Ben Hunt says, “Cut the BS! The Banks Are Solvent!"

There are bank runs and also rumors of more bank runs on the horizon. One side says, “the banks are insolvent, get to the lifeboats.” Another side says, “the banks are going to be fine…we’re sick and tired of doomers pulling the fire alarm.” Who’s right? This is our third episode in a series of conversations. To get the full debate you’ll need to listen to the last two episodes with Balaji Srinivasan and Arthur Hayes. In this episode, we’re speaking with Ben Hunt who lays out the counterpoint details on why banks are going to be fine. He believes Balaji and Arthur are dangerously wrong. Tune in to hear why! ------ 📣 Infura | New SDK for NFT APIs For Devs https://bankless.cc/Infura ------ 🚀 JOIN BANKLESS PREMIUM: https://www.bankless.com/dashboard ------ BANKLESS SPONSOR TOOLS: ⚖️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://bankless.cc/kraken 🦄UNISWAP | ON-CHAIN MARKETPLACE https://bankless.cc/uniswap 👻 PHANTOM | FRIENDLY MULTICHAIN WALLET https://bankless.cc/phantom-waitlist 🦊METAMASK LEARN | HELPFUL WEB3 RESOURCE https://bankless.cc/MetaMask 🚁 EARNIFI | CLAIM YOUR UNCLAIMED AIRDROPS https://bankless.cc/earnifi ------ Timestamps 0:00 Intro 6:55 Ben’s Crypto Credentials 10:36 Critiques of the Fed 16:55 Ben’s Understanding of Balaji’s Thesis 24:33 What Ben Believes is Untrue 33:42 Treasuries Are the Safest Assets? 43:34 Ben’s Objection 45:55 Icebergs 50:52 Fiat is Better? 57:45 Step Back for Society? 1:02:26 Checks on Power 1:07:39 Rules-Based Monetary Policy 1:12:30 How to Fix the Fed 1:15:35 Closing & Disclaimers ------ Resources: Previous Debates https://www.bankless.com/balaji-bets-the-dollar-will-hyperinflate-to-zero-not-a-drill https://www.bankless.com/arthur-hayes-says-get-your-bitcoin-and-get-out Ben Hunt https://twitter.com/EpsilonTheory ------ Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://www.bankless.com/disclosures

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  What makes me angry is for people to say things like, oh, there are hundreds of banks insolvent, and it's hyperinflation time, and the system is coming crashing down, and there's no hope, and buy Bitcoin. Right? That's what makes me angry. There are real problems here, and this is not helpful. Right? In fact, it's actively harmful. And that's what I'm speaking out about.

• 0:27Ryan Sean Adams?

  Bankless Nation, we're going to get straight into the episode today. There's bank runs, and there's rumors of bank runs going on. One side says the banks are insolvent, get to the lifeboats. Another side says the banks are going to be fine, and they're sick and tired of the doomers pulling the fire alarm. So who's right? This is the third episode in a series of conversations we've been having on Bankless, and to get the full debate, you'll need to listen to the last two. On the get the lifeboat side, we had Balaji Srinivasan. He said that Bitcoin is going to $1 million, that the dollar is hyperinflating, it's probably going to happen fast, like in 90 days fast. Then we had Arthur Hayes. He gave us the trader's perspective. He doesn't think it'll happen as quickly as Balaji, but he has the same message: get out before it's too late. So this is our first episode on the counterpoint,

• 1:11Ryan Sean Adams?

  on the gonna be fine side, the banks are okay. Ben Hunt is giving the counterpoints today. There are a few benefits, a few takeaways we want you to get out of this episode. Number one, why are the lifeboat people wrong? Number two, why the banks are actually solvent. This is what Ben thinks, it's his take. Number three, why treasuries are still the safest asset in the world. Number four, why Ben thinks hyper Bitcoin and hyper Bitcoinization for the world is actually a really bad thing. And number five, how Ben thinks we can reform rather than replace the Fed. That seems to be a theme for this episode. There will be links in the show notes to the two previous episodes if you want to get caught up on the debate as it stands. There are two other things I want to say before we get into this episode.

• 1:56Ryan Sean Adams?

  Number one, tensions are high on this debate. There's going to be an inclination to go on personal attacks and to question motives. I'll remind all of us before we get in that none of us can assess motives. We should focus on attacking the argument rather than the person. And so I encourage everyone listening Listening to this to approach the arguments on both sides with an open mind and really focus on the arguments rather than descending into personal attacks. We see our role at Bankless is to present the arguments in the best light. Our listeners are smart. They can make decisions on their own. Number two, David planned to be here, but unfortunately he had an emergency. He had to attend, so it's just Ben and myself today. Guys, we're going to get right to the episode with Ben Hunt, but before we do, we want to tell you about the sponsors that made it possible, including Kraken, which is our number one recommended crypto platform for 2023. Go set up an account.

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• 5:24Ryan Sean Adams?

  Bankless Nation, I am super excited to introduce you to our guest today. Once again, Ben Hunt, he is an investor and the creator of an incredible investor community called Epsilon Theory. He's a several time Bankless guest. Perfect person to have this conversation, I think, because he's been one of the more outspoken critics against Balaji Srini Vasan's $1 million 90-day Bitcoin hyperinflation thesis. You think Balaji, of course, in our episode earlier this week, said that the dollar was going to drop to near zero or at least Bitcoin would be going to $1 million in short order. And I think Ben Hunt is the internet's leading candidate to push back against that theory and that thesis. So we are happy to have him today. Ben, welcome to Bankless. How are you doing?

• 6:08Speaker 00

  I'm doing great and it's super to be back here with you guys. Always enjoy it. So thanks for having me on.

• 6:15Ryan Sean Adams?

  Yeah, I think we asked for counterpoints to Balaji's thesis because at Bankless, we want to hear both sides of any arguments that we can sort of make up our minds about this. And of course, Bankless is a crypto-friendly community. But I also know you, Ben, to be a crypto-friendly individual as well.

• 6:30Speaker 00

  I'm a crypto-friendly person. I am. I am.

• 6:32Ryan Sean Adams?

  Yeah, and I know that because we've spent hours, literally, on previous episodes talking about it. So that's why this is interesting. This is not a crypto villain like Paul Krugman giving this critique of Balaji's thesis. This is somebody who has expressed, hey, you know, there are some use cases for crypto. And I think you've been excited about the things that Bitcoin and other cryptocurrencies can do in the past. So I'm wondering if you could just, as we, before we get into the discussion and the counterpoint to Balaji, give us your crypto credentials a little bit. Like, what are your thoughts on crypto as a technology?

• 7:09Speaker 00

  Look, I mean, to say that I'm a fan of, I think, crypto use cases might be going a little too far, right? I think that there's a clear use case, a wonderful use case. Alex Kleinstein has been very prominent on this about, you know, in repressive communities, right? I mean, that it's a wonderful way to, or a wonderful way, really one of the only feasible ways to exit those kind of repressive systems. I think, though, that

• 7:48Speaker 00

  my main praise for Bitcoin, specifically, crypto more generally, is that I think that it is elegant and wonderful art. And people think that that's a big put-down when I say that. And it's actually my highest praise. Art is what inspires us, right? And I think that there, I'm very allied and enthusiastic about and supportive of the ethos, as I would

• 8:26Speaker 00

  describe it, of the Bitcoin and larger crypto community. One of self-reliance, long-time horizons.

• 8:36Speaker 00

  A mindset of autonomy. I think that those are what makes a society worthwhile and vibrant and successful. I think that what makes an individual life vibrant and meaningful and successful. So that's, yeah, I'm not going to call that my credentials because I also think that Bitcoin specifically, crypto more broadly, like any application in finance, attracts fraudsters,

• 9:19Speaker 00

  hucksters, worse, people I call raccoons. And that's my, that's what makes me angry. That is, has what has made me angry about Balaji, right? It's that raccoonishness, the, as Big Daddy would say in Cat on a Hot Tin Roof, the mendacity, just the mendacity, right, of the lies, the self-interested lies. That's not the only thing that makes me angry.

• 9:57Speaker 00

  I have plenty of anger at the system and the perversions of the system. But fortunately, I think it's possible to walk and chew gum at the same time, that we can call out both social and societal inequities and change them, or when it's necessary, burn it the fuck down. I also think we can call out The lying liars and the lies that they tell for their own interest. And so I really think we can accomplish both things. And that's why I'm happy to be on Bankless again.

• 10:37Ryan Sean Adams?

  So we'll get to Balaji's argument in a minute. And certainly, I think a lot of Bankless listeners will agree that crypto has seen its fair share of raccoons. I mean, specifically, 2022 was probably the year of the raccoon.

• 10:51Speaker 00

  The year of the raccoon.

• 10:52Ryan Sean Adams?

  Wasn't it? That's definitely what we had. I want to set some context some more to you, Ben, because can you tell us? Like, you said there are times to burn the system down. You said that you are angry at the existing system. And I think what you mean is, is kind of the Fed. I remember our last conversation, you talked about this idea of hollow men, hollow markets, hollow world. I think you are in common alignment that something has gone off course in the United States and maybe other fiat regimes. What are your critiques of the Fed? Where do you think that US monetary policy has gone off course? Before we get to Balaji's argument, I'd like to hear you on this.

• 11:36Speaker 00

  Sure. I'll start with this. I think the Federal Reserve saved the world in March of 2009. I think they saved the world.

• 11:51Speaker 00

  I think they did in March of 2009 what it's the one job of a central bank. The one job of a central bank. This is why central banks exist. It's not for price stability. It's not for full employment.

• 12:08Speaker 00

  Their one job is to be that, I'll use this word, liquidity provider, the lender of last resort. That when the global financial system, when the heart stops beating, I like the pulp fiction analogy, their job is to come in and get that syringe of adrenaline and put it right into Uma Thurman's heart. That's their job. And that's what they did in March of 2009. I think that saved the world.

• 12:42Speaker 00

  The problem was not that shot of adrenaline. The problem, and this is what always happens with emergency government action, it becomes permanent government policy. We move from that shot of adrenaline to get the heart beating again, save the world, to having a constant IV drip in our arm of, you know, 14 years of zero interest rate policy. That's a horrible mistake, and it perverts what good can come out of a fiat system, fractional

• 13:27Speaker 00

  reserve banking and all of that. So I have enormous disagreements with the Fed and this transition from emergency government action into permanent government policy. More broadly speaking, and this was the topic we spoke on last time, this notion of using or of transforming emergency action into permanent policy, sometimes it happens without even the emergency action. So what we were talking about last time was how Alan Greenspan, very intentionally, not

• 14:07Speaker 00

  with malice aforethought, but certainly intentionally, what he decided to do was to use monetary policy to keep interest rates artificially low in order to grow our wealth. And I understand why that's politically popular, and I understand why that, you know, why he would go down that path, because for a while you can accomplish that, you can send a little bit.

• 14:38Speaker 00

  And not pay a big price. But since Greenspan, right, so we're going back to, you know, the mid eighties now. We've been sending a little bit more and more and more. And then with the Great Recession and putting zero interest rate policy as policy, as permanent policy, we send a lot. And so there is absolutely a horrendous imbalance in our system around debt. I think that there is a path to, believe it or not, grow our way out of it. I still think that's possible.

• 15:22Speaker 00

  I think the window for that is shrinking and shrinking. I can understand people say, no, I don't think that window is there. But what I don't, it's not just that I don't agree with, what makes me angry is for people to say things like, oh, there are hundreds of banks insolvent and it's hyperinflation time and the system is coming crashing down and there's no hope and buy Bitcoin. Right, that, that's what makes me angry. There are real problems here. And this is not helpful, right? In fact, it's actively harmful. And that's what I'm speaking out about.

• 16:02Ryan Sean Adams?

  So Ben, let's get into the argument. So I think that you called the Fed, there's this in the United States, there's this horrendous imbalance around debt. And I think a lot of people in crypto see that and would agree with you. And I think what you're here saying is just because the Fed is wrong, doesn't mean Bitcoin maximalists are right. But I want to get into the, the argument.

• 16:24Speaker 00

  That's, that's part of what I'm saying. If I could just interrupt that, that's absolutely part of what I'm saying. And I'm saying, and I'd love to kind of get a chance to talk about this here. I think there is a path forward.

• 16:39Speaker 00

  You know, from here, that over a very long period of time with enough political will and resolve, it can, we can get back on a much sounder footing.

• 16:50Ryan Sean Adams?

  I hear you. We will, we will talk about that, about the way to kind of reform the Fed and get on that sounder footing. There may be some folks coming to this episode that aren't familiar with Balaji's argument. Now, I mentioned the outset that we did release another episode of Balaji earlier this week, it's an hour and a half long episode or so. You guys can go listen to that if you want all of the details. Ben, I just want to make sure we're starting on the same, like, starting point here.

• 17:17Speaker 00

  Sure.

• 17:18Ryan Sean Adams?

  Can you articulate what Balaji is actually saying? Like, what's your understanding of the point that he is making and his overarching thesis?

• 17:28Speaker 00

  Right. So, you know, when I first started writing Epsilon Theory, and this is now, you know, 10 years ago, you know, one of the, I wrote about this, and, you know, it's all very, you know, grandiosely titled. I wrote a manifesto. I mean, how, how egocentric is that, right? But anyways, I did. And, and, and one of the lines in the manifesto is about how important it is to call things by their proper names. I really believe that. It's important in our individual lives. It's important in our social lives. It's important in our political lives to do just that, to call things by their proper names. And, you

• 18:10Speaker 00

  know, that has one aspect of it, which is, I guess, let's call it an anti-political correctness, that you don't have to walk on eggshells, that you can use, you know, call things what for what they are. But inherent in that approach is that words themselves have meaning. That, that, that words mean something. And words like insolvency, words like impairment,

• 18:44Speaker 00

  that Balaji throws around like this, you know, these words have an actual meaning.

• 18:52Speaker 00

  Frankly, that's why I, you know, I think when we were first talking about doing a podcast, you know, there's a notion of a debate. There's a, there's no debate here because we'd spend the whole time talking about words and do they have meaning or not. But a word like insolvency, a word like impairment, these are not words that are just reflect your vibes, right? They're not your feels about a bank's assets or liabilities. They have real meaning.

• 19:27Speaker 00

  And so what makes me so angry is for Balaji to just kind of throw out, you know, hundreds of banks are insolvent, all caps. Your money is not safe by Bitcoin.

• 19:46Speaker 00

  You know, and what makes me again so angry is that it's these big accounts like Balaji, like of Warhies, you know, they, we know the big accounts who are typing out in all caps, "Your money is not safe. Take your money out of the banks."

• 20:11Speaker 00

  And that does make me angry. I've had, yeah, I've had a dozen, is it a dozen? No, it's not a dozen. I've had eight to 10 readers of Epsilon Theory email me and say, "Hey, I'm nervous. I'm worried." Or asking for a friend, right? "My parents are nervous or worried. What do you think?" You know, they'll couch it in some ways like that. I've been thinking about taking my, you know, my money out of Wells Fargo, for fuck's sake. And, you know, and I say for fuck's sake, and I don't know, I don't, sorry, I should have asked what our policy is here.

• 20:46Ryan Sean Adams?

  Well, this is crypto, so, you know, I'm pretty liberal.

• 20:48Speaker 00

  It's all good, right?

• 20:49Ryan Sean Adams?

  If you listen to our Arthur Hayes episode.

• 20:51Speaker 00

  Exactly. I can only imagine. No, no, no, I can, I can only imagine.

• 20:57Speaker 00

  I mean, Wells Fargo is one of the too-big-to-fail outfits. And you're talking about taking, you know, a sub $250,000 cat drop, clearly, right? And keep it in your... The cash money in your home? I mean, what is this? What is this? And I'll tell you what it is. It's lying liars saying this stuff, right? For their own benefit. And, wittingly or unwittingly, for the... Some really rich guys, who I really believe intentionally want to destabilize our country and our society.

• 21:40Speaker 00

  Again, that's what makes me angry. So, words like insolvency and impairment, and if the banks... Hundreds of banks are insolvent, that's just not true. It's not. Right? Now, does that mean that banks can't be insolvent? Absolutely, they can't. You know, the last time we had a lot of banks that were insolvent was in 2008, in 2009. And I wrote a lot about that. I ran a hedge fund. We were on this from the very start. So it's not that I'm some freaking apologist for the banks, or the bankers. But what insolvency is, right?

• 22:25Speaker 00

  Is when your assets are permanently impaired. Like when you buy lots of mortgage-backed securities. And the ability of people to pay those loans back ain't there. That is not the problem we have today. That is not the problem with buying US Treasuries, and Fannie Mae, i.e. US government-supported mortgage-backed securities, or munis. The problem is not one of impairment.

• 23:06Speaker 00

  The problem is one of liquidity. And that gets back to what I was talking about before, about the Federal Reserve, any central bank's one job. Their one job is when the shit hits the fan, i.e. the banking system halts because there's no liquidity, there's not cash. Their job is to put the liquidity into the banking system. That's it. That's their one job. And that's what they did with their term loan facility. It's not QE, right? It's not.

• 23:48Speaker 00

  Again, these words have actual meaning. So QE is the Federal Reserve buying stuff and keeping it on their balance sheet. I'm buying this seven-year bond. It's not here's cash for a one-year facility as emergency liquidity. Actually, most of the expansion of the balance sheet, this return to QE or reversal of QT, reversal of quantitative tightening, most of it's 90-day financing. It's that shot of adrenaline to keep liquidity, cash money, in the banks for the people who want to take it out for whatever cockamamie reason they want to take it out for.

• 24:34Ryan Sean Adams?

  So Ben, if I'm understanding you correctly, there are two parts to this pushback, and you've even called it anger.

• 24:40Speaker 00

  I am angry.

• 24:41Ryan Sean Adams?

  So you've got kind of a...

• 24:42Speaker 00

  You can tell.

• 24:43Ryan Sean Adams?

  Yeah, you're pissed off about this. And the two parts, it sounds like, is part one, which is you feel like there is some untruth around the actual definition of these words. So I want to talk about that in a second. And the second part is motive. You're actually questioning the motive of those who are propagating it. Motive is always a hard thing to actually ascertain, but maybe we could talk about that too.

• 25:05Speaker 00

  Absolutely, 100%.

• 25:06Ryan Sean Adams?

  Let's focus on the untruth side of things. So insolvency, impairment, what about the idea that...

• 25:15Ryan Sean Adams?

  I don't think that, you know, to play devil's advocate to what you're saying. I don't think a Balaji or Eric Voorhees are saying that individual banks won't be able to meet their obligation. They're saying that individual banks aren't able to meet their obligation without Fed intervention. And the thing that is actually insolvent is more on the side of the Fed itself. And maybe one representative, whether we call it QE or whether we call it the Bank Term Financing Program, one representative of that is how large is the balance sheet of the Fed actually growing? And we have seen it growing through this intervention over the past, you know, couple of weeks. You're saying that this is short-term growth, but I think the proponents of this argument

• 26:00Ryan Sean Adams?

  are saying it's never short-term growth, Ben. You know this. You just made the case back in 2008 that like, once you put the morphine drip in, it never comes out. And so we had Arthur Hayes on the episode earlier this week, and he said, yeah, it's small now, but this BTFP alone could grow to like $4 trillion and be a COVID-level increase in terms of base money dollar supply. What's your take on this?

• 26:27Speaker 00

  That it's not true. Right? So, so the, I mean, in any event, it's not for, so there is a maximum.

• 26:37Speaker 00

  There's $2 trillion in non-G-SIB. Okay, what's a G-SIB? So a government systemically important banker. So the, the big,

• 26:53Speaker 00

  the big four US banks,

• 26:58Speaker 00

  big retail commercial banks are too big to fail. Right? They cannot go into a resolution process. And this is what we're going to get to. There are real problems in our banking system, real serious problems about how these big four banks are guaranteed, your deposits are guaranteed, and outside of them, your deposits aren't guaranteed.

• 27:26Speaker 00

  There's a real problem of $250,000, they're not guaranteed. There's a real problem in the lack of regulatory oversight of what I'll call kind of the big regional banks. It's, again, bullshit that they don't have the same level of regulatory oversight that the big banks have. It's bullshit that there are government protections on deposits for these big four banks and not for any of the other banks. These are all real problems that really need to be addressed by policy.

• 28:08Speaker 00

  But one of those problems is not, you know, I got 99 problems and one of them ain't that we're going to have $4 trillion of new money printed and going into the banks, right? That's not it. That's the equivalent of saying, you know what, the S&P 500, it could go to zero. That is actually true, right? If every company, if the Western world, actually if the entire world collapses, right, and we return to a Bronze Age barter system, right, the S&P 500 goes to zero. Those are equivalent statements, that we could have $4 trillion in new money printing,

• 28:50Speaker 00

  money printing, and the S&P 500 could go to zero. So, yeah, I get worked up about this stuff. It's not right, it's not correct, because the key difference, and again, these words have meanings, right? It makes a difference whether you are buying a mortgage-backed security, you're the Fed, you're buying a mortgage-backed security, and it has an anticipated lifespan of, whatever, seven and a half years, let's say, or something that they buy from Fannie or Freddie. That has a meaning, it has a term, it, I mean, is written right there on the paper.

• 29:33Speaker 00

  We can say, no, we can measure what the duration of the assets are on the Fed's balance sheet. We can measure that. And it's not the same thing as saying, "Oh, well, this bank facility, well, this could be, you know, billions and billions or trillions and trillions of dollars." It has a term limit. Here's why it's not also going to expand. The interest that the Fed is charging the banks to take this facility, this is expensive money. The banks are losing money when they post a security to this Fed facility.

• 30:17Speaker 00

  This is the old and, I think, entirely correct saying about how the central banks should provide the emergency support, the emergency liquidity. You should apply it to solvent banks on good collateral at penalty rates. And that's exactly what they've done. Right? That's exactly what they've done. The collateral here is the safest stuff in the world. It's US Treasuries. It's, again, government-supported mortgage-backed securities.

• 31:01Speaker 00

  These are not banks that reached for yield by giving out liar loans and alt-A mortgage-backed whatevers. That is not what's happening here. Now, before someone asks, "Could there be problems on these banks' balance sheets on the asset side?" Absolutely. Absolutely. You know, people, me, you're talking about commercial real estate loans. Could those loans, some of them, be impaired? Yeah. Yeah, they sure could. Because I think what's happened, and this is also an... The Balogies and the others screaming about bank insolvency and "take your money out, it's not safe."

• 31:45Speaker 00

  What they've contributed to is a credit freeze here in the United States. We are at the leading edge. It's gonna be an awful recession. It is. It's gonna be an awful recession. And this is part of the contributing factor to it. So you wanna look at some of the bank loans and say, "Okay, I'm kinda worried about them." I agree. I agree. But that's not at the foundation of what the Balogies of the world are saying is driving the duration, the insolvency, their vibe word, of the banks. What they're saying is, "Oh, the interest rates have gone up and so the duration risk..." That's what a bank does.

• 32:30Speaker 00

  Right? This isn't credit risk. This isn't some sort of permanent impairment. This is what a bank does. And when people get freaked out, the central bank, the Fed, has done what it does. It provides that emergency liquidity so that the banks don't fail. And they provide it at a penalty interest rate so that all the banks don't just say, "Oh yeah, let me have some of that." Nobody wants any of this unless they need it to tide over this liquidity-driven desire to pull the deposits out. And I think that is over, frankly. I think the Fed has done its job.

• 33:14Speaker 00

  Right? And that all this business about, "Oh, your money's not safe and there's runs on the banks." I think what the Fed did is they bought time for now is to solve, and let's solve them, the very real problems of a two-tiered banking system that we have in the United States.

• 33:35Speaker 00

  And let's try to work on this massive recession that's coming down the pike because we now do have a credit freeze here in the United States.

• 33:42Ryan Sean Adams?

  So your high level take, Ben, is that they have solved the problem of the bank run, that it was temporary.

• 33:49Speaker 00

  I hope they have.

• 33:51Ryan Sean Adams?

  They injected some liquidity in and the next thing that central bankers need to worry about and all of the entire United States needs to worry about is a recession. I have a question for you because like, so this is probably a point of debate. You said this, treasuries are the safest assets in the world. I think that is a key point where people who are making Balaji's argument would disagree. They would say, no, Ben, they're not the safest assets in the world. Fiat is not a safe instrument. We had Arthur Hayes on the podcast earlier this week too, and he said that all of these fiat regimes are kind of inside money and all of the debt that nation states are accruing

• 34:34Ryan Sean Adams?

  of years of the morphine drip of, you know, healthcare costs skyrocketing, of irresponsible fiscal policy decisions, they are going to be laden at the feet of those who are inside the system, the inside money. The best thing you could do is go outside the system. I can't think of anything more inside money than treasury. So why do you think that treasuries are the safest asset in the world?

• 35:00Speaker 00

  Because when I try to imagine a world where a treasury, a US treasury has credit risk, and that's again, that's what we're talking about here. By credit risk, I mean, you're not going to get paid back at the end of the term. That's why we call it a risk-free rate. It's typically what's called a treasury bill, which officially is any duration less than a year or a year or less, but typically people mean the 90-day.

• 35:27Speaker 00

  Obligation of the United States government. That's called the risk-free rate. And for most of the past century, that risk-free rate has been above inflation. So there's a positive real return on holding, on carrying dollars. It's called carry, right? So in finance, it's the... It's why, you know, my view of these kind of dollar debasement charts that go around, "Oh, my God, the dollar's lost 98% of its purchasing power." It's, again, mendacity. It's bullshit, right?

• 36:11Speaker 00

  Because the dollar has carry. You... There's an interest rate associated with dollars. Now, again, I said this before, the last 14 years have not been a positive real rate of return. The carry on the US dollar has been below inflation. And then when inflation spiked up, it's way below inflation. And that's why job one of the Fed is to get us back to a positive real rate of return on the US dollar. The normalizing of interest rates, that's what that means.

• 36:55Speaker 00

  An abandonment of this zero-interest-rate policy, which does debase the currency, right? And it does penalize savers. And it does do all of these very true things that I think the Bitcoin and more broadly crypto community quite appropriately call out. But what that does not mean, what it absolutely does not mean, is that the US dollar system can or should be...

• 37:33Speaker 00

  Burned down, right? Or that there is actually credit risk with the United States government? Because in that scenario, if I'm not, oh, I'm not sure if I want to get paid back the next 90 days or the next two years on the Treasury, the two-year Treasury I bought. I'm kind of worried about getting my money back on that. There's credit risk there. Well, let's try to imagine what that world looks like. And I'll tell you what that world looks like. And people, you know, I get it this all the time in my tournaments. Oh, well, you know, people would actually be able to buy a house because they'd be so much cheaper then. It's like our entire GDP would be cut in half.

• 38:16Speaker 00

  Unemployment rate would be 40%. Mortgages would not exist. Your loans wouldn't exist. Auto loans would exist. No lending would exist. I mean, it really is returning to that, oh, yes. Man, I have such fond memories of, you know, a Bronze Age barter system. And that's what it's, it's, it's the epitome of fuck around and find out.

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• 41:32Ryan Sean Adams?

  I'm starting to understand kind of the picture here. You're thinking that people seem to be celebrating the idea or the fact that banks would go insolvent or that the Fed, the US, would be unable to meet its obligations. I want to make sure in the-

• 41:48Speaker 00

  The system is broken. We might as well burn it down now. And it's like, this is just like LARP. It's LARP.

• 41:54Ryan Sean Adams?

  I want to

• 41:54Speaker 00

  It's absolutely larping.

• 41:56Ryan Sean Adams?

  I agree with you on this. I want to make sure that, though, that we are not beating up a straw man here. So I think that that one of the things that you said around treasuries, I don't think that those who believe at least some portion of Balaji's argument would say that the US is going to default on its obligations. Rather, that the thing that you said, that over the last 100 years, real returns on treasuries have been net positive, I don't know, 1%, 2%, something like that. Rather that that won't be the case for the decades to come. And that doesn't usually happen, granted. It does happen, though. Yeah, so just

• 42:35Speaker 00

  Time out. I'm agreeing with you, right? So again, I was, I think it was Alex Gladstein or somebody said, well, you know, one of the reasons I like Bitcoin is like an insurance policy against us not returning to a, you know, a positive risk-free rate, a real rate of return. To which my response was, fair, right? Fair, right?

• 43:03Speaker 00

  So I surrender on that, right? That is a reason, right? And I get it. It's the same rationale you would have for, you know,

• 43:15Speaker 00

  for like 30 years, you know, why you would own gold, for example. It's exactly the same argument. It's an insurance policy against central bank error.

• 43:26Speaker 00

  And as the lawyers would say, right, stipulated.

• 43:35Ryan Sean Adams?

  Okay, so you do agree on that point. And so I think what you're saying, though, is that the Bitcoin maximalist position, or this position that Balaji is presenting, is far more extreme than just the case of, hey, Ben, you know, we're buying all of these outside money assets because we think the real returns on treasuries are going to be negative for the next three decades because of central bank policy and fiscal policy. And the US losing its power status in the world and the US dollar diminishing as a reserve currency. So that's why we're going outside the money. You would probably say that that's fair. That's a fair argument. That's also a reason to buy gold and other

• 44:16Ryan Sean Adams?

  assets. But I think what you're more objecting to is the the more extreme nature that this narrative is being portrayed. They're not saying what I just said. They are saying, get all of your money out now before it's too late. And that's what rubs you the wrong

• 44:30Speaker 00

  way. So my my argument is with both the portrayal, right, the hyperbole, but my but more fundamentally, my objection is to the vision. Here's what I mean. And you see this with, you know, in the past with with gold bugs, too. The idea is that it's not just I've got this insurance policy if, you know, we have stresses and issues in the existing dollar system. No, no, we need to replace the existing fiat system with a gold standard. We need to replace it with a Bitcoin standard. We need to end fractional reserve banking. We need to move

• 45:15Speaker 00

  to fixed reserve banking. So my larger objection, my objection is not just to the hyperbole. My objection is very much, very much to the notion that there is an alternative financial system based on a fixed supply thing like gold or like Bitcoin. So I'm very opposed to the the underlying vision in addition to the mendacity of using words like, oh, my God, hundreds of banks are insolvent and your money is not safe.

• 45:55Ryan Sean Adams?

  I got it. Okay, so I want to dig into that because that is deeper in the layer of your objections. And I think one of the most crucial pieces. So basically, what's going on is there is a ship. It's hit an iceberg. People are debating on the size of that iceberg, how catastrophic it is. Maybe you disagree with the whole metaphor and scenario, but allow me to put some pieces together. So something happened. Maybe people, how about this, Ben? People are saying that the ship hit an iceberg and there's some debate as to whether it did or not.

• 46:26Speaker 00

  No, this is my point. There's no debate, right? This is like saying, when you say it's hit an iceberg, that is a metaphor. The banks are insolvent. Oh, my God, your money's not safe. And what I am telling you is that that ain't true.

• 46:42Ryan Sean Adams?

  Okay, so Ben here is saying, and I'm trying to make sense of this for Bankless Sisters, because Balaji just came on the podcast and said, "We hit an iceberg." Now Ben is coming on the podcast and saying, "We didn't hit an iceberg at all. That's a lie. People are making this up."

• 46:55Speaker 00

  Sorry, I gotta interject. And I'm not saying you can't hit an iceberg. You know what? We hit an iceberg in 08.

• 47:00Ryan Sean Adams?

  Icebergs are real, is what Ben is saying.

• 47:01Speaker 00

  Icebergs are real. Icebergs are real. We hit an iceberg in 2008. And everything that's happened since then was our government's both initial response to hitting the iceberg, which I think actually saved us from sinking.

• 47:14Ryan Sean Adams?

  Yes.

• 47:14Speaker 00

  But then disaster, no, disaster, so that's gonna be too strong. Pathetically, right? The actions they took to keep us from sinking, they said, "Hmm, let's just do that permanently."

• 47:27Ryan Sean Adams?

  Understood.

• 47:28Speaker 00

  So, icebergs are real. We hit an iceberg in 08. This wasn't an iceberg. That's what I'm saying.

• 47:35Ryan Sean Adams?

  So let's continue that metaphor for a second, because I enjoy it anyways. I don't know if any listeners will. Okay, so we hit an iceberg. We didn't hit an iceberg, is what Ben says. Some people are saying we have hit an iceberg. But Ben believes in icebergs. They are a real thing. You can hit them in ships. Some people aboard the ship are saying, "Come on to the lifeboat. Everybody, aboard the lifeboat." Right? And you're saying, "Hold on, don't board the lifeboat. Look at that. There's only a small number of lifeboats. We're not all going to get off." And by the way, the lifeboats are leaky. They're like, this is kind of the objection to the vision. So... I want to dig into that piece of it because we've already talked about whether we hit an iceberg or not, and you've articulated why you don't think we have. But what about the lifeboat is leaky to you?

• 48:19Ryan Sean Adams?

  So let's say that everyone followed the strong Bitcoiner case for getting aboard this alternative to fiat monetary system.

• 48:29Speaker 00

  Sure.

• 48:30Ryan Sean Adams?

  What do you object to that? What's so wrong with the vision? Why do you think the lifeboats are leaky, or there's not enough to go around, or whatever metaphor you choose?

• 48:36Speaker 00

  No, no, no. So I'll continue with this my view cockamamie analogy, and I'll say this: you can't cross the Atlantic Ocean on a lot of lifeboats. That's the problem.

• 48:49Ryan Sean Adams?

  Why, though?

• 48:50Speaker 00

  Our economy is a big-ass ocean liner. That's what it is, right? And icebergs are real, it can sink. I get it. We're not sinking, and yet the claim is, oh, my God, we've got to, you know, this ship is sinking, right? We have to move to a system that's not a big ocean liner. No, no, no. We need to get on our own, all our little lifeboats. You know, what's this idea about having a captain of the ship? Oh, no, no, no, no, no. We need to all make our individual decisions about where our lifeboat is going.

• 49:33Speaker 00

  Well, you know, you're not going to cross the ocean that way. And what I mean by crossing the ocean is you can't maintain... People don't like to hear it, but, I mean, my God, the standard of living in the United States in the year of our Lord 2023 is phenomenal. And for people to say, oh, well, you know, I just, I kind of wish we'd just go back to, like, you know, the late 19th century, when, you know, men were men, and, you know, sheep were scared, and, you know, it was, you know, we had some rugged individualism.

• 50:18Speaker 00

  And this is what I mean by LARPing. This is what I mean by LARPing. It's just like, God, you know, 8 billion people, or whatever the number is in the world...

• 50:30Speaker 00

  And you're just saying, eh, you know, if they, if they live, they live. You know, it's like, it's like,

• 50:41Speaker 00

  to continue the cockamamie, you know, analogy, replacing the ocean liner with a system of lifeboats. I, I, I think that's a really poor idea.

• 50:53Ryan Sean Adams?

  This is, this is the crux of it, and I'm glad we got this deep in this, in this conversation, Ben. So make that case some more, though. Okay. So you're saying that a fleet of lifeboats can't cross the Atlantic. What is so great about the fiat system? What is so great about fractional reserve banking? What is so great about having a captain who can kind of inflate money supply to whatever kind of the ocean liner needs? Why can't a Bitcoin based or a crypto based algorithmic monetary system of some kind? Do all of these things? I mean, nation states did exist prior to fiat regimes that were based on things like the gold standard.

• 51:36Ryan Sean Adams?

  What are, like, why can't we return to something like this? And why do you have such objections to the lifeboat idea?

• 51:45Speaker 00

  Well, for two reasons. One is that the reason that governments left the gold standard was that it constrained them so much, both for doing things like, you know, fighting a war, but also constrained them so much in things like just extending credit to an economy and growing an economy.

• 52:12Speaker 00

  So it's the latter of those. I'm kind of even most interested in doing, because what would actually happen in wars is that you would debase a currency. I mean, this is like, you know, Henry VIII would do this, right? You change the, the mix of silver in your coins, right? Or you'd, you know, you'd say, oh, well, we're going to borrow, you know, I'm good for it. Right? Or you'd, you'd issue deposit notes that were actually kind of fractional reserve banking of the time. You do war bonds, you do all, find all these ways to borrow money anyway to fight a war. Let's, so I'm going to leave that aside.

• 52:49Speaker 00

  Because you can do that on a gold standard too. What is very difficult to do on a gold standard or a Bitcoin standard is to create a system in your society where you extend credit to anyone except the rich. So my objection to moving to instituting a gold standard or a Bitcoin standard is that access to credit for anyone who's not very rich does one of two things. Either it vanishes because banks will no longer be able to lend, to have a velocity of money.

• 53:33Speaker 00

  And by God, this is on my Twitter feed. People think the velocity of money is the speed of a transaction. It's not, right? It's the, and this is at the heart of a fractional lending system, right? Which is that you lend the money to a business, they want to expand, they want to buy something, they want to hire people, right? You lend them money, that money is now deposited at your bank, right? It's their account, so they're spending it. Those deposits then, you then take those deposits, you can lend that out, right? So, or a fraction, like 90% of it, let's say. So it, this is the velocity of money.

• 54:16Speaker 00

  The same dollar is doing, is accomplishing more economic activity. That's the velocity of money. And that is not just possible, it's at the heart of a fractional reserve system, a fractional banking system. And it's exceedingly difficult to do in a fixed banking system. Now, the counter to that, as people say, is, "Oh no, it's okay, right? The banks will just originate the loans and then they'll securitize them and, you know, that will fund the lending that takes place." What that means is then you have to think, "Well, who is buying those..."

• 55:00Speaker 00

  Who is buying the asset-backed securities? Who is buying the mortgage-backed securities? And in our country, because those would be the two things that would be securitized. And you can do this, all right? European banks, for example, this is called a wholesale funding system. The banks fund their loans, basically by packaging the loans and then selling those as securities to generate the funding for the next set of loans, as opposed to relying on deposits in the fractional reserve banking system. That's much more prevalent in Europe than is in the US, where our banks are much more supported by deposits, retail deposits. You can do it, right?

• 55:43Speaker 00

  What that leads to, though, is the buyers of these securities are the banks. The buyers of these securities are the government. So when Bitcoin standard or gold standard people are talking about, "No, no, no, we need narrow banks, we need a fixed supply and the like," and yes, there would be these other ways to accomplish lending, because the banks would just be a wholesaler, they just originate the loans, and we package them up, and we'd sell them. Guess who the buyers are? It's the banks and the government. You're basically calling for a far more centralized world than a world of fractional banking,

• 56:27Speaker 00

  where banks make loans and hold their loans on their own balance sheets. I... Sorry, I'm a capitalist, and the root word of capitalist is capital. And to make a capitalist economy grow, you need that supply of capital and credit, particularly to the non-very-rich.

• 56:53Speaker 00

  So that's my five-minute defense of fractional reserve banking system. And as they would say, happy to take comments. And you know, you're going to get tons of comments on this, on this, this podcast, right? I mean, the comments are going to be, oh, you let them off the hook on XYZ. And it's like,

• 57:10Ryan Sean Adams?

  I know that. Look, I know that. And this is why we're, we want to hear both sides of the argument. And I, look, I would encourage, I mean, Twitter is a nasty place, isn't it, Ben? Like, sometimes people get personal. I think conversations-

• 57:20Speaker 00

  Oh, my God, you should see my feet.

• 57:23Ryan Sean Adams?

  I know it. I've been there, too. Not for this particular issue, but others. And there are tribes, and there's anger. And it's just a nasty, you know, nasty place. I, anything that the bankless platform supports is going to be constructive debate. And so I would encourage all of the people wanting to comment on this, be constructive. Let's have the conversation. Let's have the debate. No personal attacks. Okay, so could you also contrast the world? Let's say that we did move to some sort of algorithmic coin standard where it couldn't be debased, something like Bitcoin. So why is that a worse world? I mean, you've just painted the picture of, of why, you know, fractional reserve is necessary, is kind of

• 58:07Ryan Sean Adams?

  a cornerstone for civilization. And I think it's really, it's for people to think about-

• 58:11Speaker 00

  Sorry, sorry, sorry, sorry. It's a cornerstone of modern society.

• 58:14Ryan Sean Adams?

  A cornerstone of modern society.

• 58:15Speaker 00

  That's all. And now that we're here to eliminate, or, you know, not eliminating, right? You're limiting it to the very rich. Mortgages, credit in general. So I mean, credit cards go away, auto loans go away, mortgages go away, student loans go away, except to the degree that they are absorbed by the big banks and government.

• 58:48Speaker 00

  That's what's happening with student loans, for example. Every student loan now is back, the government owns those loans. So yeah, you could still have student lending with a Bitcoin standard, but it means that we're just, we're creating a more government-reliant, centralized society for doing it.

• 59:07Ryan Sean Adams?

  So that's what you see, even if we just swap out the denominator, if we swap out the dollar for some other standard as a store of value, medium exchange, unit of accounts, you think that that leads to a more centralized, more unequal world that is less free?

• 59:22Speaker 00

  A hundred percent.

• 59:23Ryan Sean Adams?

  Okay, so you're saying that the product that maybe maximalist advertised is really not as advertised because the picture they're painting, at least part of it is, the ship is sinking, we have to flee to this other ship. That's kind of narrative number one. But also, this other ship is a more self-sovereign, freer world with more liberties and is going to lead to greater, I hope this is the argument, greater economic prosperity. I mean, there are some that might even disagree with that statement and be like, no, it's all about bunkers and citadels. And that's a very dystopian view of things. And I think there's an element to that.

• 1:00:05Speaker 00

  But it's self-reliant.

• 1:00:06Ryan Sean Adams?

  Some are painting a picture of this being a good thing for society. And you're saying this is not, this is a huge step back.

• 1:00:14Speaker 00

  Yes, that is exactly what I'm saying. And the crux of that argument is that I do not know how it is possible to extend credit with a fixed supply system, except at extremely high interest rates.

• 1:00:37Speaker 00

  Because let's say you're the bank of Bitcoin, right? And somebody comes to you, I've got this great idea for this project, and I just need you to lend me this money from your deposits. You're a bank, you make loans. And so you say, okay, okay, okay, right, I'll do it. And you make the loan. And then something happens and they can't pay the loan back.

• 1:01:00Speaker 00

  What do you do? Right? There's no loan loss reserve, right? There's no, you know, separate equity here. You've lost money for the depositors. And if the depositors are part of that decision to go and invest the money, and they're making that decision, A, they're going to want a much larger, you know, the risk is larger, so they want more of a return. What banks do is that they allow us to pool social risk-taking, or fractional reserve banking does. Right? And that's a really good thing. Because the alternative is that credit dries up,

• 1:01:44Speaker 00

  except for people who already have a lot of money. So that's the crux of my argument, that you can't have this fixed reserve system based on gold, or Bitcoin, or whatever it is, and maintain societal-wide access to credit, which... Are there excesses in credit? Of course there are! Of course there are!

• 1:02:14Speaker 00

  And there is a necessary... Credit is the oxygen for our modern economy and society. And if you take away that oxygen, it dies.

• 1:02:27Ryan Sean Adams?

  I want to ask you about this. So another word for credit, Ben, is trust. And I think very much the... The whole story of humanity up to this point is a story of scalability. Our species is able to coordinate better than any other species. That's why we develop roads, and hospitals, and cities, and nations, and technology. So scaling trust is kind of the name of the game if we're going to survive and thrive into this 21st century. So another word for credit is trust. But I want to ask you about this. It feels like, to many people, and I think you would agree to this, the central bank has kind of betrayed our trust. It's like, we don't necessarily get a vote on the money supply.

• 1:03:09Ryan Sean Adams?

  And I'm wondering, I want to pitch to you this idea, Ben, is there some sort of a sweet spot here? Okay, we have the ship, the big ocean liner, there is a captain, okay? But like, what's to prevent the captain from sailing, like going to some destination we don't want to go? Or making bad decisions, or treating everyone on, you know, in the ship in kind of a subpar way? Making decisions that aren't democratic, that aren't liberal? Well, one prevention mechanism is leaving the system. We can basically threaten the captain and say, look, hey, we should have the right to fork off. We should have the right to go on to these, you know, these lifeboats. And if you don't steer the ship in the right direction, this is our vote.

• 1:03:54Ryan Sean Adams?

  We'll leave, we'll go in the lifeboat, we'll go find some other ship. Is there some sort of sweet spot where we have a check on power through these non-inside money systems? Outside money systems like Bitcoin or Ethereum or gold or some other monetary standard? And we can use this because it feels very much, Ben, and I think you would, you'd probably agree with this, that central banks have too much power, too much unchecked power. I'm like, what can I do about this? I mean, how much money did we print during COVID? If I disagree with that, I can vote, but like, we're just on this, on this kind of machine. And I don't know what else to do other than to vote with capital. And that is an Adam Smith, that is a capitalist idea of being able to exit the system,

• 1:04:37Ryan Sean Adams?

  vote with your capital and get outside of a system that's no longer working for you. Is there a sweet spot we can find?

• 1:04:44Speaker 00

  So, couple of strands I want to untangle here. The first is that I would very much be in favor of a more, I'll call it, rules-based monetary policy. Right? And, you know, that's absolutely a course correction that I think makes a ton of sense, a more rules-based monetary policy. And the main kind of big rule that I'd be very much down for, right? Is an explicit recognition of the Fed's one job, right?

• 1:05:29Speaker 00

  That lender of last resort facility, right? And in moving away from the...

• 1:05:40Speaker 00

  Effort, an intentional effort to guide or mold behaviors through words. And God knows, I've written thousands of words about this and it's a real problem I have with the Federal Reserve, that because they are of this church who believe that they have this, the French would call it dirigez-ma, this ability to direct economic activity and they know best for us, they are going to use their words, not as an accurate representation of what they believe or think, but to use their words intentionally to alter our behavior, you know, what we might call lying under other circumstances.

• 1:06:25Speaker 00

  That just, again, that's the mendacity on the institutional side. So, if you're asking me, should we reform, change, sear, shrink the influence and the actions of central banks and terrorists? Absolutely. Right? Should we eliminate central banks in our modern system, much less a fractional reserve system, banking system? Hell no. Right? So, that's strand number one. Now strand number two, the exit. Why can't we just take our money and go somewhere else? Amen, brother.

• 1:07:09Speaker 00

  Take your money, go somewhere else. Right? That's separate from big name accounts getting up there and on Twitter and here and every other place shouting in all caps, "The banks are insolvent. Your money's not safe. Buy Bitcoin." Again, that's what pisses me off. Right? Both of those things piss me off. The one that's more kind of urgent and in my face right now is the latter.

• 1:07:39Ryan Sean Adams?

  I see. I want to ask a question about this rules-based monetary policy really quick because I can hear probably the bankless listener saying, but Ben, that's what crypto is. So the idea behind crypto is that any rules-based monetary policy, as long as it's tied to a human making decisions and some sort of political apparatus, those rules will be bent and broken. And they would say, that's what we actually have with crypto. Whether you believe the Bitcoin algorithm is correct, or the Ethereum algorithm is correct, it's something that is immutable, very difficult to change, that is kind of written in the software, that is rules-based. Now, maybe it doesn't have the right rule, but they would say, Ben, you'll never get humans.

• 1:08:20Speaker 00

  I get the point. Let me answer the question. Right? So I'll answer it. So

• 1:08:27Speaker 00

  the core problem for a government and a Bitcoin standard or a gold standard is that the rules that are there are out of their control.

• 1:08:41Ryan Sean Adams?

  Right.

• 1:08:42Speaker 00

  And this was true for the gold standard, too. One of the huge problems of the gold standard was, do you have a gold mine or not? That was a big problem. That was a big problem if you're a country and you're on the gold standard and we don't have a gold mine. That's a real problem here. Because we can't legislate, right? It's the exceptions. It's those emergencies that come up. And when the rule is not in your...

• 1:09:15Speaker 00

  When you can't, when there's nothing where you can break the glass in case of emergency, like the Fed did in March of 09, like the Fed did with this bank term loan facility. It's the separateness and the inability of government to ultimately control.

• 1:09:39Speaker 00

  The reason for being, the raison d'etre of any government, which is to tax.

• 1:09:47Speaker 00

  And that's why governments exist. And you call it seniorage, you can call it all these different words, but they're basically about, this is why governments exist. And you say, well, screw that, I'm gonna be my own sovereign individual, I'm gonna go live out on the Isle of Whiteman, or whatever, you know, screw you, right? And knock yourself out, man, knock yourself out.

• 1:10:11Speaker 00

  This has been kind of at the core of my, of that philosophical difference I have with Bitcoin maxies and as a supply for policy, right? I don't think this is a battle that is winnable, and I don't think it's a battle that even if you won, is a good thing for the world, which is to move to a fixed supply monetary system that is inviolable and not, cannot be changed by the citizens, however they are represented, and however their will is represented in the perversions of that in government, but how it is separate from what citizens can do anything about.

• 1:10:57Ryan Sean Adams?

  Ben, this has been great. I want to get to one more thing before we close, but I'm kind of summarizing this, going back to our, you know, my ham-fisted analogy, but maybe it's helpful for some listener out there. We're all in the ship together. Ben believes in icebergs. He doesn't think we hit one in this particular case. And he believes in your right to go board the lifeboat, but he takes issues with those who are screaming and shouting, "Run to the lifeboats, run to the lifeboats!" And that is the crux of his issue. What do you think about that summary?

• 1:11:34Speaker 00

  I think that's pretty good. The only thing I'd add to that is, I don't, I don't, I think it's a pretty crappy world if we live in a world of lifeboats, right? I think the ocean liner is an important... Thing to maintain, it has definitely gotten off course over the, you know, the last 13, 15 years. I want to change the course of the lifeboat of the, of the ocean liner, right? And replace, if not replace the captain, put more controls on the captain and let's get better cap, you know, crew. But I don't want to live in a world where we're all floating off in our own little lifeboats. That's the only thing I'd add.

• 1:12:16Ryan Sean Adams?

  Let's complete this counterpoint with this then. So I'm understanding this is Ben Hunt, the reformist, right? Not the radical who's telling you to, you board the lifeboats, but hey, we can reform the ship that we're on. And I promised you to give you like opportunity to make the case earlier in the episode on how we could actually reform the existing system. Ben, what do you think that looks like? How do we fix the Fed?

• 1:12:41Speaker 00

  More rules based, less reliant on, they'll call it communication policy or forward guidance.

• 1:12:50Speaker 00

  A real rate of return, a real rate of return, right? Greater regulatory scrutiny of the banks.

• 1:13:00Speaker 00

  An increase in the uninsured amount of deposits or the insurance on deposits, an increase, not unlimited, but an increase. Because I want to make it possible to still have a regional bank system that is deposit driven, that still allows for banks to make loans and keep it on their books. Because that is such an engine for entrepreneurialism, for risk taking, for economic growth in our society. That's what funds small little businesses all around, you

• 1:13:39Speaker 00

  know, this country. That's what funds farmer loans, ag loans, right? Car loans, all that stuff. That's the economic activity, the banking activity I want to strengthen. While at the top, right? We need to return to a monetary policy that has a positive real rate of return. And you do these things and it'll take a while, but fortunately we have time.

• 1:14:07Speaker 00

  We grow our way out of the debt. We grow our way out of the debt. And that's going to require some real fiscal reform, too. There's a whole set of things that I'd want to do there. And then the final thing I do, right, is I would have a million-dollar lifetime you know, tax-free capital gains exemption. Right? And then I would tax capital gains progressively over that $1 million. But I want us to return to being a society of risk takers, entrepreneurs, and investors. And I think our fiscal and monetary policy should support that.

• 1:14:52Ryan Sean Adams?

  Ben, you think we can-

• 1:14:53Speaker 00

  The window's shrinking, but that's what I think we should do.

• 1:14:55Ryan Sean Adams?

  You think we can get there? You think we can use politics as our engine to get there?

• 1:15:01Speaker 00

  I absolutely do. Like I say, it's getting harder and harder. And it's made harder and harder by the biologies of the world. Right? It's made harder and harder by this because it breeds more and more distrust. And there's plenty to be distrustful of and lots of things to change, including some things to burn the fuck down. But the fractional banking system and having a lender of last resort ain't two of them.

• 1:15:36Ryan Sean Adams?

  Ben, this has been a really productive conversation and-

• 1:15:39Speaker 00

  I hope so. Thank you. I've really enjoyed it.

• 1:15:41Ryan Sean Adams?

  Yeah, I appreciate you coming on and making this counterargument. I'm hopeful we can have these, continue to have these kind of civil conversations and debates. And I would encourage anyone listening to this is if you have a commentary or follow-up, let's keep it on the high-rung arguments, not the low-rung attacks, so that we can have some more productivity and hear all sides of the arguments and figure out what's going to happen next. That's what we're all trying to do here.

• 1:16:10Speaker 00

  Well, thanks again. I really appreciate the opportunity to come on.

• 1:16:13Ryan Sean Adams?

  Guys, gotta end with this. Risk and disclaimers, of course. None of this was financial advice. Crypto is risky, so is DeFi. You could definitely lose what you put in. But we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.