WBD418 Audio Transcription

Fix the Money Fix The World with Lawrence Lepard

Interview date: Tuesday 2nd November

Note: the following is a transcription of my interview with Lawrence Lepard. 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 Investment Manager and Austrian Economist Lawrence Lepard. We discuss sound money as a moral issue, the monetary role of gold, and why bitcoin is the most important invention in history.

“I think it’s over… it’s changed, we are now in an inflationary environment, get used to it, get ready for it, prepare for it, protect yourself against it.”

— Lawrence Lepard

Interview Transcription

Peter McCormack: Morning, Larry.

Lawrence Lepard: Good morning, Peter, very nice to be with you.

Peter McCormack: Yeah, nice to be with you.  A few days ago I was with Marty Bent.

Lawrence Lepard: Yes, good friend.

Peter McCormack: Yeah, he told me about a report you'd written, said I had to read it, which I did.  Then I reached out to Marty said, "Are you doing the interview?"  He said, "Yes", I said, "Well, okay, I'll go after you, but I definitely want to talk to Larry.  I've got a lot I want to talk to Larry about".

Lawrence Lepard: I appreciate that, thank you.

Peter McCormack: You know my show.

Lawrence Lepard: I sure do.

Peter McCormack: I like to keep things simple, I think you come with a lot of expertise and a lot of interesting things that people like to hear about, but shall we do a bit of a background?

Lawrence Lepard: Sure, I don't know how deep or how far back you want to go, but I grew up in the Midwest, went to college and studied economics.  Went to Wall Street for a couple of years, saw what that was all about.  Got an MBA and entered the investment business in the early 1980s and really have been an investor my entire career, that's what I focused on.  I think my highest and best use is kind of figuring things out, I like that.  I'm analytical, I like to study stuff.

It was a very interesting time.  I started in the venture capital business in technology, I mean Apple II was out when I was in college or just after college and then in business school the IBM PC came out.  It was $5,000 and had 20 kilobits of memory.  Mitch Kapor came to my business school class and showed us Lotus 1-2-3 and I thought, "Wow, that would just totally change everything I've been doing for the last two years", because I was doing it all by hand. 

So, I was an investor in technology companies from the early 1980s until really 2004, with venture capital.  I saw disc drives and computers and graphic chips and you name it, semiconductors the whole nine yards and that was what I did.  Then in 1993, I was very fortunate, a guy gave me a business card with an internet or something, I said, "What's that?"  He said, "This is my internet company", sent all the material there.  I went back to my office and got all my guys and go, "This internet thing could be big.  We've got to figure out what this is".

Peter McCormack: Yeah.

Lawrence Lepard: Right, so we just went and bought as many private internet companies as we could, and some were no good but many of them were good and it worked out great.  Of course, by the end of it all in 2000, my partner and I were sitting there and we were looking at the market and we thought, "This is the most insane bubble we've ever seen", we're selling everything we could.  We knew the internet was real, but a lot of these companies weren't.  We said, "Are we the only two guys in the world left who believe that a company is worth its discounted future cashflows", and by the way this reminds me of a lot of the market today.

We decided to retire for a variety of reasons, we had a fund raised, a $400 million fund; we gave it back and I retired.  So, I started managing my own money, moved from New York to Boston area and I was just kind of cruising along buying growth and reasonable priced companies.  What happened is the GFC happened and that was like a wake-up call for this guy.

Peter McCormack: GFC?

Lawrence Lepard: Global Financial Crisis.

Peter McCormack: Okay, 2008, yeah.

Lawrence Lepard: So, 2008 the housing bubble burst and boy did that shock me.  At that point I thought, "I'm in pretty good shape here.  I'm coaching my kids' teams and got a nice lifestyle managing my own money".  Then I realised, I'm going to run out of money because there's going to be a ton of inflation given what the government decided to do.

That caused me to pivot massively into things that I thought would protect me from inflation, which I still think is the problem of our era, becoming more of a problem as we speak.  So, I started investing in gold and silver mining companies and gold and silver bullion, which I always held and that fits into another part of my life which is my grandfather was a sound money guy, and I've always been a sound money guy.  He thought what Roosevelt did, confiscating the gold, was wrong and I agreed and he gave me a bunch of gold coins when he passed.  So, my belief in sound money is pretty strong, as I know you know because you've read my material.

Peter McCormack: Yeah, I have.

Lawrence Lepard: That's kind of the background.  As the time has gone by, I've watched with interest as every step has taken place, the Federal Reserve and so on and so forth and we can go a lot of directions, so I look to you for a little direction on where you want to go next.

Peter McCormack: There is so much to unpack there, just so you understand my background, I was financially illiterate until -- I still kind of am in some ways.

Lawrence Lepard: I doubt that.

Peter McCormack: Until my 30s, I had no real pension, no real savings.  It was only really when I discovered Bitcoin that I really started to think about money and the future and savings.  I always felt like I would create a business that would give me a retirement.  I got divorced and lost that business and I was in a position where I was two weeks from losing from house.

Lawrence Lepard: Oh my.

Peter McCormack: Yeah, I know, but I started the podcast, I started to stack Bitcoin, so I leapfrogged from somebody who didn't understand any of this to having to think about savings and Bitcoin and got introduced to sound money and Austrian economics, which is still relatively new to me, but has kind of saved my retirement in some ways.

Lawrence Lepard: Indeed and relit you career.  I mean you leapfrogged to the right lily pad.

Peter McCormack: A lot of luck.

Lawrence Lepard: Yeah, I don't know how you found it, but boy you grabbed the right one, because you're sitting on top of the most asymmetric trade in history.

Peter McCormack: Yeah, but there was a lot of luck involved with that, Larry.  I mean at the time, my company had collapsed, I worked in advertising and I just didn't go to work for a year after my divorce.

Lawrence Lepard: How did you hear about Bitcoin, I'm curious?

Peter McCormack: I heard about it in 2013, because I used to take drugs and there was a website called the Silk Road.

Lawrence Lepard: Yeah, I know it well.

Peter McCormack: A friend came round my house, and he phoned me up and he said, "Yeah, there's a website you can buy drugs on with Bitcoin".  I was like, "What are you on about?"  He came over and he showed me and I bought my first Bitcoin for £80.

Lawrence Lepard: Nice.

Peter McCormack: Yeah, spent it straight away on the Silk Road and that's all I did.  I never actually looked at Bitcoin at the time.

Lawrence Lepard: Interesting.

Peter McCormack: I did some trading and made and lost money and Bitcoin hit like $1,200 back then and then crashed and then I just ignored it.  And then what happened was, it would have been my mum's birthday yesterday, she died a few years ago from cancer.

Lawrence Lepard: Sorry.

Peter McCormack: No, it's fine, but she in some ways restarted this, because when she was suffering we wanted to get cannabis oil to treat her.  My dad was like, "How do we do this?"  I was like, "Remember I had that problem back in 2013 with drugs, well let me tell you about Bitcoin".  So, what happened was we bought some Bitcoin on Coinbase and I saw this other thing, Ethereum.  We bought the treatment and because I was out of work and didn't know what to do I had a little bit of money left over, I just bought some Bitcoin and a bunch of crypto stuff, which I've got rid of now.

Lawrence Lepard: Sure.

Peter McCormack: It's a really long journey, but I ended up on a yoga retreat because I was suffering with chronic anxiety and panic attacks and this guy called Rich Roll had a podcast and I just said to him, "I like your life.  How do you do this?"  And, 17 November, I think it's four years ago, I released my first show and here we are now.

Lawrence Lepard: Here you are, yes.

Peter McCormack: There's a lot of luck.

Lawrence Lepard: One of the biggest podcasts if not the biggest out there, yeah.

Peter McCormack: Hard work and luck, I just think it's hard work and luck.

Lawrence Lepard: Yes, it is great, yeah, well you landed on a good lily pad.

Peter McCormack: I did.  I feel very fortunate and the great thing is I don't have to listen to podcasts, I get to have the conversations direct and ask the questions I want.  I get to speak to people like you, who make these incredible reports.  There's a lot to unpack, I think the history is an interesting part, covering the history of what's happened, specifically in the US, because you're an anti-federalist.

Lawrence Lepard: Yeah, I am, pretty much so.  Let's talk about sound money and how we've devolved and we're all good.  Just a basic premise, sound money in my opinion is a moral issue and the reason is, and this has been known for some time, I mean they said it in the Bible, "Honest weights and measures".  Lots of people have tried to fool with money over time and there have been hundreds of hyperinflations as a result of printing money and unsound money.

As an example, the Founding Fathers of the US knew about the risks of unsound money, because they had the collapse of the Continental during the Revolution, they tried to fund the Revolutionary War with Continental and they printed too many and they collapsed.  So, in 1789, when they wrote the Constitution, obviously they specified that only gold and silver could be sound money.  That's in the Constitution and yet, look around what's going on.  It's not exactly being applied, is it, right.

Peter McCormack: No.

Lawrence Lepard: From that period of time until 1913 when the Fed was founded, created I should say, the country actually did pretty well.  We were on a gold and silver standard and kind of quasi-both and there were some issues back and forth about the weighting of the two, but the point is that in general the money was sound, so that things which cost a certain amount of money in 1800 cost the same amount in 1880.  There was a time when there was a small amount of inflation, and there was a big presidential campaign that was run on, "What this country needs is a good 20-cent cigar", because that's what it used to cost before the inflation.

During that period of time, the improvement in lifestyles and the common man did incredibly well.  There's never been, in the history of humankind, such a big period of overall wealth in creation.  People crawled out of poverty lifestyles, average life span increased, wealth increased, just the standard of living.  In the beginning, the poorest people in 1900 were living better than some of the richer people in 1789, and that was all in an environment of sound money.  Were there some panics and so forth?  Yes, and those are what the Keynesians used as an excuse for unsound money, but it's nonsense, it's sophistry.

Around 1913 obviously, a bunch of money interests got together, and by the way there were some battles back then too.  I mean there was the federalist, the anti-federalist, Hamilton wanted a central bank and Jackson threw out the second central bank.  It has been a contested issue for a long time, but in general during that time period we were on sound money.  So, the Fed comes along and gets created and the creature from Jekyll Island, fabulous book.

Peter McCormack: Read the book.

Lawrence Lepard: I am sure you are familiar with, right.

Peter McCormack: Yeah.

Lawrence Lepard: They got control of the money.  The powerful, rich people in this country got control of the money supply with the Fed, by creating the Fed.  They said, "It's only going to be there to prevent panics.  We're just going to discount bills as necessary at a high rate of interest and then we'll unwind what we've done".  All those things are untrue.

It didn't take them but a few years and they started financing World War I and then they created a bubble in the 1920s, an enormous bubble obviously, which led to the Depression.  When that burst, when the stock market bubble in the 1920s burst, it led to the Depression; the pain was immense.  It's what Bernanke wrote his wrote his whole college thesis on, and his PhD thesis on; of course he got it wrong.  Nobody believes that, because he's an expert on the Great Depression and today he, whatever.

Peter McCormack: Was that when the FDIC was established?

Lawrence Lepard: The FDIC I think came later, as I understand it.  That might have part of SEC and the Securities Law.  I don't know the history of the SEC or the FDIC that well, I think it might have been on the same timeframe.  I know the SEC and a lot of the reforms that took place coming out of the Depression were good.  I mean, Glass-Steagall separating bank, and we'll come to that in a minute, that was a very important law.  It said the banks shouldn't be gambling with shareholder money, if the banks are backed up by the Fed.

Peter McCormack: They literally wanted to get rid of it, didn't they?

Lawrence Lepard: It was long gone when Mnuchin was there, the people got rid of it.  Larry Summers, Robert Rubin and that crew are the guys who got rid of it.

Peter McCormack: Right, okay.  I seem to remember Mnuchin debating Elizabeth Warren on Glass-Steagall, but I can't remember the details.

Lawrence Lepard: That's very possible.  My guess is Warren might have wanted to bring it back.  There's not much of what she says that I agree with, but her point about the banks having an unfair business model, I do agree with.

Having said that, the Fed rolled forward and they did a lot of things.  I mean, they confiscated the gold in 1933, then they repriced it right after that, so that was a 70% devaluation.  By the way that sovereign debt crisis, which is really what that was coming out of the Depression, that's what we're going through again.  The reason why I think a lot of people today don't really understand the environment we're in and the investing climate we're in and what to do in this investing climate, is that everyone who lived through the last one is dead.  None of us were around in the 1920s and 1930s.

Peter McCormack: No.

Lawrence Lepard: So, you have to read the history books to see what's happening, but this is chapter and verse the same kind of thing going on.  Let's keep rolling forward, the Fed goes on and they helped finance World War II and we had a very compliant population who bought war bonds, and they were repressed because interest rates were held low, and inflation was high, so savers did poorly.  And, bond holders from the mid-1940s until the 1960s and 1970s, end of the 1970s, they lost money on a real basis because of all the inflation that was there.

There were a lot of good things going on as a country, we won the war.  The other countries were destroyed, we had a huge industrial base, we built all these things before the war and we just turned them into building cars.  It was a great time and then technology got developed and that brought a lot of deflationary stuff, so there's a lot of good that happened in there with a real little interregnum in the 1970s. 

Okay, so as we all know, the Vietnam War, not such a good idea obviously, somebody had to pay for it and Johnson's guns and butter, so he brings in all the social programmes, many which are good to some degree.  But in turn we also ran the war, we ran these huge deficits.  We're on a Bretton Wood system coming out of World War II, so they'd set the price of gold at the $35 and held it there.

But people in the world could see that we were spending more than we were bringing in and that was not sustainable, the French, in particular Jacques Rueff and Charles de Gaulle said, "These guys are printing money and we know it, and you say your dollar's as good as ounce of gold, well at $35 we'll take the gold please".  We had 20,000 tons of gold post World War II, we now have 8,300 allegedly.

Peter McCormack: Allegedly.

Lawrence Lepard: Allegedly.

Peter McCormack: Yeah, interesting this week, somebody was tweeting out the fact that they think there might not be anything in Fort Knox.

Lawrence Lepard: There is no doubt, I mean said this on other podcasts.  Ron Paul told me he doesn't think there's anything there and I feel the same way.  I think it was too big a honeypot and it's very likely that they raided it.

Peter McCormack: Wow!

Lawrence Lepard: I could be wrong, but one tell on the subject is why hasn't it been audited since the 1950s?

Peter McCormack: Exactly.

Lawrence Lepard: If you ask, and people have asked, and they say, "It's too expensive".  Really?

Peter McCormack: I mean…?

Lawrence Lepard: Think of all the billions of dollars the government spends.

Peter McCormack: You could estimate it pretty easily.

Lawrence Lepard: Yeah, right.

Peter McCormack: Just by taking a photograph!

Lawrence Lepard: Right, right.  I mean this is not rocket science, so that is a bullshit answer.  Is it there or not?  Who knows and that'll lead into a lot of other things we're going to talk about regarding Bitcoin, why Bitcoin might be a better choice, but the point is that the Fed continually loosened.  What they did was with every single financial crisis, they provided accommodation.

Let's play through 1970s, okay.  So, the 1970s started to play out and we broke the gold standard in 1971; that was an enormous event and we should talk about that more.

Peter McCormack: Didn't the UK break before though?

Lawrence Lepard: Yes.

Peter McCormack: We did.

Lawrence Lepard: The UK did.  I don't know the exact year; I believe it was in the early 1960s.

Peter McCormack: Yeah, I think it was like a decade before.

Lawrence Lepard: Yeah, I think it was in the early 60s, but the dollar was the leading currency at the time and that was a big deal.  Of course, Nixon said it was temporary, it wasn't obviously.

Peter McCormack: Yeah.

Lawrence Lepard: 1971 to today.  So, here we are, we've got the gold standard falling down and that led to massive inflation in the 1970s.  As we all know, consistently, the price of oil and gold; oil went up 30% a year compound through its entire period, gold went up 18% a year the entire period compound.  Actually switch those around gold went up 30% I think, oil went up 18%.  That was in a massive inflationary period and there was a time at the late 1970s, I remember it quite well, when people were thinking, "The dollar's going to fail and we're going to have hyperinflation and the dollar is going to fail".

Regan won, Paul Volcker came in, and he created a solution which was to take interest rates to 20%, which nearly bankrupted my father's business, I remember it quite well; eating tuna fish sandwiches and being very scared that we weren't going to make it.  They did get inflation under control with 20% interest rates, but it was pretty brutal.  A lot of businesses suffered, a lot of people suffered, but that and the combination of kicking off of the technology stuff started to create a long period of deflation from 1980 to present really, and that was fabulous for financial assets and really good for the world. 

One of the things I find most interesting and amazing is the fact that if you think about how much more technology we have today than we had in 1980, look at what computers have done.  We should all be working 30-hour weeks and living lives of leisure, if we'd have been able to transfer that technology value to the greater populous.  But what's happened is that because we've got a system that allows the people at the top to rake off the profits, ie because we've got a broken monetary system, what it's done is all that excess value created by that productivity has flowed to the top.  So, we've got billionaires and then the rest of the poor people in the world, middle-class average people, work twice as hard to keep their head above water.  That is to me the fundamental theme that I'm working on. 

There's a moral basis to sound money.  The Fed prints money simply said.  I mean you can talk about how it flows, you can talk about the fact that it goes into bank reserves and they have to lend.  I don't care, all those things are true, but the fact of the matter is M2 has gone up consistently.  I've got a chart on a website that you can see that very clearly and that rate of growth is growing, it's getting higher and higher and higher.  We're now at the point where it's about to go straight up in my opinion.

Peter McCormack: Scary times, again a lot to unpack there, but just want to ask you quickly about deflation.

Lawrence Lepard: Sure.

Peter McCormack: I always saw the news reports, the reports of inflation to 1.5%, 2.5%, government target of 2%, and I grew up with the belief that inflation was a natural part of the economy, something that was signifying growth.  As somebody who doesn't really understand economics, my dad would be watching the news and I'd see it in the background, and I was always taught that deflation's really bad because if we have deflation, then people will stop spending money, because they expect things to get cheaper in the future.  A bit like the same reason you don't spend Bitcoin, because you think it will be worth more in the future.

Lawrence Lepard: Right.

Peter McCormack: Is that just government propaganda that allows --

Lawrence Lepard: I believe it is, that is Keynesian propaganda, so I think that the authoritative book on this is the Price of the Future written by Jeff Booth.

Peter McCormack: Jeff Booth.

Lawrence Lepard: I am sure you have released a podcast with him.

Peter McCormack: Yeah, I have, great guy.

Lawrence Lepard: So, we live in deflationary world and deflation is a good thing; we had deflation from 1789 to 1913.  The average person, their wages didn't go up, but what they could buy with their wages went up.  So, deflation represents efficiency, deflation represents you can do more with less and so sound money leads to a natural rate of deflation.  And the whole notion that you need these animal spirits to grow, that's what Keynes said, "You need these animal spirits to grow demand and to grow an economy", that is a flawed notion.  In a world with limited resources, think about it, compound growth forever we're going to eat the world, the world is going to blow up.  We can't have compound growth, we've got to align the monetary system with an economic system that makes sense.

The issue isn't about having growth, the issue is about having efficiency.  How do you get more for less?  That's what deflation is.  Same amount of money gets you more goods and services, and so deflation is good.  I think our kids will know that, I think our grandkids will know that, I think everybody will come to understand that.  What's good about inflation?  All the stuff I buy, it's going to cost more next year.  What's good about that?  There's nothing good about that.

How about if I save this capital and don't buy things I don't need, and don't chase stuff, that money will get used into something that will make things more efficient and things will be cheaper next year.  The perfect example, remember after 9/11 when George Bush got up and said, "Everybody go buy an SUV", I mean did that really make sense?  Was that really the right piece of advice to give?  How about we become a nation of savers again, and we're prudent.  I know it sounds really radical, right.

Peter McCormack: People don't save.  Amongst my friends --

Lawrence Lepard: Why should you?  It is the evil line that Keynes used which was, in the long run we're all dead.  Okay, so let's party like animals and get knockout blind drunk and pass out and not worry about the long term; or you can say, "No, I'm going to take care of my body and I'm going to eat sensibly and I'm going to sleep and I'm going to rest and I'm going to get stronger and I'm going to live a sensible life".  There really are just two views of the world.  One view is, "Party on, Garth", and the other view is, "No, be smart about this.  Let's try to be intelligent".

Peter McCormack: The time preference that Saifedean introduced to everybody.

Lawrence Lepard: Exactly, exactly.  Time preference and long time preference.  I mean you can tell who long time preference people are, they eat well they work out, they sleep, they treat people well.  It's a much better moral code than the 1980s Gordon Gekko, "I'm going to get mine, greed is good, let's grow this thing, let's run up the numbers, more is better than less".  How much do you really need?  Do you really need billions to live a decent life and is that the right measure of what a decent life is?  I don't know, I don't believe so.

Peter McCormack: You have it in your Twitter, "Fix the money, fix the world".

Lawrence Lepard: Fix the money, fix the world, yeah.

Peter McCormack: It seems to me that the moral decline in society is very much aligned to the money.

Lawrence Lepard: Absolutely, they track.  If you look at Weimar Germany, I mean that was an incredibly immoral period of time.  When people see other people lying and getting away with it and doing well as a result of it, they say to themselves, "Why shouldn't I do that too?  I'm the sucker here, I'm playing by the rules and I'm the sucker, right".

Peter McCormack: I feel like the veil is being lifted finally.

Lawrence Lepard: Oh, yeah.

Peter McCormack: I think people have realised, "Hold on, we're being lied to", and it's funny.  I think there's a lot of defence now out for the billionaires with what Janet Yellen came out recently saying, tax them on realised gains, which logically doesn't make any sense.

Lawrence Lepard: That's impossible, how are you going to do it.

Peter McCormack: Then my friend Vijay Boyapati, I'm pretty sure he said, "Originally, income tax was only meant to be for the rich" and now we have 40% income tax.

Lawrence Lepard: Of course.

Peter McCormack: If they're going to tax on realised gains for the billionaires, they'll come for everyone, but it doesn't make any sense.

Lawrence Lepard: The state lives to keep the state alive and to make the state bigger.  When you're in that game, you're all about growth and control and so on and so forth.  Think about what the American Revolution was about, it was like a 4% tax on tea.  If I paid 4% taxes on something today, I'd be very happy.  The state has really grown to be a leviathan and some people worship it, some people think that it is the solution to all of the problems; and yet I would argue that history, long spans of human history can show that people can self-organise, and they can do very well on their own.

Those of us who believe that, we were a very small group, we are becoming a bigger group.  I think Bitcoin is educating people and I think the failure of the money is going to be a real wake-up call for a lot of people.  I'm not with Jack, he heard my last podcast and he retweeted that he thinks we're going to see hyperinflation.  I don't know, I mean it's possible, okay.  It's definitely within the realm of outcomes but I don't think right away, I think more likely what we're going to see is we're going to see pretty high and persistent inflation.  I'm hoping that that's going to lead to some serious reform, because I think that's what's needed.

Peter McCormack: There's two things to talk about there, firstly we'll talk about the inflation and then we'll talk about the reform, because I think most interestingly the reform is coming in the form of Bitcoin and everyone has an opportunity to become part of it.

Lawrence Lepard: That's right.

Peter McCormack: I'd like this idea of a decentralised sound money.

Lawrence Lepard: Absolutely.

Peter McCormack: Which anyone can opt into, which is great.

Lawrence Lepard: Absolutely, yeah, no and it's perfect game theory, right.  The only defence about Bitcoin is you got to buy it.

Peter McCormack: Yeah.

Lawrence Lepard: Everyone gets the price that they deserve.  I mean I've been progressively orange pilled.  I started a long time ago, but I was small in it and for a long time, I was afraid the thing would blow up and I thought that's a computer, it can blow up right and I've seen too many computer things blow up.

Peter McCormack: We're all afraid of that.

Lawrence Lepard: Yeah, right, and so I didn't get -- but now we've got 12 years of data points and we've got a lot more systems around, and of course the guys have done a lot more stuff to protect it and I'm kind of the view that, "Well, the odds of that happening have gone down substantially".

Peter McCormack: Let's talk about the current inflation levels and what's happening.

Lawrence Lepard: Sure.

Peter McCormack: I spoke with Lyn Alden a couple of days ago.

Lawrence Lepard: Yeah, she's great.

Peter McCormack: She's amazing and she said, "Hyperinflation is month-on-month plus 50% inflation".  I would be very surprised to see that in the US, the UK.  I would have thought the central banks would respond and put us through a painful period of high interest rates to curb that situation, but I don't know.  I've no experience in this, I've not lived through -- I feel like I've been lucky to live through a fairly stable 40 years of life.

Lawrence Lepard: We all have, I mean I've had a very good life and a very good country and as broken as things are, it hasn't been bad.  This is the Fourth Turning, right.  To Lyn's point and your point, the Fed's really trapped.  If they try to really jack interest rates, it's not going to work.  I mean, one, they're very far behind the curve in my opinion, they're going to taper, fine.  Throughout the 1970s, interest rates were going up and gold still kept going up.  I mean, gold was the Bitcoin of its day back in the 1970s, there was no Bitcoin, but the point is that they really can't. 

They're kind of in the -- they've got a devil's choice.  If they try to save the money, they're going to croak the economy and the debt structure and it's all just going to collapse and it's going to look like the 1930s.  If they don't do that and they try to keep the system going and keep the growth going and just continue with what they've got, the inflation is just going to get away from them and it's going to be runaway. 

Stan Fischer who used to be the Vice Chairman of the Federal Reserve wrote a number of good papers on this, where he said, "We're going to have to go direct.  We're going to have to print more, we're going to have to do all kinds of unconventional financial repression policies.  The only issue that we face there is we need --" they know they need inflation.  They definitely need inflation, because with debt at 130% of GDP, you can't grow out of that without --

Peter McCormack: No.

Lawrence Lepard: They were able to do it in World War II, but this time they need inflation, but they don't need too much inflation.  Stan Fischer said, "Once it gets started, it's pretty hard to stop", inflation is kind of a vicious circle.  Some guy has to pay more for something, he says, "I want more wages", the company says, "Fine, I'll give you more wages, but I've got to up my price", and so on and so on.

Particularly, we're at this extreme where we have enormous negative interest rates, we have a zero interest policy in many places.  We've really run this deflationary thread about as far as you can run it, and so with all due respect to Lacy Hunt, and other deflationists, I think it's over.  I mean I think Ronnie Stoeferle said it very well at a conference out in Beaver Creek, the Gold Conference, he said "It's a monetary tipping point".  I mean, this is like the Archduke getting shot in Sarajevo, it's changed.  We are now in an inflationary environment, get used to it, get ready for it, prepare for it, protect yourself against it.

Peter McCormack: Yeah, again very interesting you should say that, because when I spoke with Lyn, she said the next decade will be defined by inflation.

Lawrence Lepard: I can't see any other way.  I mean look at the numbers, look at the evidence.  There are a lot of kinds of inflation too, Peter.  I think it's important to understand there is demand, there's cost push, there's demand pull, those are all the kind of traditional ways.  There's another one that I've kind of invented a word for, which is substitution inflation, and that goes to just the issue of people suddenly realise that their currency is losing value, it's Gresham's law.  They say it's not about buying stuff or selling stuff, it's about what assets they're going to hold their savings in. 

Everybody has some savings, everybody has some net worth; not everybody, but most people have some net worth.  Where are you going to put it?  You want to protect it, right.  You want to have a sound retirement, you want to save for a rainy day, whatever it might be; and traditionally in bonds, stocks, those kinds of things have all been pretty good places, real estate certainly.  That can change, and bonds in particular.  When people realise bonds are just a melting ice cube, the bond market is going to get hammered here, I mean I have very little doubt about that, and the Fed's probably going to have buy the whole thing.  The old curve control.

Peter McCormack: Yeah, yeah.

Lawrence Lepard: Once you see the Fed buying the whole thing and again it all goes back to --

Peter McCormack: Ponzi.

Lawrence Lepard: It's a Ponzi and also, the reason the dollar works is because we have a government, we trust our government, we won World War II, we've got all the weapons, we've got these serious people at the Fed, saying like they're watching it very carefully, etc, but it's all a Potemkin village, it's all a façade.  The fact of the matter is if you look at the facts behind that, it's empty.  There's nothing supporting this dollar and so the dollar is the emperor walking down the street naked.  And Bitcoin and gold, to a degree, we're the little boy sitting there going, "Hey, that guy's got no clothes on, what's going on here?  Can you guys believe this shit?"

Peter McCormack: The interesting thing is, I think you could walk down here, walk down Broadway and you could ask a hundred people and I only think a few people will really understand what's going on.  My friends don't understand.

Lawrence Lepard: Absolutely.

Peter McCormack: I'll tell you a funny story.  I use my Facebook, with all my friends and family, it's just a testing ground for ideas, just to put things out there and I've been talking about Bitcoin and inflation.  I'm like a broken record with this.  I've had people unfollowing me because they think I'm crazy and I'm like, "No, this is happening.  I said inflation's coming.  I'm only sharing what other people are telling me".  I was like, "You could have the biggest rise in inflation".  Now, we've got the massive increase in energy costs, we've had record petrol/fuel prices.  We've got house prices leaping up.  Rishi Sunak just came out with a 4% prediction, the Bank of England said 5% next year, it is probably much higher.

People just are not paying attention to this.  I just think people don't really fully understand what's going on in the economy or how bad it can get.

Lawrence Lepard: Yes, definitely they don't understand how bad it can get.  I use my gym as my data point, because I get a broad cross-section of people who work out with me.

Peter McCormack: Yeah.

Lawrence Lepard: They all see the inflation, but you raise a very good point, they don't know what causes it.  Let me give you a little anecdote that was fun and it was a while back, but I don't know if you ever saw the video of Andrew Dice Clay and he was out on a corner in LA.  He had a Hershey's candy bar and he got a 10 ounce silver wafer, or silver bar.  People were walking by and he said, "For free, for free, your choice, which would you like; the Hershey bar or the ten ounces of silver?"  I swear 85% of them took the Hershey bar.  Ten ounces of silver at the time, it was $100, they didn't care, they wanted the Hershey bar.

But people are coming to see the inflation and that's part of why I do what I do with respect to Twitter and other things.  I think there are a lot of great people in this country and a lot of people could get hurt, and I think the policies these people have set up are irresponsible and I think people should try to protect themselves.  I see a lot of political chatter about all manner of things and all that stuff is really real, but let's get to the base of the problem. 

The base of the problem is unsound money.  If we have sound money, a lot of these other problems would go away, they really would.  I think Bitcoiners get that, even not every bitcoiner; some bitcoiners are just like, "Hey, price goes up, I like it.  Give me some of that, price goes up".

Peter McCormack: And will go up, yeah.

Lawrence Lepard: I think a lot of the bitcoiners get it, certainly if you've read Saife's book you get it, that sound money is a really important societal issue.  I want my kids and grandkids to live in a better country than we live in today, and I remember what it was like growing up.  This was a great country, it still is a great country, but it's gone downhill since my youth, I know that.

Peter McCormack: There's no country I've travelled to more than the US, this is like my 70th, 75th time here.  Every opportunity I get to come here, I come and I travel to a wide range of places.  I think I've done like 19 of the states now.

Lawrence Lepard: Awesome.

Peter McCormack: I have a great time in left-leaning states, I have a great time in right-leaning states.  I find the people are brilliant.  I absolutely love America; I can go anywhere.  I can go into a bar and I'm pretty sure I can sit down with a Republican and a Democrat and we could have a great conversation.  I think the broken part of this country is the media and the politics.  I put a lot of it at Roger Ailes' door and Rupert Murdoch, because they created the division, and I also think social media's causing a problem, but I think it's a very small group of people who are causing the problem for everyone else.

Lawrence Lepard: I completely agree.

Peter McCormack: It's still a great country.

Lawrence Lepard: I completely agree and that's why one of the things that gives me great hope is that we've got -- and I will say it in a slightly different way, the elite have crafted a narrative that really serves them.  They really benefit from this system.

Peter McCormack: Of course.

Lawrence Lepard: They're very, very wealthy and I mean, why wouldn't they like it?  It works for them.  They've got a ton of money.  I mean, I see Janet Yellen saying there's no inflation, well she's got a $20 million net worth, she doesn't feel it.  How about the person who's working hard for every dollar and their cost of food just went up substantially?

The problem is, that person's so busy on the treadmill, trying to put money on the table, that they don't have time to listen to podcasts from you and they haven't necessarily been introduced to Bitcoin and they don't necessarily understand all these issues.  It's tragic, it's really sad that that message has not gotten out.  You say, "Social media is part of the problem", maybe but it's also part of the solution.

Peter McCormack: Agreed, yeah.

Lawrence Lepard: Right?  We can use this for real, it's just a tool.  We can use this for really good purposes and some of us I believe are.  Yourself, Marty, George Gammon, you name it.  They're a just a number of people out there who get it, who are trying hard to fix it and what I'm hoping is that when the whole thing collapses, which I believe it will, I mean the maths is pretty unassailable, I believe it will, those of us who understand what went wrong, why it went wrong, will step into the breach and try and say, "Okay, guys, listen the money failed".  The fundamental issue is the money is bad, you can't believe any prices, right, the money is bad.

Peter McCormack: I'll give you an anecdote on believing prices.  I was in Texas for a week and one of my friend's there was explaining to me that he'd got a local taco shop and he showed me this photo.  It's behind the counter, they have all the menu and the prices next to it.  He said they've taken the prices off now, because they can't guarantee the prices of things because of the changing costs of the produce they need.  It's so inconsistent, so they're now pricing it -- rather than changing the prices all the time, there's just no price and you go and order and they give you a price.

Lawrence Lepard: Wow.

Peter McCormack: A second person works for a company which does POS software, and what they're now having to do, they're having to update the POS software to now have prices update based on the price of the produce coming in, because produce changes.  When he explained this to me, I was like, "That makes me think of two things". 

It makes me think of when I took a visit to Venezuela a couple of years ago.  Wonderful people again, under a horrible authoritarian regime which has pillaged the country, and there was a store I went into and the prices were stickers, so they just replaced the prices.  It made me think of that, but it also made me think, I've read When Money Dies about the Weimar Republic.

Lawrence Lepard: Yes, that's where I was going to go.

Peter McCormack: But really, it's a story of anecdotes, it's a book of anecdotes.

Lawrence Lepard: Yes.

Peter McCormack: A chain of anecdotes to take you through a period of time of all the different things that are happening, I was like, "That's a signal".

Lawrence Lepard: Yeah, that's a signal exactly.

Peter McCormack: Go into Starbucks, "We don't have any sandwiches", that's a signal.

Lawrence Lepard: Yes.

Peter McCormack: My friend who can't get a shipping container, that's a signal.  All it is, we have all these signals now for what is going to be the book of the potentially this decade.

Lawrence Lepard: No doubt, I mean another very good signal, I'm sure you've seen it.  Have you seen how these auto dealers who are having a hard time getting cars, manufacturer suggested retail price $50,000, delivery charge $30,000.

Peter McCormack: Yeah.

Lawrence Lepard: Call it price gouging, call it whatever you want.  I mean they're being capitalistic; they don't have things to sell and then they're just trying to balance supply and demand.  It's pretty basic stuff, right, you take away the supply, you leave the demand the same, the price has got to go up.  Of course, that flows through to everything else, right.

So, it's a nasty, vicious circle and it's been created because the Fed just kept putting coins in the fuse box, rather than allow us to take a recession, allow interest rates to rise like they naturally would, allow the system to function the way it was designed to function, they've done everything the opposite; to continue to keep it growing, keep the money flowing, keep the Wall Street bubble going, enrich themselves, enrich the billionaires, etc.

2008 was the classic example that makes me just furious what happened, to be honest with you.  I mean they blew -- The Big Short does a great job of documenting it.  It's a movie, they blew an enormous bubble, fine and when the time came to pay the piper, okay we hit the end point and we got to pay for it, they went to the government and the government said, "Oh no, don't worry about it, we'll bail you out".  A year later they were all paying record bonuses. 

It was incredibly unfair, because it was socialism for the rich and connected and the bankers and the people who blew the bubble, and it was raw, rugged capitalism for the poor homeowners who had to basically lose their house if they weren't able to make the mortgage payments as a result of the downturn and the loss in employment.  In my speech I just gave at the New Orleans Gold Show, I'm going to have a great photo spray painted on the wall of a house in California that said, "Three tours in Iraq, foreclosed.  Three tours in Iraq and no bail out for people like me".  They broke the social contract, they really have.

Peter McCormack: Nobody went to jail, well one guy went to jail.

Lawrence Lepard: Nobody went to jail.  I mean Dick Fuld's worth $650 million.  The social contract has been broken and so these people gained hundreds of millions or billions of dollars, but they lost their soul and their credibility in the process and they helped to ruin the country.

Peter McCormack: I'm glad you brought up The Big Short, because I think that's a film that's able to contextualise what actually happened to people who aren't economists or people who don't have time.  But the thing about that film that really got me, I thought was so powerful, I think I've talked about this on the show before.  Just at the very end when the family pack up and they get in their car, and essentially they've lost their home, and that was the reality of what happened  I mean, I can't remember the numbers, was it like 1 million people lost their home, 2 million people?

Lawrence Lepard: Many.  Many, yeah.

Peter McCormack: Now BlackRock owns them.

Lawrence Lepard: Yeah, right.

Peter McCormack: Motherfuckers.

Lawrence Lepard: BlackRock owns them and Steve Mnuchin, he foreclosed on them with his IndyMac.  That's another crony capitalist deal, he had full backing of the government in order to --

Peter McCormack: OneWest, wasn't it?

Lawrence Lepard: I think it was IndyWest or Indy --

Peter McCormack: Did he rebrand it as OneWest?

Lawrence Lepard: Maybe he did, I'm not aware of that but anyway, long story short, he had a one-way ticket.  If the government backed him, if he'd have failed he'd have been guaranteed and he had a call option on reletting all those houses and he foreclosed on them and made billions of dollars.  That kind of thing, that's why people in this country are angry and rightly so, absolutely rightly so, and why we absolutely go back to sound money and I believe we will go back to sound money.  People on the left are angry, people on the right are angry, to some degree I'm sympathetic to both sides, because things are broken.  They really are broken, there is no doubt about that.

Peter McCormack: A lot of people are going to lose.  Let me ask you something with regards to, you've said that they really needed to allow the economy to go through a period of pain and default and recover, a bit like the Ray Dalio video, about how the economic machine works.  I've asked this a number of times to various people, but I wonder if the problem with that is the election cycle, because for any president to allow that to happen, they have to be the president that potentially takes the country into recession and their legacy is that.  So, does the election cycle really just create that someone has to kick the can down the road?

Lawrence Lepard: I think that's right, but a couple of things there.  How powerful is the president?  Is the president really running the show?

Peter McCormack: Let's say the party.

Lawrence Lepard: Yeah, okay.  Broader, possibly, I mean certainly that's a possible, but again the Federal Reserve is really not even -- I mean they're linked to the government, but they're not a part of the government; it's a private organisation.  The government, even unto itself is -- everything is not as it appears.  There are other people pulling strings in my opinion of the government.  But yes, your point's a good one, there's no doubt that nobody wants to be in charge when the whole thing collapses and everybody does hope to kick the can.  I mean, I'm sure these Fed people when they get out of there, they're happy.  I got to believe --

Peter McCormack: Haven't two quit recently?

Lawrence Lepard: Yeah, right, two quit recently.  My gut is that Kaplan's sitting there thinking, "Thank God, I don't want to be around when the shit hits the fan".  Of course, they're going to replace -- the two that quit were kind of on the hawkish side, they'll get probably get replaced with doves.  Danielle DiMartino Booth says that there's a Game of Thrones going on inside and J Powell wants to maintain his position.  I think he's nuts.  If I were him, I would have to be out of there so damn fast, because there's a mathematical piece to this and so it's the second derivative, right.  Things are happening quickly now, they're happening more quickly.  We printed $3 trillion from 2008 to 2011, so it's three years.

This time around we've printed $3 trillion or more, almost more than that in four months.  When the next crisis comes, we're going to have to print $10 trillion.  Each one of these rolling crises will make it more obvious to more people that this money is no good and I have got to get out.  I mean, you go bankrupt slowly and then suddenly, at the end it's going to be suddenly, it really is going to be suddenly, and this is the substitution thing I was talking about earlier.  When people decide that their money is melting, it's a melting ice cube, they're going to buy Bitcoin and gold and silver, they just are.  Or they're going to buy real estate and we're already seeing that, right, the housing prices are going up.

Peter McCormack: That's a great fix.

Lawrence Lepard: Yeah, it's a great trade, it's a hard asset.  You can borrow money at 30 years at 3%, yeah, I'll do that, sure.  A house is a house, I can live in it so people aren't stupid with respect to what's going on with the money, but not everybody understands how deep it is and how we've got to get back to sound money to have things be repaired and it's going to be a tough transition for sure, but it'll be much better on the other side.

Peter McCormack: Wouldn't it be great if we taught financial literacy and sound money in school.  I mean I did two years of economics, but that was optional, that was my A Levels, that was my senior years and we were taught Keynesian economics.

Lawrence Lepard: Of course you were, yeah.  Keynes is wrong, I mean Keynes is just wrong.  That's a whole another line of thought, we could get into my feelings about Keynes are not very positive.

Peter McCormack: I did the same for the Paul Krugman.

Lawrence Lepard: Yeah, same with Paul Krugman, but I subscribe to the Austrian School of Economics which is much more, in my opinion, realistic and predictable of what has happened, how the world works.  As a result of that, the Austrians have been ignored, they've been completely ignored and shut out of academia.  Academia gets money from the government.  You have to remember that when a government gets set up the way it is and the people benefit from being a part of the government and sucking up to the tit of the government, they are going to do everything they can to supress narratives and people who call the emperor naked.

The Austrians, for quite some time now have said, "Hey, this emperor's naked.  You're printing money and that's theft".  Back to the moral issue of all this, we would all agree, I mean I wouldn't come in here and steal your watch or steal your wallet, that would be theft, that would be immoral.  That's what the Federal Reserve does.  All of us who earn money, we have dollars, we exchange our labour for dollars, we put it in our pocket, we call it savings; but every year, the Fed dilutes that, because they print more dollars that they print with just the stroke of a key and as a result, your savings are worth less.

By the way, the CPI numbers are completely misstated.  Shadow government stats and Chapman and Chetwood have shown that.  CPI is probably running 10% to 15% right now.  Certainly when you get the housing component in there, it will adjust up to that.  So the fact of the matter is, how do you feel about every year the government taking 10% of your savings?  I know how I feel about it, I don't like it and the average person shouldn't like it either.  There's a way to fight it and it's simple, buy gold, buy silver, buy Bitcoin.

Peter McCormack: Let's talk about sound money then.  What are the myths of sound money, because there are some people who are very critical of Austrian economists and think they're crackpot libertarians?  What do people get wrong about sound money?

Lawrence Lepard: That's a good question.  I think they think it's old fashioned.  One of the first ones, one of the ones they start with is to say the gold standard caused the Depression, that's the first and biggest lie they tell, and Bernanke wrote his entire thesis on that, his PhD thesis on how the Depression was caused and the fact that we were on sound money, that was the gold standard.

By the way, we weren't on sound money because Roosevelt devalued it 70%, so we had a mini hyperinflation during the Depression.  But the fact of the matter is the Depression was caused or the Depression was just an equal and opposite reaction to the bubble that was blown in front of it, the Fed was very lax post-World War I and as a result, they let a lot of money into the system; they held interest rates down well below where they should have been and so we blew an enormous credit bubble.  And as a result of that credit growth and stock market bubble, when it collapsed it was enormously deflationary.  That's the issue.

What happened there is not something to do with sound money.  In fact, the fact that we were on a gold standard after we revalued, and the fact that we were on a gold standard was actually a net positive.  So, one of the things they get wrong is to say the gold standard was responsible for the Depression; it was not, it was completely not.  Anyone who studies it, intellectually and is intellectually honest about it, would come to that conclusion. 

Now, Bernanke was not intellectually honest, because he obviously foresaw a future in the Federal Reserve system and in the government and in the system that we now have and so, he had to support everything the Fed did.  In fact, he said they didn't do enough, they should have done more.  It's that famous 1982 speech, which by the way I think was an incredibly irresponsible thing to do, where he said, "Look, we can never have deflation --"

He looked at the Depression he said, "Look, there was massive deflation that caused massive pain".  Rather than diagnosing that and saying, "Yes, and that's because the Fed was lax and let the bubble get blown", he said, "No, that's because the Fed didn't print enough to prevent the deflation".  By the way, they printed a ton, but set that aside for a moment, that was the wrong conclusion, okay.  So, what he said is, "Look, we don't have to worry about inflation". 

His 1982 speech was famous, it will be in the history books, he's kind of the John Law of our time, well pre-Stephanie Kelton, but it'll be in the history books where he said, "Look we have a technology, called a printing press that ensures that we can create dollars at zero cost and as a result of that, we will never suffer deflation again in this country".  Right there, that was the major coin being put in the fuse box, "Okay, we're not going to let any serious monetary corrections take place", that's what he said. 

As a result of that we've just had this continuing wave of greater and greater inflations and each one has to be bigger than the last.  A good analogy in my view in terms of looking at his monetary stuff is, think of it as like a heroin addict.  You just have to keep taking more.

Peter McCormack: Keep taking more.

Lawrence Lepard: You've got to take more to get the high.

Peter McCormack: Otherwise you crash.

Lawrence Lepard: Otherwise you crash, and I think the analogy is pretty good, right.

Peter McCormack: As a previous addict who's been through recovery, it's a perfect analogy.

Lawrence Lepard: Right, and by the way I've heard stories from people who have been through this whole thing that, "Look the crash is almost as bad as dying.  The crash is pretty damn bad coming out of this stuff".

Peter McCormack: But after the crash you feel good.

Lawrence Lepard: Yes, there is a recovery.  If you don't die, there is a recovery and by the way, if you don't crash and you keep doing it, eventually one of those times you're going to hit an OD and then you do die.

Peter McCormack: Yeah.

Lawrence Lepard: Sadly but looking at time and slopes and math and everything that's going on, I kind of feel like we're getting pretty close to an OD moment here.  How are they going bring it back?  I don't know.

Peter McCormack: It's quite interesting that you're previously a gold bug and a silver guy and you've now gone into Bitcoin.  Not every gold bug has managed to get it, there is one quite well known --

Lawrence Lepard: Yeah, we all know him.

Peter McCormack: We all know him, Peter Schiff.  He just can't get it.

Lawrence Lepard: That's too bad.

Peter McCormack: I think that's more about ego than anything.

Lawrence Lepard: Possibly, I mean some say it's actually his marketing pitch.

Peter McCormack: Maybe, I don't think it's a great one but by the by, for some goldbugs it's been hard to get across.

Lawrence Lepard: It has.

Peter McCormack: What was your Bitcoin introduction?

Lawrence Lepard: Imagine being frustrated, imagine having all the stuff right?  I said it in my speech in New Orleans, "Imagine having this whole thing right.  You just got it figured out and then this other thing comes along and supplants your asset".  I get it, I completely get it.  I don't know, maybe I'm just different because I was in the venture capital business, and I'm a big believer in the future and I'm a big believer in technology and I'm a big believer in things getting better as a result of technology.  Look I had some of the initial scepticism that everybody has, and I think everybody who comes to accept Bitcoin as being important goes through a bunch of phases.

Peter McCormack: Yeah.

Lawrence Lepard: "Oh that's ridiculous", to, "Oh my God, how could I have anything else.  I've got to have 100% this", right and I would never get there.  You peel the layers back, right, and so the history of it all is I tried to buy some back when you were buying at £80.  It was hard to buy it then, you had to meet somebody in a café and get a code and it wasn't very available.  I bought my first ones off of the Coinbase, off the Mt. Gox blow up. 

In fact I was trying to get an account at Mt. Gox; fortunately I didn't, because I know people who did and they lost all their money.  But I was fortunate, like right after the Mt. Gox blow up it traded up a bit.  I think it hit $1,000 at one point and I said, "Okay I'll wait for correction", sure then it corrected down to $300 to $400 and I started buying and I've kind of bought since then consistently.  But always with a, "Gosh, is this really going to work?  Is this technology sound?  Are people going to really adopt it?"  Yeah, I get it and it's a libertarian dream but maybe it's going to blow up.

Peter McCormack: I think we all feel like that.  Tell me, you were down at this gold event in New Orleans.  How much talk of Bitcoin was there?

Lawrence Lepard: This is pretty interesting, I think you'll enjoy this, there were probably 300 people there and a lot more online, a lot of people don't go to conferences anymore.  One of the speakers asked the question and said, "Okay, folks, how many of you here own Bitcoin?"  Half the hands went up.

Peter McCormack: Wow.

Lawrence Lepard: So, there are a lot of people who were in my camp.  They came from the gold world, pre-2008 we didn't have Bitcoin.  If you believed in sound money, you had a couple of choices: gold, silver, gold, silver stocks, period.  That was about it, real estate.  Bitcoin got invented, a lot of growing pains, obviously it's become much more mainstream now and a lot of gold people are like, "Yeah, I get it".  I mean I have one friend who said, "Look, Larry", he was 100% gold, I mean all gold.  He's now 100% Bitcoin, has no gold, sold it all.

Peter McCormack: Wow!

Lawrence Lepard: He said to me, "Larry, the reason gold isn't working and the reason you feel Sisyphus is that the central banks have figured out how to control it, they've got the price supressed.  They've created so much paper gold that the price hasn't gone up the way it should be, we've got these really brilliant guys over here, with this technology which serves the same purpose as gold.  They're like the rebels with the torches and the pitchforks.  They're storming the citadel of the central banks and they're going to take over.  I want them to win and they're going to win.

To be honest with you, I think he's right to a degree, but that doesn't make gold irrelevant.  I think some of the bitcoiners are like, "Gold is a buggy whip and why would you ride a horse when you could be in a car?"  My view is that they both beat walking.  But they're different assets, right.  I mean gold is obviously less volatile, gold doesn't have 80% drawdowns, a big drawdown in gold would be 20%.  Gold is more private, if you have gold coins in hiding, nobody knows you have them.  The blockchain is there for everyone to see, it's synonymous so you don't necessarily know whose address is whose, but that could change, the government could come after that and face some interesting decisions.

In my opinion as a professional money manager, as a manager of risk, an investment person, there is a place in a portfolio for both and it depends on what your risk profile looks like.  If you want to be super conservative, you have much more gold than you have Bitcoin, if you want to be super aggressive you go much heavier in Bitcoin than gold.  But I actually think everybody, even bitcoiners, should own both.

I made this point in another podcast where I bought Bitcoin at $17,000 and then it fell to $10,000 and it fell to $3,500.  If it had been 100% Bitcoin at $17,000 and that had happened, where would I have had the cash to buy the balance?  I sold gold to buy Bitcoin at $10,000, I sold gold to buy Bitcoin at $3,500.  There's some balancing that can go on here and there's a point -- they're both sound money assets we cannot deny that, one's 5,000 years old and one's 12 years old, 13 years old, but there's some balancing in allocation that you can do that I think is sensible.

Peter McCormack: It's funny because a couple of times this year, I've nearly bought some gold.  A couple of times I've had some spare cash and I've thought, "Shall I buy some gold?" and then I've tried to go through the process again there and it just felt a bit painful, so I ended up buying more Bitcoin.  So, I don't own any, but I understand the argument for it.

Lawrence Lepard: You're probably going to be right.  I think some of it has to do with age.  Frankly, if you're young and you've got a lot of time to recover and probably the most important thing about being 100% Bitcoin is to be sure you're not going to be blown out on a drawdown.  I see people pumping it, I see people talking about it, I see people who don't really understand it, maybe chasing it and buying it, and I think it's sad if they buy today at $60,000 or whatever it is, and what if we do have a 50% drawdown?  If they can mentally process a 50% drawdown or, heaven forbid, an 80% drawdown and they know they won't sell it, have at it.  They've got a long time preference, they believe in the asset, they're going to be fine.

What I think is sad, because I know people like this, is the people who bought it because everyone recommended it at Thanksgiving in 2017 and it went to $10,000 and it went to $3,500 and, "Oh shit, I blew that" and they blew it out.

Peter McCormack: Yeah, they sold out at the bottom.

Lawrence Lepard: They sold out at the bottom, right.

Peter McCormack: Yeah.

Lawrence Lepard: To me, what's important is that you've got to be in it longer term if you're going to be in it, and you've got to understand the volatility of it when you buy it.  You can't just listen to your friendly Bitcoin guru, "This is great, buy it, it only goes up", and then when it doesn't you freak out.

Peter McCormack: You have to get through that first four years.  I think it's easy after four years.

Lawrence Lepard: I think that's right, yeah, when your average cost basis is well below where it's at, you're like, "Hey this is great".

Peter McCormack: Yeah.

Lawrence Lepard: Then it's also a matter of how far down the curve you are in terms of understanding it.  You hear about the threats, you hear about the FUD and so you go investigate them.  You say, "All right, well is it going to destroy the planet in terms of electricity?  No, Red Card approved it, it's 0.5% of the electrical use in the world".  That's a small price to pay for sound money.

Peter McCormack: A very small price to pay.

Lawrence Lepard: Yeah, right.

Peter McCormack: The guy at Fortune came out today and did a report like it was $100 per transaction.  My friend Josh tweeted out, he said, "Are we still doing this?"  Then my brother did some research and found out the guy behind Fortune has invested in a blockchain company that wants to tap into the $150 billion payments market in Asia.  It's like, "Okay, there's your incentives".  You want to attack Bitcoin because of your bullshit project.

Lawrence Lepard: That's exactly right.  Unfortunately, there have been some sleazy actors in other crypto areas, and it has cast a pall upon some of the bitcoiners; and rightfully so, some of the bitcoiners are very angry about that, because Bitcoin is not a sleazy coin like some of these others are.

Peter McCormack: Yeah, it's going to be an interesting year, two years ahead, because if we do see a crash, Bitcoin has been a risk-off asset, so will it crash with it or are we going to make that leap?  Are people going to suddenly realise it?  I think people are suddenly starting to realise with Bitcoin.

Lawrence Lepard: I do too.  I mean I think there's one remaining risk in my mind and that is Tether.  I think the Tether thing is bad news.  We've made an investment in a company called Avanti run by Caitlin Long.

Peter McCormack: Yeah, I know, the bank in Wyoming.

Lawrence Lepard: Yeah, right and she wants to do a fully reserved stablecoin, and that's the way it should be.  She's talking to the SEC and she's talking to the Fed, she's very serious about this and I think she'll do it and I think Tether is slippery.  I think there's a good chance that at some point, Gary Gensler of the SEC said he's pro-Bitcoin but he is anti-crypto fraud.  I'm good with that, in fact I think it'll help the whole area.  And so, I think there's a chance at some point they will move against Tether and the reception of that move will probably be a dip in the Bitcoin price.

Peter McCormack: You say that, but if there's a run on Tether, where does the money go?  It goes into Bitcoin perhaps.

Lawrence Lepard: Maybe, I don't know the actual mechanics of how it all works, but I do think that -- let me add another point on that line.  An important point here with Bitcoin is, this is a very volatile asset.  You don't want to get leveraged.

Peter McCormack: Yeah.

Lawrence Lepard: That's the other thing I see around this space that gives me, as a guy who's been investing for four years, has given me a lot of concern, there's a lot of leverage.  You're young, you want to invest in it, you believe in it, fine, but I would caution everybody to be careful with leverage, because you don't want to lose your coins.

Peter McCormack: Yeah, I mean I don't trade, I don't use leverage.  The only leverage I did is I took an opportunist loan when the price dropped to 17.5%, I bought another two and a half Bitcoin which worked out to be a fair trade, but I've got cashflow.  I've got a business that's fairly successful.  I don't like people trading with leverage, I think it's scary and if they do it's like, do 0.5 or 1 on equity.

Lawrence Lepard: The issue with leverage is just that you don't want to be forced to lose the asset that you've levered that you know will have value in the future.  I'll give you an example, in March 2020, I was somewhat levered on the gold stocks in this levered ETF.  March 2020, gold stocks plummeted, I mean this levered ETF went down enormously and it taught me a real lesson about the danger of leverage.  As you know, there have been times where you could lever Bitcoin 100:1, which is basically just giving your money away.  Even 5:1 is a bad number.

Peter McCormack: None of the pro traders I know do 5:1 or 10:1.  The best two traders I know say they never go above 3:1.

Lawrence Lepard: Honestly, I wouldn't go above 10%.  I mean my view is, "Okay, so you want to take a little leverage against and buy a little more, fine, but something that you can handle".

Peter McCormack: I think just buy spot, put it away in your cold storage, forget about it and just keep doing that.

Lawrence Lepard: Exactly.

Peter McCormack: You can win that way and focus on your career.  It's so hard to trade, especially as you see these liquidation events where I'm sure a lot of people aped in when we got to $67,000 thinking, "We're going to go to $75,000, $80,000".  Now, we're back below $58,000.  People aping in keep getting liquidated.

Lawrence Lepard: Yeah, possibly.  It is going to a much higher number though, I do know that, I believe that very sincerely that it is the one monetary fire alarm that's really working.  This gold suppression has just been perverse and everybody says, "Bitcoin's going to demonetise gold" and it will over time, but gold's already been demonetised.  I think that's an important point that if you look at the numbers, gold and M2 were substitutes in 1980, the gold we theoretically have in Fort Knox covered the M2 at the time, so we were on a quasi-gold standard even though it wasn't formal.  You look at that today and today's M2, it's like we've got 5% coverage, it's terrible.

If gold were to adjust to its proper price, it would be multiples of where we are today.  Depending on the coverage it could be $10,000, $15,000, $20,000.  I think another case for being in gold is that at some point, it might reset.  We might wake up one morning and China says, "Hey we're backing the yuan with gold and we're setting it at this price", and suddenly gold is money.  China, India and Russia are the three largest gold hoarders in the world, well we are too theoretically, but that's something we don't know for sure.

Peter McCormack: That's why I think maybe perhaps China is a little bit schizophrenic with their opinions on Bitcoin, back and forth.  I mentioned to you earlier, it's like this public comment on unbanning Bitcoin.  My worry is they do that, and they ban Bitcoin, but I do wonder if there's this next phase is that reality and understanding from governments actually, or central banks, is we need to adopt Bitcoin.  The El Salvador project has been proven to be a success so far.

Lawrence Lepard: Not according to Steve Hanke.

Peter McCormack: That guy's an idiot, he's just delivering propaganda.

Lawrence Lepard: It's awful, isn't it?

Peter McCormack: It's truly awful.

Lawrence Lepard: It really is awful, yeah.  He just lies blatantly.

Peter McCormack: There's two things: he's lying, so that's first of all.  He's a liar, and to lie like that means you're morally broken; but secondly, it also feels like he has an agenda against a small central American country that's trying to do something.

Lawrence Lepard: Make their people's lives better.  Yeah, what a concept, right?

Peter McCormack: Yeah, crazy, so they've provided banking services to the 70% who don't have banking services.  They now have free remittance through the Chivo ATMs, they have investment and opportunity happening in the country, and all he wants to talk about is the bond rate or crackpot idea here.  The sad thing about Hanke is there's things I agree with him on when he tweets about Turkey, I think he's fundamentally correct.  When he tweets about the economy, he's fundamentally correct.  We agree on the problem, but he is so anti-Bitcoin it doesn't make any sense.

Lawrence Lepard: Yeah, no that's right.  I believe we will ultimately go to a Bitcoin standard, I really do.  I think that's strategically the right thing for the United States to do.  I think it is the form of sound money that will win.  I mean this is a digital age and it has serious advantages versus gold.  Having said that though, there's a set of maths that I think is important for people to understand that I'd like to kind of repeat.  It just has to do with how well both of these assets will do. 

They're both sound money assets and if you consider the amount of fiat money out in the world, there's about $450 trillion of fait money in the world as cash, stocks and bonds.  Right now, the Bitcoin market, call it $1 trillion, the gold stock market, call it $1 trillion, tradeable gold is $5 trillion, there's $10 trillion total gold, but a lot of it's in antiquities and around women's necks in India.  So there's $7 trillion of sound money stuff in the world today.  There's $450 trillion of --

Peter McCormack: Rubbish.

Lawrence Lepard:  -- of fiat garbage.

Peter McCormack: Yeah.

Lawrence Lepard: Some of the stocks are valuable.  I think that what's going to happen is -- and we've had a 40-year deflation, so everyone's investing in the rear-view mirror.  A recent survey showed lots of money managers believe that inflation is transitory.  That's going to be the next bubble that bursts in my opinion.  A year from now, nobody will be saying, "Inflation is transitory".  People will be saying, "We've got a real inflation problem and the Fed's behind the curve".  I think that is going to happen in the next year.

When that bubble bursts, people are going to think, "If we've got a real inflation problem, well the first thing I'm going to do is I'm going to sell my bonds".  The bond market's $100 trillion plus, worldwide.  What happens if a piece of that $100 trillion says, "Okay, I've got to go get some of that $7 trillion".  It doesn't take much, and so if for example you were to go back to the ratio that you used in the 1970s, gold was about 7% of total financial assets in the 1979, 1980 when it was kind of at its peak; 7% of total financial.  So if you went to that today, 7% of $450 trillion is about $32 trillion.  So, the $7 trillion of sound money assets is going to go to be $32 trillion if we just go to the 1980s.  That's almost 5X.

Now, probably more of it will go to Bitcoin, but some of it's going to go to bold.  I've got clients and boomer friends that they'll never buy Bitcoin.  It doesn't matter, they're going to stick with their gold and that's fine.  But they're both going to go up, they're both going to be sound money assets that perform substantially.  By the way, I think we're going to go much further than we went in 1980.  I think this might be the end game event, which is when literally the currency fails and it's the hyperinflation. 

To me that is further out and uncertain and it's so hard to tell, but I've been game theorying it all, I think inflation's going to get really, really bad.  I think that we're going to have a real political upheaval and people are going to know it and we're going to finally -- somebody is going to arise in the political system that's going to go, "This is the problem, it's with the money and we've got to fix it".  My candidate for that is Francis Suarez, who is the Mayor of Miami.  He's a bitcoiner and I think the guy's wonderful.

Peter McCormack: Yeah, hopefully I'm going to be interviewing him in about a month.

Lawrence Lepard: Is that right?

Peter McCormack: My only issue is he's done this MiamiCoin junk, but …

Lawrence Lepard: Oh really, I haven't seen that.

Peter McCormack: He needs orange pilling a bit harder, but he's clearly someone who thinks he's a potential presidential candidate.

Lawrence Lepard: Right, right.

Peter McCormack: He's liked, we just need to be a little bit more Bitcoin and a little less of shitcoin junk.

Lawrence Lepard: There you go, he'll get there.

Peter McCormack: Yeah.

Lawrence Lepard: I hope.  I think inflation is going to get really bad, and we're going to reset.  We are going to say, "Okay, look, we've got a real problem here and we just can't seem to stop it.  We got to tie the money to something, here's how we're going to do it".

Peter McCormack: The reason why I like a Bitcoin standard, Larry, is because I'm operating with one myself.  The gold standard was really something that was centralised by the government, they could take the country out of it as they did in the UK, and they did here.

Lawrence Lepard: Yeah, that's the weakness of it, yeah.

Peter McCormack: But a Bitcoin standard is something which has a network effect.  I'm on a Bitcoin standard, perhaps you are.

Lawrence Lepard: I kind of am, and I think in those terms, yeah.

Peter McCormack: Yeah, Jeremy, our camera guy's on one, and Danny, my producer, and some of my friends are, some aren't; but I'm on that standard and what's happening is I am seeing my life improve, because it's improving my net wealth position but it's improving some of my thoughts around my own personal health, and wellbeing and my children.  It's given me that shift where I'm slowing down where everyone's speeding up.

Lawrence Lepard: Right, here's the great thing about it, you don't feel like you're on the treadmill, right.

Peter McCormack: No, I'm off.

Lawrence Lepard: You're off.  That's one of the things I try to communicate to some of these people at this New Orleans's Gold Show, because as you can imagine these people have been on the finance panel for a long time and they're tired and they're bitter and they hate the Fed.  I do too, but there's a certain kind of grim resignation, "Oh here we go, we're going to get screwed again".  I went to the Bitcoin show in Miami, 2021 Bitcoin Show, everybody is pumped!

Peter McCormack: Yeah!

Lawrence Lepard: It's like, "This is great, we're going to crush this system.  This is sound money.  It's fair, everyone can participate.  It's a real democracy, etc", so the mental mindset of the two groups, it couldn't be more different.

Peter McCormack: We figured it out.

Lawrence Lepard: Yeah, right, you did.

Peter McCormack: Figured out the hack in the system.

Lawrence Lepard: Yeah, you really did.  So, in that respect, it really is superior.  All I'm saying is don't forget us.  Drag us along, we've been carrying this water for a long time.

Peter McCormack: You're with us.  The other thing I like about the Bitcoin community is their creating enormous wealth for themselves but they're very generous.

Lawrence Lepard: Absolutely.

Peter McCormack: I know a lot of people support a lot of projects, support other people and I think we're going to go into difficult times.

Lawrence Lepard: Yes.

Peter McCormack: I believe in humans, I believe in the generosity of humans to help people out when times are hard.

Lawrence Lepard: Absolutely.

Peter McCormack: So, I do worry.  I was talking about this to a guy I did an interview with a couple of weeks ago.  You might see figures or inflation or you might see Janet Yellen and you might tweet it out and put, "Clown", and make memes and laugh about it, but there is this thing that's constantly on my shoulder.  I'm constantly thinking, "Some people are going to go through a really rough time and we may see a massive increase in poverty, destruction of parts of the economy and people are going to really struggle".

Lawrence Lepard: Yeah.

Peter McCormack: That really hurts my --

Lawrence Lepard: Do you remember the scene in The Big Short when the Ben Rickert character, the two guys are kind of high fiving each other, "Hey, it's working.  We're going to be rich, we're going to make millions and millions of dollars", and the Rickert character is like, "Hang on, shut up, get that under control.  People are going to lose their jobs, people are going to lose their houses".

Peter McCormack: Was that Brad Pitt?

Lawrence Lepard: Yeah, Brad Pitt was playing that.  This is not something to celebrate about and I think that's a very important part of it.  Jeff Booth does a wonderful job of this.  I think it's very important for bitcoiners to try to remain humble.

Peter McCormack: Yeah.

Lawrence Lepard: As humble as possible and the two memes I don't like about Bitcoin and one is the, "Not going to make it", meme, and other is the, "Have fun staying poor".  I don't think they're constructive, I think we want to save and help people, not mock them or belittle them in any way shape or form.  I think it should be a very inclusive community.

Peter McCormack: I understand what you mean about that.  I think those memes are used mainly and directed at the wealthy people or the academic class or political class who doesn't get it.

Lawrence Lepard: I understand that.  A lot of people pointed out to me that that's in reaction to Peter Schiff telling me I'm an idiot.

Peter McCormack: Yeah.

Lawrence Lepard: He's going to call me an idiot, I'm going to say, "Have fun staying poor", I get it.  Consider that a lot of people, they don't have a dog in a fight, they're just clueless running along trying to run their lives.  I know bitcoiners are very generous, if you ask for help they'll give you help, but even people who maybe don't entirely get it.  I've orange pilled a lot of people who started off pretty negative on it and I could have just said, "Have fun staying poor", and I've tried to counter it and say, "No, no, I think this through, I understand your concern".  One of the big things that gold bugs really have a hard time getting around is the notion it's not physical.

Peter McCormack: It's not tangible.

Lawrence Lepard: How can I touch it?  I said, "Guys, you can't touch your money in your bank account either".

Peter McCormack: Listen just say, "Are you still using a Kodak film?  Are you still visiting Blockbuster or are you using Netflix?  Are you on Spotify or have you got CDs?"  Money is just the last thing that's been digitised.

Lawrence Lepard: As I say it's a ledger.  I mean before gold even existed, I love this example, somebody explained it to me this way.  We had ledgers in caves, I killed two bison, you tilled three bison, I owe you a bison.  Money is just keeping score, who owes who what and it doesn't have to be a physical item.  Now, it turned out that gold became a very useful physical item when people were running around the world trading, so the gentlemen in Italy and so forth when they were trading with the East, they could use gold.

Peter McCormack: My friend John Pfeffer, do you know John?

Lawrence Lepard: I do.  I know who he is; I don't know him personally.

Peter McCormack: I was having lunch with him in London a few months back and he was telling me how Wences orange pilled him and he said a very simple thing, he said, "Money is just a ledger, Bitcoin is the best ledger that's every existed".

Lawrence Lepard: Exactly.

Peter McCormack: That's it.

Lawrence Lepard: That's beautifully succinct and Wences is great, I love that guy.

Peter McCormack: I love that guy.

Lawrence Lepard: He's really impressive.  That's how I got orange pilled too, somebody explained that to me and I went, "Wow, that's true".

Peter McCormack: Do you think something like the Fed eventually collapses and doesn't exist; and how do you think society operates without them, we don't need it?

Lawrence Lepard: We don't need it, we really don't need it.  How does it exactly collapse?  I don't know.  One of the things I would caution all listeners to all of my podcasts to understand is, I don't know for sure that I'm right about this stuff.

Peter McCormack: We all speculated!

Lawrence Lepard: Right, and everything is just a probability bet.  The hyperinflation, could it happen?  Yeah, I think it could.  Is it going to happen?  I have no idea for certain.  I think the Fed will be gone.  I think the federal government will be severely cut back when it's starved of its source of money.  We may return very much more to the original constitutional republic that we had when we first launched this country.  I think that might happen with a lot of governments.

Or, I could see a situation where bitcoiners end up being big participants in the government.  I made this observation before that it seems like the people in government often are the people with a lot of money.  They have the time to fiddle around and they want to do something and so they get into government.  I have said this, and I truly do believe this.  I think in this turning, I think the bitcoiners and the gold people are going to end up with all the marbles, I really do. 

I think we're going to win and we're going to be insanely rich, and I think when that happens -- and that creates a real problem.  I mean it's Kipling's meet with Triumph and Disaster and treat the two just the same.  This is triumph and the humility and the helping our fellow man and the doing the right thing is going to be extremely important.  I'll tell you just today based on what I know, I would much rather have a government full of bitcoiners than the government we got.

Peter McCormack: Look at the people within government that you can trust the most.  Cynthia Lummis, I still don't agree with her on everything, but I agree with her on money and we've just had Rand Paul come out and say we expect to move to a Bitcoin standard.  I mean I'm not in the slightest bit a fan of Ted Cruz, but he is talking sense on money now.  When people understand Bitcoin, they start to talk about something that makes sense.  If you end up with bitcoiners in government, game theory says they want to keep supporting Bitcoin and they won't want to support the old system.  And, if they're the ones who are getting significantly rich, they're going to have the power to do that so the game theory just works out.

Lawrence Lepard: Yeah, it really does.  The whole notion that government's going to ban Bitcoin, that was one of my -- I had a part of my getting to a bigger allocation, I was fearful of that.

Peter McCormack: Myself too.

Lawrence Lepard: I have a lot of gold friends who that is their major objection.  I get it, it's a secure ledger, I love all of that, but you know what, you guys think this is going to work and the government is just going to squash you like a bug.

Peter McCormack: I think we're beyond that point now.

Lawrence Lepard: I do too.

Peter McCormack: I think Gensler is signalling.

Lawrence Lepard: Yeah, the horse has bolted the barn and those guys generally don't understand how tough it is to squash this thing like a bug.  I mean 12 words and you can't touch my wealth.

Peter McCormack: On the geopolitical level as well now, there is clearly an element of a cold war between China and the US being established.  I worry about what's going to happen with Taiwan, but I don't think the US is going to militarily step in front.

Lawrence Lepard: I sure hope not.

Peter McCormack: Because, there is no winner in that, we're all losers.  But I think the currency wars are the really interesting wars of the next decade.  I think it's very clear that Bitcoin benefits the US.

Lawrence Lepard: Absolutely.

Peter McCormack: Firstly, if the US is pro-Bitcoin, most of the rest of the world will follow and be pro-Bitcoin.

Lawrence Lepard: Yes.

Peter McCormack: So that's that point.  The US has most of the large companies with Bitcoin and I would estimate a good percent of the Bitcoin is held within people in the US.  Maybe the government owns some Bitcoin or not, but if Bitcoin continues to grow, it strengthens the US.

Lawrence Lepard: Totally.  And somebody said it on Twitter, that China just made one of the largest strategic errors in their history.  They made a similar error in the 1800s when they went with silver versus gold and gold demonetised silver.  Justin Lowry's done great work on this.  We need to adopt the Bitcoin standard vis à vis China, because if we go to a gold standard, China, India and Russia, three very corrupt countries, although we're somewhat corrupt too, they win because they've got a lot more gold than we probably have.  We've got a lot more technology than they've got, and so I think it's natural, I think this is what will happen.  I think the Pentagon's going to get it too.

What's happened here in the last 20, 30, 40 years is we made some big strategic errors as a country.  Abandoning Glass-Steagall, huge error; letting Wall Street become as dominant as it has done and letting the Fed, which is really controlled by Wall Street, do what they've done, huge error; going off the gold standard, huge error.  And so those of us who remember what it was like before all those errors, we're kind of like, "Hey I want my old country back".

Peter McCormack: Also the distraction of 20 years of war in the Middle East.

Lawrence Lepard: That's right, that's not to mention all the money we've spent overseas and all the guys and girls have come back shot up or dead.  It's tragic, the Vietnam war was tragic, all this stuff is tragic.  These things are all part of the life of the nation state.  As my personal guy I work out with, my weightlifting coach says, "War is the sex organ of the nation state" and he's right.  These guys, it gives them power and they want it.

The average Vietnamese guy, he doesn't want to kill Americans, the average American, "I don't want to kill Vietnamese guys", but you put us on their soil and they get mad, it happens right.  Who did that?  The state did it.

Peter McCormack: It's like what Mohammed Ali said, he said, "I've got no problem with these people".

Lawrence Lepard: I love him, man.

Peter McCormack: They put him in fucking jail.

Lawrence Lepard: I know, I love that man.  I mean I think that was one of the bravest things any American leader has done in a long time.  I thought that was just an amazing story when he did that.  So, yes, the beautiful thing is this thing is happening and it's really positive.  It's why people are optimistic and it's why I'm optimistic that it is happening.

Peter McCormack: My question really is, how do I continue to talk to my friends and family?  But I just think it's becoming inevitable now and there's so much news coverage of this.  There's like a mix of news coverage, you get announcements, news releases of things happening, the futures product or a company achieving a certain evaluation.  There's all these positive stories of events within Bitcoin, and then there's analysis and op-eds, which are always FUD and usually incorrect.

Lawrence Lepard: Yeah, right.

Peter McCormack: I feel like that's the battle some people have, they're just seeing this nonsense and they still think this is magic funny money.  I think what's going to happen is there is going to be a shift, as things get worse, as we see higher inflation, much higher inflation and people realise this is really affecting them, they're going to question.  We're going to be ready to say, "Remember that Bitcoin thing I told you about?"

Lawrence Lepard: I have already seen that, I've had a half dozen of my clients and investors in my fund who were very, very negative on it.  They now completely get it.  You can mark the steps as they go through it and it's got positive things going on for two reasons: (1) additional monetary debasement makes its price go up, but (2) and this is on our website and so forth, you can see it, we're kind of at this inflection point and Gladwell's tipping point 10% and things get going.  You look at full adoption of broadband or full adoption of autos or mobile phones or whatever it might be, it tends to take about ten years. 

So if we're at the 10% tipping point now, what's that 2021?  I mean I would think that 10% is going to be a big number in ten years.

Peter McCormack: There's big moves.  This week alone we have Mastercard announcing that they're going to support cryptocurrencies and Bitcoin, we have the FDIC Chairman saying he's going to make it easier for banks.  These are two huge stories.

Lawrence Lepard: Huge stories, yes.  You've got big organisations embracing it.  Rick Rieder at BlackRock, there's no more connected money management firm that BlackRock, probably the largest in the world, right, and the guys who runs the place is saying he's in favour of Bitcoin.

Peter McCormack: Larry Fink?

Lawrence Lepard: Yeah, I don't know about Larry Fink, but I know Rick Rieder, the next guy down, he doesn't run the place, he's like number two.

Peter McCormack: Okay.

Lawrence Lepard: Fidelity is there, Goldman's there, a lot of other people are there.  It's kind of obvious and it's kind of inevitable in my opinion, but it'll take time.  It's like any new idea, it takes time to be adopted, but everyone who gets involved then they become another spreader of the orange pill to their group of friends and it kind of keeps rolling.  It's exciting, it's fun to be involved with it.  As I say again, I was in the internet in 1995, and this feels exactly the same.

I had people who were very sceptical saying, "Oh that thing, I don't believe in the internet.  Why are you investing in that?  That's not going to work".  I was like, "I don't know guys, I know you've got to put your phone on a modem and wait for the dial up, but I think this thing's going to work and it's not always going to be that clunky and slow.  This is not going to be CompuServe forever, this isn't going to be AOL forever, they are going to make it better right", and that's what's going on here.  Every problem that's out there is getting worked on and getting solved, key management, security, etc.

Peter McCormack: So, it's a peaceful revolution.  It's funny, I've been spending some time down in Texas and I'm not a gun nut, I've shot a gun once in the UK, which is a shotgun.

Lawrence Lepard: Right, sure.

Peter McCormack: Clay pigeon shooting and every time I go out to Texas my friends are like, "Come on, let's go and shoot guns", and I do and I enjoy it.  Then we have the debate and they say, "You need the guns", I was like, "Why do we need the guns?"  It's a tyrannical government, we had them in 1776.  We got rid of you after you tried to give us the tax on our tea, and we need them if our government becomes tyrannical.  My view is like, "I think it already is tyrannical".  New York is a different place than what it used to be, California is.

I was like, "When do you pull your guns out?"  But I actually think you don't need your guns, because you have Bitcoin.  Bitcoin is now your defence against a tyrannical government.

Lawrence Lepard: Well, that's right.

Peter McCormack: That's what we should be communicating to people, and let them understand.

Lawrence Lepard: Yeah, that is exactly right.  The money is the health of the state.  The money is broken, it is broken from our point of view because they're screwing us.  It's working perfectly from their point of view.  So, in my speech in New Orleans, as I said, you want to argue and fight, you want to push back, you want to have a revolution without guns, buy Bitcoin, buy gold, buy silver because when we take away their ability to print money, when we say, "Hey government--"  I mean, it's the ultimate vote of no confidence. 

Everyone thinks the voting system's broken, the election's rigged, who knows, I don't want to go there but the point is this is the vote, this is the vote that counts.  Where are you going to put your savings?  If everybody in this country starts putting their IRAs, and goes into savings…  One thing actually that is terrible that's been happening, a bunch of terrible things have been going on with the government recently, this notion of $600 reporting, what's that all about?

You can tell they're getting desperate, they're trying to figure out more stuff and they've also talked about trying to restrict these self-directed IRAs and a lot of people are using those to opt out of the Fidelitys of the world, because they want to put their money in gold or Bitcoin or something else, and Fidelity won't let them.   This is the way we fight back.

Peter McCormack: There's a great tweet recently that somebody put out, I think I mentioned it before on the show where they said, "The government can lose trillions of dollars. but they want to know why I spend over $600".

Lawrence Lepard: Yeah, right.

Peter McCormack: Come on!

Lawrence Lepard: Yeah, exactly.  Once again, this all falls into the bucket of the emperor protesting and the more we put heat on them the more they will protest and the more absurd their behaviour will become, and then more and more people will go, "This is ridiculous and I'm bailing out of here".  I think a comment -- this reminds me of a situation when I was a kid.  My family was moderately anti-war in the Vietnam War, we didn't really fully understand, I mean I was a young kid and I was looking at having a number and having a go.  But I'll never forget when Kent State went down, my father looked at me and he just said, "That's it, war's over".

Peter McCormack: What's Kent State?

Lawrence Lepard: The murder in Kent State.  In Kent State in 1970, the national guard was out on the quad and a bunch of students were out there, anti-war protestors were out there protesting.  That's what Neil Young wrote the song "Ohio" about.  Four students were killed, and the national guard took the rifles down and shot and killed four students.  It's really sad, but when that happened my father said to me, he said, "That's it, war's over".  He said, "There's no way this government is going to allow this war to go on.  If we've got national guardsman killing students on colleges, there's your tipping point.  And, that's going to happen somewhere monetarily and people are just going to go, "Shit, it's over".

Peter McCormack: Is that the protest the one there was a film I saw recently.

Lawrence Lepard: Yeah, there have been some documentaries on it, they're very good.

Peter McCormack: A little bit emotional there.

Lawrence Lepard: Yeah, I did.  It's just a sad episode.  I think of all the things the government has done and the pain and suffering it's caused and the lives lost.  I went to Vietnam two or three years ago.

Peter McCormack: I was there two or three years ago.

Lawrence Lepard: I was even more than that, probably five or six years ago, but I went to Vietnam, and a lot of people there weren't particularly friendly, and I get it.  3 million Vietnamese died and yet Henry Kissinger walks around New York and he's free.  To fight communism, really?  Was that a good thing?  I think people have to think a little bit about what these nation states are capable of doing in our name.  Yeah, I feel pretty strongly about the fact that it's incumbent upon those of us who are moral and care and are in a position to do so that we push back hard on this stuff.

Peter McCormack: I feel the same about Iraq.

Lawrence Lepard: Right.

Peter McCormack: Vietnam's before my time, I only know it from Platoon and what my father told me and I barely remember the first Iraq war, but the second Iraq war, we had some of the largest protests ever in the UK and my brother protested.  We had people resign from government and we know now that Blair and Bush lied and took us into a war.

Lawrence Lepard: Absolutely.

Peter McCormack: 1.5 million dead, a region destabilised.  What are they doing?  Blair's getting speaking fees, and does he work at the UN?  Fuck knows, I mean fuck that guy.

Lawrence Lepard: Right.

Peter McCormack: We know what happened, we saw it happen in front of us.

Lawrence Lepard: Halliburton did extremely well.

Peter McCormack: Of course he did.

Lawrence Lepard: You know what, we were able to finance it and guess what, as Vice President Cheney said, "Deficits don't matter".  That's the stuff, I mean the Kelton line, "These deficits don't matter", and all of these people are driving in the rear-view mirror.  History is going to be so unkind to so many of the people that have done what they have done in the last 20 or 30 years.  It's going to be incredibly unkind, and rightly so.

Peter McCormack: Rightly so.

Lawrence Lepard: Rightly so in my opinion.  The person you were talking about, other leaders here, the Fed, etc.  Our grandkids are going to say, "What were those people thinking that they let an unelected bunch of people grab control of the money supply and create the largest bubble of the world which when it burst, created enormous economic pain".  That goes back to your earlier point that a lot of people are going to get hurt in this.  They really are and it's very, very sad, but I'm not a central banker, I didn't set the system up.  I'm just one man looking at it from my point of view and just trying to protect my family and my investors and other Americans by doing what I think makes the most sense in light of the circumstances.

We all have good and evil in us, so I'm not even sure -- some of them are obviously very evil, the Epstein's of the world, but the point is a lot of these other people, they're probably just misguided, they just don't know any better.  Krugman strikes me as just kind of a goofy idiot.  He got the Nobel Prize, but I'm not sure he's evil, I just don't think he's very smart.

Peter McCormack: I just consider it a bad organism.

Lawrence Lepard: Yeah.

Peter McCormack: With misaligned incentives.

Lawrence Lepard: That's right.

Peter McCormack: I think that's why we need the checks and balances and that's why we need sound money.  The maths doesn't lie, that's the beauty of the whole thing.  Human beings we're all flawed, we're all capable of cheating, we're all capable of doing things that aren't right, but if you've got something based on technology and maths that is immutable, it's a pretty important thing.  I've said in my papers, I've said it in my speech, I do think it's probably the most important invention in world history.  I mean, the printing press and a lot of other things that we invented before, were at the time the most important invention.

I think this one's going to really rock the world and then I'm extremely optimistic on the longer term, but I do worry a lot about what the next five or ten years are going to look like.  I'm sure you've read the Fourth Turning.

Peter McCormack: I have.  I did an interview with Brandon Quittem about it.

Lawrence Lepard: There you go, and things are coming to a head, things are happening more quickly now.  So what's going to happen when Bitcoin's at $250,000, which it will be at some point?  The monetary fire alarm is going off now, it's going to be going nuts when Bitcoin's at $250,000.

Peter McCormack: Yeah, my only worry about that is the people who see that and are bitter and become anti-Bitcoin because they're bitter about it, rather than seeing it's something they should be part of and understand the benefits of it.

Lawrence Lepard: I get it, and everyone buys at the price that they deserve.  It's a system that makes sense, it's a sound money system that makes sense and I know in my case, I have a lot of people say, "Gosh, I missed it, I should have bought it at $10,000; it's at $50,000 or $60,000, I can't buy it now".

Peter McCormack: You know the answer to that?

Lawrence Lepard: What?

Peter McCormack: I'm not selling.

Lawrence Lepard: Yeah, exactly.  Well that's our answer to it, but I think it's hard for people to reframe it and understand that if it's the best savings system in the world, forget the price.  Why wouldn't you just want to save in those terms.  What's going to make it go the other way?  I can't really see anything.

Peter McCormack: Buy a little bit.

Lawrence Lepard: Exactly.

Peter McCormack: Buy a little bit, just get started.

Lawrence Lepard: That is exactly right.

Peter McCormack: Once you get them to buy a little bit, once you show them a transaction and say, "That just happened without any intermediary".

Lawrence Lepard: Right.

Peter McCormack: The economic policy, the monetary policy is fixed.

Lawrence Lepard: Right.

Peter McCormack: Go and listen to this podcast.  You can buy a bit and listen to one podcast, they're off.  You've just got to sow that kick start.

Lawrence Lepard: Yeah, no that's right and more and more people will do it and people say, "Well, it's hard to do it" and, "How's this thing going to support 6 billion people?"  Well, that's where Lightning and all these other layers that are built on top of it are going to make it much more efficient and easy to do transactions and so on and so forth.  One of the other great concerns some people had as well, what happens when we run out of new coins?  It's obviously quite some time off, but then the fees will cover it.  Saife has done a good job about talking about how the math will change to allow the fees to pay for it, the electricity costs.

Peter McCormack: Everything seems to work out just fine for Bitcoin.

Lawrence Lepard: It does.

Peter McCormack: It's so beautifully designed.

Lawrence Lepard: It really is, as you dig into it and you think about, I mean who invented this difficulty adjustment; who thought of the halving process?  The group that designed this, I think Hal Finney is clearly either Satoshi or was very close to Satoshi and the whole process.  These guys were really smart, because there have been a lot of guys trying to figure out a way to create digital gold pre-Bitcoin, but there was always a missing piece.  There was always some kind of missing piece and when they got the proof of work and they got the algorithm and they got the adjustment and they got the halving, suddenly it all kind of came together and coalesced and here we are.  It's really kind of early days, in my view.  In ten years, everyone will think this was obvious.

Peter McCormack: Yeah.  Listen, it's been great to talk to you.

Lawrence Lepard: Likewise.

Peter McCormack: Is there anything we didn't cover?

Lawrence Lepard: Not that I can think of, I think we hit most of the highlights.  Happy to fill in other stuff if you can think of it after the fact.

Peter McCormack: What we'll do is, people who've seen this, these documents, we'ss share them in the show notes so people read them.  It was a fascinating read for me.  We can always do this again, I'm going to be back.  I'm sure we could talk about a lot more in the future.  I think who you would be great to sit down with is Greg Foss, I think you and him together.

Lawrence Lepard: I love Greg, he's a good friend, yeah.  So, he and I were in New Hampshire at this sound money thing, or at this thing and, yeah, I know Greg is fabulous.  He's kind of my generation.  In fact I quoted him in the speech.  He said this line and it hit me like a thunderbolt where he said, "Bitcoin is a CDS on sovereign currency", it's a credit default swap; it is, that's exactly what it is!

It's the most asymmetric trade in the history of the world.  I mean, these things are going to be worth tens of millions of dollars per coin.  Having one coin is going to be a big deal.  It's going to be a really, really big deal.

Peter McCormack: Those guys with a few thousand, they're going to have some fun.

Lawrence Lepard: Yeah, I've got some great stories on that, Luke Gromen has a friend who was a miner who's a famous name, I can't remember it now; he had 10,000 coins.  He's a billionaire.

Peter McCormack: Yeah.

Lawrence Lepard: Then, you'll like this, so I was involved with the Ron Paul project in the early days.  There's a person up in the Ron Paul group who, she didn't make a lot of money, she's a secretary.  But somebody told her about Bitcoin and sound money and so on and so forth and so when it was $2 or $5 she picked up 200 coins.

Peter McCormack: Nice, lucky for her.

Lawrence Lepard: I think she still has them.

Peter McCormack: Great, even better.

Lawrence Lepard: How great is that?

Peter McCormack: Yeah, I think back and think what I should have done and what I didn't do.

Lawrence Lepard: We all feel like we don't earn enough, right, and I bought a lot at $3,800 when it dipped to $3,500 and I was like, "Why didn't I buy more?  I had it, I could have".

Peter McCormack: It's funny we all think that but then we don't want to spend it, so it's a really interesting position to be in, but we did discover it and we have this opportunity, you with your writing, me with this, to try and spread this message and I want a lot more people to get in.

Lawrence Lepard: That's the thing, I mean sound money will improve the world.

Peter McCormack: Yeah.

Lawrence Lepard: Bitcoin is a form of sound money.  Gold is too.

Peter McCormack: Yeah, gold is too.  Listen, Larry, if people want to read your work or follow you, how do they follow you?

Lawrence Lepard: Yeah, so there are really two ways.  We put a lot of this up on the web, we do a quarterly letter.  This is all free, talks about how we see conditions and how we're managing our fund and we manage a fund which people can join if they're qualified.  All this information's on my website.  It's ema2.com for Equity Management Associates.  Then, I'm kind of a loud mouth on Twitter, which is probably how I got here, so if you go to Twitter and you put in my full name, my formal name, @lawrencelepard just as one word, you'll see me on Twitter and I try and contribute on a regular basis.  All sound money, that's what I care about.

Peter McCormack: I really appreciate this.

Lawrence Lepard: Thank you, I've enjoyed it very much.  It's been fun.

Peter McCormack: Hopefully, we'll do it again sometime next year.

Lawrence Lepard: Anytime, happy to do it, Peter.

Peter McCormack: Take care, bye.