is

monetary inflation it's the expansion

and the money supply

not just the increase in consumer goods

because the CPI is a distorted it's a

submetric

right if if you look at the US dollar

the dollar is the supply of dollars has

been increasing seven percent a year for

90 years it's been increasing 15 to 20

percent a year for the past two years

right right so the the big I think

that's true so it seems worth walk us

through

how where do you get that number

well if you go back to 1930

my house in Miami Beach cost a hundred

thousand dollars and if you roll the

clock forward to

two thousand and 2012 it cost 14 million

dollars and today it would cost you 40

million dollars so

so it's 400 times more expensive

than it was

you know 90 92 years ago now if you back

solve that you'll find that that works

out to about a six percent or seven

percent annualized inflation rate

right and if you go and you look at any

kind of scarce desirable asset something

that's something that is uh you can't

make any more of you'll find typically

the increase in cost about seven percent

a year normally you can actually see uh

if you look at the market basket of

things people like want like really good

health care really good education uh you

know a beach house in the Hamptons uh

artwork picassos right that kind of

stuff

that doesn't go up in price one or two

percent a year that goes up in price

normally about seven percent a year and

uh if you look at the at the price of a

a basket of stocks

like the s p

the s p has gone up about 10 percent a

year Well the reason it's gone up ten

percent a year is because the money

supply expanded is seven percent a year

and then the underlying companies

probably grew two or three percent you

know effectively so

uh you can figure this out for yourself

if you just got start to go and take

samples of what stuff costs in 1971 what

it costs in 1930 what a cost in in the

year 1950 and what you'll see is that

for anything that's really desirable

like uh scarce energy that has energy

content it doesn't go up in price two

percent now the stuff that that uh

doesn't go up in price is expensive is

stuff that's highly manufactured with

low in low energy content High

information content so for example a

streaming video on YouTube

or something that could be Stamped Out

in quantity 100 million at a time

[Music]

boxed food right stop highly

manufactured stuff that has machines

generating it or even better

you know something that's got cheaper

right it cost a lot of money to listen

to Beethoven's Fifth Symphony if the

orchestra plays it in 1850

but it costs not that much to listen to

Beethoven's Fifth Symphony if you're

listening on your iPhone through your

airpods right so if I can strip the

material the matter and the energy out

of the product I can provide that to you

very cheaply so the information content

products got cheap but

Stakes right more expensive although

there's a slight benefit if you can

manufacture a hundred thousand cows and

I can use machines right then there

that's a deflationary thing one thing

you can't easily manufacture more of is

three acres of beachfront property in

the Hamptons

that's very difficult right and if you

look at the cost of a Palm Beach House

they're a hundred million dollars right

now

okay so a hundred million dollars for a

house on two acres or three acres in

Palm Beach now ask yourself the question

why isn't that getting cheaper that

thing's going up a lot

so

the problem coming back to money is is

um Fiat currencies aren't anchored in

energy uh when we were on the gold

standard theoretically during the gold

age 1870 to 1914 if a if a dollar uh was

convertible at a 20th ounce of gold

right and you really pegged it hard to

gold

then you're anchoring the currency

into a hard asset now gold isn't um

isn't um fixed in Supply the gold Supply

increases at two percent a year two to

three percent a year so if you're on the

gold standard that means that the supply

of money would be increasing at two

percent a year or an otherwise doubling

every 35 years

so so money under the gold standard

perfectly executed bleeds energy every

35 years it's got a half-life of 35

years but that creates stable prices Tom

because the economy grows at two to

three percent a year

so if the economy grows three percent a

year if the money loses three percent of

its value a year then everything kind of

stays stable right the demand increases

the supply increases right that's a good

situation in that case you can save your

money and 30 years from now your money

will be worth as much as it is today

now

if um if it turns out that you're saving

your money and the supply of money is

increasing at seven percent a year then

the money is cut in half every 10 years

right and so that means in 30 years uh

the amount of money you have will be cut

in half once twice three times

so you would you would have uh 12 and a

half percent of your wealth in 30 years

saving money under the Fiat standard uh

under uh under a seven percent regime

now seven percent was the about the rate

that the US was inflating the dollar

supply but in the developing World in

weaker countries uh you would see them

inflate the the money supply about

double that 14 so the half-life of their

money is five years the half-life of the

dollar is ten years most people don't

even notice 10 years is half-life except

that anecdotally

if you asked anybody in the past 20

years are you going to save your life

savings in a checking account that earns

one or two percent interest in dollars

they would tell you no I I know

intuitively the cost of a college

education is going to go up the cost of

a house is going to go up I can't just

save in dollars that generate zero

percent interest

so the so under the Fiat standard the

money supply is expanding from seven to

fourteen percent a year depending on

where you are until we got to covid and

in covid everything doubled and so you

started seeing a much more rapid

collapse in the value of fiat currency

the US dollar expanded the money supply

uh 15 to 20 percent a year and so in the

U.S we expanded the money supply maybe

40 percent and so U.S single family

homes went up in price 40 percent oh God

I think about the correlation the price

of a house is 40 higher than it was 24

months ago the amount of money in

dollars is 40 higher than 24 months ago

the number of houses are about the same

the number of people want them about the

same

makes sense

now if you go to other countries if you

look at uh currencies outside the US in

the past 12 months right the Chinese

currency is weakened seven percent

Australians down eight the euro is down

15 percent the wands down 15 the pounds

down 17 South African Rands down 18

polish a lot is down 18 and Japanese

Yen's down 24

in dollar terms what's happening

they're putting more money

right it's even a bigger issue for them

the Japanese

have pegged the 10-year interest rate at

25 basis points

and um the U.S 10-year interest rate

right is is uh more than 10x that

the Japanese Central Bank is printing

infinite yen in order to keep in order

to buy every Bond and keep the price of

bonds much much higher than they would

otherwise be so they're holding up the

price of bonds by pumping yen in the

economy and the reason as they do that

the Yen crashes against the dollar

but of course it's even crashing faster

against scarce desirable assets if you

price a barrel of oil in dollars it just

got 24 more expensive in Japan

because they want to hold up prop up

asset prices they want to Pro they have

institutions that are holding Bond

portfolios of Yen and the they have

institutions Holding stock portfolios

and if they stop printing in to hold up

the asset prices those those uh

portfolios of assets will crash

and if they crash than the inflationary

impact well if those portfolios of

assets crash then the banks or the

investors that hold them will be

technically insolvent and go bankrupt

if I'm a bank and I have 10 billion

dollars of assets and seven or eight

billion dollars in loans outstanding

then I look solvent but if those assets

are in sovereign debt and the sovereign

debt crashes by two or three billion I'm

technically insolvent it creates a

banking crisis or a financial crisis so

it gets worse than this right Tom that's

the good news those are strong countries

great

the bad news is like Sri Lanka Argentina

turkey now are those the same thing just

played out on a longer timeline

those are examples where the

government's printing even more money so

for example the cost and Turkish lira up

120 over 12 months

so the Turkish lira is crashing more

than 50 percent against the dollar the

Argentine peso is crashing in Sri Lanka

Sri Lanka crashed the entire economy and

the government how'd they do it well

first they uh they made it illegal to

use fertilizer to grow crops and they

kind of crushed the the farming business

then they um they printed too much money

under a modern monetary theory that they

could just print money so they crash

their currency then they couldn't afford

to buy fuel they couldn't buy energy or

gasoline so then they actually

regulated the use of gasoline by saying

that private citizens couldn't actually

buy gasoline

then the people rioted and they toppled

the government because if you're going

to starve me to death and freeze me to

death and then lock me

and and deprive me of my car right

you you're pretty much like ripped me

back to the Stone Age right you're gonna

freeze to death walk everywhere and

there's no food to eat

why because it got excessive government