WBD409 Audio Transcription

Bitcoin and the U.S. Fiscal Reckoning with Avik Roy

Interview date: Wednesday 13th October

Note: the following is a transcription of my interview with Avik Roy. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.

In this interview, I talk to Avik Roy, Editor at Forbes. We discuss the growing problems with debt and inflation, healthcare, and central bank digital currencies.

“If Bitcoin ever does compete with Treasury bonds as the premier store of wealth in the world that’s a really really big deal, that transforms the entire way the world economy works.”

— Avik Roy

Interview Transcription

Peter McCormack: Avik, hi.

Avik Roy: How's it going?

Peter McCormack: I'm good, man.  Thank you for having us here.

Avik Roy: Oh, it's my pleasure.  Welcome back to Austin; we're so happy to have you here.

Peter McCormack: Yeah, it's good to be back.  I mean, I'm a big fan of Austin, I've been coming for years.  I've just seen its competition in Nashville which, big fan as well, but it's great to be back here.  It's good food, good people, and thank you for letting us use your office.

Avik Roy: Nashville is way too muggy, man, I can't handle that weather.

Peter McCormack: It is, but it's also a little bit more country, and I kind of like that.

Avik Roy: You like that?

Peter McCormack: Yeah.  I went to a Whiskey Jam and, yeah, I just liked it, I just thought it was a cool place.  But listen, if you can go between the two?

Avik Roy: Absolutely, non-stop flights.  I think Southwest has non-stop flights to Nashville.

Peter McCormack: Well, I think these kinds of -- I explained to you before we started, this mix of where you have a good mix of Democrats and Republicans together, I think is where you get the best of America.

Avik Roy: Yeah, I like that too.

Peter McCormack: Well, very excited to talk to you.

Avik Roy: Me too.

Peter McCormack: You wrote an amazing article.

Avik Roy: Well, thank you.

Peter McCormack: Thank you for sharing it.  I will put it in the show notes, everyone should read it, Bitcoin and the US Financial Reckoning; is that correct?

Avik Roy: US Fiscal Reckoning.  That too!

Peter McCormack: That's it, yeah.  Not everyone who's going to tune into this might know you.  I've mentioned to a couple of people I'm interviewing you, some people know you, some people don't.  Can we just do a background to let people know who you are, and then we'll dig into this article?

Avik Roy: Yeah.  So, I have a very zig-zaggy professional career.  I went to college and majored in molecular biology, then I went to med school.  Then after med school, I got recruited by a then unknown investment firm, called Bain Capital, to invest in biotech companies.  I barely knew what a hedge fund was.  So, I spent 12 years on Wall Street as a healthcare investor, as a portfolio manager, and I'll skip the Bitcoin parts of the story for now and we can get back into it if you want.

But when Mitt Romney ran for President the second time in 2012, since my first job out of med school was at Bain Capital, he had asked me to help him design his health reform plan for the 2012 Presidential election; how many times do you get that call?  So I said, "Sure".  I took a year off work to do that and he obviously didn't win, so I didn't join the Romney Administration, and I thought I'd go back to Wall Street.

But then a bunch of people started asking me, "Well, now that you're this Republican healthcare guy, what should we do; what should the healthcare plan be of the Republicans?"  I said, "Well, it's pretty simple.  You should embrace universal coverage, universal healthcare, but show how free markets, free enterprise, the private sector, can deliver it".  I got a lot of blank stares when I said that, a lot of, "Well no, we're going to repeal Obamacare when we get in power in 2016".  For those of you who aren't familiar with US healthcare debates, Obamacare was the big healthcare reform plan that President Obama put out in 2010.

Peter McCormack: Do you consider that a success?

Avik Roy: I would say it was a success in certain ways and a failure in other ways.  It certainly didn't live up to expectations, and that was my criticism of it.  The thing I always said about the affordable character Obamacare was, yes, every American should have access to affordable health insurance.  It's a major component of our financial security.  Healthcare's so expensive here.  If you aren't insured and you get a big bill, you can go broke; it's a big problem.

There are ways to have a universal healthcare system that are much cheaper, more fiscally sustainable and more innovative than the system we have, but we haven't done it for various reasons.  So, I said, "Well, I'm going to take two years.  No one else wants to do this", so I literally just took two years off to say, "Okay, if one were to design a new way of doing healthcare in America that was universally private, meaning it's not a government-based system, it's a private-based system, where you have freedom to choose your own insurance plan, your own doctors, your own whatever; but for those who are vulnerable, those who are low income, you're protected, we're going to make sure you have a backstop, a financial cushion to support your healthcare needs and health insurance needs".

Once I did that, I thought, "Okay, I'll hand it off to whoever and then go back to Wall Street".  But then, the 2016 candidate started calling.  In the meantime, somehow I started blogging about healthcare, just because I didn't know what else to do, and that took on a life of its own.  Forbes made me its Policy Editor, which I still am, so I'm the Policy Editor of Forbes.  I manage our public policy coverage, so I write a lot about healthcare and fiscal policy for them.  And, I started a think tank, called The Foundation for Research on Equal Opportunity, where we are shooting this today, which focuses on how to expand economic opportunity for Americans on the bottom half of the economic ladder using free enterprise, economic freedom, entrepreneurship, technological innovation, things like that.

The basic point, the thing that I took away from my healthcare work, and the thing that I took away from my think tank work was, we think of politics as the left versus the right, and Bitcoin's a great example of this.  It doesn't always have to be the left versus the right.  You could achieve a progressive policy goal, like universal health insurance, but have a system that's actually more fiscally sustainable, where there's more choice, more innovation, more of a free market.  So, there are ways for both sides to win, and that's not just true in healthcare, that's true in a lot of things.

So basically, what ended up happening was, I was running a long-short equity healthcare portfolio during the Financial Crisis, saw from my Bloomberg terminal the end of the world in 2008.  I had a bunch of friends from that world who were into Austrian Economics who were following Bitcoin from the very beginning, and they were in my ear about it.  But it was too intimidating for me.  I was like, "What, I have to learn how to code, I have to figure out how to get a wallet; how am I going to do all this?  This is just too complicated.  I can't run a node; I'm too busy.  I'll figure this out eventually".

Then what happened was Mt. Gox crashed and I think Bitcoin went from $1,200 to $300.  I'm like, "Okay, if I don't drop everything and figure this out now, shame on me".  So, I did.  I just paused everything for a minute, spent some time working on it and I took a good chunk of my biotech winnings and plopped it into Bitcoin, and that just obviously, even though biotech has had a pretty good run over these last ten years, so has Bitcoin, so has crypto.  So, I had to pay more and more attention to it and got more into it, and certainly understood certain aspects of it where I had high conviction.

For some people, they get into Bitcoin because they love the technology.  For me, I had that high conviction about the fiscal side of it, the monetary side of it, the fact that healthcare is the biggest driver of America's debt and deficit crisis, and I spent a lot of time trying to reform and fix the US healthcare system, so I know how hard it is first-hand, how hard it's going to be for us to solve our debt and deficit problems.

So, even though my day job involves trying to fix those problems, in a sense my portfolio, my investments and a lot of my world view is driven by the possibility, if not the likelihood, that we fail to solve these problems.  If we fail to solve these problems, what happens?  And, 2008 was a bit of a preview, in that we saw around the world countries go into sovereign debt crisis.  It's not the first time that's ever happened, obviously.  And, Bitcoin will obviously play, over time -- I shouldn't say "obviously", because it's not obvious to everyone; but to us, it's obvious that over time, Bitcoin will play an increasing role in that problem, how the US finances its debt; can it continue to run these trillions and trillions of dollars of debt; can the world; can the advanced economies continue to do that?

Before, we had no recourse, right.  Countries would devalue their currency and you couldn't do anything about it, you were stuck.  When Nixon left the gold peg in 1971, as you know well --

Peter McCormack: WTF Happened in 1971.

Avik Roy: Right.  In fact, I tried to give Ben a shoutout in my article on that, and they edited out, so apologies for that, Ben.

Peter McCormack: We'll give a shoutout to Ben here, and Heavily Armed Clown.

Avik Roy: Exactly.  So, you couldn't do anything about it.  If you held dollars at the time in America, you were stuck.  Yes, if you were an institutional investor, you could buy gold, you could trade on it; but if you were just an average person, you were stuck.  The value of your dollars went down by 10X, 20X.

Today, it's different, we have Bitcoin.  The question is, for how long will that be true?  Will we get to a point where the US really does struggle to finance its debt?  And, when that happens, how does Washington react?  Does Washington then look at Bitcoin as truly a competitor?  Right now, they look at Bitcoin sort of, "What is this thing?  People are losing their money, or they're making money, they're evading taxes.  What are they doing?  I don't know".

But if the government, the people in Washington, eventually start to think of Bitcoin as a competitor to Treasury bonds, which is the way I look at the world, some people say, "Well, you should be able to buy your coffee with Bitcoin.  That's a competitor", and obviously, we're trying that out in El Salvador and other places.  But the bigger story to me is, if Bitcoin ever does compete with Treasury bonds as the premier store of wealth in the world, that's a really, really big deal.  That transforms the entire way the world economy works.

The reason I wrote this article that you mentioned is to try to walk Washington through that, because the journal I published it in, and I made a point of publishing it in that journal because it's something that's widely read in Washington, so just to help members of Congress, people in the Treasury department, members of staff who support those agencies and individuals, help those who aren't already familiar with cryptocurrency, which is most of them, have a way of thinking about that transition; the fact that as our debt piles up and piles up, the temptation is to want to restrict that competition, prevent that competition from taking place.

The argument I try to make in the piece is, "No, if you want to protect the ability of lower-income and middle-income Americans to protect themselves from inflation, from the irresponsibility of the government, then you've got to allow them to have this alternative store of value".

Peter McCormack: Well, a lot to unpack there.  I'm going to come back to the Bitcoin thing; I'm really fascinated about talking about the healthcare side of things.  It's not something I talk about a lot on the podcast, it's something I'm acutely aware of, because we have a very different system in the UK at the moment.  We have universal healthcare, but it's state-run, which has its pros and cons.  It's highly inefficient, it wastes a lot of money and a lot of bureaucracy.

But if we ignore the fact that we've got these extended waitlists at the moment because of COVID, the fact of the matter is, in the UK, wherever you are, wherever you live, whatever age you are, whatever gender, whatever colour you are, whoever you are, if you get knocked down, you have a heart attack, you get cancer, you will get treatment, you can be treated; maybe not as fast as if you have private healthcare, but you also have the option.

So, I have options to use the National Health Service; I also have very cheap private healthcare.  I pay £150 a month for myself, my son and my daughter.

Avik Roy: That's pretty good.  I spend over $1,000 a month, $1,200 a month for myself here.

Peter McCormack: The equivalent of a deductible that you have, mine's £150 or something.  So, when I had my back injury recently, I got back from, where was I?  Yeah, I was in El Salvador.  I got back from El Salvador, phoned up my private healthcare and within four days, I was in surgery and I was repaired.  So, I had that option.

Then, a recent thing that we've got is quite big waits to get into the GPs, the general practitioners; it can be two to three weeks, because they're so busy.  We've now got private GPs opened up by appointment, so you can pay £50 and usually get seen that day or the day after.  So, we're starting to get some easing off on the pressure of the NHS, because there are private services, but still have that universal healthcare.  I think it's a pretty good system.  If I'm talking to some bitcoiners, they're like, "No, this is socialism, this is state-run, it's really bad".  I'm pretty sure if you surveyed people in the UK, 95% of people plus would say, "No, we like this system.  It can be improved, but we like this system". 

I come out to the US and I have friends here and I remember meeting somebody and they were telling me of a story of his daughter, she broke her finger surfing.  He called the wrong ambulance.  He was meant to call one company, he called the wrong one and he had to pay thousands of pounds, he had a £5,000 deductible.  He ended up just spending an awful lot of money.  I've heard about people with a broken leg having to re-mortgage their house, because they didn't have healthcare coverage.

So, it's a big intro, but something I'm acutely aware of, you must have studied UK and other health systems around the world.  What do you believe the perfect model is?

Avik Roy: Yeah, it's a question I care about a lot actually.  And we actually, at FREOPP, my think tank, we have a whole programme called The World Index of Healthcare Innovation, where we rank the top 31 countries, that is to say the wealthiest 31 countries by income, by GDP per capita, around the world that have a population over 5 million, and compare them on all sorts of metrics that you'd want us to compare them on, not just how many people have health insurance, which is a traditional thing that people look at, but how good are the health outcomes; how much choice do you have in your treatment, in your doctor; how much scientific innovation is actually going on in that country; how many patents; how much R&D; how many Nobel prizes; and how much IT is being used to advance the quality of care and delivery?

The US ranked fifth in our survey.  Number one was Switzerland.  The top three were Switzerland, Germany and the Netherlands, and I can't remember this year if it was Switzerland, Germany, Netherlands one, two, three, or was Switzerland, Netherlands, Germany.  But Switzerland, Netherlands, Germany, and Ireland was fourth, and the US was fifth, and I think the UK was eighth or ninth, so wasn't at the bottom.

Peter McCormack: Okay, that's quite interesting, because if I compare and contrast the UK and the US, I think I prefer the UK system; but I know if I was in the US, I could afford private healthcare.  But I think as a net, I prefer it.  But the one thing I'm clearly aware of between the two is that, if I'm relying on the NHS, I'm probably going to have to wait a longer time to get seen, because I'd be obliged to have healthcare coverage here.  I also feel like US healthcare innovation is way ahead of the UK.  We have a lot of people who raise money to come and get treatment in the US for specific cancer treatments, because you're way ahead.  Is that where the UK falls down?

Avik Roy: Yeah.  So, the US got dinged in our survey on a couple of things: one, affordability, exactly what you said; another, which is related, is fiscal sustainability, because we spend so much on healthcare, not just on the private side, but the public spending on healthcare.  US Government subsidies for healthcare per capita is higher than every other country in the world, even though there are people who are uninsured here, even though it's still expensive when you're paying out of pocket.  That's how bad our system is.

So, we dinged the US really heavily for those two things, affordability and fiscal sustainability; but where the US really dominates, the gap between the number one and number two country on this particular thing was massive, was science and technology.

Peter McCormack: Right, okay.

Avik Roy: Nobel prizes per capita, patents per capita, new drugs developed by companies native to that country.  The UK actually does pretty well on a lot of these things.  The UK scientific culture is very, very strong, and that's why the UK ranked as highly as it did.  If it weren't for the scientific culture and the academic culture of Oxbridge and things like that in the UK, the UK probably would have done worse, because of the wait times and other things.  Affordability is good in the UK, but it's good in a number of countries, so that alone wouldn't distinguish it from, say, France.

Peter McCormack: Right, so what is it the Swiss have got so right?

Avik Roy: What the Swiss do really well, and Germany is like this too, Germany and Switzerland are very similar in terms of our rankings; slightly different systems, but similar in our rankings.  They're basically all private systems, so in Switzerland everyone chooses their own insurance.  It's not like you have the NHS, or if you can afford to get outside the NHS system, you can.  In Switzerland, everybody buys their own health insurance, and it's bought as an individual. 

You have complete choice; there are dozens of insurers competing with one another; you have access to all the latest technology, so a new drug comes out, the Swiss get it pretty quickly, as do the Brits actually, believe it or not.  You have new treatments, you have a system that's fiscally very sustainable and a big part of why it's sustainable is, unlike the NHS system, where the government's paying for everybody's healthcare, regardless of whether you need the help or not, the Swiss system, they basically subsidise the bottom quarter of the population. 

They say, "Look, if you're middle class, or you're upper middle class, you can afford to buy your own health insurance.  You can afford to buy your cable bill, your cell phone contract, you should be able to afford health insurance too".  So, because of that, their system costs the government a lot less.  And so, from a fiscal sustainability, it's really good, along with having the universality, the affordability and the choice.

So, it's a really good thing to point to Americans, because a lot of Americans falsely believe that our system is the most free market system in the world.  It's not, it's not even close.  As I mentioned before, government subsidies per capita here are the highest in the world.  We have a heavily regulated system.  We basically have the worst of both worlds.  We massively subsidise the system, but we don't actually try to make it affordable. 

So, there a lot of things that the US needs to improve on to get better, and part of that argument that we put forward in the World Index of Healthcare Innovation, is to help people who think the status quo is just fine and they're saying, "Well, if we become more like Europe, that's bad".  Actually, there are countries in Europe that are a better model, if you believe in a more choice-oriented, competitor-oriented system.

Peter McCormack: Right, so in terms of the US system, if you're getting the best of both worlds, who's winning in this, because I always believe there must be somebody winning; is it the lobbyists, is it the insurance companies themselves, is it the pharmaceutical companies; somebody must be winning in this?

Avik Roy: The simplest way to put it is, in the US, we spend about $4 trillion a year on healthcare.  So, the people who are receiving the $4 trillion have a very powerful incentive for that number to go up and not down, and they have a lot of money and a lot of resources to convince Congress and the executive branch, the presidency, that they're right.

To give an example, one of the examples that actually doesn't get highlighted a lot, is the hospital industry.  In pretty much every part of America, the two largest employers are the public schools and the hospital.  So, if you're a member of Congress and your hospital comes to you, the CEO of that hospital that's probably making $10 million a year, comes to you and says, "Gosh, if you try to do anything to lower the cost of hospital care, then we're going to go broke, we'll have to close this hospital and tens of thousands of jobs could be lost".

As a congressman, you're probably, "Well, you're probably BSing me, but if you're not, I'm the one who's going to get blamed if I sign on to this", and everyone just runs around terrified that if they try to reduce the cost of hospital care, whether it's through competition, through price controls, whether you're left or right, whatever method you would like to use to reduce the cost of care, the price of care, people are afraid to do it, because the hospitals are that large employer, particularly in the rural areas where sometimes they're the largest employer.

So, that's an example of how hard it is, how entrenched the interests are to make this better.  It's not just the hospitals, it's the pharmaceutical industry, it's doctors, it's everything pretty much.

Peter McCormack: Well, there's a similar problem with the prison system as well, because I spent a lot of time with Lyn Ulbricht, the mother of Ross Ulbricht, and while she's been campaigning to try and have Ross freed, she's also become a campaigner for prison reforms.  And she said one of the biggest problems is that where the prisons are, they're often the biggest employer in the town.  So, to have any form of prison reform, which maybe would remove non-violent criminals from jails, would lead to a loss of jobs, and that would not be popular in local communities.  So, it sounds like that's almost a very similar scenario.

Avik Roy: You're right, and you reminded me that since she's relatively local, I should reach out to her here in Austin.

Peter McCormack: I think she might have moved actually.  But if you want to connect with her, I can connect you with her.

Avik Roy: Yeah, please do.

Peter McCormack: She'd probably love to hear from you.

Avik Roy: Because, we do work in criminal justice reform too.  So, we work on all sorts of things.  We work on obviously now, crypto, but also healthcare, energy, housing policy, criminal justice, all sorts of areas, education reform; all sorts of areas where we think innovation and free enterprise can drive progressive policy outcomes.  And about 70% of our work has to do with the rising cost of living, which is partly about monetary policy, but it's also about other things.  It's about regulations and subsidies and rules that allow people, or incentivise people to raise their price.

You take away how much college costs in America, a big part of that is we massively subsidise the cost of college in terms of these loans, these student loan programmes, that are run by the federal government, but we don't hold colleges accountable for what they charge.  So basically we say, "We want college to be free, so let's just basically pay the bill as a government".  But the end result is the colleges say, "Well, thank you very much, we're just going to raise our prices by 10%", and just get more and more money.  And, that's exactly how healthcare works here too. 

So, we have a lot of problems like that in America, where the cost of everyday life is going up, and our argument is that, if we actually bring a more decentralised, pro-competition, pro-choice approach to those areas of the economy, you can make life better for a lot of people.

Peter McCormack: How do you break the deadlock of the incentives for the hospitals and the pharmaceuticals, because it points to another thing I've been thinking a lot about recently.  A few months ago, I spent a lot of time reading the US Constitution and the forming of modern America, and it feels to me at the moment, politics is very broken in the US, but it shouldn't be.  It's broken in some ways, but in other ways it's great.  The state system is proving to work; we're seeing migration with people to here, to Nashville, to Miami.  People are moving their companies and their jobs based on the local rules.  So that, to me, is a system that works, because my only option in the UK is to leave the country.  I can't move to London to have different rules, or Manchester, and I envy that.

But at the same time, politics seems to have just become this, I don't want to use the word "corrupt", just broken, dirty system of fighting, arguing, perpetuated by the media and social media, and not really working for the people.  It feels like, with the forming of the US Constitution, it was about a government for the people.  It feels now it's a government for the corporations, and that's probably something you've looked at, and if I've said anything wrong here because I'm British, you can fix my errors; but do you see what I'm saying?

Avik Roy: Totally, and a couple of points I'll make really into that.  The first is, it's absolutely hard to try to change these structural problems in America, which is exactly why I'm doing it.  This is exactly why I dropped out of the hedge fund business to take on these problems, because I want to be able to look back on my life when I'm 80 and feel like I tried to solve something really hard.  Maybe I'll fail, I'll probably fail, but in the 15% chance that we succeed at FREOPP, then we've changed history, we've done something really important for this country, so that's why we do it. 

Because, it's a lot easier to say, "Okay, we're going to take some small problem and solve that and then count that as a win, because what we want are wins".  For us, those things are important, I don't want to discount the importance of incremental progress.  But solving the big problems matters too.  So, once you actually try, once you say your goal is to solve those big, structural problems, you have to think about them very differently. 

This gets to the second part of my answer which is, okay, if you want to solve these structural problems of how do you take on the hospital industry, or how do you take on the corporate, industrial, subsidy, crony capitalism kind of complex that we have in the US and work backwards from there; how do you solve that problem?  One of the most important things you have to do to solve that problem is, you've got to address some of the political divisions in the country.  So, that's where you get to the whole idea of FREOPP's mission where we say, we're trying to answer progressive policy problems, or the solutions to progressive policy problems, using free enterprise. 

So, it's a way of uniting people who think of themselves as Republican and people who think of themselves as Democrats, or people who think of themselves as moderates and say, "Hey, there are solutions that you can advance that you can advocate for in terms of a standpoint of legal reform, regulatory reform, whatever, that allow you to champion your values".  These aren't compromises, these aren't things that split the difference; these are things where you can say, "This is a progressive thing to do", or, "This is a free-market thing to do", and not be wrong.  Both can be true at the same time. 

Just as, and I think one of the things that we both love about Bitcoin is that it can do that too; it is both progressive and also, very pro-freedom at the same time.

Peter McCormack: So, what do you think about term limits and age limits for members of Congress, because that's something that came up recently.  I met somebody who's running for Congress and she said, "One of the biggest issues is that we don't have term limits".  She thinks that's one of the most important policy changes that the US can have, is term limits and age limits of people in Congress.  What do you feel about that, because you have term limits for the Presidency?

Avik Roy: We do.  I think age limits is an interesting idea.  There's a good side and a bad side to term limits.  The good side is, I think, what's obvious to most people, which is people get too comfortable in Washington.  They become insiders; their only response is to lobbyists, and that only becomes more so over time, and they just lose perspective from the real world.  All that's true.

There's one downside which is, when you're dealing with all these highly technical things that the government now regulates or controls, it is valuable to have policy knowledge.  You talking about the healthcare system is a great example.  Healthcare is incredibly complicated in the US, and if you have people who have only been serving for four or eight years, it's very hard to learn enough about the healthcare system to actually know it well; especially when, as a member of Congress, you're doing 20 different things at the same time.  You're rarely very focused on one single issue.

Yes, for example, we know that Cynthia Lummis loves crypto and she's very interested in that, but she's also having to deal with a lot of other issues that don't have anything to do with crypto, that are important to her state in Wyoming, right.  And that's true of every member of Congress.  So, it's very hard for members of Congress to have that depth in an issue.  And, if they're there a little bit longer, that helps. 

But I do think the age thing would help, because I think what you see a lot of times is these 80-year-old senators who think everything is the same it was when they were 30, and it's not, and there are new solutions to problems that weren't available when they were maybe out in the private sector, out in the free world.  So, I feel like there, there could be a lot more turnover, and that would be helpful.

Peter McCormack: Right, okay.  So, the biggest problems that need solving and a big question, what are they?  What would you tackle first and how would you tackle it?

Avik Roy: Oh boy, there are a lot of big problems, but I would say, what is the biggest problem; and maybe that's the way to put it?  The single biggest problem in America is that America is insolvent.  Everything else really stems from that, because at the end of the day, if America -- you didn't grow up here, but for those of us who did, all of us grew up with the Pax Americana. 

We grew up in a world where the US was the leading power, especially after the end of the Cold War, and we're just used to that relative stability in the world that comes from that order of, the US is the leading power and the US is a relatively benign leading power.  We're not trying to generally conquer other countries and incorporate them into the United States.  So, people complain about the US, but relative to other leading powers over the lens of human history, the US has actually been pretty good.

The problem is, what happens if the US can't finance its debts?  What if the US has a massive economic crash; then what?  And I think that's a huge problem and we're, instead of actually trying to solve it, in certain ways we're making it worse.  The various spending bills that Congress is considering now, the massive printing of US dollars from the Federal Reserve; we're doing things to actually push the accelerator down in terms of going over the cliff, not trying to slow down.  So, to me, that's the biggest problem that we have to solve, because if we don't solve that, all the other problems become really trivial.

Peter McCormack: Well, there's no incentive for any president to take that medicine, to give up -- I was explaining to somebody recently, it's like any addiction.  You can put off all your addiction, "I'll give up tomorrow, I'll give up the next day, I'll give up the next day", because giving up on any form of addiction is very difficult.  You have to go through a cold-turkey period, you have to go through a withdrawal period. 

It feels like, I think even Giacomo Zucco referred that to me a long time ago, he said, "Really, America has an addiction now to printing money and for any president to take the foot off the gas means they're going to be the one that led them into perhaps a very tough economic period", which has all its associated geopolitical social issues and a contagion that will spread around the world.  But it feels like there's no incentive for any president to take that; why would they?

Avik Roy: I agree with you to a significant degree, but here's where I might offer a note of optimism, which is most people who are in politics in America, true of most countries, they want to be president someday.  They look in the mirror and they see a president in the mirror.  But once you've actually been president, what really matters?

What should matter and I think what matters to a lot of presidents is, what's their place in history?  50 years after you're a president, what are people going to think of your presidency?  That starts to matter a lot to presidents, once you've actually made it to the White House.  So I think, once you get to that point, the problem is all those things you did to climb up the ladder, those are your habits.  Your habits are always to think about the next election; or, how am I doing in the polls?  That's always going to be a part of your cast of mind as a politician.

But I do think that some presidents, more than others, really try to think hard about their legacy; what are people going to think of me 50 years from now?  And if you are thinking about that, then you're going to be much more concerned about the problems that we've been discussing.

Peter McCormack: So, how bad is this economic position from your perspective?  Obviously you wrote the article, the Fiscal Reckoning; how close do you believe the US is to the -- I mean, what is the Fiscal Reckoning; what is the point in time we're heading towards?

Avik Roy: Well, this is one of the things that I talk about at length in the piece, which is people who are fiscal hawks, that raise a lot of concerns about the debt and deficit and say, "This is a real problem in America.  We can't do this for long".  The counter argument to that is, "Well, we've been doing it for 50, 60 years and we're still number one".  Yes, inflation is up right now, we're recording this in 2021, but over the last 30 or 40 years, since Reagan and Volcker tapped down inflation in 1981, we haven't had a lot of inflation in the US.

So, you have a lot of people say, "Well, what's the big deal, people still buy Treasury bonds, inflation is low, so obviously it doesn't matter if we rack up all this debt.  Who cares?  Nobody cares.  We're living in some sort of new world where none of this really matters".  That has been true up to now.  And so the question is, what changes that?  What I walk through in the article are some indicators that it's starting to change, and that is to say, to start to use one example, how is it exactly that we borrow money as a country?  It's not different from actually the way we borrow money as people.

As people, we borrow money by taking out a mortgage on our house, or getting a credit card, and the credit card company agrees to lend us the money, or the bank agrees to do the mortgage.  And, they're only going to lend us that money if they think we can pay it back, and if they're worried that we're not going to pay it back, they might charge us a higher interest rate.  And, that's pretty much how it works with governments too.  So, governments issue Treasury bonds, in the case of the US, or sovereign debt, in the case of countries in general, and the individuals and investors and institutions that buy those Treasury bonds are effectively lending the US Government money.

The way that the bond markets work is, if there's a lot of demand for those bonds, if people really want to buy those bonds, the effective result is the interest rate is lower.  And, if there's weak demand for the bonds, the interest rate goes up.

Peter McCormack: And also, risk with the bonds.

Avik Roy: Risk, exactly.

Peter McCormack: So, you can get a high interest rate for Argentinian bonds, but they come at a high risk.

Avik Roy: Right, and that's exactly how those things all go together, right.  So, the reason why the interest rate is higher is because you're worried that the default risk is higher.  That's why you actually demand a higher interest rate.  So, people look at Treasury bonds and say, "Well, hey, Treasury bond interest rates are really low, they're near zero".  This is true in Europe too, this is true in Japan.  "So, obviously there's no problems, we have almost zero interest rates.  So, clearly nobody cares about the US debt".

But that's not true, because the interest rate that right now you can get on a US Treasury bond is effectively an artificial rate that's not a true market rate, for a number of different reasons; the most important of which is that the Federal Reserve is buying up a good chunk, roughly half, depending on exactly how you count it.  Roughly half of the Treasury bonds that the Treasury department issues are being bought not by outside investors, not by outside governments or companies or hedge funds, but by the Federal Reserve.  That's a problem.

It's like, if you take out a credit card, Peter, and you rack up a huge bill and you say, "Gosh, I don't think I can pay this bill.  I think I'm going to take out another credit card, pay off the first credit card bill, and then we'll worry about the second credit card bill later".

Peter McCormack: And I've got friends who've done that, and I know how that ends up!

Avik Roy: Yeah, right.  Exactly.  That's kind of what we've been doing.  There are a couple of other things I talk about in the piece; that's not the only one.  So, there's an informal form of banking regulation, called The Basel Accords, which basically is a group of countries, financially significant countries, that get together and basically try to harmonise their banking regulations so that you don't have a situation where some banks are being very conservative in their capital cushions and other banks are not, and so all the capital flows to the more risky banks, and that creates systemic problems for the world economy.  So, they try to harmonise their rules.

One of the things they do to harmonise their rules is say, "We're going to reward you if you hold Treasury bonds; we're going to punish you if you own risky assets", like Bitcoin, for example.  They don't want banks to hold Bitcoin, "But we're going to reward you if you own Treasury bonds.  If you own Treasury bonds, we're basically going to treat them like hard cash".  So, what ends up happening, if you're Bank of America, or Deutsche Bank, or whatever bank it is, Bank Sumitomo in Japan, you're rewarded for owning US Treasury bonds, and some other forms of government debt as well, but particularly US Treasury bonds, because there's so many of them, because we're so big as a country.

So, for reasons like that, there's an artificial increased demand for US debt.  People want to buy, because they're effectively steered that way, or forced that way, by regulators, along with you have the Federal Reserve buying them.  So, you have the situation where the demand for Treasury bonds is goosed and the inner interest rates are artificially low.  What happens over time, you can't continue that forever.  The reason you can't continue that forever is because the debt is growing and growing. 

When Obama left office, the US federal debt was $8 trillion.  Today, it's $29 trillion.  Within 10, 20 years, it could be $100 trillion.  So, you're having to issue more and more of those Treasury bonds; who's going to buy them?  And, what we see if we look at some of those underlying indicators, is very alarming.

Peter McCormack: It sounds like a racket.

Avik Roy: There have been a lot of strong words or descriptors used to describe the US fiscal situation.  Ponzi scheme is one you hear a lot, racket is another.  It's a big problem.  You started with the question of, how long will it take for this to play out?  None of us know.  None of us know when the denouement will happen.  But what we do know is that the problem is getting worse.

So, one of the indicators I talk about in the article is that, the share of Treasury bonds owned by foreign investors has declined by 20% over the last ten years, and the share owned by the Federal Reserve has gone up by about 10% over the last ten years.  Those curves are going to cross.  We're going to get to a point pretty soon when the single largest holder of US debt is the US Government.  That's just not -- that's Latin America-level monetary and fiscal policy.  That just does not fly.

Yes, we're the biggest country in the world and we can probably get away with it longer than most, and the US dollar is the world currency, and there are a lot of reasons why we're going to be able to get away with it longer than a random country that can't issue debt in its own currency; that is a big advantage, the exorbitant privilege of the US.  But there comes a point where here just aren't enough banks out there, or governments out there, with trillions of dollars to put into Treasury bonds.

Peter McCormack: Does it become easier for the US to default when no one's holding the debt, and is that really a default on the people?  I mean, we're really talking about can we even see a situation -- I'm trying to articulate this, but I'm thinking, is this the equivalent of chopping zeros off the Venezuelan bolivar?

Avik Roy: It can be like that.  So, there's different kinds of default.  The formal, or hard default, that most people are familiar with is, you don't pay your rent.  Or in the case of the US, you don't pay the bond.

Peter McCormack: But that's now going to happen, right; they're going to soft default via inflation?

Avik Roy: Inflation, yeah, exactly.  So, the way that the US has been doing it effectively, I mean monetary expansion is a form of default.  If you double the number of US dollars in circulation, all else being equal, each of those dollars is worth half, that's a form of default.  When Nixon left the gold peg in 1971, that was a default.  So, there are things that we're doing that actually should be called defaults that aren't.

The question is, at what point do people decide that they're tired of it?  That's where Bitcoin comes in.  Bitcoin, as we record this, is 12 years old.  What happens when Bitcoin is 25 years old, when people get more used to it, when the people who are in their 40s and running multi-billion-dollar funds, they've lived their whole lives, certainly sentient lives, in a world where Bitcoin exists, and they don't think of it as this novelty; they think of it just as part of the ether, just like Facebook.  Kids grow up now, they were born after Facebook was invented.  For them, Facebook is what their grandparents use to talk to each other. 

There comes a point where Bitcoin is the same.  It's the thing that your grandparents use, as opposed to the other way around.  At that point, you're going to see more and more people think of Bitcoin the way Ray Dalio and Paul Tudor Jones do, where they say, "You know what, I'm not going to go whole hog into Bitcoin, I'm not going to put 90% of my funds into Bitcoin, but am I going to start to gradually shave off what I allocate to Treasury bonds and shave in what I allocate to Bitcoin?"  That is happening and will continue to happen.

There comes a point where that transition is complete, that the US will have a tough time financing its debt.  Look, it's going to be really a challenging time for the US, and I think one of the things I try to talk about in the article is not to sugar-coat that.  A lot of us who support what Bitcoin stands for, we want to say, "This world in which Bitcoin takes over is going to be so awesome and so wonderful", and look, it will be a freer world in a lot of ways than the world we live in now.  But there will be pain points along the way.

Peter McCormack: Of course.  I mean, that's one of the things I often talk about to bitcoiners is, sometimes I don't enjoy celebrating certain things that people seem to celebrate because it's good for Bitcoin, because we know the people who are going to be most affected by this.  It's not going to be the wealthiest; it's going to be the middle and lower classes that are going to be most affected by this.

I just want to come to the default though, because a hard default is hard to argue against.  Somebody who doesn't pay their debt, they've defaulted.  A soft default via inflation, there's a strong argument that the US Government is in the process of defaulting right now, because 5.4% inflation, which I think nobody agrees is actually real, I've really noticed the increase of costs on this trip, the amount of money I'm paying for things.

One morning, I was with Preston Pysh and we got two bacon and egg sandwiches and two bottles of water, it was $38.  I was like, "What the fuck?!"  But I've really noticed the increase in prices.  I was with my friend, Brandy, yesterday, she's a hairdresser.  She's had to put up her prices 20%, 30% because her materials have gone up so much, her rent's gone up so much.  So, this 5.4% inflation, I don't think anyone really believes.  So, my question is, could we argue that the US is defaulting right now; and also, have you looked into how bad this might actually get?

Avik Roy: The answer is, I can think yes and yes, which is to say I completely agree with you, and I talk about this in the article, the fact that conventional measures of inflation, consumer price index and the personal consumption, expenditures that the Fed uses, these are artificially designed measures of inflation that in various ways, exclude the things that are actually driving up the cost of living for average Americans.

Peter McCormack: What the fuck?!

Avik Roy: To give one example, just the way that the CPI and PCE measure housing costs, which I know you've talked about on your show; the Owners' Equivalent Rent.  There's a survey where they ask you, "Okay, if you were to rent out your house, how much do you think you could charge in rent?"  Most people don't know, they've never rented out a house, they've never been a landlord, how would they know?  All you have to do is look at Zillow, or any of these other third-party databases, you know how much home prices are going up.

If you own your house, that's great, you're making more money.  If you have money in the stock market, which is where all the extra dollars that the Fed prints go, that's great, you're doing well.  But if you haven't bought a house yet and you're trying to, or you're renting, or you don't have a lot of savings and you don't know where to start, you're falling further and further behind.  That's a huge problem. 

Socially, it's a huge problem and in terms of what is actually the return on a Treasury bond, which is the way to think about your point about whether or not people should own Treasury bonds or not from a standpoint of, are we defaulting, if you use the conventional metric, which is the interest rate on the Treasury bond minus the inflator; if the inflator is 5%, if you're using that number, and the interest rate on the bond is 0.5%, then yeah, that's a negative return of 4.5%, that's not great.

That's before you think about the fact that if you're an institutional investor, if you're Ray Dalio, say, that's not how you're judged.  You're not judged on whether you outperform inflation; you're judged by whether or not you outperform the stock market.  The stock market is booming because of all those extra Fed dollars flowing in the system; the venture capital market booming because of all those Fed dollars flowing into the system.  So, when you're competing against those asset classes, let alone crypto, to try to figure out how to beat them, holding Treasury bonds becomes less and less appealing, and that's for professional investors.

Think about if you're a government?  Let's say you are Germany, and Germany's a very conservative place, they're probably going to be the last people to try to take on some of these more cutting-edge investment approaches, but they're also very attuned to the problem of inflation.  They have obviously a long history of it, with the Weimar Republic, and they care a lot about -- I mean, it's the country that has done the best in terms of being fiscally responsible, precisely because it's seared into their brain what a tragedy fiscal irresponsibility and fiscal crises and monetary crises can be.

Peter McCormack: And I think the rest of the EU is grateful!

Avik Roy: Right.  I mean if it weren't for Germany, the EU would look very different, that's absolutely right.  But think about that.  If you're Germany, what are you doing right now?  You're basically guaranteeing that your balance sheet, the money that you have in your treasury, is declining in value every month, every year.  The famous analogy of Michael Saylor: it's a melting ice cube, and that just can't go on forever. 

It can go on for a time, where you put up with it, when it's a trickle.  But there comes a point, particularly as more and more countries, if the El Salvador experiment works and that country becomes a wealthy country over time and other countries start to follow and say, "You know what, we're going to put some Bitcoin on our balance sheet", then what happens when they start to see that outperformance over time, over a 10-, 20-, 30-year period?  It becomes this kind of snowball effect.

A way to analogise it, for those of us who are old enough to remember, is when Netflix destroyed Blockbuster, or when Amazon destroyed Barnes & Noble.  So, these big box chains of bookstores, in the case of Barnes & Noble, or video cassette rentals and DVD rentals, in the case of Blockbuster, they didn't fall apart, they didn't go broke overnight when Netflix came on the scene, or when Amazon came on the scene.  It took 10 years.  So, something similar will happen here.  It may not be 10 years, it may be 20 years, I don't know, but it will happen in our lifetimes; I think I'm pretty certain about that.  If you put a gun to my head and made me predict, I'd say within 10 to 20 years.

Peter McCormack: Well, there's two aspects to this: there's the high street banks as we refer to them, there's Lloyds, NatWest, Royal Bank of Scotland in the UK, it's Wells Fargo, Chase, etc, here; but there's also the money itself and central banks, and both are being disrupted at the same time.  We should probably talk about both.  But let's just talk about El Salvador, because you did mention it, if it works.  I would say right now, it's working, and I would say there's three indicators that show me it's working.  So, we have, I think the last time it was reported, 2.1 million have downloaded the Chivo wallet.

Avik Roy: 3 million now.

Peter McCormack: Is it 3 million now?

Avik Roy: I wrote a piece today for Forbes about it.  3 million is the latest number from Bukele.

Peter McCormack: Wow!  I mean, so it's from Bukele, I've obviously interviewed him, but he does work for the government, so we don't know the exact figures.  But even if it's 2 million, and we know, say, 70% of people don't have bank accounts, we're talking about millions of people are now getting access to banking services.  We're seeing the report that more money is being used to buy Bitcoin than to sell Bitcoin now, so we've had the initial dump, whoever wanted to get rid of it.  We have the, is it $2 million a day or a week that's being sent back by remittance?  And also, all the Bitcoin they've bought is now in the green.

So, I would say right now, it's a success.  We don't know in six months, a year, we don't know if there'll be a bear market, we don't know if the price will be stable; that's to be proven.  But even if the price changes, even if the price of Bitcoin drops, and maybe their Bitcoin investment on a certain timescale isn't in the green, all the additional investment, opportunity, money, banking services brought to the country, to me has already proven it's a success.

I think if someone like Hanke only points to the price of Bitcoin, he's missing the actual bigger picture for El Salvador.  They're plugged into an open monetary network, everybody's interested in it, loads of us have been to visit, loads of us have witnessed what's happened.  So, I really think it's a success; it depends on your measures.

Avik Roy: Hanke used to be one of my contributors in the Forbes' policy team.  He's not there anymore, but we tweet each other and various other mediums, so yeah, we have different views on that topic.  I mean, I think what's really interesting is the national affairs article that we've been talking about, I don't mention price really at all in that article, because it's really more about that long-view issue of what happens to the US Government, the Fed and the Treasury bonds.

But what's interesting in the case of El Salvador is, September 2021 was when the law became effective, and that month was not, from a price standpoint, a great month for Bitcoin.  It went from $47,000 to $41,000; and even so, the Chivo wallet was downloaded by 3 million people.  So that, I think, gives you an indicator of the resilience or the robustness of the effort.  And there was a new thing that was announced relatively recently where you're going to get a 20 cent per gallon discount on your gas if you pay through the Chivo wallet, as opposed to the --

Peter McCormack: Really?  Wow!

Avik Roy: Yeah.  So, Chivo negotiated with the gas stations, I don't know if it's the petrol companies directly or the gas stations, but they're going to have a 20 cent discount, because I guess because of middleman fees or whatever, they can pass on some of those savings to the consumer.  So, if you have a car in El Salvador, that's a big deal.  So, the adoption's only going to grow there, and the last sentence of my Forbes article, the most recent one is, "If Bitcoin can work for the poorest Salvadoreans, it can work for everyone", and I think that's what makes the Salvadorean experiment so interesting.

I think a lot about Clayton Christensen, who was this Harvard Business School professor, who came up with this concept of disruptive innovation, and the big contribution intellectually of his was, the way a lot of innovation and disruptive innovation happens, is it starts with the low end of the market.  So, the Japanese car companies come into America, and they start selling these compact cars, that cost $5,000, and the Cadillacs and the Lincolns, the big brands, they're like, "These guys are selling these cheap imports.  We don't want any cheap imports.  That's not where the profit margins are on our business". 

But the Japanese, by perfecting a low-cost, reliable car that doesn't break down, for that lower income worker, they eventually move up the value chain.  Toyota starts building Lexuses and Honda starts building Acuras, and they all of a sudden have basically driven the Detroit companies to bankruptcy.  I grew up outside of Detroit, so I've lived this story.  And that's what I see in El Salvador.  If Bitcoin can prove itself in that market with effectively very affordable transaction fees and all the reliability we know that the Bitcoin Network has, then there's really not much reason why it won't work everywhere.

Peter McCormack: Well, that's a really interesting point, because Bukele was pretty brave to do this.  Whatever he says, it's a brave move to become the first country.  It starts to become common sense for the second and third, but you don't want to be the last, because you miss most of the opportunity.

Avik Roy: It will be too late.

Peter McCormack: It will be too late and you've missed most of the opportunity.  You're doing it out of obligation, rather than opportunity.  I think I've seen Brazil now, I think I've seen, is taking a look; we've had Panama, Cuba, various countries now, Ukraine, so I think the next steps now will be interesting.

So, let's get back to the problem in the US and the role that Bitcoin will play in this, because again it's another interesting thing.  Bitcoin feels like a very American idea for me, and a very Texan idea as well; but it feels like a very American idea.  It's innovation and it protects private property.  But it feels like a very non-US Government idea; it's lack of control.

That said, it hasn't been banned in the US while it has been banned in various other countries throughout the world, and actually we're starting to see a lot of interest from people within Congress, or political figures or mayors or governors, primarily on the Republican side, Senator Lummis, Ted Cruz.  We've seen Warren Davidson up in Ohio, we've just seen Josh Mandel, Mayor Francis.  I mean, it's just a list that keeps growing of people who are in politics, or in Congress, who seem to be interested in Bitcoin.

So, what is the role of Bitcoin in this US fiscal position for you?

Avik Roy: So, this is the heart of the article and the heart of it.  I think, my thinking about Bitcoin all the way through, as I mentioned, the reason I got into it and the reason I hodled through all the ups and downs was because I had that conviction around the fiscal and monetary thesis that we've been discussing.  And that fundamentally is about Bitcoin, not necessarily competing with the US dollar for buying your Starbucks; it can do that too, as you well know.  But the most important thing that Bitcoin can do, and the most important thing that would lead to a completely different economic system, is Bitcoin competing with the Treasury bond for a store of value for institutions and governments, and as a store of value for ordinary Americans as well.

What's interesting is that's not so much the conversation now in Washington.  You think about someone like Janet Yellen, who's now the Treasury Secretary, her view is basically that Bitcoin is this fringe thing that's used by criminals and terrorists and really has no real place in the mainstream economy.  You have a lot of people in the Biden Administration, and it was true of some people in the Trump Administration as well.

The irony of it is, a lot of people in the Bitcoin community thinks that everyone understands that Bitcoin is this threat, this frontal assault on the primacy of the US dollar.  That is not what Washington thinks.  The average person in Washington thinks Bitcoin is worth nothing and it's completely fringe, magic internet money, that basically people are going to lose their shirts on.  It's the Hanke view, right.  So, the irony is that it may be that, at the point at which it's obvious that Bitcoin is a competitor to the Treasury bond, it's too entrenched for the government to ban it.

But there is this midpoint at which there's a lot of uncertainty.  Part of what I'm trying to do, when I walk Washington through a lot of this stuff, is to say, "Look, yes it's true that you should take Bitcoin more seriously.  Bitcoin can be a competitor to the Treasury bond; it already is for a small, but growing number of institutions and governments".  But that's an advantage for the US.  As you said, who knows exactly how much it is, but I say let's just back-of-the-envelope and say that half the crypto wealth in general, and Bitcoin wealth specifically, is held in the United States.  I think that's a realistic estimate.

If that's true, that's half a trillion or so of Bitcoin, and a trillion overall of the crypto industry, and that's just the value of the tokens.  That's not including, say, the stock market value of a Coinbase, or the equity value of a Kraken, or many of the Unchained Capitals of the world; all these companies that are based here and built here that have equity value, that have net worth for Americans.

Peter McCormack: Also, you have the jobs and the associated jobs that they have for people down the line.

Avik Roy: Absolutely.

Peter McCormack: It's like, you talk about the problems with the car industry, but it's not just the automotive car manufacturers, it's the parts suppliers, it's the garages.  There would be a huge impact on the US economy and net wealth by banning this.  It doesn't make sense.

Avik Roy: There's a great example relatively recently, which is that New York State was going to ban Bitcoin mining, because some of the green types were saying, "This is environmentally terrible", and it was the Electrical Workers Union that sent a stern note to the Democrats and the state legislators saying, "These are good jobs, these are good paying jobs.  We want these jobs.  Don't do this to us", and that's how it got stopped.

Peter McCormack: I did not know this; that's fascinating!  I mean, it's a whole other subject, but the relationship between the Bitcoin miners and the energy sector is an area of debate and discussion which is growing fast, especially here, but how the role of Bitcoin mining can play within energy reform is incredible.

Avik Roy: Absolutely.  There is, as I think you are aware, Compass Mining recently entered a new agreement with a nuclear energy start-up here in town, called Oklo, to basically use Bitcoin mining to basically take advantage of the extra energy that these next generation nuclear power plants will generate.  They're called Small Modular Nuclear Reactors.  That's a win/win; it's a win for the nuclear guys and it's a win for Bitcoin.  Obviously, it's a low-cost source of energy if you want to mine Bitcoin.

But one of the challenges with nuclear is, it's very capital intensive upfront, and you have to recoup those costs gradually over time as the electricity charges come in.  And so, having Bitcoin miners as a customer early on, and having that upfront contract, in the case of a Compass, that's a big advantage and it helps accelerate the development of those technologies.

Peter McCormack: Wow!  Okay, sorry, back to the Bitcoin solution.  So, what is the role it should play?  And also, another question on that actually is, if the US is buying half of the treasuries, just imagine if they were also stacking sats?

Avik Roy: Yeah.  You know, there are probably some people who are.  Who knows what the NSA is doing in its spare time, right?  We can't completely rule anything out, especially given how much competence there is in the US Government in cryptography.  But having said that, we know that the Treasury department isn't doing it, we know that the Fed isn't doing it, because for them to do it would require a certain amount of public notice, so we know they're not doing it yet; and that means they're being left behind, in the sense as the value of these other assets grows and grows.

So, the question really becomes, how does the government react?  And unlike, I think, a lot of hardcore anarcho-capitalist bitcoiners, I'm of the view that there are things the government can do to damage the Bitcoin ecosystem.  They can't ban the network obviously.  The network is independent of the US and the network will survive.  Bitcoin, as a network, will survive whatever the US does to it, as China has proven, right? 

But if we want Bitcoin to have the most robust possible network, if we want the value of Bitcoin to represent the possibility of Bitcoin being this global store of value, this global store of wealth, we should want there to be a friendly regulatory climate for Bitcoin; and specifically, the big area where the US Government can either mess things up or make things work, is in Americans' ability to convert US dollars back and forth to Bitcoin.  Right now, that's obviously legal, you can do that, it's somewhat regulated if you do it through regulated exchanges, but it is legal.

If the US were to ever turn that off and say, "No, we're just going to say you can't do that anymore", that would obviously be a problem.  That would be a problem for the Americans who are trying to protect themselves from monetary and price inflation.

Peter McCormack: Do you think there's any appetite to do that really?

Avik Roy: I don't think there is appetite -- I mean, if there's appetite on the far left, I think Elizabeth Warren would be happy to do that.  Another thing that we've heard that was rumoured, I'll just say was a rumour, I can't say it with any more definitiveness than that, but I'll say a well-credentialled rumour, is that one thing the Biden Administration was floating was saying, "If you have capital gains from crypto, we're going to tax it at 80%", which was a technique that the US Government used in the 19th Century to eliminate wildcat banking. 

So, in the time when the Continental US wasn't fully settled, there were no dollar bills, there was not a paper currency at that time, and so local private banks would issue paper notes that could be redeemable for gold.  And like certain stablecoins, at least to hypothesise, those paper notes were not backed by actual gold or hard money.  And so, a lot of people had these paper notes that were worthless.  So, in the late 19th Century, the US Government basically "solved" this problem by saying, "We're going to issue government paper currency and the non-government paper currency, we're going to tax at some punitive percentage", and effectively that wiped out the old private currencies.

Peter McCormack: Is this what Nic Carter wrote about recently?

Avik Roy: Yes, exactly.

Peter McCormack: Yeah, that was a fantastic article.

Avik Roy: Absolutely.  Everyone should read it who hasn't.  So, that's the history that a lot of people in the Democratic party's left look to to say, "Hey, we can do that again.  Whether it's stablecoins or Bitcoin specifically, the way we can wipe it out, we don't have to ban it.  We can just change the tax rate at which cryptocurrency transactions are taxed".  Right now, they're taxed at the normal capital gains rate that you would pay if you had a gain in the stock market, or with your home value.  If you change that to something really unfavourable, then you're going to drive a lot of people out of Bitcoin, for example.

So, all that to say that while we can be very pleased with ourselves and say the Bitcoin Network is resilient and can survive war, it can survive governments banning it, that's true, the network can survive; but in terms of a very important component of what attracts people to Bitcoin, which is the steady appreciation relative to fiat currencies, you can definitely impact that if you're the US Government, and I don't think there's appetite to do that today.  It would take an act of Congress, so the ways in which Congress are dysfunctional today, in that sense, work to crypto's advantage, or Bitcoin's advantage.  But it only takes 50 votes in the Senate and a majority in the House to pass a tax law change.

So, just like with this Infrastructure Bill, where to some people anyway, there was this tax provision that came out of nowhere; it actually didn't come out of nowhere, but to some it did, you can do something like that that was very punitive.  And, yes, the crypto community, the Bitcoin community would yell and call their senator, but would that be enough?  With the Infrastructure Bill, it hasn't been enough.  So, there's danger.

Peter McCormack: That would be a federal tax?

Avik Roy: It could be a state tax, but yeah, it would really have to be federal, because if New York were dumb enough to do that, then everyone would just move to Texas or Florida or Tennessee.  So, it would have to be federal.

Peter McCormack: And, how much recourse does, say, the state of Texas have to oppose such a federal tax; because it feels like that would be a very bad policy change for what's happening here in Texas?  Texas is becoming the Bitcoin capital of the world, not just the US.

Avik Roy: I thought it was Bedford?!  You're changing your tune; are they going to let you back in the country?

Peter McCormack: Well, I think we're about even now!  We've got nothing in the UK; it's terrible.  But is there any recourse?

Avik Roy: The short answer is no.  The recourse is, you'd have to leave the country.  And it's actually harder than that, because the US has this really cute law where, if you're an American citizen and you leave the country, they tax you as if you were a US citizen.  So, corporations can leave, at least under current tax law; they're trying to change that too.  But individuals cannot.

So, that's a real danger and I think that's why there's the bear case for Bitcoin from an investment standpoint that you hear some people say which is, "Oh, they're just going to ban it some day if it ever gets too big for its britches".  I don't think that will happen in terms of a true formal ban.  But there are plenty of things short of a ban that the US Government could do that could drive the crypto economy here, and the Bitcoin economy here, overseas.

Peter McCormack: The Elizabeth Warren situation is really disappointing, and I feel like she needs to have a seat at the table with the right audience.  I feel like she's obviously been sitting with the wrong people and been misled.  And the reason it's quite disappointing is, I did a whole bunch of research for a series I made about Steve Mnuchin previously, and actually I spent a lot of time watching her interrogations of Steve Mnuchin, then follow-up things in Congress, where she was talking about Wall Street having essentially an arm of government. 

Do you know what, she really stood up for the people, she really stood up against Mnuchin and what he did with, is it OneWest Bank?  She was very critical of that; she was very critical of what happened in 2008.  I just feel she's just not been explained what Bitcoin really is and what it really means for the people I think she's thinking about.  So, I feel if she had the right audience, she would become very pro-Bitcoin.

Avik Roy: Well, I'm less optimistic about that in the near- to mid-term, and the reason is that the way somebody like Elizabeth Warren looks at Bitcoin today is, there are a lot of people who have made a lot of money out of Bitcoin who haven't paid the taxes they've owed; that's something that will offend her.  There's a lot of incredible wealth that's been generated by people who were early in crypto, and she's someone who doesn't like wealth inequality. 

So, those are the things that she sees that kind of dominate her perspective.  And also, the volatility, which means in her mind that ordinary people will be left holding the bag.  If they've got an account on Binance and they've had 100X leverage and they get screwed, then that's terrible and we shouldn't allow that.  We shouldn't allow people to harm themselves by taking on risky investment strategies like that.  So, she will take those elements of the story and prioritise those over the things that you're hoping that she'll care about which is, "Hey, this is a way to disrupt the big banks, this is a way to democratise finance", which I totally agree with; that's absolutely true.

Peter McCormack: And reduce inequality.

Avik Roy: And reduce inequality, exactly, and protect people from inflation.  All those things are true, but those other factors are going to be prime on her mind today.  I do think that as time goes on and the tax question becomes a little bit more mature, where people are paying their taxes to a large degree, just like they do on the stock market, or the venture capital market, when they make lots of money, then people will start to see it as that.

That's, in a sense, the bull case for Bitcoin, in that as the tax revenue starts to come into the federal government, they won't want to ban it for the same reason why Austin doesn't want large companies to leave Austin, and New York doesn't want Goldman Sachs to leave New York City, or the New York Stock Exchange to move to Miami.  They don't want that, because that tax revenue, those jobs, are valuable to their ability to fund the government, let alone to have a prosperous economy for their people.

So, I think as that becomes more visible, and that becomes a larger share of the US economy, then you have more of a case to make than, "Hey, this is something you should be constructive on and understand its economic value".

Peter McCormack: All right.  Well, listen, we've got one other subject to talk about: CBDCs.

Avik Roy: Oh, yeah, baby!

Peter McCormack: Oh, man!  These things scare me, CBDCs scare me, because all I can think of is the Fed running the currency and this becoming attached to a Social Credit Score.  Social Credit Score is this distant thing in China, which is an authoritarian state, which it now is one of the leaders in pushing forward with CBDC tech; so, the idea of just having your money connected to a Social Credit Score is the dystopian future that none of us really want.  But it doesn't seem as far away from Western nations as well now.

Rogan's been talking about the fact that having vaccine passports essentially is the first step to a Social Credit Score.  You can arbitrarily be cut off from parts of society if you choose not to take a vaccine.  I'm vaccinated, I'm not anti-vaccines; I understand why people are hesitant, but I believe in free choice and I believe in private companies having the choice who can come into their business, but I do not like the idea of what's happening, say, in places like Australia and Canada, where people are being cut off from society, because this isn't a risk-free vaccine, but it's being treated like everyone should take it.

So, I'm in that position where I'm worried about CBDCs anyway.  I don't want to give full control of my money to the government, I don't want my app to be telling me what I can have when I can have it; I just don't like that.  That connected to where certain government policy seems to be going adds an extra layer of fear for me.  So, there's my thoughts.

Avik Roy: Well, I should mention, as a side note, that at my think tank, at the Foundation for Research on Equal Opportunity, we did a lot of work on why lockdowns were the wrong answer to COVID; we've done a ton of work on that.

Peter McCormack: Okay, interesting.

Avik Roy: When you start doing your non-Bitcoin podcast, we can talk about that.

Peter McCormack: Listen, we can talk about that anyway.  I mean, what's the TLDR on that, because when we had the first lockdown, there was a lot of information that was coming in.  It was people collapsing and dying in China, which I really want to know what that was about now, but also there was a very serious situation in Italy, and we're very close to Italy.  So, I was a bit like, when the lockdowns happened, I said to my kids, "This is something we're just going to have to put up with.  We have to protect the hospitals, etc".  Then I very quickly realised it was nonsense and bullshit.  What was your TLDR?

Avik Roy: That's part one of it, which was we saw the pictures out of Italy, the hospitals getting overwhelmed.  It was starting to happen in New York City; there was worry that we were going to have hospitals overwhelmed in New York City.  So, those first couple of weeks where we locked down, you could understand.  We didn't know what was going on, "Let's just take a pause for a minute".

But then, there was actually one of our competitor rival think tanks that put out a paper, that's normally pro-free market, pro-choice, saying, "Well, we've got to lock down the economy for a few months here, just a few months, and then we'll have these cures.  The drug companies will generate these cures for COVID and then we'll be fine, then we can lift up the curtains and everyone can go back to work".  I'm looking at that as someone who spent 12 years investing in start-up biotech companies and pharmaceutical companies, understanding what the timeline is for developing new treatments, new cures, and how hard it is and how uncertain it is and how risky it is. 

I'm like, "That is insane".  It takes months, if not years, to develop new treatments.  You're not going to have new treatments in a matter of weeks.  The average small business has about a month's worth of cash on its balance sheet.  You lock them down for a month with no opportunity to get revenue, they're going belly-up.  And we solved that problem by printing the trillions of dollars and handing it to lots of people, so we at least kept many of those businesses afloat.

Peter McCormack: Deferred the problem.

Avik Roy: Deferred the problem, that's the right way to put it, yeah!

Peter McCormack: I was in New York recently and I think a lot of these restaurants are going to be going bust.  The only restaurants I was in that were full were top end.  The regular restaurants in the middle ground, many of them were half empty.  And someone made me realise recently, I don't know if this is correct, but they're just about to end the rent protection for companies within New York as well, so the view was many of these restaurants are now insolvent as well.

Avik Roy: It's a problem.  It's going to lead to more consolidation, more concentration of economic power, which is a huge problem.  So, the economic damage was being undersold by those who favoured lockdowns, was part of our argument; and the other part of our argument was that we knew enough in April 2020 about COVID to know that we didn't have to lock down the entire economy.  We knew that outdoor transmission was very, very low, it was mostly indoor transmission; and we also knew that disproportionately, it was the elderly, and particularly the elderly in nursing homes and long-term care facilities and care homes, as you call them in Europe, where the deaths were happening.

In the US, we were the first people to do this analysis.  No one had actually bothered to do it before.  40% to 50%, depending on the exact timepoint, 40% to 50% of the deaths from COVID in the United States were taking place in nursing homes and long-term care facilities that housed 0.6% of the US population.  So, we were locking down the country, going to panic, closing schools where kids were at almost zero risk of serious illness or death from COVID, we were closing schools, which is incredibly damaging to those individuals to their communities, but we're not doing anything to solve the problem in nursing homes, where people really are at risk of dying.

So, a big part of our argument was, if you actually look at the scientific evidence as to where the real public health risk is, let's be very aggressive in protecting people in nursing homes, but let's keep schools open, let's try to figure out ways to keep every type of business open that can operate safely, not merely the so-called essential businesses.  I mean, define essential business?  Well, you're a grocery store, you're essential; if you're a carwash, you're not essential.  But what if you're one of those robotic carwashes where you just drive through and it's all automated; you can operate that safely; you don't have to lock that down.

That was the kind of stupidity we were trying to get over and say, "Look, there's actually a lot of things we can do to reopen society and reopen the economy and, yes, let's respect that the virus is dangerous for certain populations and be careful in those settings, but let's be case-by-case about it".  Texas adopted that approach, which we were grateful for, as did Florida and some other states, and that's where the non-federal element of our system was really valuable.  If we'd have had a one-size-fits-all federal approach, which a lot of people were pushing for, we wouldn't have had the opportunity to get those recommendations and those ideas to different states.

So, we made an impact to a degree, but not everywhere obviously with those ideas.

Peter McCormack: Well, at least you had that impact, and it's been very clear for me, travelling back round the US, where I've been to Ohio and Miami and Texas and Tennessee and New York, and I'm going to be going to Vegas, I'm seeing it all.

Avik Roy: Seeing the diversity, yeah.

Peter McCormack: Yeah, I'm seeing the diversity of it.  And for me, it's been very clear that Texas and Miami and Tennessee have got it right.

Avik Roy: Right, absolutely.  People aren't dying here at a significantly faster rate than anywhere else, and we've had a much more rational approach.

Peter McCormack: I'm not sure that's entirely true.  I would want to double-check that, because I did have a look at the death rates, and I think in Florida, there was one point that Florida might have been one in four; I can't remember though, but I don't think that's exactly correct.

Avik Roy: Well, I'm painting with a broad brush.  If you want to get really precise about the stats?

Peter McCormack: Yeah.

Avik Roy: So, in 2020, let's say pre-vaccine is 2020 and post-availability of vaccines is 2021.  In 2020, the death rates, say, between California, Florida and Texas were roughly the same.

Peter McCormack: Yeah, I agree.

Avik Roy: Even though California locked down heavily, Texas and Florida were much more light touch.  In 2021, the death rates in Texas and Florida have been a little higher than in California and the reason for that, there's a lot more vaccine hesitancy in Texas and Florida, where the vaccination rate in California's higher.

Peter McCormack: Okay.

Avik Roy: So, in 2021, the death rates are more driven by the vaccine rates, vaccination rates; in 2020, they were independent of lockdown strategies.

Peter McCormack: It's kind of ironic really, because you kind of want the mix of the two.  I know some people will be upset by this, but you want to be as open as possible, and you want as many people who should get vaccinated; that's the good combination.  What you've got is, you've got this mixed picture where the people who are locking down the most in California are also the most protected, so should be the most open.

Avik Roy: That is the paradox.  And the CDC, the Centres for Disease Control and Prevention, have been a part of the problem, where they've said, "If you get the vaccine, you should still wear two masks when you're outdoors", or combining Fauci and CDC guidance, "2-year-olds should wear masks in school".  It's just stuff like that is absolutely just not scientific, makes no sense and leads people to mistrust public health authorities when they say things that are actually true like, "The vaccines are safe and effective and you should get one".

That undermining of public health authority and public health trust has been a big problem here and again, we could spend lots of time on that if we wanted to, but we should talk about CBDCs.

Peter McCormack: We'll come back to that.  I want to go away and do a bit of research and come back with just better knowledge, better facts to do that, but I think that would be a fascinating subject to come into again.  Let's talk about CBDCs.

Avik Roy: Yeah.  So, one of the things that's interesting about CBDCs, and I was thinking about this as you were giving your introductory comments there, the crypto community has been curiously pro-CBDCs.  If you read the press coverage --

Peter McCormack: You think?

Avik Roy: So, I'll explain what I mean when I say this.  When I read the press coverage of CBDCs, a lot of it has the tone of, "Isn't it cool that the Federal Reserve is embracing the blockchain?  Isn't it cool that even Janet Yellen is talking about CBDCs and J Powell, these people who we think of as totally distant from and removed from crypto and blockchain technology; they like CBDCs?"  And you hear another group of people say, "Well, you know, I don't care about CBDCs, but they're inevitable, they're going to happen here, we should just get used to it".  You hear this a lot from, say, the venture capital community.

Peter McCormack: Well, forget the venture capital community, where are you reading the pro that they're into blockchain, because it's definitely not in my circles?

Avik Roy: Well, I'm glad to hear that, and that may be because you're a Bitcoin-centric guy, as I am, but when you read the broader crypto press, where maybe there's a more friendliness to things outside of Bitcoin, the view is, "Oh, isn't it so cool that this rebel, non-mainstream technology that we have all embraced and we're on the early side of is now being embraced by the establishment; isn't that cool, that it validates us as the cypher punks?"

Peter McCormack: Right.

Avik Roy: I've been just like, that makes absolutely no sense, because CBDCs are tools of totalitarianism.

Peter McCormack: Of course.  Do you know what, I put that on Facebook the other day, I broke this piece on Facebook, because I'm always trying to just share bits of knowledge with friends and family.  I think most of them find me annoying and they think I'm just some weird Bitcoin guy, but every now and again, one person gets in touch and says, "Do you know what, tell me a bit more about Bitcoin".

But I put a thing on there about CBDCs and I said they're tyranny.  One of my mum and dad's best friends blocked me!  She said, "I've had enough of this now, I'm blocking you"!

Avik Roy: You sound a little bit like you're foaming at the mouth if you use words like "totalitarianism" to describe this acronym that most people don't even know what it is, right.  So, I'm mindful of that, as someone who spends a lot of time talking to people in Washington.  And I can tell you, when I talk to very senior people in the government, who are actively thinking about this topic, they're, "Oh, yeah, CBDCs.  This makes a lot of sense.  It's a way of improving the settlement time for US dollars.  The wire transfer system is so slow and if we had a CBDC, we could do all this stuff more efficiently and it's just the way of the world.  We're using fintech to make the US dollar better.  And, boy, we wouldn't want the eCNY, the CBDC for China, to take market share from the dollar, so we've got to keep up with them and have our own version".

So, these are the things that people are saying in Washington; they're not saying what you're saying, or I'm saying.

Peter McCormack: Well, if they're managed by people with good intentions who you could trust; but the reason we have Bitcoin is you can't trust humans and money.

Avik Roy: Well, one thing that is very helpful to those of us who don't want to sound like we're crazy, even if we might have our own eccentricities over time; not sounding like you're crazy is actually important when you're dealing with Washington, because if they think you're crazy, they're just not going to listen to you. 

So, one thing that was really helpful that happened recently is that President Biden nominated, as the Head of the Office of the Comptroller of the Currency, the job that Brian Brooks had in the Trump Administration, a woman named, I'm blanking on her first name, it's Saule Omarova.  Saule Omarova is a Cornell law professor, who once wrote, just a year or two ago, a 60-page paper entitled The People's Ledger.

Peter McCormack: Was it about Bitcoin?!

Avik Roy: It was about CBDCs.

Peter McCormack: I'm making a joke --

Avik Roy: Oh, yeah, sorry!

Peter McCormack: -- because Bitcoin is the people's ledger!

Avik Roy: So, yes.  Well, her view is, and she uses the term "people's" in the way that we talk about the People's Republic of China people's, she is a graduate of Moscow State University, back when it was part of the Soviet Union.

Peter McCormack: Great, she's a Communist!

Avik Roy: So, she literally wrote this paper saying, "The virtue of a CBDC is that we can use it to wipe out the private banking system.  One doesn't need a private place to deposit, to have a checking account or a savings account if you have a CBDC run by the Federal Reserve, because everyone would have their bank account at the Fed.  That would enable the Fed to deposit money in your account if they wanted to, or take money out of your account if they wanted to".

Peter McCormack: Which sounds like a big step towards communism, well certainly socialism.

Avik Roy: Yeah, I mean if people in the US don't like single payer healthcare or state-run healthcare British style, well wait until you have a British style banking system; I mean, not British style, but --

Peter McCormack: I know what you mean.

Avik Roy: -- where you have an NHS, but it's the banking system.

Peter McCormack: Yeah, it sounds horrendous.

Avik Roy: And, she talks about this as a good thing.  She's like, "Well, if we had a CBDC, we could take money into your account, we could take money out, we could short stocks that we thought were overvalued, we could use the money to invest in green infrastructure", which is Congress's job, not the Federal Reserve's job.  But because, of course, the Fed can print money, imagine if you basically didn't need Congress anymore, the Fed controlled the dollar, could print another trillion dollars to spend on whatever it wanted; that's the world that she's envisaging, and that's the world that a CBDC would enable.

Now, when I talk to people in Washington, I was just there last week, walking them through these problems, some of them would say, "Well, we don't have to have a CBDC like that, we could have basically a CBDC lite, where it's only a way for banks and the Fed to interact with each other.  It's just a fancier version of Fedwire, the wire transfer system that the Federal Reserve uses, and it's restricted from any sort of interfacing with average people".

Peter McCormack: Sure.

Avik Roy: Yeah, I mean once you actually go through the trouble of creating a CBDC, which is actually the hard part, it's very easy to just flip a switch and say, "We're going to use these for a lot of these broader and more ambitious purposes that it isn't used for now". 

So, one thing that I'm spending a lot of time on in my writing, in my policy work, is this topic, because people just aren't aware, particularly in Washington, and I think some in the crypto community, some very significant figures in the crypto community, are not aware of how dangerous it would be if the Federal Reserve controlled every bank account in America; not only what money was in it and what money was not in it, but they could have visibility in every single one of your financial transactions, they could turn you off if they wanted to.

Peter McCormack: Automatically fine you.

Avik Roy: Yeah.  I mean, one of the points I make in an article that is coming out very soon on this topic is, when China shut down Apple Daily, the pro-democracy newspaper in Hong Kong, they didn't do it by formally censoring the publication; they jailed a number of the executives, including the publisher, Jimmy Lai.  That didn't stop them from publishing.  They were publishing while he was in jail.  The thing that they eventually were able to do to shut down Apple Daily was to turn off their bank accounts.

Peter McCormack: It's like what they did with WikiLeaks.

Avik Roy: Right.  The difference was there, with WikiLeaks, they were able to get Bitcoin.

Peter McCormack: They got Bitcoin, yeah.

Avik Roy: But that was now unavailable to Apple Daily, because Bitcoin's banned in China.  So, they can't pay their journalists, they can't pay their suppliers, they can't pay their printers, and that's how they shut down Apple Daily.  So, we do not want the government to have that level of control.  It's particularly bad for lower income and average people.

You think about the cyber security problem we have in America today, where so many things that should be protected private information, are basically hacked out of government databases.  Now, you're going to say that the federal government, with its competence in those areas, is now going to have a record of every single financial transaction of every American?  It's just a sitting duck for some smart Russian or Chinese hacker to basically download all that information. 

It's absolutely insane, and there are a couple of people within the Federal Reserve system who've made some of these points, who've said, "Look, you're creating --" the title of one talk by a Fed governor, who's against CBDCs was, "It's a solution in search of a problem".  There are already things off the shelf.  We can make better stablecoins that are backed by cash, or backed by hard assets, that can serve the same purposes of CBDCs if your sole goal is to have faster and more efficient transactions.  We can do that today; we can do that on the Lightning Network.  There are lots of tools that we have to have fast, low-cost efficient transactions.  We don't need a central bank digital currency for this.

If you are a believer in decentralised financial technology, the word "central" in central bank digital currencies should be a problem for you.

Peter McCormack: Well, there's another big concern there as well.  We only saw last week where the entire Facebook infrastructure went down, and I think that cost them $100 million, or it was $100 million an hour or something.  Whatever it did, it cost Facebook a lot of money because of their mistake within the infrastructure.  We actually have competing payment rails at the moment. 

So, the banks tend to have problems here.  Lloyds Bank might go down at some point, but I've usually got cash, or I've usually got a credit card, like an Amex.  I've got competing access to pounds that I can use whenever something breaks down.  I also have Bitcoin now.  If you give control of the entire financial rails to the US Government, you create a central point of attack for if the financial rails break.

Imagine the CBDC US dollar blockchain, it goes down like Solana went down, or like Ethereum went down.  The entire country would grind to a halt; you wouldn't be able to do anything.  So that, to me, is a big fear.  And also, look, I don't like the banks, but I need banking services, and what I want is competition within banks.  I don't want a high street bank anymore, because they're annoying; I want a neobank.  But I want banking services.

I'm very fearful of CBDCs and the fact that China loves them so much is a good indicator for me that they're fucking terrible!

Avik Roy: Yeah, the fact that China is the world leader in CBDCs should tell you something.  It should tell you who understands what the advantage is and virtues, or value of CBDC is.  The virtue of it is, and I'm using the word "virtue" in its broadest sense, is that it allows you complete surveillance and control into people's financial lives.

This is why it has to be raised now, because you and I understand this, but J Powell, when you ask him what the pros or cons are of CBDCs, "This is great.  If we had a CBDC, we wouldn't need crypto.  We wouldn't need Bitcoin if we had a CBDC".  It's actually the exact opposite!  If you have a CBDC, more people will want to use Bitcoin, because they'll want that guarantee of privacy and resilience.  So, that just tells you the level of education for very senior and influential and impactful people in our financial system, who just don't understand yet these problems. 

Now, the good news is, there's supposed to be this big report from the Federal Reserve that was supposed to come in September.  It didn't, but it's going to come out at some point, where they ruminate on CBDCs and their value.  And, my hope is that some of this feedback will start to filter into that report, and they'll acknowledge that there are risks as well as -- whatever the rewards are, they're totally overwhelmed by the risks and that we won't see a CBDC.

But I think more people who understand the virtue of Bitcoin need to vocalise that point, right, because I feel like it's been very, very quiet.  The Bitcoin community has not come out as a community and said, "CBDCs are a threat to our freedom"; that has not happened, for sure.  And I think it's because for whatever reason, it's just not been on people's radar.  It is absolutely top of mind in Washington and it's something that people really need to start bringing the fight to.

Peter McCormack: I think that's a really good point.  And, Rishi Sunak, the equivalent of the Treasury Secretary in the UK, the Chancellor of the Exchequer I think he is, am I right in that?  I'll have to double-check that, but he has come out in support of CBDCs, and he annoyingly wanted to call it Britcoin, which I thought was fucking embarrassing.  But listen, look, I completely agree with you, it's a complete threat against our freedoms.  Avik, I've loved this; this is great, man.  We're going to have to definitely do this again.

Avik Roy: We've covered a lot of ground.

Peter McCormack: We've covered a lot of ground, man.  We probably could have done a lot more.  I would love to have got into some of the COVID stuff with you, but I'll come back and talk to you about that at some point, because I'm always evolving my understanding of what it is and response by governments and pharmaceuticals.  But I also just loved talking to you about the healthcare industry, as I really want to see that report on Switzerland and find out what they're doing.

But, yeah, loved this.  Thank you.  We should definitely do this again.  Probably every time I come to Austin, I'm going to be, "Yeah, can we do something else?" so, thank you for your hospitality, and thanks for coming on.

Avik Roy: It's my pleasure, Peter.  You're like the Anthony Bourdain of our community.

Peter McCormack: Oh, shut up!

Avik Roy: It's just great.  I've been a long-time listener, so it's an honour to be here with you.

Peter McCormack: That's praise which is too high, because I'm a big fan of Anthony Bourdain, but I do appreciate this.  If people want to follow what you're doing, if they want to see any of the work you're working on, where can they do that?

Avik Roy: The best place to find most of it is probably to follow me on Twitter @Avik, just my first name, and our think thank is FREOPP.org, it's the Foundation for Research on Equal Opportunity.

Peter McCormack: Okay, mate, amazing.  We'll put that all in the show notes.  Appreciate your time and, yeah, we'll do it again some time.

Avik Roy: Thanks, Peter.