Is There a Collateral in the System to Back a Stable Coin?

"Everyone should have an intense interest in what money is and how it’s manipulated by the few at the expense of the many. Money is crucial for survival. It is necessary for maintaining a free society. A healthy economy depends on it. Limiting political power is impossible without it. Sound money is essential for preventing unnecessary wars. Prosperity and peace in the long run are impossible without it."

Welcome back to another episode of Made You Think! In this episode, Nat and Neil are joined by their official new co-host, Adil Majid! In today's episode, they discuss their key takeaways from End the Fed by Ron Paul, a book which explains the fundamental problems with fiat money and provides a history on banking in the US. If you've never challenged the role of the Federal Reserve, this is an episode you won't want to miss.

We cover a wide range of topics including:

• Currency vs. money; How are they different?

• The shift in power from countries to companies

• Money printing, inflation, and the fate of the US dollar

• The Cantillon Effect, and who benefits the most from this

• Why utility is important in the longevity of currency

And much more. Please enjoy, and make sure to follow Nat, Neil, and Adil on Twitter and share your thoughts on the episode.

Links from the Episode:

Mentioned in the show:

• Great Books Program (2:11)
• Growth Machine (8:22)
• Audit the Fed, Sanders and Paul (10:04)
• Taylor Pearson - Cryptocurency and the Turkey Problem (12:28)
• Luna (19:45)
• Tether (20:08)
• Nat’s Tokenomics 101 (22:35) 
• Nat's Tokenomics 102 (22:35) 
• Starlink (26:46)
• The Tim Dillon Show (29:16)
• Reagan tells Soviet jokes (35:04)
• Flexport (36:50)
• Bank of North America (39:18)
• First Bank of the United States (39:23)
• Second Bank of the United States (39:24)
• Independent Treasury System (39:27)
• Jekyll Island (48:14)
• Cantillon Effect (49:45)
• Fiat money (54:28)
• 40% of US dollars in existence were printed in the last 12 months (59:15)
• Iron (1:00:12)
• DAI Stablecoin (1:01:11)
• Russia's "Gold Standard" (1:05:06)
• Ruble as Year’s Best-Performing Currency (1:05:10)

Books Mentioned:

• End the Fed
• The Revolt of the Public (1:40)
• The Iliad (2:20)
• The Odyssey (2:21)
• Gödel, Escher, Bach (7:23) (Book Episode) (Nat’s Book Notes)
• Principles for Dealing with the Changing World Order (23:08)

People Mentioned:

• Tommy Collison (2:12)
• Aristotle (3:29)
• Seneca (3:30) (Book Episode)
• Douglas Hofstadter (7:21) 
• Bernie Sanders (10:00)
• Ben Bernanke (10:24)
• Tim Dillon (29:16)
• Warren Buffet (32:33)

Show Topics:

0:32 We're stoked to announce that Adil Majid (who has joined us for episodes #7, #33, #34, #35, #71, #74, #75) is officially a co-host of Made You Think! Nat, Neil, and Adil talk about what's next for the podcast, and share the Great Books list that will be used to guide their book choices on future episodes.

4:01 Why some books have lasted so long, and why there are very few good philosophy books that have come out in the modern world. These old books were written over a long period of time, covering a wider span of history as compared to books written today.

8:32 The book we're discussing today is End the Fed by Ron Paul. One idea brought up in the book is auditing the Fed to see what exactly it is that the Fed is doing and where the money is going. We use the terms money and currency interchangeably but conceptually they’re different things. The U.S. dollar is not money, it is currency.

15:34 Paul makes a case that there should be a free market of currencies, and people should create currencies that compete with the dollar. This ties in well with cryptocurrency where there are numerous coins, all with different rules and tokenomics for each currency. Historically, it hasn’t always worked this way.

19:00 Creating stablecoins in crypto, they fail when they don’t have a clear and necessary utility. Many projects will create new stable coins pegged to the dollar, but unless there’s a specific market where that coin has utility, it falls out of circulation.

23:49 One interesting change that we’re living through is the shift of power from countries to companies. Because many of the big and powerful companies are in the US and tied to the US dollar, the dollar retains it value and utility.

27:19 The era that we grow up seems to play a role in how we view and trust the government, as well as our support level of major wars. When things feel the best is when the down trend begins. Likewise, the uptick begins when things are at their worst.

32:54 With a pessimistic attitude, we have to remember how resilient countries are. We also don’t have to solely rely on the government to fix the slump that we’re in, there are companies that can fix some of these issues we're facing.

38:22 What is the Fed, and what systems were there before it? There were 4 systems before: Bank of North America , First Bank of the United States, Second Bank of the United States, and the US Independent Treasury System. Adil gives a brief history of these systems and how it has led to where we are today.

45:13 When you think about different sectors of crypto, sound money is underrated in the US. Gold for example, Neil shares the significance of investing in gold in Indian culture. Rising inflation rates in the US.

48:14 Jekyll Island and the Cantillon effect. Whoever is closest to the money printer benefits the most. Some people are effected more than others by inflation. How banks benefit from inflation.

54:28 Funding war with Fiat vs. hard money. Once we had the ability to print unlimited amounts of money to fund war, we didn’t have to stop due to the economic cost of continuing as we may have had to before.

57:50 We keep having to print more and more money to get out of each economic downturn, and Paul predicts that at one point there will not be any amount of money to get us out, potentially leading to the collapse of the US dollar. What happens if or when we get to this point?

1:04:30 Hypothetically speaking, is there a way for the Fed to transition to having backing for the dollar? Does it have to collapse, and where are we in the current collapse?

1:08:54 Consumer debt crisis- if that all starts to collapse and unwind, the effects of that could be pretty devastating. Parallel economies.

1:11:43 Thanks for listening! Next episode, we will be covering The Revolt of the Public, so be sure to pick up a copy before our next episode!

If you enjoyed this episode, let us know by leaving a review on iTunes and tell a friend. As always, let us know if you have any book recommendations! You can say hi to us on Twitter @TheRealNeilS, @adilmajid, @nateliason and share your thoughts on this episode.

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Thanks for listening. See you next time!