Episode Transcript
[00:00:00] Speaker A: In this episode, we take a look at some of the more intriguing things in the book. Talking to my daughter about the A Brief History of Capitalism.
Hello, welcome to the Call Like I See it podcast. I'm James Keys and joining me today is a man who's so good on screen, we've been looking for ways to to have him play not one, but two roles on the show. Tunde, Ogalana Tunde. You ready to show the way today for all the sinners?
[00:00:39] Speaker B: Yeah, man. Jesus, I didn't realize I was such a movie star.
[00:00:44] Speaker A: Yeah, man. We gotta have you play yourself and then you play your twin also.
[00:00:48] Speaker B: Oh, that's a lot. Do I get paid twice?
[00:00:51] Speaker A: That's what I'm saying. We'll have a third screen, It'll be a three person show and you'll be responsible.
[00:00:57] Speaker B: I wasn't sure what type of economy we were talking about here. I gotta do it three times, but only get paid once. But if I get paid three times.
[00:01:04] Speaker A: That'S the kind that the capitalists like to set up.
[00:01:06] Speaker B: Yeah. And so we're good. Maybe we can leverage it and I could like doing it right seven times. So as a whole. Nother conversation.
[00:01:14] Speaker A: Yeah, yeah. So now before we get started, if you enjoy the show, I ask that you subscribe like the show on YouTube or your podcast app. Doing so really helps the show out. Now we're recording on April 29, 2025 and we continue our culture series today by doing some reading between the lines in the book Talking to My Daughter about the Economy, which is alternatively titled How Capitalism Works and How It Fails. The book was first published in 2013 and in it author Yannis Varoufakis details the rise of market societies and how things like money and the profit motive came to be, and also discusses the mechanics behind the rise of capitalism in our societies over time and how this rise in capitalism has supercharged societies in both some good ways and also some risky and unsustainable ways. Now for the show, we're not trying to do a book report and cover all the information laid out in the book. And I would definitely say it's worth checking it out in its entirety. We're not going to really focus on an explanation on why. He discusses why there's so much inequality. Something like that, which was very insightful. Or the difference between exchange value and experiential value, which also. And how that shapes modern society, which was also very valuable. But those sections are fascinating in their own right. But what we did want to discuss, one of the first Things we wanted to talk about is Tunde, you know, like, now the author lays out the idea of the profit motive, which is something I think that in modern societies we pretty much take for granted. But Varoufakis contends in the book that profit motive as a reason to do something, do anything, even productive things, is kind of a new development in societies and so forth. So what were your thoughts on this premise that the profit motive was something that was recently invented, so to speak?
[00:02:54] Speaker B: Yeah, I think it was a great, great explanation that he gave because I think it's a good point that the idea of profit, especially when I think of it, is just kind of peeling a little bit of something off the top. And the idea of creating more than.
[00:03:10] Speaker A: You or getting back more than what you actually needed, you know.
[00:03:14] Speaker B: Yeah. And. Well, and I think the way to define it is, is very interesting because I used, before reading this book, I would have thought of profit and let's say wealth being a little bit more connected than the way he breaks them apart in this, where we're going in this conversation. And so the thought might. Would have had it, okay, well, King Tut was a wealthy guy, right. They found his tomb with a bunch of gold in it. So this idea of.
[00:03:38] Speaker A: So he must have had a profit motive in all that.
[00:03:42] Speaker B: Exactly. There must have been some sort of.
[00:03:43] Speaker A: For the feudal kings in Europe, you know, or feudal kings in China, like that. They must have been thinking about that kind of stuff.
[00:03:50] Speaker B: Yeah, yeah. And so the, the idea. So that's why to me, this book, this part that we're discussing was very good because it broke it down. And I want to get back to something you mentioned in your lead in which was the concept that he, that he brought to bear in the book of exchange value versus experiential value. And I think that's what the prophet, modern prophet, and I would say the modern capitalist system that we're under, which is different than other systems like you just mentioned, feudalism, that's another ism, that's another way of organizing society, people organizing.
[00:04:30] Speaker A: All that kind of stuff.
[00:04:31] Speaker B: And what I found fascinating, James, was he got to this idea of capitalism in its modern form through a story he told about the Faustian bargain, which is a famous story which people can go look up. Many people heard of it and those that haven't, you know, it is an interesting story. But what he got into was the first iteration, which was in the early 16th century, versus then the second time it was reproduced by a different author a hundred years later at the end of the 16th century. And he contrasts the way this story changed over that century as a backdrop of his explanation of really that century. Representing, I would say this, this would be my words in interpreting it, because we're talking about things that were happening, let's say, in Europe, going from the feudal period where the lords and the kings and the kind of that structure was dominant, to a hundred years later, the real seeds of capitalism. And what you're getting at, James, is the idea of profit in the modern form. And that came about through several things.
[00:05:41] Speaker A: Well, let me jump in real quick because I want to throw some bones on this, because the thing that go, really the way he explains it, I think is very good, because what he ties it to is the idea of debt, which contributes to what you're talking about, the story of the Faustian bargain at a time when debt was looked at in one way in society, because that's the whole thing, is that the guy sold his soul to the devil for a certain amount of time of pleasure and having anything he wants. And so that's a story about debt. And when it was initially told the initial author, debt was very frowned upon at that time in society. It was illegal, and it's still illegal in Islam, and it was illegal in Christian Christianity, you know, doing this, charging interest at least on debt and so forth, that usury, you know. And so the idea of debt was very much frowned upon him in society, capitalism. And where it really started to explode was with the use of debt in capitalism. He calls it the great reversal. Debt is the beginning of the production process, as opposed to, you know, is something that. That may happen, oh, I need to eat or something like that. And the explanation is that in order to start a business, in order to. To. To buy your equipment or your machinery or the, the capital things that you need in order to produce other stuff that you're then going to sell, you need to incur debt. And so with that, because debt is the beginning of the process. And then you're working then to sell all this stuff, you. That creates this profit motive at the end because you have to pay back the debts, then you have to earn a little more, and then you can reinvest that, or you can pull or you can pull that out and so forth. So this reversal, where debt then becomes the initiator of productivity, then necessarily creates this profit motive then, because that's the initial. If you want to start a business, you got to start debt or you got to have debt. If you want to expand your business a lot of times that requires debt. And so then, Because. And so, as a result, you're talking about this Faustian bargain, when the story is later told, was retold again by a different author at a later time in society. The idea of debt, at least in that part of the world, was not frowned upon to that same degree. And so the story, the ending of the story was changed to work with the sensibilities of the culture at that time versus when the story was originally told. So it was really fascinating how you could illustrate how society changed and looked at something like debt very differently. And again, debt being going hand in hand with the profit motive. And you can illustrate that through the telling of the same story and how the ending got changed.
[00:08:07] Speaker B: Yeah, well, and I found it because in reading all this, it then struck me that part of the reality over this century that we're talking about where the European, at least kind of the Western European part of the continent, the culture really shifted from feudalism to capitalism. You can think about things like the Dutch East India Company and later followed by the British East India Company being developed around that time. Which. Which represented what? Which was the idea of corporations, the idea of shareholders. And like you said, when limited liability, that was a.
[00:08:44] Speaker A: That was a big introduction there.
[00:08:45] Speaker B: What was that?
[00:08:46] Speaker A: Limited liability, you know.
[00:08:47] Speaker B: Yeah, well, which we'll be able to expand through the acquisition of debt or equity through. Through the corporation and the ability to. And with the technology of naval ships and all that, the ability to really expand, colonize, and begin to bring more things that eventually, a few hundred years later, created the industrial revolution. But back to just this, why I found it so interesting, this piece, because there were two things that were necessary in order for this to really work out. Which one was really in your world, which was contracts. The idea, like you're saying that debt went from sort of a moral obligation and. Yeah, like, he gave the example of like a handshake.
[00:09:28] Speaker A: Right.
[00:09:28] Speaker B: I mean, the idea that I owe you one that same.
[00:09:30] Speaker A: Yeah, yeah, I'll help you is rake your lawn. And then when I need something, some help with something, you know, like, I need you to help me move that block. I'll help you later.
[00:09:37] Speaker B: Yeah, yeah. And that's kind of. So that, to me was like, okay, that's an example of barter. Like, that's always been around in human kind of thing. Right? Just. I think this is like you're saying you want. You know, I got some seashells here. You got some eggs. Let's trade them. That's. That's. But that's different from actually what happened. Once you had a legal contract, then you had an obligation that followed someone, that's one thing. The second thing became interest where you are now paying extra. It's the price of borrowing the money.
[00:10:09] Speaker A: Which like I said, was illegal in certain religion, in major religions up until this point. And I guess it's still.
[00:10:16] Speaker B: And that goes back to going from an exchange, sorry, an experiential value type of meaning the experience of moral, the moral side of a transaction. If James, you and I are neighbors like you said, and I agree to rake your lawn in exchange, you're going to help me for something. There's also a certain moral kind of thing between us, right? If I, if I end up not coming through on you, you can make me look bad in front of the rest of the village, you know, I'm not a trustworthy guy, all that. What happened when it became this interest based on legal contracts and then owing someone money back? It took it from experiential value and became much more of an exchange value proposition. And what also happens is if, if I'm borrowing money from you, James, at a profit, this is what kind of cre became created over time. You can take the note that says, the legal note that says I'm obliged to, to pay you back. You could sell that to someone else. Now I'm, I'm paying the money back to someone else. What happens is we lose that personal experience and it becomes more about the transaction. And then he says it, he says money was usually the root of all these transactions. So to me it was like, okay, he's basically describing the beginning of modern banking and the idea of creating a spread and arbitrage.
[00:11:40] Speaker A: Yeah, it's, it's exactly this change in mentality which again it's hard for us to appreciate absent trying to understand the way things were before. And I think that one of the biggest things, and because I don't want to move to the next topic, but the, the thing about it that one of the big takeaways I had was one like another thing we, we don't conceive of as much is that in that time, in those early days of this transition, debt was a matter could be a matter of like freedom and jail, debtors prisons and so forth. So the idea of needing to earn whatever in order to pay your debt off was the difference between your freedom and not being able to, you know, not being able to walk around, you go to debtors prison and you and your family owe this money until it can be paid back, but because you owe money, you can't, you know, nobody else is going to loan you money to start something. So it was very serious. The idea of, hey, I got to make this money back, and then I also got to have more extra on the top of that to be able to live. And then I got to make, have more on top of that to pay workers if I have it, then I got to have more on top of that to put some money aside. So if the next round, if, if next year, I'm a little short, I got some money saved aside to be able to put that back. So the, the, the stakes were so high. And the other thing is that also when you're trading favors, so to speak, you're not necessarily borrowing. And the borrowing isn't about, I'm going to like, I'm going to take this money you're giving me. It's not like I'm, hey, loan me some money, I'm going to go to the casino and I'll just pay you back when I earn more money at some point in the future. It's like, I'm going to use this money to then make money and then I'm going to give you a piece of that, so to speak. So the arrangement of that was a reordering of the way that money was used because prior to that, and again, these feudal lords had all this wealth that they had and they weren't using that to make more wealth. You know, the way you got more wealth was by plundering or by helping the king out with something and he would bless you with stuff. And so it's a patronage, more society as opposed to, I'm going to put my wealth to work for me, so to speak, to then earn more back. So it was a reordering of the mentalities across the board. And so, you know, I know you have one more thing that you want to get to before we get out.
[00:13:40] Speaker B: But we gotta keep it moving.
[00:13:42] Speaker A: We.
[00:13:42] Speaker B: I find it, no, it's just, I find it fascinating, especially as someone in the wealth management space, this idea that, like, how we think of profit, money, capital is just like you're saying, James, that there was a time when the husband, the human experience was just different and we were motivated by different experiences.
[00:14:00] Speaker A: And all that's the fascinating thing about this, is that it is describing a world that could be on Mars compared to like my own experience.
[00:14:08] Speaker B: But, but, but, but he says, I.
[00:14:10] Speaker A: Want to keep it.
[00:14:10] Speaker B: Well, let me just say this. Well, he described going from a society of Markets to a market society.
[00:14:16] Speaker A: A society with markets. Yeah, to us, a market society. And that goes back to what you were talking about, what you mentioned about experiential value versus exchange value. He calls that the triumph of exchange value. But I do want to keep us moving because. All right, so, you know, like another thing that we look at, and this is something, I think, that touches on us more in our modern society, where it's very. It's something that is not necessarily as intuitive. If you read a lot of economic texts, you know, things that people are saying. And one of the things that he talks about is, and as the reason for writing the book is that the economy is too important to be left to the economist. You know, like the economist, and we've talked about this before, like the economics is not a science like physics, you know, like where, you know, you're running all these tests and you can have controls. And like economics is kind of things happen. We try to explain why it happened, but we can't rerun the scenario. And we change certain things and then see if our theory plays out. And like, oh, yeah, that's exactly what happened, why that happened, and so forth. So some of it is. There is, you know, there are parts of it that you can kind of get a good handle on, but some of it is still kind of untestable. And these are just dogma that we think. And one of those that he kind of took head on was the idea of unemployment in our modern society. And he talks about how, you know, like, the expectation of how things are going to go play such a big role in how things actually go, you know, and it talks about, you know, like kind of the Oedipus, you know, like legends and so forth with that. And one of those. One of the specific things he does is takes a buzzsaw to the idea that unemployment, you know, like the unemployment would go away if wages fall down far enough like that. Unlike for a house, for example, I can always sell my house. You know, like, if I'm. If I want to sell my house for a million dollars, I may or may not be able to do it. But if I want to sell it for $5, I can do it. You know, I can. There is a price I can lower my, My. My house down to and sell it. But with labor, it doesn't necessarily. People try to make it make the same equation, but it doesn't work like that because the biggest reason being is that the wages that labor make are also the mechanism that creates demand for the products and services that this cycle, the recycling, you know, so to speak, as he calls it, and what you call the velocity of money that lowering wages in fact operates to also lower demand. So what did you think on his, on him taking a buzz saw to this idea that the, the price of labor if that when we have unemployment that basically means that the price of labor is too high and we just need to lower the price of labor and then more people will work. Because again, if, but if you do that, then you're reducing demand and so it's self defeating.
[00:16:50] Speaker B: I'll answer you in a second. But as an opportunist, I'm going to call your wife and tell her that I'm going to offer you guys $7.50 for your house.
[00:16:59] Speaker A: So you're going over the $5?
[00:17:01] Speaker B: Yeah, it's a 50% increase of what you told me you're willing to sell it for. So you got it on tape too.
You got a nice four bedroom house in South Florida, man, for $7.50. I'm definitely going to call her and tell her that I' you accept.
I'm feeling so generous that I'm over.
[00:17:21] Speaker A: Here trying to create a contract, man.
[00:17:23] Speaker B: Yeah, exactly.
[00:17:25] Speaker A: You and your exchange values, man.
[00:17:27] Speaker B: Yeah, you know what, I'm trying to.
[00:17:28] Speaker A: Take away my experiential value with my.
[00:17:30] Speaker B: No, but I'll even act as the bank. So you only have to give me a dollar and then I'll lend you this dollar six and fifty cents and then I'll charge you interest on it. So I'll just make it a whole ecosystem for myself. So.
But, but no. So this was another great, great part of the book in this discussion. I think you're right. So he used a term called unem deniers. Yeah, you know, I guess for the class of people who believe that, who don't believe in things like minimum wage, kind of. That's the way I understood it broadly.
[00:18:01] Speaker A: But generally speaking, the people that present the argument that when people say hey, we should raise the minimum wage, they're like no, no, no, that'll cost jobs. Or that hey, we should lower wage, lower downward pressure on wages will create more jobs because then employers will have more, can hire more for the same dollar. But you know, again, what he points out is that they are not anticipating or they're either ignoring, willfully ignoring or whatever that those say the people making less money means there's going to be less demand, there's going to be people buying less in the system.
[00:18:31] Speaker B: Yeah, well, and that's kind of you know where we're going, right? It's, it's, it's. Look, these are ideologies and ideas and like you said about economics, it's not something like physics where you have, you know, the scientific method can do empirical studies and you can have all these control groups and factor for this and that. And he gets into that a little bit too, which is again, labor and money both have more experiential than exchange value in many ways. And I think that to me is the whole left brain, right brain thing of some of this stuff where think about the concept, and I'll just go on a quick tangent here, something like trickle down economics, right? The idea that just cutting taxes will just make everything better somehow and not create all these deficits because you're going to grow your way out of these deficits by all this growth and then you'll have more taxes. But what happens when you have a recession and you don't have growth and all these taxes but you still doing trickle down economics? And so we have almost 50 year history of that to show that it did work in some ways and in other ways it didn't work. Right?
[00:19:38] Speaker A: I mean, I can't say in any way that it worked.
[00:19:40] Speaker B: Yeah, well, I'm just saying it did produce a lot of growth, but it produced a lot of other side effects that we tend to think are negative right now, like a bunch of debt and all that.
[00:19:47] Speaker A: But you say that it produced the growth. You know, again, that's the way we can't then keep everything else the same and then change that one factor and then say like again, the premise that you can grow your way out of deficits did not work.
[00:20:00] Speaker B: You know, there you go. That's all I'm going to say is that's why that was a tangent. And therein lies the point that this is not physics, right? Everyone's gonna have an opinion, so.
[00:20:08] Speaker A: Well, it's not an opinion. It did not work to reduce the deficits. The deficits increased year over year. You go from a time when there were small deficits, a small government debt in 1980, it's steadily increased since then. That's my point.
[00:20:21] Speaker B: I'm not saying it did. That's my point of saying that it created. That was one of the negative side effects I mentioned, is it balloon deficits.
[00:20:28] Speaker A: But that was the premise of what I'm saying. The premise was that you could cut those tax, cut the revenue, cut the taxes, and then because the growth would be so high that you would not grow the deficit. I'M saying that premise failed because the deficit immediately grew. And then they raised the tax. You know, remember, they doubled the Social Security tax right after that and doubled the Medicare tax right after that. So they cut the income tax. We shouldn't go down.
[00:20:52] Speaker B: Get you back on the topic. I just used it as an example.
[00:20:56] Speaker A: I could not allow that. I had the same.
[00:20:58] Speaker B: I couldn't resist. But let me, let me finish because you kind of proved my point in that sense, which is just like that was sold in one way, but the results happen a different way. That's kind of where I was getting at with the unemployment deniers. The idea, and you were saying it too, the idea is that people are sometimes trying to sell this ideology that, hey, if, if you don't have a minimum wage, if you allow, you know, all these workers to compete and sell their labor at the lowest cost, you'll never have any unemployment. And to your point, and the point we're making is he blows holes on that in the book. And then I started thinking about reality, right? Like, prior to a minimum wage in the United States, we had extreme poverty all over the place. It's not like there was massive employment and unemployment. Was that 1%.
[00:21:43] Speaker A: Well, what it does, though, this is the trick that I think that you have to read between the lines to get. What it does is it puts the blame for like what the unemployment deniers do is put the blame for the unemployment on the workers because you won't work for a low enough dollar that that's why things didn't work out the way that I said that it would work out. But what he's pointing out is that fundamentally their premise is flawed because workers are the source of the demand. And he kind of jokes about it. And I know this is kind of similar jokes that you've told. It's like, well, actually, so business owners is walking around thinking like, well, actually I'd like to lower the, the wage for all my workers and have everybody else still pay their workers the same or everybody else pay their workers more.
[00:22:29] Speaker B: Because then all those people can buy.
[00:22:31] Speaker A: My stuff, my workers can't afford my stuff. Like, this isn't new stuff. This is kind of how the. When certain people have gotten into kind of try to take over academia or something like that, then they will then start just saying stuff that doesn't make sense. Like, Henry Ford knew 100 years ago, hundred years ago, Henry Ford knew I got to pay my employees enough so that they can buy my car so that then I can sell more cars like this Isn't a new concept that you want your workers to make enough money to then be the demand in society? A few rich people at the top. Another premise of the trickle down was that the rich people at the top would, would up their spending if we cut their taxes, so much so that it would create all this growth. They buy a bunch of yachts and all this other stuff. But it doesn't make up for the fact that the lower group, that the lower 80 or 90% of the people are the ones that really drive demand. So if you want to, if you really want to create growth, those are the people who need more money in their pocket, not, you know, the top 1% or something like that, because there's.
[00:23:27] Speaker B: Just not enough of it. You know, let me just tell you. But let me tell you for the audience. Did the proof in what you're saying is the recent stimuluses of the last five, six years seriously go give everybody bucks, grow? Yeah. The $1.7 trillion meaning. And that's under two separate administrations from two separate parties. What I'm saying is that's the proof, like you're saying is that and things like Social Security and all that stuff, meaning people without a lot of capital already, once they get money, they spend it.
[00:23:57] Speaker A: They spend all their money.
[00:23:58] Speaker B: Yeah.
[00:23:58] Speaker A: With a lot of money already get it. They don't necessarily spend it.
[00:24:02] Speaker B: Correct. So guys like me that have a boat, if you give me a bunch more money, I can't buy three or four boats. I mean, I guess I could.
[00:24:08] Speaker A: You could. It doesn't make sense of the trickle down thing. And it's like, no, that doesn't make any sense, but go ahead.
[00:24:12] Speaker B: But it doesn't make sense. Right. Like, like I only have, you know, the ability to go on boat so many times in my day. Right.
[00:24:18] Speaker A: Or my life experiential value limits you on how much boating.
[00:24:22] Speaker B: So at some point my money just stacks up and maybe, you know, people at brokerage firms and banks do well when that money's sitting with them, but that's a much smaller slice of this society than those getting, let's say, Social Security checks. So. And again, in saying all this, I'm not advocating, you know, I want to be clear that, you know, I'm not sitting here advocating for communism or some strong style of socialism. The idea is that there's a healthy equilibrium within an economic structure. And that's what this book is getting at, is that in order to maintain certain, certain health and like you're saying, James, to have a population that can Afford to buy things at the store that's there. You do need to have a floor on wages, period. And it's been proven.
[00:25:03] Speaker A: And you probably should raise that floor from time to time.
[00:25:06] Speaker B: Yeah. To maybe keep pace with inflation. And that's a good point, James, and maybe finish on this because I think about this a lot in recent years. Everybody's complained about the inflation over the last three, four years, which is fine. We all feel it, we all know it.
But you know, there is something to be said that as a society, we have not advocated for raising the minimum wage since 2010. It's 2025 today, and the minimum wage in this country is still $7.50, so which equates to about 15,000 a year for someone working 40 hours a week for 52 weeks a year. So again, we all on one side say one thing, that it's unaffordable, housing's unaffordable, all that. But then we don't advocate for actually policies in place that could help people at the bottom get a little bit more of a leg up.
[00:25:55] Speaker A: And the concern obviously, with the minimum wage, a lot of times people say, oh, well, that's inflationary, because if businesses have to pay their workers more, they're going to have to raise their prices and so forth. But the point being is that this is one mechanism that is used with, in concert with other mechanisms, because you can. Also, housing is very expensive, not necessarily because of inflationary, because builders are making more money. It's because our supply hasn't been growing at the pace that it should have been growing. So if you grow the supply, even if the construction workers make a little more, if you grow the supply of housing, that won't necessarily feed the inflation. So there are other levers that can be pulled to control the inflation, like inflation might, because the Fed has been printing money for 15 years nonstop.
[00:26:37] Speaker B: You know, this is why.
[00:26:39] Speaker A: But this is why.
[00:26:41] Speaker B: Let me just finish on this point, because it's very good that you said that. I just want to say this for the audience. Why it's not a science. Because one of the lurking things that is unseen in what you said, why, is why is supply of housing been kind of limited in recent years, is because the individual like you and I and everyone listening has had to compete with private equity firms for the last 15 years.
[00:27:01] Speaker A: Well, that. And they've just kind of been building at a fast enough pace also.
[00:27:04] Speaker B: Yeah, but that's what I'm saying is a part of it is decisions made from those who can make policy and regulation within the economy. And that's why it's not a science, because you got this human element that can always pull these levers.
[00:27:16] Speaker A: So the other point I wanted to make on this, and my point, I mean, you kind of laid out with like, my reason for, for kind of wanting to emphasize this stuff is that I think that it's very dangerous for people. There are a lot of people that have kind of a dogma in their mind as far as all of these immutable truths about the economy. And I don't think that those are really. That a lot of those are false, basically. I think that. I don't think that a lot of people are holding on to things that are absolutely true and they think they're absolutely true, but they're not necessarily true. And so it's. There's. It's kind of. It's complicated. And if you want to try to simplify it so much or try to say like it's a science, like physics, then you're actually selling everybody short. And I think that's by design to some degree, you know, because if you convince everybody that having everything a certain way and that works out for you really well, then that kind of might be what you want to do. And so. But I think that we got to remember.
[00:28:06] Speaker B: No, I was just. I'm smiling because I would say I'm about to go 30,000ft on you and say, don't forget what happened when the first two humans ate from the tree of knowledge. Right, you're right.
[00:28:15] Speaker A: Of course.
[00:28:15] Speaker B: People don't want people to know things.
[00:28:18] Speaker A: Well, no, I mean outside the box. But the point I wanted to get to, though was where we have a danger in our modern society with this because wages haven't kept up. But it's like, well, we still got all this demand. Why do we still have all this demand? Well, I just sent you something the other day talking about how personal debt, you know, like people are buying groceries now using, you know, personal credit cards.
[00:28:38] Speaker B: To pay deficit the way that we.
[00:28:41] Speaker A: Have over the last. Like when you have the hollowing out of the American manufacturing class and you got automation and all this stuff all taking away all these jobs, lowering the standard of living for all these Americans. Well, how does America still have this big demand where China loves selling us stuff and all these countries love getting their products into this market? The reason why is because although American, the citizenry of America, their wages haven't necessarily kept up. What's been made available to them since, like the 80s is a lot of Personal debt. And so, you know, whether it be student loan debt, credit card debt, all that stuff. So basically, the bankers are eating more, you know, off of us, you know, so we got to be very careful. That's not a given. Like it shouldn't be necessarily, if we have a situation where the 80%, 90% of population need to use personal debt to make it through society, to make it through just a normal life, not like they're out here doing personal debt to take, you know, specific vacations or something like that, but just, you know, I got to go buy groceries, I got to do this and that, and my salary and my wages aren't keeping up, so I got to start using cards, credit cards for this. That's a fundamental breakdown in the system, but it's a fundamental breakdown that benefits a certain class of people. And so tying this together, it's like, okay, yeah, of course, if unemployment, or, excuse me, if wages haven't kept up in this misguided thinking that if we just keep the wages low, more people can work, then in order to maintain the demand, now we got all this personal debt, too. So people are not only not getting the money they should be getting in order for our society to be healthy, but now they're. They're. They're making Faustian bargains with the bank, you know, about all this debt also. So, again, it's. It's really. It's a difficult situation that we've allowed ourselves to be put in because of all of this dogma that people walk around with. And so it's good to see laying this stuff out, laying out facts in terms of how this stuff actually isn't necessarily the way that you think. Yeah. You know, the last.
[00:30:28] Speaker B: Fascinating man.
[00:30:29] Speaker A: Say what now?
[00:30:31] Speaker B: I just said it's fascinating. That's why me. It struck out, like, the racial stuff, like. Like we have these constructs and they're just, you know, that's why I love In Sapiens the idea of the imagined order. This is all imagined order stuff. So, yes, it's just interesting to see it now from this book. That's why it's a great book to read from an economic lens, you know, versus other parts of our cultures and societies.
[00:30:56] Speaker A: No, for sure, for sure. So the last piece that I wanted to get to. And again, this is not meant to give a total representation of the book, but it was. He had a discussion on crypto and, you know, like the, The. I think. I think he laid the. Laid it out well in the sense that this. He laid out the issues and the concerns and the problems with having a political money system. You have your monetary system, meaning interest rates, the supply of money and all that, which in the US is the Federal Reserve, but all countries or all currencies have these central banks. And the concern that people have expressed for a long time, even back to the times of kings and all that, which I guess we may be returning to the times of kings, but that people were concerned about politics and the political system infesting the monetary policy and how much money's in the system. Is your king going to flood the market with currency and devalue everything or things like that?
One of the solutions to this historically was the gold standard, and we've seen even people pushing for that now. And one of the modern solutions, which everybody's heard of was Bitcoin, is like, okay, we have this thing that's managed outside of politics. You know, the supply of it is managed outside of politics. The transactions are managed outside of politics. And so the idea being that, hey, we can solve this problem. We can have money that is not beholden to the political leaders in politics. And. But he points out, you know, while he points out this is something that is understandable, an understandable impulse, and you know, that it has some benefits, that there also are some costs with it. So what, what really stood out to you in this section? You know, talking about the, the kind of. The pros and the cons or the, the kind of risks that crypto may or may not be able to help us deal with.
[00:32:42] Speaker B: Yeah. So again, another great part of the book. So again, for those that feel like it, definitely read it. So first thing is, money is political. That's what I got out of this section and everything we've set up to this point, I think kind of is in line with that because at the end of the day, money is the tool that, you know, we use for exchange and experiential value in our society. So that means that our opinions. And this is why, again, this economics can't be a science because you got too much of this human element. And so the idea is money is always going to be political because the money directs who get, like you said, who gets access to what resources in a society. Money is used. Think about the weaponization of ideas like emergency management response or things like that that people worry about. So that all has to do with allocation of money to different pockets of society. And like you said, James, some societies will be a little bit more based on a system and rule of law of how that's done. Others might be patronage and fealty and who was good or not to said leader within the society gets repatriated. So that's why it's political, because it just, it's about people.
[00:34:01] Speaker A: Well, but, but more specifically though, because you know, in this section, really looking at kind of the, not necessarily how money's spent, but the supply of money, like controls on the supply of money. Whether that's that. But let me, let me continue because whether that is actually something, you know, like does. When, when the supply of money, for example, was fixed to the gold standard, that was an attempt to keep politicians from increasing the supply of money which devalues everybody else's money. And so therefore create a system that is less, has less control of political figures of how much money is in the system, because how much money in the system it controls the value of money, because. And one of the interesting examples was the, that he gave was how markets can develop spontaneously. And he talked about in prison camps in World War II. And I'm not going to go through the whole story, but it illustrated how in that scenario they did have like an apolitical money because the Red Cross was sending supplies and then the prisoners basically were using those supplies to barter. And they ended up, eventually they ended up having cigarettes become the, the, the currency then. So you could buy coffee with cigarettes, you could buy chocolate with cigarettes and so, and so forth. And so.
But because the Red Cross didn't know this was happening, they were just supplying X amount each month. The money was apolitical. How the supply of cigarettes was apolitical. And so with what he talks about, though, and which I found to be very, very, very fascinating from the crypto standpoint. Like the, the crypto touts itself as being out of control. Like, more similar to this prison, this, this World War II prison example for, you know, for soldiers, you know, but because the supply of crypto can't be manipulated and you know, in terms of Bitcoin, for example, it's set by the algorithm. It's going to grow to a certain amount and then that's it. But he points out that the ability to increase or decrease the supply of money is very helpful for managing a society and managing a market society. And that in the sense that, and he specifically said his quote was having a setup like that makes a crisis more likely to happen because of its deflationary effects. You know, eventually things will, because the money supply is fixed while the quantity of things continues to grow, then the price of things will, you know, like, you lose that basically it's deflationary. The price will keep going down, which means wages will keep going down and so forth. And then also it makes it harder to alleviate crises. Crises, when they hit, because you can't. What has been learned from the Great Depression. In the Great Depression, because you had the gold standard when the crisis hit, governments weren't able to print more money to help get out of the crisis until Britain and then FDR eventually took us off the gold standard for that purpose. Well, crypto, you can't do that. You know, Bitcoin, you can't. If a crisis hits, you can't increase the supply so that you can then help help the society grow itself out of the chaos. Which is literally what was done with the great financial crisis and is done. Was done with the pandemic. Like that is a way to.
[00:36:55] Speaker B: Well, it's basically Keynesian economics. I mean.
[00:36:58] Speaker A: Yeah, well, that was the lesson that was learned in the Great Depression. Like, oh, you have to be able to increase the supply of money when this happens, and that'll mitigate or kind of alleviate the crisis. So he makes that point that it again makes. It makes the crises more likely because of the deflationary effects and what that'll do to wages and then also harder to alleviate.
[00:37:15] Speaker B: So here's. So there's a couple of things I want to follow on that. One is I want to quickly get into just the kind of. The reason why that as you're saying that the money. First of all, everything you said is why money is political, right? That it's going to be arguments of what people think. And based on just what you said, some people may agree or disagree. And like you said, when he was.
[00:37:36] Speaker A: Like, it's inherently political and trying to remove the politics out actually just may move it to. From elected to unelected people.
[00:37:45] Speaker B: That's where I'm going with it, is that we used to have the same issue with crypto that we have today. In a sense, that was with securities. Leading into this period of the 30s, like you're saying, stocks and things and markets were pretty unregulated. And then the Great Depression happens and then all of a sudden, the rest of the 1930s, into the early 40s, they regulated the capital markets in the United States. And again, what happened, the country benefited from that because it created trust, right? More trust in the system. And so. Well, real quick.
[00:38:17] Speaker A: Also they regulated it. Again, it's not apolitical, it's political. So who is it being done to benefit? The regulations were being done to benefit Society at large and not just a small segment of people at the very top. And so because they regulated in that way, then. Yes. You're talking about, you know, a prosperity that was had.
[00:38:36] Speaker B: Yeah, so. Because I just wanted to get through that quickly because the audience can recognize things like the FTX collapse or, you know, my cousin had $13,000 stolen from his crypto wallet two years ago just in front of his face. Those are all things that happen when I guess currency is outside of the realm of politics because no one's regulated it. No one's that. So that's why.
And there's no. That's what he says. There's no social insurance on this stu. There's no fdic. No, none of that. So that's why I just wanted to get that out quickly as just another example. But what you're talking about, and that's why I want to sit on. It's very important because I've had these kind of conversations even in my personal life with people, because the way that some of this stuff gets sold is as if we need to look at it as. It's exactly the same as our personal life. So, for example, like you're saying about the gold standard and about not having this inflationary type of economy and all that and the ability to leverage against things and all that and this expansionary money, like we have this ability to print money.
Again, this is why history is so important as well. And I know we live in a complex world and we can't learn everything but this stuff like you're saying specifically about the 30s and the gold standard, and he mentions it slightly in the book, but even me sometimes gets caught into this idea that Nixon got us off the gold standard in 73 because that was when it really ended. Yeah, that was like. Exactly. It was temporary, but it began earlier than that. And one of the times to your point, James, was in 1933 under FDR. And that's why for a lot of people, it's hard to contemplate the idea that, well, if we just have a fixed amount of Bitcoin and they're not printing more and more all the time, then how can it crash? Right when how he said it makes it more likely to crash. Because in people's mind, it's like all they think about is the scarcity. There's always going to be this supply, supply. And people should go back and read about the tulip mania in the 1600s, because that was only a limited supply. And that ended up into a big crash. And so the idea, like you're saying, is that we had a system where the gold standard was the currency and the quantity of the US Dollar was fixed to the amount of gold we had in reserve. Really?
That didn't help us. That helped lead to the Great Depression, the crash after 29, because there was no way to expand the money supply in the society. That's why FDR was the first to decouple the quantity of US Dollars from the total quantity of gold held by the United States in 1933. And that began to grease the wheels of the system, the velocity of money, which helped get us out of the Great Depression. Now, we said it earlier, every single downturn ever since then, these Keynesian economics has been used. The ability to. For the government to print more money when no one else has capital. The difference that you and I always rail about in our discussions here, this is not part of the book, this is us, is that for our lifetimes, the last 45 to 50 years, we've had American governments that continue to play Keynesian economics when we're in the middle of huge growth spurts.
[00:41:44] Speaker A: Well, they keep pushing the emergency button because it's not Keynesian economics if you're pushing the emergency button.
[00:41:49] Speaker B: Yeah, well, good point.
[00:41:50] Speaker A: They're taking advantage of the emergency button, like, hey, let's keep pushing this emergency button which leads to inflation. Oh, yeah, exactly.
[00:41:58] Speaker B: So. So that's why I wanted to get that out, James, because I've had these arguments. They're like, oh, well, if we just went back to the gold standard and we didn't devalue the dollar, we wouldn't have all this inflation. I'm like, man, it doesn't work like that. It's not human body, basically. Yeah, exactly. It's like saying like, I've got a cold or I've got some illness. And just saying, well, it's because of this. One thing only in your body is like, no, the human body is pretty complex. Yeah, it's a complex ecosystem. And a lot could be going on that causes these symptoms that I'm feeling.
[00:42:27] Speaker A: That's a good example, though, because a lot of times people do that. And it's like, oh, okay, I got sick because I got exposed to this. And it's like, well, actually, you're exposed to stuff all the time. The reason you got sick was because you're exposed to it. And then your immune system didn't fight it off. Why didn't your immune system fight it off? Well, we can go about. There's probably about 10 or 8 reasons. 8, 10, 12 reasons why your immune system might have fought it off. So even getting sick won't be that simple. But the one thing I want to say as we wrap this is just to piggyback on your point, going back to the gold standards or the crypto standard, if you think about it from the standpoint of how deflationary that is, like if your money supply is fixed, imagine how much more stuff there is in the world right now than there was 40 years ago. Like the whole cell phone. The cell phones weren't even around like that 40 years ago, you know, and like you had car phones, you know. But I guess. But I mean, the whole smartphone thing didn't exist then. So if we had the same amount of money now in 2025 as we did in 1985, that money would be so, like, that money would be so basically so valuable compared to everything else that it would be so deflationary that wages would be so low. And I say what I mean by that basically is that I should stop using the deflationary thing. What I mean by that is that the cost of goods, because the supply of goods will continue to increase. If the supply of money does not also increase, at least in lockstep with that, then the cost of those goods will continue to go down. The cost of those goods are what controls how well, plays a big role in how much money people are making. So the wages will go down and so the money is, quote, unquote, more valuable. Each, each Bitcoin is worth more. And that's kind of, that's why it gets kind of used as an investment more than a currency a lot of times. But it just, it's not something that makes a lot of sense why we would have the same amount of money now as we would in 40 years, or that as we would have had 40 years ago. The. Ideally, if you. The. And this is what the Fed is supposed to be doing is keeping the money, tracking how much stuff's out there, tracking how much the money supply is and trying to keep them at an equilibrium so that the prices stabilize. And along with interest rates and stuff like that, we're just not gonna.
[00:44:29] Speaker B: That's why, man, this stuff is awful complicated. You can't. There's no 30 second soundbite. And that comes back to the idea just to finish off on trust, people. Whether it's the US dollar, whether it's gold, whether it's Bitcoin.
What saddens me is that we just have so much, so many forces causing our Population to distrust a system that appears to have been pretty good and.
[00:44:52] Speaker A: Could be tweaked, but.
[00:44:55] Speaker B: But doesn't need to be destroyed. Yeah.
[00:44:57] Speaker A: Yeah. So, yeah, I mean, that's, that's what we're seeing. And so we'll see. I mean, but a lot of times, again, society's got to learn the same lessons over and over again, you know, so we, we can't, you know, we don't have that. That collective memory is as good as it would be helpful for us. So, you know, we'd have to do that. But at least as long as we don't lose the information, you know, as long as the universities are still around and can teach, you know, real stuff and so forth, like, ideally, at least we can learn the solutions that were used before that work. So. But maybe books don't get burned, you know, like.
[00:45:29] Speaker B: But yeah, but I'll say maybe it's not a given another tax or I'll get another tax cut and buy another boat then.
[00:45:34] Speaker A: So either way, don't worry about it.
[00:45:36] Speaker B: Either way, we'll figure it out.
[00:45:37] Speaker A: Yeah, we'll figure it out.
But, yeah, well, so you. And you in the, in the other version of. You can use the second vote thing.
[00:45:44] Speaker B: Yeah. And I'll park it at your house that I buy for $7.
[00:45:48] Speaker A: There you go.
[00:45:48] Speaker B: So it's a whole. It's a whole. You know, we're working around the whole.
[00:45:51] Speaker A: Thing, but now we definitely recommend. Check out the book. You know, it's. It's a good baseline of knowledge, you know, just to kind of see through a lot of the stuff that's happening. But without it, it's a short book. You know, it's, it's not a long, long book, so a couple hundred pages and. But you get a good understanding of what's going on. And then again, just being able to guide your own life and kind of know when somebody's BSing you, you know, is kind of helpful.
[00:46:10] Speaker B: So.
[00:46:10] Speaker A: But we appreciate everybody for joining us on this episode of Call. Like I see it. Subscribe to the podcast, rate it, review it, tell us what you think, Send it to a friend. Till next time. I'm James Keys.
[00:46:16] Speaker B: I'm Tunde.
[00:46:18] Speaker A: All right, we'll talk.
