[00:03:25] Dr. Peter St. Onge: And that they don’t fear because they have these paid PhDs who sort of lecture the public how, you know, this is just part of free market capitalism and, you know, this is the price of progress is that the is that everything’s going to get a little bit more expensive every year. So where they really get scared is when inflation gets away from them and gets up into 5, 7, 9 percent because they know that at that point, voters get angry.

[00:03:50] Dr. Peter St. Onge: If voters get angry, Congress gets angry, and then Congress can put a leash on them. So why did it get out of hand this time? And the core, sort of the original sin here was in order to buy the COVID lockdowns, it was fantastically expensive. This is really everywhere in the world that went through lockdowns.

[00:04:09] Dr. Peter St. Onge: They had to absolutely pump out money in order to bribe voters into doing it. So when the lockdowns first came in, I was up in Canada. And they had these CERB, they were these, it was basically a universal basic income that was implemented nationwide. You know, it was astoundingly expensive. The only way that they could have done that is by printing gobs of money.

[00:04:31] Dr. Peter St. Onge: So in the case of the U. S., it took about six, six to seven trillion dollars. is how much the increase the money supply during COVID. So it went from about 15 trillion to about 21, 22 trillion. Now, if you print that much money all at once, every school of economics, even Paul Krugman, even the Marxists, they all know that it’s going to lead to extreme inflation.

[00:04:53] Dr. Peter St. Onge: So to a first approximation, that’s going to give you something like 40 percent inflation. It’s not going to happen all at once, but it’s going to come over time. Initially, we didn’t see that because the economy was flat on its back, you had supply chains were choked, people were staying home to save lives.

[00:05:07] Dr. Peter St. Onge: And then once the economy started to normalize a little bit, then you started seeing that jump up. So right around, almost to the day that Joe Biden came into office, you know, of course you can’t cause inflation in six hours. So at any rate, right around January of, what is it, 21, inflation started picking up and then by about the middle of the year.

[00:05:25] Dr. Peter St. Onge: We were at the point where it was really hitting 1970s levels. And so that was something that people didn’t think was going to happen again for a long time, that the Fed had sort of learned its lesson back in the seventies. And you know, you can’t let the money supply run so fast, but that’s really what got us into trouble in the first place.

[00:05:42] Dr. Peter St. Onge: Now, at that point, the Fed did panic. They are afraid of high inflation because it calls into question their own independence. And so they sort of panic hyped interest rates. Now if we sort of pause the story there for a moment, once inflation started taking off, the Fed really had two options. Okay, one option would have been…

[00:06:04] Dr. Peter St. Onge: it tells, it identifies the source of the inflation, which was obscene levels of government spending. And then it tells the government, you guys got to cut back. You got to lower the spending. You got to get rid of the deficits. In fact, Powell could have forced them to do that. If he simply said, I’m not going to buy government bonds anymore.

[00:06:18] Dr. Peter St. Onge: I’m going to sell them instead. He could’ve actually forced the feds to end the deficits. But that’s a politically costly thing to do to the people who run the organization, right? The Fed exists at Congress’s pleasure and they can always change the rules on that. So instead of doing that, he said, okay, the Feds are spending.

[00:06:36] Dr. Peter St. Onge: I’m not going to complain about that. That’s probably going to continue. And so one of my other options, if I want to reduce the amount of spending in the economy, I want to reduce the amount of money that’s out there chasing goods. And the only man left standing is to crush the private sector, and the way they do that is by hiking interest rates.

[00:06:55] Dr. Peter St. Onge: Up they went, the fastest rise in about 50 years, so since the 1970s, since Paul Volcker, so it was really an epic level of rate hikes, and then, of course, a lot of us warned that if you do it that quick, that you’re going to break something, specifically something in the financial sector, which is very top heavy, so it’s very vulnerable, and of course that’s what happened in March when the banks started going under.

[00:07:18] Dr. Peter St. Onge: They responded by pushing out, I call them pre bailouts, but they basically pushed out trillions of guarantees and open windows. They, you know, lent money based on fictitious asset values. They, they did a lot of things that in the private sector you would get like a 20 year sentence for, but of course this is par for the course when it comes to, to our ruling thieves.

[00:07:40] Dr. Peter St. Onge: They headed that off with yet more trillions of money. That money doesn’t immediately lead to inflation. Okay, they knew that from 2008 because when you bail out banks, the banks tend to hold on to it. They don’t go out and spend it on, on vacations or something. It tends to stay put. So they knew that from 2008.

[00:07:59] Dr. Peter St. Onge: They pumped out trillions in 2008. A lot of us said you’re going to see bad inflation. We didn’t get the inflation. The reason is because the banks held on to it. So that’s what they’ve been doing so far. And so where we stand at the moment is that for the past year or so, inflation’s been coming down. It has largely been coming down because of energy prices.

[00:08:16] Dr. Peter St. Onge: So energy… Usually energy falls whenever the world economy is slowing, and that’s now happening really coordinated across the world. So even China is slowing, and then the other reason is that the world sort of routed around Mr. Putin’s war. So initially there were some shocks to energy markets. You know, Europe wasn’t buying, it was buying elsewhere.

[00:08:36] Dr. Peter St. Onge: A lot of sort of energy supply chains had to get rejigged. And at that point, a lot of that has already been digested. So energy prices have been coming down. That was bringing down headline inflation. And so, you know, the administration was declaring victory. The Fed was not because the Fed could see the underlying numbers, which the core inflation, okay.

[00:08:54] Dr. Peter St. Onge: That’s excluding food and energy. That’s really the number that the Fed sort of grades itself on and core inflation has been stuck really for about a year. If we compare to the absolute worst of the inflation last year or two years ago, core has only come down about half point. It’s really pretty stuck.

[00:09:11] Dr. Peter St. Onge: So the Fed is still concerned. That’s why, you know, they’ve been sort of pouring cold water and saying that it’ll be some time before rates come back down. And then just in the past two months now, sort of, you know, if we want to get the latest stories for what’s going on inflation, The past two months now, inflation has started to rise again, largely because of energy prices are starting to go up again.

[00:09:32] Dr. Peter St. Onge: And so if that continues, then the Fed is going to be a lot more concerned. It’s going to get people upset about, they’re already upset about their grocery bills, but that’ll get them upset about the gas pump again. And then that leads to congressional pressure. So the Fed is, is kind of back to the corner at this point.

[00:09:48] Dr. Peter St. Onge: They won’t say no to the government. They’re sort of stuck with these high rates and they’re just basically waiting for the economy to die so that that’ll cut down inflation and if sufficient millions of jobs are lost at that point they can declare victory and then they can go back to start to normalize rates and that not until that happens are we going to see these sort of financial stresses and the bank crises stop.

[00:10:14] Preston Pysh: It’s fascinating to me to see that the energy prices aren’t up all that much. I mean, they’re up, but they’re not up like aggressively. And I just literally saw a tweet that there’s more talk that they’re going to go back into the Strategic Petroleum Reserve to potentially release more. And the irony of this, right, isn’t just that they’re immediately jumping into the SPR as if it’s QE for oil.

[00:10:41] Preston Pysh: It’s they, they want to create a recession. They, they need higher prices. They need things to slow down, but yet they’re so quick to come in there. It just shows you how desperate and how they, they want it both ways. They want, they want it to have lower oil prices. They want interest rates to be down, but they also want a recession simultaneously and it’s just like, I’m speechless.

[00:11:02] Dr. Peter St. Onge: And I was going to say I really liked that QE for oil. That’s, that’s exactly what it is. And they have to keep their powder dry because they use that SPR, at least Biden did to buy the last election. Yes. Right. So, you know, he flushed out a huge share

of it. Something like 30 percent or more of it.

[00:11:20] Dr. Peter St. Onge: He flushed out and that got oil price or gas prices low for the election for the midterm. So he’s got to keep some of it. Yeah, right. Exactly. For the midterms. And so he’s got to keep some of that for the 2024 election here. So when, you know, they just added like a tiny amount, like 600, 000 barrels, just to drop in the bucket, I guess, to like show people that they’re prudent about such things.

[00:11:41] Dr. Peter St. Onge: But yeah, they’re going to try to take the edge off of any hikes by draining that out. And. You know, the problem, of course, is that the Strategic Petroleum Reserve is supposed to be there for wartime. It’s like, if there’s a war and supply is interrupted, you want enough gasoline for the ambulances, okay?

[00:11:56] Dr. Peter St. Onge: So, that’s supposed to be kind of the family jewels. You don’t go selling that off for elections, but apparently that’s, that’s what they’re up to.

[00:12:04] Preston Pysh: People calling it the strategic political reserve.

[00:12:07] Dr. Peter St. Onge: Bingo. Exactly.

[00:12:08] Preston Pysh: There’s a lot of time left on the clock for them to be going back into that and draining.

[00:12:14] Preston Pysh: There’s a lot of time left. You said something very early on in your response to the inflation where you said 6%. I’m assuming that you’re looking at the M two growth rate over multiple decades. When you said the 6% bingo, you said 2% comes out that we see in our inflation, and then 4% kind of gets washed out.

[00:12:35] Preston Pysh: Do you see that 4% and I’ve done similar numbers. I, I think I’ve come over the last 20 years. I was like around 7% on a compound annual growth rate.

[00:12:43] Dr. Peter St. Onge: There you go.

[00:12:43] Preston Pysh: So we’re real close on the numbers, the 4%. Do you think that that is manifesting itself in asset prices? Cause people’s houses are going up equity prices are going up.

[00:12:55] Preston Pysh: How much of that amount are people attributing to their skill in markets thinking that they’re actually outperforming markets or whatever you want to quantify that in nominal terms when in fact it’s just the printing, it’s just the other 4 percent that’s not showing up in the CPI gauge?

[00:13:12] Dr. Peter St. Onge: Yeah, that’s an interesting question and right, a lot of that money is going to be absorbed From the perspective of money printing, financial markets occupy the money.

[00:13:21] Dr. Peter St. Onge: Okay. So, you know, if we sort of zoom out, inflation is a question of how much money is chasing, how much goods. And so when people are taking some of that money and they’re playing in a casino, for example, then the money is occupied and it’s not chasing goods, right? So in the sense of inflation, when money is going and being passed around on financial markets, It’s not being saved, but it looks like savings.

[00:13:44] Dr. Peter St. Onge: It kind of comes out of the game temporarily. And so that’s an interesting question. What percent of that 4, sort of extra 4 percent because the economy hasn’t grown 4 percent for a very long time, right? So, I mean, there is something like 2 or 3 percent overhang. That’s kind of a mysterious, it’s like you can detect that there’s a hidden planet from its gravity field.

[00:14:04] Dr. Peter St. Onge: Okay. But like, you can’t actually see the planet. And so people usually assume that this may be foreigners saving or maybe it’s cartels. We generally save a lot of dollars because they’re apparently more prudent than the federal government. But anyway, right. So that’s kind of a big mystery is where, you know, the extra two or 3 percent goes.

[00:14:20] Dr. Peter St. Onge: People usually assume that it bleeds overseas or bleeds into gray markets or black markets. But that’s an interesting question that a big amount of it may be soaked up into financial markets and what that implies. is that that was two to 3 percent per year. So that might be quite a large aggregate number that’s essentially occupied at the casino.

[00:14:38] Dr. Peter St. Onge: And so if the casino empties out, if markets decline and people sort of pull out of the casino and get back to the real world, then it’s possible that there could be a lot of money that floods out of that. Normally when people are looking at that sort of financial black hole, like where did all those extra dollars go?

[00:14:56] Dr. Peter St. Onge: The other usual suspect is going overseas. If you’re a rich Mexican, for example, you are not holding a whole lot of Mexican pesos, right? You, from hard earned experience, you know that that’s not where to park your fortune. So you might have a little bit of pesos for monthly usage. And then to the extent you have cash or treasuries, which is a cash substitute, you might have those parked in dollars.

[00:15:19] Dr. Peter St. Onge: And so, that’s absorbed a lot of those dollars, and if de dollarization is one of the big things people are talking about, if that advances, then a lot of those could also come back, but really, either of those two scenarios are sort of black swans. They’re not necessarily likely, right, that financial markets are suddenly going to become extremely unpopular, or that foreigners are suddenly going to dump their dollar coins.

[00:15:40] Dr. Peter St. Onge: It’s not necessarily likely, but they are interesting because they would catastrophically affect the dollar. They will both lead to enormous inflation because you have this massive overhang of dollars that are currently kind of out of the game and they would be coming back into the game and circulation in the U. S.

[00:15:54] Preston Pysh: Yes. Yeah. And I think that that’s the big concern. Another thing that I think is lost in a lot of the way that we look at inflation and these growth rates. And this goes to Jeff Booth’s thesis where he’s a technologist, and he’s saying that when we invest in these technologies, it’s like, where’s the calculator?

[00:16:14] Preston Pysh: Well, it’s all on your iPhone app, and so is everything else. Like, where’s, where’s that captured in a CPI gauge as you continue to have this dematerialization effect that keeps compounding, but isn’t necessarily captured in these numbers just to kind of further compound the six or seven percent. M2 growth rate really not being captured in any of these inflation gauges.

[00:16:38] Dr. Peter St. Onge: For sure.

[00:16:39] Preston Pysh: I want to talk about China a little bit. We had recently the country garden situation. We have the Evergrande that happened probably a year and a half ago, maybe, maybe even longer than that. And it just seems like there’s a deflationary force that’s kind of hitting China right now, but. I closely follow Luke Gromen and Luke is kind of like not having it.

[00:17:00] Preston Pysh: And so I’m hearing like all these different kinds of competing narratives that are happening in China. And as everybody knows, it’s really kind of difficult to piece through what’s legit, what’s made up, what’s a strategic messaging narrative here in the U S. I’m kind of curious to hear your thoughts on China.

[00:17:17] Dr. Peter St. Onge: The moment China is definitely deflationary, most of that is coming from manufacturing. They have overcapacity in a lot of areas. The Chinese government, like our own government, identifies industries that it wants to give capital to. So, green above all. They have industrial policy where they look at semiconductors or other industries that they want to dominate, and so they give them preferential access to capital, as does our government, by the way, in all of those, and what’s happening in China is kind of a concentrated version of what happens here, which is that those investments typically fail because governments are really, really bad.

[00:17:54] Dr. Peter St. Onge: It’s not just they’re bad at picking winners. I mean, they are, but in addition to that, of course, the process gets corrupted, right? And so the likelihood that the taxpayer money is actually going to go to the correct company is essentially zero. Most likely it is just going to be lost. And so in China’s case, they’ve got that problem in manufacturing.

[00:18:11] Dr. Peter St. Onge: They have overcapacity, a whole lot of areas, for example, in cars. So Chinese buy about 20 million cars and China can produce about 30 million cars. There’s a lot of extra cars. And so there’s only two possibilities. One of them is that the lines go idle, then you lose all those millions of jobs. The other option, of course, is that you crank them out more or less at cost, or maybe even below cost, variable cost, so that you’re using the factory, you’ve already amortized it.

[00:18:36] Dr. Peter St. Onge: And then you just pump those things overseas, and you sell them, you know, potentially even below cost, so you quote unquote dump them. They’re going through both of those. So there are a lot of, let’s see, it was 20. The youth unemployment rate in China hit a record high. It was about 20, 20. 5, or it might’ve crossed 21%.

[00:18:53] Dr. Peter St. Onge: At that point, the government stopped reporting it to save money. So and you know, people, of course, interpreted that the way that you and I would. The numbers must’ve been really, really bad. It’s actually shadow estimates that maybe the youth unemployment is like 50%. These are shadow estimates because nobody ever really knows what’s going on in China.

[00:19:12] Dr. Peter St. Onge: But anyway, so manufacturing is definitely in trouble, and manufacturing is a much bigger part of the Chinese economy, famously, right? They stole all the jobs. And so it’s something like 25 percent of the Chinese economy. And then the other industry that’s really in trouble is property, right? So China, again, preferentially channeled capital towards property.

[00:19:32] Dr. Peter St. Onge: And something like 70 percent of Chinese household savings are in property. And a lot of what they’ll do is, is like buy an apartment. They don’t intend to live there. In fact, I don’t want anybody to live there because the apartment is worth more if it’s never been lived in like a new apartment. And they’ll, they’ll use that like as a savings account.

[00:19:50] Dr. Peter St. Onge: So they’ll just park their assets over there. And as long as you can get a really cheap mortgage from the government, it’s a great deal, right? The property is going up 10 percent a year. You’re paying, I don’t know, 3 percent on your mortgage. That’s free money, right? You’re just basically printing money.

[00:20:03] Dr. Peter St. Onge: The problem, of course, is that so much, I mean, 70 percent of household savings, that means that if that property starts crashing and, you know, you name some of the major property developers in China that are now in trouble, I mean, they’ve got major debts. These are like 100 billion. I think Evergrande is like two hundred.

[00:20:21] Dr. Peter St. Onge: I mean these are really large numbers. Massive. Two, three billion dollars. Yeah. These are potentially big enough that China can’t necessarily bail them out. Too big to bail out. So, if that starts crashing, then that’s essentially Chinese household savings. I mean, they don’t get wiped out, right? Years and years of saving for the kids and for their futures.

[00:20:42] Dr. Peter St. Onge: So, there’s the potential in China for a lot of unrest on both of those counts. If you have people, young people who are laid off from any taxing jobs and they’ve got everybody losing their life savings, they’re not going to have a sense of humor towards the government. And those two sectors, they make up about half of the Chinese economy, both much bigger than they are in the West because of all that preferential capital from the government.

[00:21:03] Dr. Peter St. Onge: So if you’ve got half the economy that’s in bad shape, that generally drains away from the rest of the economy. You know, all those assembly line workers, they don’t have enough income to go buy a scooter. The, you know, property prices going down means that households, you know, they’re not taking vacations or they’re not investing in a new car.

[00:21:22] Dr. Peter St. Onge: And so that’s really bringing down the entire economy. So China, I think it’s definitely going through a rough patch here. But a lot of people in the West, I think, are taking a victory lap, you know, sort of saying, ha ha, the whole Chinese miracle was built on sand. It’s all fake. And that I think is short sighted.

[00:21:39] Dr. Peter St. Onge: We are committing all of the mistakes that China does. We’re actually doubling down. We’re getting a lot worse at it. So if you look at both the EU and the US are cranking out these trillion dollar green funds that they’re going to invest in the future. And so they’re going to be squandering the money over capacity.

[00:21:56] Dr. Peter St. Onge: That’s one of the reasons the UAW is striking at the moment because this massive flood of government money is going towards forcing the car makers. To switch over to electric vehicles, and those electric vehicles, they require much fewer workers. Plus, a lot of the components, they simply don’t exist in the U. S. at the scale, and so they’re all going to have to be imported from China. So you’ve got all these disruptions that are coming from how the government is choosing the winners. So if you take that back to China now, before we celebrate and do our victory dance, in many ways, China is our future. I think more important than that, China…

[00:22:32] Dr. Peter St. Onge: The economy under Xi has not been like, you know, the previous 30 years where China was kind of this free market paradise, right? So Xi is much more anti market. He’s much more suspicious of markets. He channels money to state owned enterprises. He’s definitely halfway between the free market paradise and like Mao Zedong.

[00:22:53] Dr. Peter St. Onge: Okay. So he, he’s a big part of China’s problem. But the thing is that over that 30 year period, China has really built up a lot of expertise in their economic bureaucracy so that China really in many ways looks like Singapore in terms of how it manages the economy. Now, in recent years, that was overruled by Xi’s political bureaucracy, and that’s why China’s getting into trouble here.

[00:23:18] Dr. Peter St. Onge: But if we sort of look on a 20 or 30 year timeline here, the U. S. has almost nobody, like in the bureaucracy, the U. S. or Europe has almost nobody who actually knows how an economy works. Right? Their point of view is to fleece China. The productive sector, squeeze out the eggs, you’re not even waiting for the golden eggs, you’re like squeezing it to get more eggs out.

[00:23:40] Dr. Peter St. Onge: So they’re absolutely killing their economies. In China at the moment, yes, they’re going through a rough patch, but I think in the long run, they have a lot more people in the government who actually understand how to grow the economy. And so if they make corrections from what they’ve been doing, I think that they’ve got a pretty bright future ahead of them compared to the West, which I think is almost guaranteed to keep going downhill.

[00:24:02] Preston Pysh: Yeah, one of the points that Luke was highlighting, I guess, with all the oil maneuvering that’s been taking place ever since the Russia Ukraine war kicked off, he’s expecting that they’re going to be getting their energy prices at half the price of where it was at before. I’m not really well versed on it, but he’s, people that are, that are counting China out here in the coming five years and saying, Oh, they’re going to have this massive deflationary.

[00:24:26] Preston Pysh: He’s looking at them versus let’s just call it G7, NATO countries. And he’s looking at their energy prices. And he’s saying, there’s a lot more to it than what might appear on the Newsweek cover right now, that where people are doing the victory laps, like you were, you know, kind of highlighting there.

[00:24:45] Dr. Peter St. Onge: Yeah, he’s absolutely right on energy, but also on minerals, like on raw materials in general, China has been much, much smarter than the U S or the West in general. The Ukraine war sort of repositioned a lot of China’s or a lot of Russia’s oil now where it was aimed at Europe. And now it’s being a more towards China.

[00:25:05] Dr. Peter St. Onge: That was an absolute unforced error. Once it’s going to China, there’s, it’s likely that it’ll keep going to China. China’s also been very smart about cultivating relationships with African countries to get both energy supplies and mineral supplies. The, and you know, this concerning for a West, which in general is trying to destroy its own extractive industries.

[00:25:26] Dr. Peter St. Onge: So they’re bad for the environment, quote unquote. Now, of course the activists will say this while they’re on their iPhone that uses cobalt and zinc and all these other wonderful things. But they just, you know, they don’t want it to be happening at home. They want it to be somewhere else where somebody else’s problem.

[00:25:40] Dr. Peter St. Onge: And China, Russia the whole BRICS group is ready to be that somewhere else so that they can make a lot of money providing those things. And we’re, we’re actually at a point where mineral dominance, right? So the degree to which the China led group of countries Dominate the production of a lot of minerals is it’s, it’s even higher than OPEC’s domination of oil.

[00:26:03] Dr. Peter St. Onge: So we are absolutely, you know, sort of giving away a hostage for the future. And China is, they still have enough bureaucrats who have their heads on straight and they see the opportunity and they’re absolutely taking it. Something else you mentioned earlier, Jeff Booth with deflation and when people talk about China going through deflation, so I think certainly in the near term, they’re going through deflation in manufacturing and that’s a very specific reason because they have overproduction and then you have to cut the prices.

[00:26:31] Dr. Peter St. Onge: But it’s worth noting that having deflation in your economy, that’s not actually a bad thing. Like, deflation in general is not a bad thing. It makes people richer. The best periods of growth in American history or European history have been deflationary periods. Really our golden age was the late 19th century, the so called Gilded Age.

[00:26:51] Dr. Peter St. Onge: Gilded came from socialist journalists who didn’t like it, but that was really the golden age. Almost everything that we use today was invented in that period between about 1875 and about 1910. It was basically Wilson who killed it with the Fed, the income tax, World War I, the whole progressive moment.

[00:27:09] Dr. Peter St. Onge: But anyway, if you take that 40 year period, essentially everything that we today think of as high tech was invented then. You can go through every single thing Elon Musk does, and all of it was invented, like, in the 1880s. Computers, rockets, maglev magnets, electricity, everything was invented back then, and that was a deeply deflationary period.

[00:27:29] Dr. Peter St. Onge: So deflation itself is not a problem. If China’s going to go through 30 years of deflation, then we’re doomed because they will own everything. Deflation is grand. The reason why deflation has this bad name is because there’s a very, very specific type of deflation. That can happen. And central banks cause that.

[00:27:49] Dr. Peter St. Onge: Okay. And that’s when you have a financial panic, all of a sudden, remember inflation is money chasing goods, right? So if you have deflation, it means that you got lots of goods. That’s the good deflation. You got lots of goods. You got the same amount of money. Okay. And so now, what’s bad for government prices are lower.

[00:28:06] Preston Pysh: It’s really bad for governments. If you’re sitting in the government, it’s terrible. Yeah.

[00:28:10] Dr. Peter St. Onge: Oh, for sure. Right. Yeah. Right. Because governments like the license counterfeiting operations known as central banks. Now, but the one type of deflation that is really bad is when your stuff stayed the same, you didn’t have economic growth or anything, it’s just the money suddenly went away.

[00:28:26] Dr. Peter St. Onge: Normally, if you’re printing a bunch of money, then you have inflation. But if your money suddenly vanished, then you would get deflation. But the thing is, normally, why would the money vanish? Why would that happen? And the answer, historically, is because you had some kind of financial crash, or you had some kind of financial bubble that popped.

[00:28:42] Dr. Peter St. Onge: And those bubbles don’t form except for either central banks or the precursor to central banks, which was species redemption, you know that, but like, ironically, most people think of deflation as being a really bad thing. You know, if you turn on a Bloomberg or something, they’ll say China is way forward going through deflation.

[00:29:00] Dr. Peter St. Onge: And they sort of present it as if, you know, this is a really horrible thing. It was like the plague in economics, but in fact, deflation itself is not necessarily a bad thing. It’s just that very specific type of financial deflation, which we dodged it by a half inch in March, but that’s always the threat.

[00:29:17] Dr. Peter St. Onge: So right. If China, I don’t think they’re going to go into a long term deflation. And the reasons that the Chinese government loves to print money, just like ours do for the same reason, counterfeiting is extraordinarily profitable. If you’re a counterfeiter. So China will just print their way out, so we’re not going to see long term deflation over there, but in the long, or in the short run, I think it’s likely because of manufacturing, also because the government right now doesn’t want to do stimulus, because it’s afraid of the debt levels, so China’s got debt levels that are actually higher than the U. S. If you want to feel good about something today. And so the, the Chinese government is, they feel like that’s unsustainable. And so they’re, they’re trying to trim back on that, but in the long run, China sadly is not going to have deflation.

[00:29:59] Preston Pysh: I think it’s important for people to kind of wrap their head around just fractional reserve banking in general.

[00:30:05] Preston Pysh: So like when we get these deflationary fits. It’s a function of what we’re calling money, which is everything’s just debt and every everything is just somebody else’s IOU. And because of that, there’s counterparty risk with every single piece of currency that people are sitting on that we call money.

[00:30:23] Preston Pysh: And those explode. But if we actually have money that’s a bearer asset, meaning I give you a unit, Peter, and then you give me that, that unit back, or you give me two units, me having that, like, that can’t become deflationary. It’s a bearer asset. It’s a monetary baseline unit. in the currency, right? Which is, and we’re both Bitcoiners.

[00:30:44] Preston Pysh: We both like Bitcoin. That’s what Bitcoin represents is if I have Bitcoin and I give it to you, you are now the, the, the owner of that unit. That is monetary baseline money. It can’t be deflationary. It can’t go poof and disappear. It’s yours. So it’s been so abstracted away from everybody. I mean, you go out and you ask a hundred people off the street there.

[00:31:04] Preston Pysh: And I, if I would say that to them, they’d be like, I have no idea what this alien is talking about. Like, what is he, what is he saying? What are those words that he’s talking about? I don’t know. It’s frustrating because there’s so much that’s been abstracted away from, with the terminology itself.

[00:31:20] Dr. Peter St. Onge: No, it has.

[00:31:21] Dr. Peter St. Onge: And you’re right. A lot of that is intentional to make it confusing. You know, sometimes in Bitcoin, we talk about how, or, you know, we sort of complain how difficult it is to explain Bitcoin to people. And the thing is, if you really sit back for a second and consider how difficult fiat is to explain, right?

[00:31:40] Dr. Peter St. Onge: There was just, you know, like, what is it? It’s a debt. And I mean, what? There was this professor in Switzerland who as an experiment is a PhD, he’s a monetary expert. He’s, he’s, he’s widely known. I can’t remember the guy’s name. I want to say border. Anyway, he went out and asked a bank, he said, okay, I want you to make a loan for me.

[00:32:03] Dr. Peter St. Onge: And I mean, I’m just going to repay it the next day, but I want you to go through step by step exactly how that loan was created. Because apparently, PhD monetary economists, they have not figured out whether banks, commercial banks, print the money they lend you, okay? So like, and what he concluded is that when you go to the bank, you have to have an account at a bank in order to get a mortgage, right?

[00:32:30] Dr. Peter St. Onge: Like, you would think, well, you know, I want to get a mortgage at your bank, why can’t I just pay you fees and then you send me the mortgage to, you know, my account somewhere else? No, no, you always have to have an account at that bank. And the reason is because when you go in for a loan, they literally create the money on the spot.

[00:32:47] Dr. Peter St. Onge: So that’s very hard for people to grasp. Yeah. I mean, you know, when we compare and notably that was a monetary expert, PhD, he’d been doing money his entire life. He’s all over the place doing interviews on money. And he had to go through that with the bank to sit down and figure out exactly how it’s created.

[00:33:03] Dr. Peter St. Onge: So when people talk about Bitcoin’s complexity, I’m like, you know, look at fiat. Now, the good news from the perspective of Bitcoin is that, you know, if you take the complexity of fiat, the complexity of central banking, fractional reserve banking, the relationships they have with the money printers. So you have kind of the mother printer over at the Fed, and then you have the little baby franchise printers in each bed.

[00:33:23] Dr. Peter St. Onge: All right, when you start to go through all that, and then you get to the credit card, and you know, where does the credit card money come from? How is that born? You know, every time a child lasts, a new credit card balance is born. When you actually try to go through all those things, it is very difficult to understand and you compare that to Bitcoin where you own it, right?

[00:33:43] Dr. Peter St. Onge: I mean, Bitcoin is literally like the way that your grandmother thinks money works, which is that you got a coin. And that’s a piece of money. And if the bank puts a dollar on your, you know, passbook, that’s because they got a coin in the vault. That’s literally how your grandmother thinks money works. And that is literally how Bitcoin works.

[00:34:02] Dr. Peter St. Onge: So in a way, our job is extraordinarily easy. The only reason why people are able to use fiat, despite how ridiculously difficult it is to understand, is because everybody else does it. Okay, so everybody else uses credit cards, and I can see how it works. You buy stuff, you don’t have to pay for it. When you’re like 70 years old, that’s kind of amazing.

[00:34:23] Dr. Peter St. Onge: You’re like, wait a minute, let me get this straight. Okay, so you buy stuff, you don’t have to pay for it, and then in the mail, they’re going to ask you to pay something else, and that’s going to be pretty much the same deal, a little bit of fees. Okay, good. That’s all people need. Because they can see that other people do it, they don’t get eaten by lions, okay, that process works.

[00:34:41] Dr. Peter St. Onge: And so it’s ultimately going to be the same in Bitcoin, where normal people using Bitcoin, frankly, they’re not going to need to understand it. It is much, much easier to understand than fiat, but they’re not going to care. Their question is, are other people using it? You know, are they using lightning or whatever other payment technology comes along?

[00:34:58] Dr. Peter St. Onge: I hope there will be more. They’re using Lightning, they’re paying almost nothing, you know, three SAS per transaction, whatever the number is good. It works. That’s really all they need to know.

[00:35:08] Preston Pysh: Yeah, it’s amazing how you’re already starting to see the difference between Layer 1, Layer 2 is lost on the user.

[00:35:16] Preston Pysh: I know Cash App, you can go in there, you can buy Bitcoin. You can load a lightning, you can load a lightning address. You can load a layer one address. It doesn’t matter. And you just send it off and it just works. And I think that’s where a lot of this is quickly progressing, but Peter, I want to talk to you about what we had mentioned at the beginning of the show is the parallels between the U S. ,the Roman Empire. When we look at the Roman Empire, they went through severe currency devaluation situations. There was a crisis in the third century. We had these resets, these debt jubilees that constantly were, were manifesting themselves from a very high level. Walk the listener through kind of the, some of these parallels and some of the broader themes that you can kind of piece together.

[00:36:04] Dr. Peter St. Onge: I had a a substack article on that recently and kind of going through given his thesis on the decline of the Roman Empire. And that actually I did an interview with Charles Payne on Fox News, and Charles Payne is, he likes the big topics, okay? I think most of the day he’s chatting with stock talkies who are like, yeah, yeah, you know, rates are going to do this, and you know, the next three days, and if I’m wrong, then I’ll bet you’re going to leave first.

[00:36:31] Dr. Peter St. Onge: He likes that big picture stuff. So anyway, he was actually the one who brought it up, and I thought, okay, let me go back and look at Gibbon. Remember what, what is Stigless? And I actually did a paper on this as well about 10 years ago on sort of the Chinese version of the Roman Empire, which was the Song Dynasty.

[00:36:49] Dr. Peter St. Onge: And the Song Dynasty is famous because they invented paper money. So they recently invented woodblock printing and at that point you need to really achieve. If you have monks drawing out your money, it’s not really going to work, right? You really need, you need something assembly line style. So the Chinese figured that out.

[00:37:06] Dr. Peter St. Onge: And they went through a similar process but that got me interested in sort of the fall of empires, right? Specifically, what kinds of things we’re doing today that are really imitating these empires throughout history. And when you look at the Roman Empire, the sort of first symptoms, what got the whole ball rolling on it was Economic mismanagement.

[00:37:27] Dr. Peter St. Onge: So you had a government that was spending way too much and then it actually become predatory on the private economy. Okay, so the taxes, the regulations, arbitrary seizures. There was one point where landlords and peasants were actually fleeing to the Germans, which I don’t know, that would be like, you know, it’d be like Americans fleeing to, I don’t know, what’s the country everybody, to Bangladesh because, you know, because things are so bad in America and, you know, that was sort of rapacious government.

[00:38:00] Dr. Peter St. Onge: What inevitably happens in the decline of every empire is that they will. One of the first things they come for is the money. You can almost trace, I mean, people do this with the Roman Empire. You can literally trace out on a chart the silver content of the Roman coinage and this will give you almost like an exact marker for how bad things were getting.

[00:38:22] Dr. Peter St. Onge: Now, of course, today, you know, they don’t have to clip the coins. They don’t have to debase them. So what they do instead is just print money through fiat money. And so again, the inflation rate really serves the same purpose now. So, you know, right now in the world, there’s something like half a dozen countries that have inflation rates over a hundred percent.

[00:38:39] Dr. Peter St. Onge: These are very, very reliable markers for governments that have completely lost the plot. They have gone from the healthy parasite, right, where the productive economy makes things and the government takes off a hunk and gets to go play with it, that, I don’t like that, but anyway, that’s the best you can hope for when it comes to governments, but when they go from that to actually, they’re no longer a parasite, now they’re predators, that is really the marker that you see in the money, and that’s where we are now, and so, you’ve got runaway deficits, You have the taxes have not increased yet, not substantially, at least not in the US.

[00:39:15] Dr. Peter St. Onge: In Europe and Canada, they tend to be higher, but in the US, they really haven’t come up yet, mostly because they’re still kind of letting the inflation deal with it when they get to the limits of inflation, you know, which is really going to come out of the bond markets, then at that point, yes, they’re going to go to the next man standing, which is going to be the taxes.

[00:39:31] Dr. Peter St. Onge: but this sort of progressive government takeover of the economy that has really been fueled by fiat. Once the cancer gets above a certain size, not only it’s very, very hard to get rid of, a lot of people at that point are depending on the government being large and generous. So it’s hard to get enough voters together to try and reduce the size of government.

[00:39:52] Dr. Peter St. Onge: And you do cross some tipping point where at that point, it’s just a matter of time. You’re, you’re fighting sort of rear guard to try and keep what’s left of the productive economy. When you get to that stage, that’s when what gives you sort of those classic hallmarks of Rome, the barbarian invasions, the corruption in the military.

[00:40:09] Dr. Peter St. Onge: In the case of the Song Dynasty, there was, there was one, I thought, telling episode the army wasn’t really doing its job and they had all these Japanese pirates running around marauding in the countryside. And so they said, okay, well, let’s go ahead and use incentive payments to try to get the army up off their butt and to take care of some of these pirates.

[00:40:28] Dr. Peter St. Onge: So they decided to pay them whatever one coin per boiled head. And so you can guess what the army did, which is that it went to villages. You had to boil the head so they couldn’t tell that it was children and women. Once you go down that path, it gets really, really ugly. So we are thankfully not at that stage yet.

[00:40:47] Dr. Peter St. Onge: We are now at this, but we’re coming to that tipping point where before that you can still reverse it. You know, like in the 1970s, the government got really out of control. And then you had Reagan come in and a lot of that. Some of it came back down. A lot of it kind of leveled off and took a break for a long time.

[00:41:03] Dr. Peter St. Onge: So up until now, I think things have not have, have, they either haven’t gotten bad enough that we get it on that sort of permanent decline, or they’ve gotten bad enough, but it happened so fast that the voters said, no, no, this is horrible. Let’s flip right back. Right. If we look at the world wars, for example.

[00:41:22] Preston Pysh: I was just going to say, so when we look back at the 1970s example, we, we were able to negotiate through policy, this petrodollar system, and we were able to kind of sidestep the disaster that was unfolding through this relationship where you had this hard commodity country that you’re kind of hitching to.

[00:41:41] Preston Pysh: But now that that whole petrodollar system is literally falling apart and we could go down the path of BRICS and start talking about the de dollarization stuff that’s taking place. You have to have some type of policy that would be akin to what we saw in the seventies that allowed the U. S. to sidestep that.

[00:42:01] Preston Pysh: And I feel, and maybe I’m very biased here, but I kind of feel like We have nothing of the sort. If anything, we have anti constructive, thoughtful diplomacy taking place with the U. S. and the rest of the world. Like, literally, anti. Yeah.

[00:42:18] Dr. Peter St. Onge: Yeah, we absolutely do. And that’s an interesting discussion, where you’re talking about de dollarisation, that a lot of people who they’ll say things like if Saudi Arabia starts using the Chinese Yuan or the Euro, then you know, there’ll be assassination.

[00:42:33] Dr. Peter St. Onge: And they’re basically, I think, working off a playbook that may have been true like in the 60s and 1970s or something, but I don’t think that’s true anymore that, you know, today, whether it’s incompetence or, you know, just other priorities. U. S. government is no longer defending the dollar the way they used to.

[00:42:51] Dr. Peter St. Onge: So if you look at kind of the old days, there were really two props that were holding up the dollar. And one of them was the petrodollar. So the U. S. was essentially providing free security to Saudi Arabia and other countries, an unpaid mercenary and in exchange. They would agree to price their product in dollars, and then that would provide a certain amount of international demand for U. S. dollars, and then the price of oil then underpins a lot of other things, and so that was kind of a, kind of a linchpin to making the dollar central to world trade, so that was one. And then the other was countries putting their official holdings into the U. S. dollar. And so the dollar is dominant. I think it’s still something like 60 or maybe 70 percent of official holdings all over the world are still in the U. S. dollar.

[00:43:33] Dr. Peter St. Onge: And they’ve really been throwing both of those away, particularly since the Biden administration came in. So I assume they had some break. They didn’t bring in the old neocons who had always emphasized that dollar demand is a policy goal. I just said they really throw them away. So in the case of Russia, the dumbest thing they did was they seized Russia’s dollars.

[00:43:55] Dr. Peter St. Onge: Okay. The, the dollars that were owned by the Russian central bank, that was about 4 billion worth of dollars. Now, given the size of the Russian economy, that would be more like seizing 4 trillion in us terms, right? So that was, that was a large chunk of dollars. And the reason they seized them was that they were trying to start off a bank collapse in Russia.

[00:44:12] Dr. Peter St. Onge: In order to presume they hoped to have Mr. Putin hanging by his ankles somewhere. And the problem there is that whatever your feelings towards Russia, Okay, during the Cold War, where we had hot wars going on, proxy wars going on all over the world, we never did that because the thing is you want your enemies to be dependent on you and on your system.

[00:44:35] Dr. Peter St. Onge: What happened by seizing those dollars is that it put every other country in the world on notice, including China, including friends, including places like Indonesia, Brazil. It put them on notice that if we don’t like what you’re doing, then we will destabilize your country and try to get you hung up by your ankles.

[00:44:53] Dr. Peter St. Onge: Immediately after that movie had all these international conferences, for example, you had the ASEAN, the Southeast Asian countries. President Indonesia, who has traditionally been open to the U. S., he’s, he’s not a pariah state, and he got up on stage and he said, We have to move away from the dollar because look what happened to Russia.

[00:45:10] Dr. Peter St. Onge: Now, you might say most countries don’t invade their neighbors, it’s true. But the problem is that this administration, they have been expanding the forbidden list that’s going to get you in trouble. So, you know, now it’s green stuff, it’s potentially labor, potentially LGBT or other policy goals. Now, if you’re Saudi Arabia, or even if you’re just somewhere like Uganda, okay, most of Africa is extremely socially conservative.

[00:45:34] Dr. Peter St. Onge: They are not on board with the social policies of the Biden administration. If they are being painted into a corner where they have to approve certain social policies or have their entire banking system collapsed and ankle action going on, that is a fundamental problem, right? That is a danger for them.

[00:45:52] Dr. Peter St. Onge: So a lot of these countries who should be friendly, they should be on the dollar because the dollar is the most liquid asset in the world, kind of on the merits. They, they ought to be all in on dollars. And they’re actually trying to diversify away now because of that political risk. So I think the idea that like the CIA is going to do in anybody who gets off the dollar.

[00:46:11] Dr. Peter St. Onge: I think those days are gone. I think the grownups, I’m not saying I like them, but they’re, they were very serious about their work at some point and they appear to no longer be. They’re essentially throwing it away.

[00:46:23] Preston Pysh: It’s almost like they’ve swung Excalibur so many times that it’s just down to the handle of the sword and that being the U. S. dollar.

[00:46:33] Preston Pysh: Let’s go talk a little bit more about the Roman Empire and maybe some of the parallels. I’m curious if through some of your research, whether the wealth inequality was expanding or maybe some of the themes that are, I think, are just starting to manifest themselves today. Are there any of those?

[00:46:50] Preston Pysh: Themes that were very prevalent back then when they would go through these large, I don’t know if calling them hyperinflation was maybe the right term, but significant debasements that would manifest themselves every 80 years or 50 years.

[00:47:04] Dr. Peter St. Onge: Yeah, they definitely had that. A lot of it is once the state starts intervening in the economy, it is inevitably going to be corrupted.

[00:47:12] Dr. Peter St. Onge: It’s like vice police. Okay. Once you put a bunch of nice, decent beat cops on drugs, they almost to the man they’re going to go over the dark side. And so governments do go over the dark side. And what happened in Rome, of course, is that you essentially had to auction on government policies so that certain people were getting massive benefits.

[00:47:32] Dr. Peter St. Onge: They would then help their friends. It was sort of institutionalized corruption, where you would have entire industries that would fleece the public. They would get rules passed that benefit their particular industry, and that impoverished the rest of them. And then other industries, even if they are run by decent people, they have to participate to defend themselves.

[00:47:50] Dr. Peter St. Onge: And so you, you, you kind of get this war of all against all, where you have a corporatist system that you, you have to fight, and then the industries that can’t muster the resources, so generally that would be the industries that are most competitive, they don’t have the extra profits lying around to bribe politicians, they tend to go first, and so you get this really twisted economy, and you know, if we transpose that onto what we have today, You have kind of this hierarchy of industries in the United States that have pull.

[00:48:18] Dr. Peter St. Onge: You can see it actually whenever we do a quote unquote free trade agreement. where we will protect certain industries and then other industries get completely sold down the river. Specifically, when you look at a U. S. trade agreement, it’s going to be finance, pharmaceuticals, and Hollywood. Okay, three, very specifically.

[00:48:37] Dr. Peter St. Onge: So that’s going to be financial liberalization, which they claim is, you know, to make sure that you can join the bounties of the developed world. And then the other two tend to be intellectual property. Okay. The U S will give you anything if you give them intellectual property, because as pharmaceutical patents, that’s Hollywood.

[00:48:52] Dr. Peter St. Onge: And so they will sell automobiles down the, down the river, electronics, manufacturing, all of those industries. Good luck. You’re out of luck in exchange for those industries. And so we’re already getting that here. We have this hierarchy of certain industries that because they’re so profitable, right? Any industry that involves intellectual property tends to be more profitable because you can charge more, you can charge monopoly.

[00:49:14] Dr. Peter St. Onge: And so those industries are outbidding the other industries. And so, you know, if you sort of look at that out in the wild, in the real world, you’ve manufacturing is increasingly characterized by a guy hiring seven people in some metal shop in Milwaukee or something. I mean, it’s just kind of these tiny little, you know, probably really specialty products that’s got relationships with their clients.

[00:49:37] Dr. Peter St. Onge: It’s kind of a special reason they’re around. And other than that, you know, who, who is starting new manufacturing ventures in the U. S.? Generally, you either have to have government money or, I mean, you can do a little bit of it by saying it’s made in America and then a certain part of the market is going to want that.

[00:49:53] Dr. Peter St. Onge: But fundamentally, you would pretty much have to be insane. You’d have to be a masochist to actually start a manufacturing business in the United States. On the other hand, finance, pharma, Hollywood, you’d have to be a lunatic not to start those things because they’re so massively profitable.

[00:50:08] Preston Pysh: Intangible assets.

[00:50:10] Preston Pysh: That’s exactly it. When I was studying Buffett, he had some amazing shareholder letters. I want to say it was like in the early 80s where he talked about Why he was really trying to focus on owning intangible assets versus tangible assets. And when you look at the CapEx for any type of like manufacturing business here in the U S now that we’re getting inflation, like when he was writing these shareholder letters, he was saying that intangible assets, you can adjust the price to keep up with the inflationary effects immediately by.

[00:50:41] Preston Pysh: You know, like a Disney movie is a great example of intellectual property or of an intangible asset. I can go onto the internet and I can keystroke that now it’s not 25, it’s 30 or whatever and you can, you can keep up with the pace of that. But if it’s a factory… And you got all these machines and you got to go in there and replenish the tooling and whatnot.

[00:51:02] Preston Pysh: And you got tons of inventory and anything tangible. It’s just destroyed and so difficult to keep pace with. And it suits the comment that you, that you just provided so well, sorry to interrupt you. Did you have some more on it?

[00:51:16] Dr. Peter St. Onge: Yeah. I was going to say, you’re absolutely right. And one part that Buffett’s probably not going to get into is that those intangible industries also generate the kinds of profits he can bribe politicians with.

[00:51:27] Dr. Peter St. Onge: So, I mean, you can see it across those industries. For example, copyright. I think now it’s something like 75 years after the death of the creator. I mean, this is ridiculous. You and I both create content. The notion that, like, I’m not going to shoot videos unless I have exclusive rights for, let me do the math, like 110 years.

[00:51:46] Dr. Peter St. Onge: It’s bonkers, right? Yeah. But that’s, that’s pure corruption. Okay. So, they get that stuff bribed in. Pharmaceuticals, I won’t get into the details there, but everybody knows what happened these past couple of years in terms of government privilege. And then, of course, finance. Finance has been at this for a long time.

[00:52:03] Dr. Peter St. Onge: They get these special rules put in, they can chase out the competition. You take the 2008 crisis, for example, which was caused by the major banks, right? It was not caused by hedge funds. It was not caused by, you know, small mom and pop bankers. That was, that was made on Wall Street. And if you look at the number of new banks started in the US before 2008, you would have a couple of banks like five, seven, something like that per year from memory.

[00:52:27] Dr. Peter St. Onge: Okay, so you would have kind of this pitter patter of new banks. It was hard to start a new bank because they put all these rules in, they wanted to shut out the competition, but it was possible. You look at 2008, nothing. There’s like no new banks started. It is, I think it might be zero over the entire time.

[00:52:44] Dr. Peter St. Onge: I know Caitlin Long started a bank, but I mean, it’s just shocking.

[00:52:48] Preston Pysh: She’s trying, she’s trying to start a bank. She’s trying to start.

[00:52:51] Dr. Peter St. Onge: There you go. Exactly. And you know, I mean, it just puts in relief. So these guys. They gamble trillions of dollars, they lose it, they keep all the winnings, and then when they screw up, we the taxpayers get to bail them out, and then they say, so to make sure it never happens again, let’s get a bill in here to really clean up Wall Street, and as always, that’s the hustle, okay, the bankers always buy the regulation.

[00:53:18] Dr. Peter St. Onge: They have the useful idiots who push for it, and then the useful idiots, the guys down in Zuccotti Square complaining about the 1%, those are not the guys who write the bill. The guys who write the bill are paid 1, 000 an hour, they’re law firms, and they are paid by Wall Street. And because Wall Street has guys in the Senate on a speed dial.

[00:53:39] Dr. Peter St. Onge: And so the bills are always written by the guys who just fleeced us. And of course they wrote the bills so that they get all the goodies. So next time around we get to permanently bail them out and there’s no new entrants that they have to compete with. So we’re already well down that path where the economy in many ways is captured by these profitable industries.

[00:53:59] Dr. Peter St. Onge: They get a hold of the political process, they can shut out the new competition. In fact, they can sell the entire rest of the economy. They don’t care about housing, manufacturing, services, the gig economy, all this stuff. When they need to, all that stuff is ready to be sacrificed on behalf of these most profitable, most corrupt industries in the country.

[00:54:21] Preston Pysh: Peter, the last question I got for you, so most of the people listening to this show are Bitcoiners. They get it, they understand it, but there’s also traditional finance people that listen to the show. You as a bitcoiner, with a PhD, you got all this background in macro and you understand markets at a very high level.

[00:54:42] Preston Pysh: Why Bitcoin? Why is this something that you’re passionate about? Why is it something that you think is going to really kind of play a major role coming forward? Explain it for a person who’s maybe hearing some of this for the very first time.

[00:54:56] Dr. Peter St. Onge: So for a first timer, I’d probably start leading with Why hard money?

[00:55:00] Dr. Peter St. Onge: Okay, so that’s the first question. So why is our money today broken? Why is paper money a problem? And throughout history, hard money has been absolutely essential to prosperity. Okay, because without hard money, governments will inevitably take over huge parts of the economy. They will then render that dead.

[00:55:20] Dr. Peter St. Onge: Really, it’s like, like an infection. Once it takes over your arm, you’re done with that arm. Okay, that arm is written off. So it really does spread like an infection, which is fueled by inflation. On top of that, inflation causes the boom bust cycle. So the whole central bank process of creating inflation, that’s what creates the booms that lead to the busts.

[00:55:38] Dr. Peter St. Onge: You can trace almost every catastrophe in history. You can link that to a boom bust cycle. World War I, the Civil War, the War of 1812. Countries universally start wars. They have financial panics. They have collapses. That opens the so called political Overton window, which is when you get terrible things happen, you get changes in political systems.

[00:56:00] Dr. Peter St. Onge: And freedom inevitably is always at risk when you come into those moments. So inflation is very dangerous. It impoverishes us and it creates a never ending series of crises. It creates a crisis industrial complex which basically preys on those crises. And each time it ratchets up, ratchets up, and takes our liberties.

[00:56:20] Dr. Peter St. Onge: So we have to constantly defend our liberties. Sometimes it’s a little bit frustrating because fundamentally we have this inflationary regime. That’s why hard money. And then the next question is, throughout history, that hard money, the best hard money has been gold or silver, and so why Bitcoin? You know, why not gold?

[00:56:37] Dr. Peter St. Onge: And I think there it comes down to, you sort of zero in on exactly what is gold’s flaw. Because I do love gold, and the problem with it is that if you talk to a fiat person and you’re advancing gold, they’ll say, okay, if gold is so amazing, why doesn’t anybody use it today? right? Why do we have 200 countries in the world and nobody uses gold?

[00:56:56] Dr. Peter St. Onge: It’s a fair question, and I think the answer is because governments are very, very good at violence. Gold has a fundamental flaw, which is that you cannot have a gold backed currency where you tell everybody, I have the gold, but it’s hidden. Impossible. You have to be able to verify the gold. And the only way that you can verify the gold is that you have to know where it is.

[00:57:16] Dr. Peter St. Onge: All right, and it’s very expensive. If you tell everybody I have a gold backed currency and the gold’s in my house, you’re going to get visitors at night. So now you got to, you got to hire guys, you got to put up the wall, you need the sharks with the lasers on their head, you have to protect the gold. So at scale, the only way that gold works is that you have to have a central depository where you collect that gold and then you can’t issue paper money off the gold as long as it’s fully redeemable.

[00:57:39] Dr. Peter St. Onge: That’s perfectly stable. The problem is the gold is a fundamental vulnerability to any government that becomes interested in taking it and governments do the darndest things. They will inevitably be interested in taking your gold because it’s free. Well, who’s going to stop them putting quote monopoly on violence over their territory.

[00:57:57] Dr. Peter St. Onge: If your goal is in their territory, then they can take it anytime they like. This is how the land works. So that I think is fundamentally the question. Bitcoin solves gold. Fundamental flaw, which is that it is always vulnerable to the state, and because Bitcoin has no instantiation, it can live without the state, it does not depend on any institutions, that I think is why ultimately Bitcoin wins.

[00:58:22] Dr. Peter St. Onge: Now, if fiat is going to be dying in the next three years, And we have to go to hard money, then I think we probably will go to gold. Because not enough people know about Bitcoin. There’s still an institutional memory for gold, right? 50 years ago, our financial system was still operating on gold till Nixon.

[00:58:40] Dr. Peter St. Onge: So this is kind of hard for people to grasp. But I mean, we had the entire menu of, you know, we had mortgages and credit cards. We had the whole thing back in the 1970s. And so there’s still a lot of memory of it. Central bankers understand it. People in general understand it. So if the collapse is coming in 2026, which I think is unlikely, we’ll go to gold first.

[00:59:01] Dr. Peter St. Onge: And then I think we continue doing what we are, which is that more and more people understand Bitcoin and they can see why it’s better than gold. If, on the other hand, the collapse is not happening for 30 years or something, then I suspect we skip gold. For the first time in history, we skip gold and we go direct to Bitcoin.

[00:59:16] Preston Pysh: Yeah, I think something also important to your point where you’re basically getting at gold requires trust and Bitcoin doesn’t require trust is we could take a video camera, we could go into a gold vault and show everybody, Oh, here’s all the gold bars, but it’s still, the person still has to trust us, the person with the video camera, the person who’s managing the vault, because they don’t know as soon as we walk out of there, that all those gold bars now get sent to wherever, or that the purity in the bars are even real.

[00:59:45] Preston Pysh: So like, the ability to audit it from a sovereign level. It’s very different from an individual standpoint versus a sovereign standpoint, but from the sovereign level, like it requires trust for the currency that rides on top of it. If the ratio is one ounce of gold for a hundred paper bills, well, you can change that to 200 or to 500 or whatever.

[01:00:07] Preston Pysh: And all excellent points, Peter, and definitely things, hopefully, that people will think more about if they’re coming to this for the first time, but really enjoyed having you on the show. This was a blast. And why don’t you give people a handoff to use some of the content that you create and just give them some more information about yourself.

[01:00:28] Dr. Peter St. Onge: Sure. Let’s see. I do daily videos on economics and freedom. I use this backdrop right here. People ask me if it’s real. Believe it or not, it is. My wife put it together. So anything good about the product is hers. All the mistakes are mine. Anyway, those come out every day. I’m also very active on Twitter as all of us are nowadays, and I do a weekly podcast that gathers the videos and then also a sub stack where I do longer form articles, including the fall of Rome one that we just talked about earlier.

[01:00:59] Preston Pysh: Awesome. Thank you so much, Peter, for coming on. It was a really enjoyable chat and I look forward to chatting with you soon.

[01:01:06] Dr. Peter St. Onge: Thank you for having me on. I enjoyed it and always love your content.

[01:01:10] Preston Pysh: If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use. Just search for, We Study Billionaires. The Bitcoin specific shows come out every Wednesday, and I’d love to have you as a regular listener. If you enjoyed the show or you learned something new or you found it valuable, if you can leave a review, we would really appreciate that. And it’s something that helps others find the interview in the search algorithm.

[01:01:34] Preston Pysh: So anything you can do to help out with a review, we would just greatly appreciate. And with that, thanks for listening and I’ll catch you again next week.

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