The Joy of Hoarding

Every passage, on the record.

1. 00:01Claim

   You will often hear a negative connotation with hoarding in Bitcoin, because the way that we are measuring the results of the system are based on the current system, and the repercussions of hoarding in the current system are drastically different than that of a Bitcoin system.

2. 00:39Claim

   Hoarding is a way of collecting or accumulating something such as money or food, and more often than not it has a negative connotation, but in reality it is simply savings.

3. 01:09Quote

   If I have it, that means you can't use it, and you can certainly see how that would rub some people the wrong way.

4. 01:09Claim

   Ill-informed individuals link billionaires of the 1% with hoarding money, and then through this fictitious scenario that they've dreamed up, that is somehow detrimental to those who don't control as much money.

5. 01:43Claim

   In a debt-based system it's entirely different than a hard money system, and we have to understand what is the optimal thing to be hoarding, what should we be saving in a debt-based system to get ahead, because that will make a giant difference in what the outcome of that action is going to have for the individual and for the extended order.

6. 02:48Claim · condensed

   In the modern era a very, very small percentage of total transactions take place in physical cash, and that only escalates as the value of the transaction increases: it's less practical, and depending on where you live it may not even be possible to acquire the notes necessary to complete the transaction.

7. 03:26Claim

   What I really need is a bank account: I need identification, all the relevant KYC information, and I need to live in a place where banks operate in the first place, which by default eliminates a large chunk of the potential market for people who wish to hold dollars, and I have to trust that the place I put my dollars in won't operate in a nefarious way that might cause the loss of my ability to access them.

8. 04:05Reference

   Banks were the technological innovation of their day. They won because they allowed the extended order to become more efficient because they were able to offload a certain portion of the energy allocation necessary to complete the tasks they were built for, meaning efficiency and specialization.

9. 04:05Claim

   If we add up all the risks and the costs of accessing a bank, it is still exponentially more efficient than not having access to those services. That is why banks exist today: they solved a very real problem, and that problem didn't have a solution before banks.

10. 04:36Claim

    Now that I have a bank account, all I need to do is provide more value or utility and demand less, then I can start to hoard dollars. The important question is: does this loop of value and demand create more energy or less energy for the extended order? If I save dollars, I must have provided value.

11. 05:10Quote

    Inflation robs me of my savings by taxing it from a distance.

12. 05:10Claim

    In the fiat system I am punished for saving honestly: inflation robs me of my savings by taxing it from a distance, someone else can create more of the units I am saving and they don't have to provide value to do so, and at the same time the bank can extend loans based on my deposits.

13. 05:42Claim

    Who hoards cash in the modern world? The answer is people who don't understand the system, which is another way of saying people who are wealth deprived, poor people. They don't have the energy reserves necessary to take a minute to lift their heads up and understand the game that is being played. Rich people do have those reserves, so they learn to play the game.

14. 06:13Quote

    The game is don't let other people steal from you, aka become inflation proof.

15. 06:13Claim

    They learn the rules, they learn how to maximize their returns, and the game is don't let other people steal from you, aka become inflation proof. You divest out of cash as quickly as you can, because cash is something you can't control and that isn't scarce; anything scarce gives you greater property rights.

16. 06:45Claim

    In the fiat system the hoarding isn't an issue for currency holders; the hoarding happens everywhere else, and this is most certainly detrimental to the rest of the extended order. And this is something that Bitcoin fixes.

17. 07:17Quote

    In the energy game it's all about the juice.

18. 07:17Claim

    In the fiat system you want as much debt as possible buying as many scarce assets as possible, you let inflation do its thing and you win, rinse and repeat until you control as many resources as possible. The problem is some individuals play the game so well that they have more resources than they could ever properly manage, so you aren't getting the maximum juice from the squeeze, and in the energy game it's all about the juice.

19. 07:51Claim

    If you don't have access to enough energy to understand the game, by the structure of the system you are forced to hoard scarce resources, which means those resources aren't being maximized because you are parking them. You have to, because you can't reliably park anything else, and this incentivizes a set of behaviors that contribute to inefficiency across the entire extended order, like constantly chasing higher and higher risk in projects to take advantage of lower rates.

20. 08:23Reference

    Jeff Booth sums this up beautifully in his book The Price of Tomorrow with the quote that when the money is scarce everything else is abundant.

21. 08:23Quote

    When the money is scarce everything else is abundant. Abundance in money leads to scarcity everywhere else.

22. 08:57Idea

    Those monetary premiums, that is parked energy. That is not an efficient use of that energy, because it's added on top, because you're essentially buying the property rights, the increase in property rights depending on what the asset is, over cash. That is the exchange rate that you are paying there.

23. 08:57Claim

    If the money isn't scarce you want to get rid of the money as fast as you can and buy scarce things. That drives up the price of those scarce things and puts a monetary premium on top of whatever that resource's actual utility is to the extended order.

24. 09:28Quote

    They don't understand that nobody hoards cash anyway.

25. 09:28Claim

    People don't understand what hoarding is in general, and they don't understand that nobody hoards cash anyway, at least not anyone who has half a second to realize how the system is structured. You'll often hear that if you're hoarding something like Bitcoin it's worthless as a currency, or if you're holding cash it's worthless as a currency, or that if I have it you can't use it, but that simply isn't true.

26. 10:01Claim

    When you hoard Bitcoin you've exchanged energy with someone for it, same as the dollar. The Bitcoin gives you a claim to future reserves inside of that system, that's all. Not transferring Bitcoin into the extended order means there are less Bitcoin available for others, for purchase, so there's less available for sale.

27. 10:32Quote

    The price of everything else in Bitcoin terms goes down.

28. 10:32Claim

    When supply decreases and demand remains constant or increases, rational actors will bid higher and higher to access the utility provided by Bitcoin, so the price of Bitcoin goes up, or another way of saying it, the price of everything else in Bitcoin terms goes down. If you hold Bitcoin this is good for you: you can now access more energy should you choose to no longer hoard, because there is less Bitcoin available than there could be otherwise, thanks to your hoarding.

29. 11:03Analogy

    If you're just sitting on a big pile of Scrooge McDuck Bitcoin, doesn't that limit how much is out there in the world, doesn't that limit the availability of it to act as this currency? Well, if you're sitting on it that means that you aren't using it, right? Wrong, right? You are using it as a store of value, you created to attain control over the UTXOs in your wallet.

30. 11:34Claim

    Hoarding has no effect on the ability of the Bitcoin network itself to process transactions. So when you are sitting on a fat stack of Bitcoin that means you aren't redeeming the original energy you plugged into the system. Where is that energy? It is in the economy, in the form of whatever it had been transformed into via the person who exchanged the Bitcoin for energy.

31. 12:06Claim

    If there are only 21 million Bitcoin and you're sitting on a good amount of that, doesn't that mean there is less for everyone else? Yes. Lucky for them, Bitcoin is divisible down to 100 million sats for every Bitcoin, so there is more than enough to go around. Me hoarding it doesn't prevent it from being used by anyone else; the only thing it does is limit my own ability to call on energy in the present.

32. 12:37Prediction

    At the moment there are still entities in the space that are willing to exchange money that someone can print for money that can't be printed. This is not going to last forever. This window in time will not sustain. What this means is that more and more people will start hoarding Bitcoin.

33. 13:08Claim

    It's the easiest way to ensure you have access to future reserves, and if they are hoarding money, they aren't hoarding anything else that has moneyness. Anything that had a monetary premium on top of its actual utility is no longer being hoarded, because it's not as efficient as actually hoarding the money, and the demand for those assets will decrease significantly because we have a working money, which leads to abundance everywhere else.

34. 13:38Claim

    In a voluntary exchange system, velocity is good because it ultimately means the extended energy that would have been inaccessible without that exchange. The more we exchange, the more we are leveraging specialization to unlock energy that was previously required for some other task. But for this to be true it has to be voluntary, and it must generate real energy on the other side of the exchange; simply passing money back and forth amongst a group of friends doesn't mean more energy is now available to that group.

35. 14:16Claim

    In the fiat days it probably means the banks are the only winners, because they gobble up transaction fees every hop on the network. We want exchange, yes, and velocity in actual productive areas. How do we find those areas? Through self interest.

36. 14:47Quote

    Life wins here.

37. 14:47Claim

    Self interest in the extended order takes care of finding those productive areas for us. Life wins here. But if velocity slows, that alone doesn't tell us much: if people stopped buying goods that didn't return more energy to them, that would be a positive thing for those individuals. Who loses in that scenario? The people making the things that don't return more energy.

38. 15:18Claim

    The crazy belief that Keynesians take as law is that people will simply stop spending altogether if the money tracks the increase in productivity of a given economy. They can't have it any other way. If the Bitcoin economy grows to maturity, consumes the monetary premium parked in suboptimal asset classes, and grows as productivity increases, will anyone pay for anything? Why would you do that?

39. 15:49Quote

    Growth above 3% is a bad thing.

40. 15:49Claim

    If we remove the boom and bust credit cycles of current market growth, the picture becomes significantly clearer: most economists in a fiat world would say ideal growth of GDP should sit somewhere between 2 and 3% annually, too low is not good, too high is not good. Growth above 3% is a bad thing in a debt-based system, because that signals that we have an asset bubble.

41. 16:23Claim

    If you dig down deep enough, they're going to link to some studies around unemployment and the 2.5% figure in GDP growth, and how a certain percentage above that will eliminate a certain amount of unemployment. The higher GDP is above 2.5%, the more unemployment goes down, which means more people transforming energy, which means demand will outpace supply, leading to an increase in prices, plus unemployment being reduced.

42. 17:00Claim

    Firms will have to be forced to lift wages in a tighter employment environment. The answer to both of those things is yes, that's exactly what would happen.

43. 17:00Open question

    I don't want to get too in the weeds here for this particular podcast. That's for a separate episode.

44. 17:00Quote

    That is a return for ants in a fiat world.

45. 17:33Prediction

    In a Bitcoin world, GDP accelerates 3% year over year, except that it won't, because that is a return for ants in a fiat world. Productivity in a Bitcoin world will skyrocket because noise has been eliminated from prices. Information is now unrestricted and energy will simply flow to where it is appreciated, that will lead to an incredible amount of productivity gains, and those won't slow down. Those will only speed up.

46. 17:33Analogy

    Would you delay buying a car to get around if you knew for a fact that the car would be 3% less in 12 months time? What about food? What about clothing? Is 3% going to kill all of our needs? Probably not.

47. 18:05Claim

    What makes a difference in new projects with real risk? If you have an idea, but you need energy to start it, but that energy will increase 3% annually to maintain it, the project has to work or you're in very real trouble. So who proceeds with projects in this environment? Only those that can make more than that. Who never gets off the ground? Projects that can't make that figure work, so instead of the project getting up and failing and squandering the investor energy, that energy can find a home that won't waste it.

48. 18:37Quote

    There is no free money.

49. 18:37Claim

    Does that mean less projects get funded? Yes. There is no free money. The barrier to decide whether or not something is viable is no longer 1% interest rates in a 10% inflation environment, where you capture the difference between those two figures by doing nothing. The project has to have value.

50. 18:37Analogy

    The usual analogy here is that unproductive companies and investments need to be cleared just like the underbrush in the forest to prevent wildfires. You need those little tiny fires to clear that stuff out.

51. 19:10Claim

    That has to occur in nature, it refreshes the ecosystem and prevents a build up of too much dead material that would eventually create the perfect storm, the perfect ingredients for a major fire, and zombie companies can't exist in this environment. This is a positive, this isn't negative. Well, they aren't doing productive work in the first place, they are a negative, and at the same time we aren't getting any of the benefit from their actual work.

52. 19:42Claim

    We're losing twice as an extended order, we're losing twice on efficiency: not only are they wasting their time, whatever they're doing, they're wasting their energy, whatever they're doing now, but they're not doing something productive. So it's twofold: the cost of what energy they could be transforming into reserves, and the amount of energy that they are squandering, that is the difference.

53. 20:12Claim

    My hoarding Bitcoin doesn't eliminate your ability to use Bitcoin. Anyone can use Bitcoin, you just have to access it, you have to find someone who is willing to exchange a certain number of sats with you for whatever energy you are providing. So me hoarding 20 million Bitcoin doesn't prevent you from accessing Bitcoin at all, doesn't prevent you from leveraging the utility that comes from holding Bitcoin yourself. The actual number doesn't matter.

54. 20:44Reference

    This is just a podcast that could better be explained by reading Jeff Booth's book, The Price of Tomorrow, because it really is true what he says, where when money is scarce, everything else is abundant. Abundance in money leads to scarcity everywhere else.

55. 21:15Claim

    Rational actors in the space will notice these things and they will not allow you to steal from them. And if you get clued in to someone stealing from you, chances are you're not going to allow it. In the fiat system, if you're not going to allow that theft, or the same percentage of theft in a given time, you're going to rotate to assets that don't allow that to take place at the same velocity. Anything that can slow that down, that is where the money will flow.

56. 21:45Quote

    That monetary premium on top of whatever the resource's actual utility is to the extended order is now being wasted. And that's something that Bitcoin fixes.

57. 21:45Claim

    That is where the energy will flow and then it will sit there. And that monetary premium on top of whatever the resource's actual utility is to the extended order is now being wasted. And that's something that Bitcoin fixes.