This is a transcribed version of a special edition “Bitcoin Magazine” podcast with Aleks Svetski and Michael Saylor having a long-form conversation about the implications of Bitcoin and its effects on the world.
Watch This Episode On YouTube Or Rumble
Listen To The Episode Here:
Transcript
[00:00:05] Aleks Svetski: Ladies and gentlemen, welcome to the latest episode of the wake up podcast. And I have finally managed to wrangle the one and only Michael sailor to come join me for what I think is gonna be a deep and multifaceted conversation. So, Mike, thank you for taking the time to come and jump on, man.
You’re very generous with your time.
[00:00:26] Michael Saylor: Yeah, thanks for having me, Alex.
[00:00:27] Aleks Svetski: Absolutely, man. Look, there’s so many places where when I open this up and so many threads we can pull on but I wanted to just start off with some basics and just reiterate forever on why we’re here, why Bitcoin is important, what money is. And then we can kind of explore, you know, I don’t wanna spend too much time on the noise and what’s happening in the world today because you know, Bitcoin’s up, down and around in circles and who really gives a shit like, you know, your timeframe really matters here, but I’d love to start with How you’ve in the past separated money and currency.
And cuz I think people conflate those two all the time and I’d like to discuss what is different about the two
[00:01:10] Michael Saylor: Yeah I think oftentimes we use concepts like money in a very sloppy fashion and people use money. And currency as though they’re synonymous. And I don’t really think there’s been a lot of deep thinking about this. I mean, I could honestly say before Bitcoin, I didn’t really think that deeply about it.
I was prompted to think deeply about it when Robert Breedlove invited me onto his show, what is money?
And I thought, wow, we’re gonna talk about what is money. So I guess I’d better figure it out. And so then I started to think, and now I think it’s helpful. If you adopt these kind of definitions, N noting that we’re so early in this.
Journey that 95% of the world hasn’t thought deeply about it. And probably you’d have a, they would probably use these words or terms differently. And many people even economists and business people don’t really know what money is or they just define it slop in the context. So here’s what I think are the useful definitions.
And then we can have a discussion. I think money is economic energy. If you have a certain amount of economic energy, let’s say you have a hundred thousand dollars of economic energy in the year 2022, that will that can be exchanged for products or services or property. Right? I can fly somewhere.
I can buy something. I can, you know, throw a party in the year 20, 22, clearly a hundred thousand dollars worth of money in 2022. Doesn’t buy you the same good services. Or products in the year 1900, they’ll buy you a lot more. And in the year 2200, won’t buy you the same thing either. So, so you have a certain amount of money at a certain time that you can measure in a currency.
The currency, in this case, the us dollar is the medium of exchange in that political frame of reference. At the time you have the money. So if money is economic energy, what happens as you change political frames of reference, a hundred thousand dollars buys you a certain amount in the us. And if you go to Japan well, it doesn’t buy you anything because they don’t accept dollars for.
You know, restaurants, you can’t buy a house in dollars, you have to convert it to yen. So you would convert that amount of money from the dollar currency, into the yen currency. If you trip through 180 countries, you would have to convert it generally into the currency. That’s the medium of exchange and the legal tender in the country, since most countries have a different legal currency.
Some countries like in Europe share a similar one to Euro. So money is, economic energy. The currency is the medium of exchange or it’s an asset legally designated by a nation state as an acceptable medium of exchange. And it’s given a legal advantage, a political advantage because you can transfer it tax.
So if I have a hundred thousand dollars and I want to buy an expensive car with it, right, I can exchange the a hundred thousand of money via the currency, into the car without paying a capital gains tax. And without incurring a capital gain loss on the transaction. If I had a bunch of apple stock, a hundred thousand dollars worth of apple stock, I would have an asset.
Actually. You could, you know, in fact a batch of securities worth a hundred thousand dollars, but if I bought the car with a hundred thousand dollars of apple stock and I had acquired the apple stock for $50,000, I would actually. get the car and I get a tax bill for the capital gains on $50,000. Right.
That’s what the nation state says. So for that reason, apple stock or a bunch of securities don’t make a good medium of exchange, right. It would even if it was liquid, right, it’s not a good medium of exchange because my credit card, you know, doesn’t work so well with apple stock. And cuz I can’t transfer apple stock on a Saturday afternoon.
And those are reasons why I wouldn’t use it in order to buy a car. But the most important reason that securities will never be currency is because it’s deemed, as you know, we’ll call it property by the IRS and subject to a capital gains tax. So the currency in the modern world is whatever the government says it is.
If you’re in a state of Anarchy right. Or chaos. Let’s say you’re in a war zone. You’re in Afghanistan after the government fell right. While the Americans were pulling out all the banks failed. Right? Clearly it’s not, there’s no effective government to designate a local Afghan, Fiat currency.
There’s no government to impose taxes, right? That’s anarchy in that particular case, if you happen to be an Afghan citizen and you’re trans and you’re doing a trade with another Afghan citizen, you wanna buy whatever they’ve got their car, right? Their food, you could use Bitcoin as a currency and it would be a currency because there’s no government to tell you that you can’t use it as a currency.
[00:06:57] Aleks Svetski: In that case you could use goats, right? You could use basically anything.
[00:07:01] Michael Saylor: Yeah, you could use gold. You could use bullets.
[00:07:04] Aleks Svetski: I was saying
[00:07:04] Michael Saylor: You could. Yeah, I gotta, I got you could barter whatever you wanted, right? Because, but the reason that anything is currency is because there’s not an effective nation state. So the reason that we end up with a dichotomy, right?
What money is economic energy. There’s one aspect of money. We’ll call property. Another aspect of money, we’ll call currency.
And both of those sum up into money. The property would be a long duration asset. If I wanna own a house, am I buy house a car, a Bitcoin, a bar of gold, even a share of stock, I suppose, or a corporation.
We could all think of them as. Property forms of money, right? They all have economic value. But generally they all have a tax treatment, not always the same, but oftentimes there’s a tax a taxable event when you transfer property from one person to another person. Right? Like for example, if I if I traded you my house for a car, and if there’s a tax on disposition of real estate, oftentimes there’s a real estate tax on transfer of title, right?
Not only are you going to get the capital gains tax, you’re also going to get the real estate tax. So that’s even worse than transferring, say the apple shares cuz you get hit twice, right? Sometimes, you could get all sorts of random taxes depending upon the legal definition of the property. So, the best way to think of it is if there is an effective nation state. It can choose to designate one or more assets as currency, generally one asset, the Euro, the Y the one, the C and Y the U S D. Right. Those would be designated as currencies or legal tender. You transfer them tax free. There’s two reasons why you’ve got an advantage of your designated currency.
The one obvious reason is because I can transfer the asset to someone else in a trade tax free. Okay. That’s the obvious reason, right? Because if I move the money 10 times in a year, and if there happens to be a, you know, a 10% tax, each time I move it, there’s no money left at the end of the year.
Right. So if you’re trading a property with high velocity over the course of a few years, the property disappears. In a decade, the property certainly disappears sometimes. Like if you’re designated a property, if I had a hundred thousand dollars of property in Florida, I wouldn’t even have to trade it, just holding it, subjects it to a 2% a year fee.
So that over the course of 50 years, the property goes away. Right? So that’s a nation state basically taking your property away, but it’s worse than that, right? Because they could reassess the property every year. And if they reassess the property up 7% a year, you don’t even get it for 50 years.
You get it for about 25 years before the property goes away. So when you look at your assets the nation has the ability to classify them, however they want. And the best classification is currency. Cuz I could hold the currency. From a tax point of view, that is I can hold the currency for a hundred years and I’m not getting a 2% property tax a year and I’m not getting the capital gains when I transferred.
So that’s why currency tends to separate from property as monetary assets. And when you think about when you think about the world, right, 8 billion people in the world, if you’re, if you want liquid assets, you’d like a liquid property asset, like Bitcoin that you can hold for a hundred years, it’s a store of value.
And then if you wanna move through nation states, if you wanna do business in rent a house or buy something in the UK or in Europe or in the us, you’re gonna have to have a…
Read More:The World Is A Better Place With Bitcoin – Bitcoin Magazine
2022-07-27 05:00:00
