The Mark Moss Show Feb 16, 2022

some different perspectives. Now, you know, trying to understand this is difficult, and when you don't understand it right, what happens is um usually bad things. You can get lucky, but bad things. Right. So for example, if you don't understand it enough, maybe you under allocate towards it, Maybe you over allocate towards it. Maybe um, you don't understand it, and so then you get shaken out of your position early,

for example. And so you really need to understand it and so you can you know, get the right positions eyes and learn how to hold it and one of you know, there's a lot of things. Actually spent a few weeks um going through all the different fund if you're uncertainty doubt headlines are the big objections that we hear about bitcoin. Um. One of the ones I didn't address because it's a bigger topic that I wanted to cover at depth is one of the ones that I

hear all the time of bitcoin is a Ponzi scheme? Now, um, what is a Ponzi scheme? Um? Really? What does that really mean? What do they mean when they say bitcoins like a Ponzi scheme? Um? And why is bitcoin? Is bitcoin pons game? Yes or no? So I want to I want to explain this in a way that's easy to understand, hopefully educational. Well, it's definitely educational, hopefully entertainment um. And really, I think this is gonna give you a

lot bigger perspective. And if you um think that bitcoin will be a Ponti scheme, it maybe give you a whole different perspective on this. And if you already are a bitcoin advocate, that I'm gonna give you the information you need to answer this question when you hear it from someone else. Now, Um, I hear this all the time. I've heard it compared to the tulip mania, you know, the Dutch two mania, but really this Ponzi scheme and the Fine Fancial Times is uh the ft dot com.

It's a big financial news news publication. They came out with a article and they said why bitcoin is worse than a mad Off style Ponzi scheme? So what does that even mean? There's a lot to this lot to unpack here, and I want to kind of break this down. So let's address this first of all. Like I said, it's a big it's a big claim. So first the thing we have to do is what is a Ponzi scheme? Like, what does that even mean? Right? So let's let's let's

take on that topic. First of all, Like I said, this is gonna be entertaining and it's gonna be educational. But if we go directly to the U S. Securities and Exchange Commission, the SEC, which is supposedly out there to protect us. And I say supposedly because I don't know if they are, um, but I'm gonna takenna give you a quote directly from the SEC which says, quote, a Ponzi scheme is an investment fraud that pays existing

investors with funds collected from new investors. Ponzi scheme organizers often promised investor money and generate high returns with little or no risk, But in many many Ponzi schemes, the fraudsters do not invest the money. Instead, they use it to pay those who invested earlier, and may keep some for themselves with little or no legitimate earnings. Ponzi schemes

require a constant flow of new money to survive. When it becomes hard to recruit new investors or when large numbers of existing investors cash out, these schemes tend to collapse end quote. So that's directly from the SEC. So basically, what they're saying is that they are saying, Hey, you know, giving your money, I'm gonna invested. I'm making whatever and uh, and I'm gonna keep I'm gonna pay these investors. As long as I'm able to keep sucking in new people,

I can keep paying the old ones out. I keep eight percent. That's a pretty good deal. Um. But of course I'm not really investing. I'm not really making anything, but everybody thinks I am. Now. Ponzi schemes were named after Charles Ponzi, who duped investors in the nineteen ease with a posted stamp speculation scheme. All right, So we want to break this down, all right. So first, ponzi scheme organizers promised to invest your money and generate high

returns with no risk. Um. So that's that's a big piece of it, all right. So they go further on in the sec piece. Um, a couple other things that they list as red flags. So if you're this is the sec warning you so quote. Many ponzi schemes share common characteristics. Look for these warning signs. One high returns with little or no risk. Every investment carries some degree of risk, and investment yields yielding higher returns typically involve

more risk. Be highly suspicious of any guaranteed investment opportunity. So okay, that's one. Another sign overly consistent returns. So they say investments tend to go up and down over time, So be skeptical about an investment that regularly generates positive returns regardless of overall market conditions. Um, they say that it's uh. They also another red flag is secretive complex strategies. They say, to avoid investments if you don't understand them

and can't get complete information about them. Um. They say that they there's issues with paperwork, an account statement errors, maybe a sign that funds are not being invested as promised. And then finally they say difficulty receiving payments. Be suspicious if you don't receive a payment or have difficulty cashing out. Ponzi scheme promoters sometimes try to prevent participants from cashing out by offering even higher returns for stay input. So

that is uh good, some good red flags. Hopefully guys took advantage, took note of that. If you see any of those red flags, be careful. But now let's take that and let's compare those warning signs, those attributes, and let's see if Bitcoin has any of those. Okay, so before we before I compare bitcoin point to point by the to that list, Um, let's first just take a look at how bitcoin was launched. A lot of people

may not know this. So in in August of two thousand and eight, somebody identifying themselves as Sotoshi Nakamoto created bitcoin dot org. Two months later, October two eight, so Toshi released what's called the Bitcoin White Paper, and that that's basically the document explaining how the tech, how the tech would work, and what the solution was, how the how he solved what's known as the double spending problem.

The problem with digital goods is that if you send me a song or a photo or a video, I can make a copy of it on my computer. And if I send you the video, how do you know if I don't still have a copy on my computer. UM. So he solved the double spending problem. That's the big revolutionary thing that bitcoin solved. UM that there's only one

bitcoin and it can't be copied or double spent. UM. In addition to that, a couple months later, January of two thousand nine, s Tosi published the initial software, the Bitcoin Code Software UM. In the Genesiens Genesis block, the first block of the blockchain UM, there was no spendable bitcoin there UM, and he provided a timestamped article headlining which I love. It was an article headline about bank baillouts from the Times of London, and I love that

he put that in there. He said, the Chancellor is on the brink of another bailout. And the reason why they put that is because that was at the time of the two thousand eight bank baillouts. It was the time with the great financial crash, and so he basically stamped it saying that this is made as a response to that, because you are bailing out these banks, We're going to create our own monetary system, is what he said. Um. From there, it took a few days to finish mind

in the block Um. There was really nothing going on in there. UM. And then and then there are some other people that got involved. How Finny started publicly tweeting about bitcoin. He was running software. UM, so Toshi was running at him and soci and how Finny, we're sending bitcoins back and forth to each other. UM. Basically, the point that I'm making here is that this was done out in the open on the public um message boards. There was other people involved, how Finny, We had Nick Sabo,

Adam back. They were all getting involved in this. They were all aware of it. They were all mining bitcoin. So this was not done in the in the dark. This was not done. Um, you know, not, this was not done and the forest lead a lot of well pretty much, I think all the other cryptocurrencies besides Bitcoin were done with what's called a pre mind. And so when the founders created their token, they created a bunch

for themselves. So they printed, you know, a hundred million tokens for themselves, and then they gave away a little bit. Typically they would keep anywhere from typically about thirty to sometimes as much as seventy of the tokens they created. The founders would keep that for themselves. But with Bitcoin, that that wasn't that wasn't done. As a matter of fact, he publicly put it out to everybody long before ever

ever mining any on its own. As a matter of fact, the coins that's to Totian not Commoto mind, have never been moved, and so there was no pre mind in that. Now. Um, now that you understand that, let's dig into a little bit about these red flags and kind of dispute some of these one by one by one. Now, by the way, if you're just tune in, you're listening to the Mark Mass Show. We're talking about bitcoin, cryptocurrencies and the decentralized

revolution that's happening. Uh, specifically, I'm talking about bitcoin being a ponzi scheme. Is it is it a ponzi or is it not? Well, we're breaking down what a ponzi is, and I gave you the warning flags and we're gonna look at some of those in comparison to bitcoin. Um, again, you're listening to the Markma Show, talking about bitcoin and cryptocurrencies, giving you the education that you need to thrive and succeed through this crypto revolution. I'll be back with more

on this in a second. Don't go away, all right, Welcome back here, listening to the mark Ma Show. We're talking about bitcoin and cryptocurrencies and the decentralized revolution that's happening right now. And specifically, before the break, I was talking about bitcoin being a ponzi scheme? Is it a ponzi scheme? Is it not a ponzi scheme? What does

a ponzi scheme even mean? Well, I read you the definition from the SEC of what a ponzi scheme is, and I read you a list of red flags they said ponzi schemes have and what you should be watching out for. So what I want to do now is let's compare Bitcoin to the red flags of a ponzi scheme and let's see if that works out. So the first thing, as they said that investment returns were they they promised um high returns with little or no risk.

So with bitcoin, there's no investment returns promised. So Toshi never promised any investment returns. Let let alone, any high investment returns, never promoted any consistent investment returns UM. As a matter of fact, bitcoin was known for the first decade of his existence of being extremely highly volatile speculation UM. The online writings from Sotoshi still exists because it was launched through message boards, and so we can still see what he said, and he barely ever talked about any

financial gain at all. As a matter of fact, he mostly only wrote about technical aspects. He talked about freedom, he talked about the problems of the modern banking system and things like that, but he never talked about, you know, making a bunch of money from that. And so I think that's a big key to differentiate a couple things that he said. One of the quotes that I love that he said. Now, of course I'm educated on bitcoin and cryptocurrencies, but what what um he said? A couple

of things. He said, Uh, it might make sense just to get some in case it catches on. That's what he said. So he didn't say, hey, you should buy it. You can make a bunch of money, Hey you should buy it. Your guaranteed to make a bunch of money. Hey, you're guaranteed to get higher returns. He didn't say that. He said it might make sense to get some just in case it catches on. And that's what I tell people. If you're skeptical about bitcoin. Um at this point, I

don't know how you could be. But if you are, that's okay. You're new to it, I understand, but hey, it might make sense to get some just in case it catches on. That's what he said. Um, let's see a couple other things here. Um. Okay, So the second one, Um, the second red flag that they that they warned us of was that they they that a ponzi scheme uses secretive and complex strategies. Okay, well, bitcoin is open source. Open sources the opposite of secrecy. Now, I talk a

lot about the Federal Reserve. The Federal Reserve is the opposite of open source. The Federal Reserve is secret. As a matter of fact, in a previous segment, I was talking about the Federal Reserve and how a Freedom of Information Act request was filed against them and they are denying the request, which I don't even know how that's legal. Uh, it's the opposite of open source. So ponzi schemes rely

on secrecy. If the investors understood that an investment they owned was actually a Ponzi scheme, then of course they would try to pull their money out immediately. Right, it's the secrecy um. The secrecy prevents the market from appropriately

pricing the investment until the secret gets found out. So one of the most famous examples of the Ponzi scheme was Burnie made Off and investors in Bernie made Off scheme thought they owned a variety of assets, but in reality, the earlier investors outflows were just being paid back from new investor inflows, so it wasn't actually money being made

from the investments. The investments list on their statements were all fake and for any of those clients it would be nearly impossible to verify that they're fake, Like, how could they do that? Right, They didn't have access to it. There was secrecy. Bitcoin is the opposite though, right. Bitcoin works the opposite on an opposite set of principles. It's a distributed piece of open source software that requires a majority consensus to change. Every line of code is known.

There's no central authority that can change it. And you know, one of the things that we say with bitcoin is don't trust but rather verify. And so what that means is that because the code is open source, because I can run the bitcoin software on my own, anybody, anybody can just freely download it and run on a on an old laptop if you want, you can use that to audit the entire blockchain. You can use it to odor the UM, to audit the entire monetary supply. It

doesn't rely on a website. There's no data center, and there's no corporate structure. There's none of that. And because of this, there's no issue with the paperwork, right, there's no difficulty receiving payments. As as the SEC told us, there was red flags about now you know, there's of course there's bad actors that would you know, associate with

this with the with the ecosystem. Let's say, UM, you know people rely on others to hold their private keys, for example, and those people holding private keys, the custodians could be bad, they could do things like that. UM. But the but the bitcoin software isn't isn't bad. The

bitcoin software doesn't trick people. It's open source. UM. Another thing is that UM back to that, as I was kind of saying before about the mining UM, there was no there was no pre mind there and so um so Toshi didn't really never got any of his any of his coins of the mind. But usually you know, so bitcoin was launched and open in a fair way when it was launched, But as I said, most cryptocurrencies

don't follow those principles. So like with Ethereum. For example, ethereums the number two cryptocurrency by market app and the Ethereum developers provided seventy two million tokens to themselves and their investors prior to any being available to be owned by the broader public. So that's about half of the current token supply of Ethereum, So before anybody could get it half, about about half seventy two million tokens were given to themselves and their investors. Ripple x RP, on

the other hand, is even worse. Now, if you're an x RP fan, um plug, your ear is not gonna like to hear this. But Ripple Labs pre mind one hundred billion XRP tokens with the majority being owned by Ripple Labs, and then what they did is they gradually begin selling the rest to the public, but they still hold the majority. Now, of course, they're currently being accused by the sec of selling unregistered securities. And we've yet to see how that plays out. But with bitcoin, the

founder gave himself no advantage to mining bitcoin. He started talking about it, he started even the software oute long before mining was ever done. Um, So lots of people had the same opportunity to mine at the same time. And he's never even cashed his coins in anyway, and so that makes it the cleanest approach. The other thing is that there's no leader, right. So bitcoin is really

interesting because there's no centralized leadership. So totian not comot to a person or a group of people, but you know, a group of people potentially, Um, they disappeared, So there's no leader there. Um. And so I think when you break that down point by point, you see that it doesn't really trigger any of these red flags. Um. There's you know, again they're not unregistered investments or unlice. It's sellers.

If if there was maybe any um red flag to be raised potentially and not not about a ponzi but about but but about a security, um, is that you know, I mean you're selling assets, um, But it doesn't mean that just because it's an asset that could be maybe potentially a security doesn't mean it's a ponzi. Right, So it doesn't mean that. Now let's look at something else.

Let's look at um a broader definition of a ponzi. Right. So, I think I've proven that bitcoin is not a ponzi based off of the SEC's definition and the SEC's red flags. But I want to look at a broader definition of a pons because I believe that maybe there are some similarities to the gold market or some other assets like that, And I think if you understand how the gold monetary network works or the Fiat banking system works, you might

actually see this whole situation from an entirely different angle. Now, by the way, you're listening to the Markmas Show, we're talking about bitcoin, we're talking about cryptocurrencies, we're talking about the decentralized revolution that we're going through. We're talking about bitcoin and cryptocurrencies. Well, bitcoin not being a ponzi scheme,

as it's been a huge many times before. When I come back, I want to talk about, like I said, the broader definition of a ponzi and talk about the gold market, talking about the Fiat money system and the stock market, and like I said, once you understand these from this different angle. I think you'll see this from a completely new light. You don't want to miss this. You need to understand this. Listening to the Markmas Show, I'll be right back. Don't go away, all right, Welcome back.

You're listening to the Markma Show and we're talking about bitcoin and decentralized revolution, cryptocurrencies and all that stuff that's going on right now. And specifically, before the break, I was talking about bitcoin and uh, bitcoin being a ponzi scheme? Is Bitcoin a ponzi? What is a ponzi? A lot of times people throw these words around and they don't ever really stop to think about what they are, what they mean, And so I want to break that down.

We've been dissecting what the SEC said of ponzi was. Um, we talked about the Bernie made Out scandal. I talked about the red flags that the SEC gives you to watch out and be careful if you may be involved in a ponzi, and then we went point by point and showed how bitcoin actually doesn't have any of those red flags. UM. Now, what I want to talk about

is is something bigger. I wanna talk about the broader definition of a ponzi because the narrow ponzi scheme, you know, as I just made the case, it clearly doesn't apply to bitcoin, um. And so what some people try to do is they use like a broader definition of a ponzi scheme to assert that bitcoin is one of them. You have to be very careful, like I said, with these words and definitions, especially in today's age, because we've twisted all these words. So for example, let me give

you an example, UM, capitalism. Capitalism has almost become this dirty word, and I've found myself starting to not use the word capitalism and instead used UM free markets because free markets to sound different, and people think, no, capitalism is capitalism led to slavery, and capitalism led to colonialism, and capitalism UM allows these greedy corporations to pollute the environments. Right, Okay, well we should inspect the word capitalism then, because UM,

I don't believe that is capitalism. So capitalism is sure private property rights and UM me being able to manage and control my property rights and direct him as I see fit. Now, UM, what people think is that capitalists are only in the pursuit of profits, and that's it. And so that's what leads to slavery and colonialism and etcetera. But that's not true. That's not totally true. So capitalism is the protection the priority of private property rights, private

property rights. It's also voluntary exchange. And so my thoughts, my labor, my energy, it's my private property. That's my private property. My arm is my private property. Nobody can move my arm except for me. That's my private property. My energy is my private property. My my my my thinking capacity, my ideas, my creativity, that's my private property. And so if anybody were to, you know, hold me as a slave, for example, I don't think that would

be protecting private property. As a matter of fact, I think that would exactly contradict that. Another attribute of capitalism is voluntary exchange. If I'm a slave, that's not voluntary exchange. So you see, by omitting the key words that define what capitalism is, sure then you can say capitalism is colonialism if you're saying all capitalism ism is trying to be as greedy as you can and try and grow

your capital. But that's not what it is. It's protecting private property rights and free and voluntary exchange, all right, So it's important to break that down. And by the way, I'm wanna throw a plug out. I wrote a book UM a couple of weeks ago, UM, trying to actually define this much better. UM. And you can go to Uncommunist dot com Uncommunist dot com and you can check out this book. It's just a little booklet UM. And I basically took the Communist Manifesto and we rewrote it

and it's it's just about a forty five minute read. UM. And I read defined um this capitalism theme because in the Communist Manifesto he broke down how capitalists were bad and didn't contribute anything. And I think you just got it all wrong. And so in the Uncommunist I basically rewrote the book to kind of reframe it. That's why it's the top of my head. But it's important to

understand these UM, these words and what they mean. And so back to Ponzi, we also need to understand what it means because we broke down the definition, but they're trying to use a broader definition of what that Ponzi scheme is. So UM, a bitcoin is basically a commodity. That's how the Commodities Exchange has labeled it. UM. The I R s has labeled it as property, which is like a commodity. So in the sense it's a scarce

digital object. But um, it provides no cash flow, all right, But it has utility because it allows me to store wealth and transmit value. But there's no cash flow. R's just the digital object. Now, like any commodity, um, so commodity like energy, like wheat, like grain or whatever, it produces no cash flows or dividends, right, So it's only worth what someone else is willing to pay for it or trade you for it. And that's a key piece.

So that's what people say with with with with bitcoin, Yeah, it's only good if you can find someone else to buy it from you. Yeah, like every other commodity in the world, because it pays no casual or dividends. It's only worth what someone else will wanted to pay for it, all right. Now, it's specifically it's a monetary commodity commodity, but it has utility, like I said, storing and transmitting value. So it kind of made Gold is probably its closest comparison.

So if we look at bitcoin versus the gold market. Now, some people say that bitcoin is a Ponzi scheme because like I said, it relies on an ever larger pool of investors coming into the space to buy from the earlier investors. Right, So if more people don't come by, you need you know, they say, Mark, You're always like, you're always shilling bitcoin. You just want more people to buy. Um. Yeah, okay, so bitcoin, you know need They say that it needs an ever larger pool of investors to come in. But

that's basically the same thing as other network. So the reliance on new investors is correct, that's no k framing. Bitcoin keeps growing its network effects reaching more people, and it reaches more people with bigger pools of money, which then keeps increasing its usefulness and its value. Right, So um Metcalf's law. If I'm the only person in the world with the phone, it's not worth very much. If more people have phones, it's worth more. When everybody has

a phone, they're worth more. And so as it reaches more people, it becomes more useful and more valuable. Yes, they are true with saying that, right, but that doesn't make it a Ponzi scheme, because if I use similar logic with gold, then goals of five thousand euro ponzi scheme, right, Because the vast majority of gold's usage is not for industry. It's for storing and displacing displaying wealth. It produces no cash flow. It's only worth what someone else will pay

for it um. If people's jewelry taste change and if people no longer view gold as an optimal store value, then it's a network effect would go down and it would lose value. Right, So very similar, it requires more and more people to continue to use it and can continue to store their wealth in it um. There's about sixty years of gold's annual production supply estimated to be available in various forms around the world, and that's like five hundred years worth of industrial only supply, and that's

factoring out jewelry and store value demand. And so that means that gold's supplied demand balance to support a high price requires the ongoing perception of gold as an attractive way to store and display your wealth because it's not being used for monitor for industrial usage. So gold monetary network has remained robust for a long period time because the collection of unique properties it has is what made it continually regarded as being optimal for long term wealth preservation.

All right, that's why people use it. Similarly, bitcoin relies on network effects, meaning it's a large number of people need to view it as a good holding to retain its value. But a network effect is not a Ponzi scheme in you know, in itself. Prospective investors can analyze the metrics of bitcoins network effects and then determine for themselves the risk and reward of buying into it. So bitcoin is no more a Ponzi scheme than gold is a Ponzi scheme, or any other commodity to be a

Ponzi scheme. Now, what about if we look at the FIAT banking system. Now this is interesting, so let's look at it in the same type of a lens. So by the broadest definition of a Ponzi scheme, the entire global banking system is a Ponzi scheme. Now we've talked about um. The Federal Reserve has now come out and said they're gonna cut rates. They're gonna cut them, They're gonna start tapering, sorry, cut taping. They're gonna they're gonna

start tapering, and they're going to start raising rates. And I've said over and over and over again, you can't taper a ponzi You can't taper a ponzi because it requires new money coming in to pay the old people. And so, um, I'm gonna back it up. I've said that any times. You probably heard me say that many times. Let's back that up here. Like I said, the broadest definition of a ponzi scheme, the entire global banking system is a ponzi scheme. So, firstly, fiat currency is an

artificial commodity. Right, A dollar in and of itself is just an object made out of paper. Now the dollar is supposed to represent something. The it's an artificial commodity. So gold was money for five thou years. Gold is hard to move around, it's not portable. It's hard to pay someone in gold. So I put the gold in a bank and the bank gives me a paper gold certificate. Gold is layer one settlement. The paper goal certificate is layer two. The gold. I can tran the paper certificate.

I can transact very quickly, but it's not final settlement. And so what that means is that there's additional risk there. Um, But really that that paper only represents it's a claim against the gold, all right. Now, Secondly, when we organized all these pieces of paper or let's call it a digital representation of the paper because now most dollar transactions that they are digital. So if we take the piece of paper the digital representations in a fractural reserve banking system,

then we add another complicated layer. So what does that mean? So that means that the banks create money or they create currency from thin air. Alright, the Fiat money. So first of all, Fiat A lot of people don't understand what Fiat is. People think that Fiat money is like fake money. That's not really what it means. I'm gonna give you the definition of Fiat money. I'm gonna explain to you how they create this Fiat money through the

banking system out of thin air. When I get back, you're listening to the Mark Moa show talking about bitcoin, cryptocurrencies and the decentralized Revolution, talking about the Fiat money system and how that is a Ponzi system and not bitcoin. I'll be right back with more. Don't go away, all right,

welcome back. You are listening to the markma Show and we're talking about bitcoin and cryptocurrencies and the decentralized revolution, and uh, I was knocking down some of the big objections that you hear talking about how uh, well, we were taking a look at is bitcoin really a ponzi scheme? Yes or no. We've looked at what the definition of a ponzi scheme is. First of all, what the SEC warns us, the warning signs of what a ponzi scheme is.

We looked at, um, the broader definition of it. We looked at one of the best, the most famous ponzi scheme histories of Bernie made Off and now we're looking at a broader definition. We compared to the Ponzi scheme of bitcoin to gold and how if if bitcoins upon the scheme, then gold upon the scheme as well. And when we just finished off, we were talking about big the Fiat banking system and how um, by the broad definition of ponzi scheme, the entire global banking system is

a Ponzi scheme. Now I was talking about fiat currency and a lot of people think that fiat currency is like means it's not backed by anything for example. Um, but what fiat currency means is I believe it's a Latin word and it means like by decree. So what does that mean? So? Um, that means that fiat money has value because we say it does. We've create it as a government. We've said you must use this by law, right, and so that's what it is. But like I said,

it's just an object made out of paper. And so what happens is, um that that paper, that money, that that currency is created when the banks loan it into existence. And so the federal reserve creates um reserves. They put those reserves into the banks, and then the bank's loan money into existence. And it's a fractional reserve banking system. So what that means is that, UM, you deposit your money into the bank, and then the bank keeps that money on deposit on reserve and they loan money out

in multiples of that. And so for example, if UM, you bought something from me for ten dollars, I take that ten dollars, I put it into the bank. The bank holds onto one of those dollars, and the nine loans them back out, And those nine dollars going to nine different banks, and the bank takes ten percent of it, holds it, and the rest loans it back out, and that process repeats over and over and over and over

and over again. That money is created into existence. So when you take out a loan for a house, a car, a boat, and RV that money is created into existence. And so what that means is if only a few percentage of the people were to all go to the banks. Let's say that, you know, all these people that don't have trust in the banks anymore, decide we're all gonna go to the bank and pull our money out right now. That would create what's called a run on the bank.

It happen, It's happened to many times throughout history and even in recent history, and the banks would collapse because they don't have the money. They would create it out of the air. Now, realistically, the banks would say no, they would say no, you can't withdraw. As a matter of fact, go to your bank and try to withdraw twenty dollars and see what happens. I pretty much guarantee you if you drove to the bank today and try to withdraw dollars, you could not get it out. They

would tell you that. They would tell you no because they don't have the cash. That's why if you want to get twenty dollars today, you pretty much have to organize that ahead of time. You have to order that ahead of time. They just don't have the cash. Now, Like I said, this has happened many times throughout history. In recent history, it happened to some banks in the early twenties during the pandemic shutdown. Um, it occurs regularly

around the world. And it's actually, like I said, one of the SEC's red flags of a ponzi scheme is quote difficulty receiving payments. M that's interesting. So, um, that's a red flag. They warned me about that, So that's one strike against it. Now. It's kind of like, um, probably as a kid, you guys have played the game musical chairs. Right, there's like a set of chairs. Someone's

playing music. Um, there's one less chair than there are people than kids, and they walking around around around right when the music stops, one per one kid unfortunately doesn't doesn't get a chair. Right in the next round, you move another chair. Um, and on and on and on. Eventually you have just two kids in one seat, and then eventually there's a winner. Um. And that's basically what the banking system is. It's a it's a permanent round

of musical chairs. There's more there's more kids than chairs, there's more people than money, and they all can't get one. Right. If the music ops, then that would become very clear. Now what happens to stop the music, Well, that's when trust is lost, right. UM. For the United States, banks collectively have about plus or minus about of customer deposits held as cash reserves, so about two outs. So that's like back to the musical chairs, there's ten kids walking

around the chairs and there's only two chairs. To put that into perspective, that's basically what we're working with. UM. So that's not very good UM at all. Now this this actually used to be much lower. It was about five percent back to the global financial crisis. So that means out of UM anyway way way more kids, weigh less chairs. That's what that means, UM. And so that's basically it works. It's a it's a red flag UM.

At the Ponzi scheme, there's not enough money for the people to be able to pull their capital all at once, and so people would run into that difficult receiving payments. UM. Now, the monetary system also, like I said, functions as like this round of musical chairs on on top of artificial governed government issued commodities UM, which is those those paper moneys right, So there's more claims on the money, there's more kids and there's available than there are chairs. Now

we kind of accept this as normal. Well, actually we don't accept it as normal. Most people just have no idea. Um. I I've said many times before, Henry Ford famously said, over hundred years ago the American people knew how the banking system work, there would be a revolution before the morning. That's why you don't know. So most people don't know you're actually playing a game of musical chairs. But for those that do, like myself, we also assume it may

never end. Right, the fractional reserve banking system, it's functioned, you know, for a few hundred years. Um, you know, I mean, sure there's been a few you know, problems here and there, but you know, for the most part, it's not that bad. Um. Although you know, the purchasing power of my via currency has lost about of its value. I guess that's not really good. Most people don't know that as well. They think things are getting more expensive.

They don't realize that that means that their dollar has just lost the value. But what that really means is that investors either need to earn a rate of interest that exceeds the real inflation rate, which of course isn't happening, or they have to buy investments instead, which inflates the value of stocks and real estate compared to their cash

flows and pushes up push up the price of those assets. UM. So if the inflation rate, if the government printed thirty percent more currency, then you need to make about thirty more money, which, as I said, most people are getting that pay raise, and so everyone is being forced into being an investor. Um. Also there's very high frictional costs.

So um. Again, another variation of the broader Ponzi scheme claim asserts that because bitcoin has frictional costs a Ponzi scheme, um, the system requires can don't work to keep it keep it functioning, so you have to you know, mine it, you have to pay a transaction fee to move it. But again bitcoin is no different in this regard to any other system of commerce that costs money to move gold, for example, Any any healthy transaction has a cost associated

with it. Right, So bitcoin miners have this customized hardware, they pay electricity, they have support personnel, all those things. If I was talking about gold, gold miners have the same thing. They put a bunch of money into equipment, they have personnel, they have exploration, they have to extract the gold, they have to process it, all of those things. So there's cost. And also the global fiat monetary system

as frictional costs as well. Um. And so you know, banks and fintech firms extracted over a hundred billion dollars a year in fees, and that's just what happens. That's the way things work. UM. So the gold system, the bitcoin system, and the monetary system both require that. And then I guess um summary, Um, I was a bitcoin is a network effect and not a pon z right, So the broadest definition of a ponzi's game refers to a system that must continually keep operating to her main

functional or has frictional costs. Um. Bitcoin doesn't meet this, um because you know any more than the than the gold market doesn't anyway, but the global fiat banking system does. As a matter of fact, we saw President Biden come out talking about the last stimulus and they said, um, the government has always paid its bills, but we need to take new debt in order to pay the old debt. He said that I don't have a clip for you.

I wish I should have pulled that ahead of time, but he basically told us up front, we are a ponzi. We need new debt to pay our old debt um not like bitcoin. Bitcoin doesn't do that, and hopefully that makes sense. You're listening to the Mark Mos Show talking about bitcoin. Thanks for listening.