KOL463 | Contracts, Usury, Fractional-Reserve Banking with André Simoni

all right I’ve hit record and it looks like we’re both smoking pipes now now you have to remind me what we were going

to talk about um uh we made we had a conversation with

Sheldon Richmond like two or three weeks ago and uh I introduced the idea of um let’s

say a libertarian usery like a yeah a limit for for interest uh

interest rates and loans and stuff like that in the beginning you had a a disagreement with me like oh that does

not make sense then I start to talk about inalienability

saying like oh if you if you charge so much you can just enslave people and that is it does not follow so there is a

limit then we started uh to talk uh sporadically about

um loan contracts and I have a position they are um how how can I

say bilateral and you say I I have a wrong conception which they are like two

unilateral contracts and I I respectfully disagree but that is not the central point of my argument but I

want to explore this even if possible all right and there are a lot of small stuff that we don’t discuss but I want

to ask okay in the meantime I read the dog French

book the just walk away it’s a 100 pages book really good and it’s it reads up

more about the psychological uh conditioning of over over and that is

a it’s a really good um aspect for my argument because I I

came to believe after studying this that the whole modern state the fid the

fractional reserve fiduciary currency and central banking everything is tied

together in to promote this kind of e economic activity which is in my view

antical cool hey hold on hold on just a second hold on give me Give me to 30 seconds no problem

back back back back come on so um by the way on So are you talking about the most

recent um the most

rec um on Amazon I think no I just took it from Mrs institute website i just

download the the PDF let me Oh because he he put a uh he put an updated version out about a year ago

on online which um slightly I think has an extra chapter or something at the end

i need to take out and I help I helped him with that a little bit and um he and I are good

friends i actually talked to him i’m not sure if I quite agree with his uh he’s an expert on the banking industry

but I was surprised that there are such a thing as non-reourse loans this walk away concept um I guess that’s true um

that in some states in America anyway if you have a mortgage then you’re not

personally liable the only collateral is against the house um Exactly and I and I

think that is the the right way to do it well that’s one way to do it that’s one way to do it yeah my argument is the

right way that that is I know it’s a really hard heel to stand on uh uh I

think if you don’t do in this way you are just open yourself up to be like let’s say to defend slavery in

in some way you know not not consciously like I want to slavery but you give uh

you give um well but then but then but then you’re against the very concept of

any um any any obligations whatsoever um no limited obligations in this way well

yeah but I mean it’s limited by See the problem is most contracts are not most I don’t think most people

understand this um most contracts are not secured is what we call secured mhm

um this is my problem with this li Bitcoin Bitcoin idiots who talk about

smart contracts is they and even the Roth party they’re not contracts they are just execution tools and it’s not

just that it’s not a contract it’s like only a very limited subset of contracts could be

done with with an escrow situation i think Rothbart has this idea in his

contract theory where he talks about um um a b a performance bond

which is a little bit confused but the idea is that you you basically ahead of time you you deposit the

possible amount of damages or something with some third party and then they can distribute it if there’s a breach of

contract or some conditions triggered but the problem is very most most

yeah your I don’t know if it’s your connection or mine cutting go ahead uh it chopped a bit i

don’t know if it’s your connection or mine yeah i don’t know it might be mine because I’m outside okay uh can you

repeat after what he said about the third party like the third party damages distribution yeah the idea is that um

you can you could escrow you deposit the possible damages or the possible payment

ahead of time with a third party but the problem is that in most contracts you

don’t no one the guy that owes the future payment doesn’t have the money yet so there’s nothing to deposit um and

and not only that contractual damages are uncertain they could be way they could be greater

than expected mhm you know if if if if you’re a singer and you’re paid a

million dollars to perform at the Super Bowl and you don’t show up you might have a reciprocal obligation to pay

money damages if you don’t perform and that might be $10 million it might be more than you’re

paid i don’t know it depends on the deal but you might not have $10 million you know so you there’s nothing to escrow

um so the whole idea of these Bitcoin smart contracts and escrow and

performance bonds is just un unrealistic and impractical because in most contracts

you the future thing doesn’t exist yet you can’t transfer a future thing now you can’t transfer it to a depository

now that’s the big problem I see with it yeah uh and the only way to solve this

problem is some way to to introduce credit and on Bitcoin in a second layer

something like that and that will be just like the whole uh the whole legacy

system all over again if well I don’t what do you mean credit credit with Bitcoin I I don’t even know okay tell me

what you mean uh what I mean is like Bitcoin don’t does not have this on on

the first layer on chain this function and as it is uh

Xnovo asset like it’s not an asset that we can mine from the ground or anything we just edit the asset people I think

the there will be a demand for a second layer on which they can do a freshenary

reserve or I use and and treat the

second layer as a um a credit title and use that for for settlement and and try

to try to uh trying to absorb the the real economy like the the real assets

the tangible assets inside of that like I think that will be something uh that

corporations will have u interest if they want to dominate

Bitcoin uh they should do it you know like not saying should so are you are

you uh opposed to fractional reserve banking yes yeah I’m opposed to it uh

economically I’m opposed to econ economically and ethically I think it’s fraud well fraud

I when I say fraud I said in broad terms is I I think it’s it’s not possible for you to have more titans than you have uh

assets it’s like you so you are ensuring a conflict i I I don’t disagree with

that strongly but I just think that because of that reason fractional reserve banking just can never work as

long as if there’s if there’s full disclosure it can never work but if if

there’s full disclosure I there’s no ethical problem with people trying it it’s just that there it’s like everyone

invest well it’s is a casino then it’s uh Exactly exactly it’s it’s an unstable

thing and it will it will collapse and that’s okay but gambling is okay is ethically fine

yeah like if you if you say so like for you gamble no problem but that is not

like let’s say uh as it’s not spared you cannot uh give it as as the asset you

know so the problem is I don’t know what that even means to give it as the asset i think we have to clear all these terms

up anyway let’s go on with Yeah like the problem that I say is like the title does not represent the full asset

because there are more titles than than goods yeah but but the but this word title is used in a bizarre way by the

anti-fraction reserve Rothbardians um even Hapa uh this two titles

idea it makes no sense as long as there’s disclosure there’s not two titles there’s just an IOU and an IOU is

not a title it’s just a promise to repay um but if you understand the

nature of money and credit and wealth then you understand that um a

fraction reserve system has to be unstable because there’s always the chance of insolveny

mhm the bank cannot get insured because those types of risks are uninsurable

according to uh say Rothbard Mises Hapa’s understanding of risk so you

cannot I I subscribe to that so you cannot insure it and therefore uh the

any bank is most of its assets if it loans the the depositor’s money

out and and and gives IUS to the um to the depositors then most of its assets

are these loans but they could there’s a there’s a chance that a nonzero chance

that they will go bad because um because the people that or the or the uh or the

lenders of the bank um may not be able to repay because

they’re the things that they invest the they borrow the money for might go might go bankrupt

so eventually these banks will go bankrupt yes they will have and and and

they will necessarily be unable to repay their claims and then there will be a run on the banks and everyone will

realize these types of schemes are risky and they’re they’re just like Ponzi

schemes yes yeah they’re they’re a Ponzi scheme and they’re they’re doomed to failure and they solve no real problem

this is where I just no problem um so they’re they’re

just not it’s not going to be as long as there’s disclosure there’s no fraud but then it then the so the to me the real

question of of fractional reserve banking is if you have full disclosure okay then that means the bank

issues IUS okay to the depositors they’re not really depositors they’re

actually investors or whatever you want to call it they’re they’re lenders they’re lenders

so who are called depositors or lenders they’re not defrauded if they’re

given full notice of the risk and the only question is an economic question and the economic question is can the IUS

the bank gives them serve as money substitutes and the free bankers think they can substitute as they they can

they can function as money substitutes and I think I the Austrians say the Rothbartians say they cannot it’s just

an economic question i think they can’t be money substitutes because they cannot be worth as much as the underlying money

they represent because there’s a risk there’s a risk of default no and the risk of default is

non-uniform from bank to bank and also um it it can’t be insured against it’s

uninsurable so it’s basically an uninsurable risk so there has to be a premium a discount and the discount has

to vary from bank to bank so the whole thing is pointless so these IUs cannot become money substitutes so they don’t

and if they if you do that you just have more more of the collapse and that is the problem about fiduciary currency

that we have today and and all of this and why they are doing it like why

because human human action is a rational is purposeful right so why are people

doing that and all uh all of the government and the banks and corporations have this uh unholy union

let’s say to to make it work to make like the impossible uh the impossible

scheme to work the main problem my view is uh is over lending money lending

money is just creating money out of money in this case money money out of nothing so money have no value what have

value is the what money can buy value not saying in the in a

subjective marginal way i say it’s uh the real wealth is what you want to

access using this digital digital this virtual wealth which is not uh is not uh

wealth per se is just access and then you use that as an a medium to to

extract uh wealth from producting individuals by using currency

manipulation and all this kind of stuff so I I I agree with all that but the thing is in a in a free market system

where there’s there let’s say there’s there’s there’s 100% reserve banking Bitcoin Bitcoin or gold either one

probably Bitcoin um and that as long as there’s full disclosure of this IOU practice of banks

I don’t think they would be creating new money so they just would be creating risky IUs to people and if they want to

take that risk they can take that risk yeah like uh the problem is um that

sounds like uh virtual coin clipping to me and I I don’t I don’t like the idea

virtual coin clipping when you take a let’s say a gold or silver coin and you

take out a piece and then you try to rem but it’s just not like it’s not like No

no I say it sounds like it’s like Yeah yeah the real the real question is whether whether a loan agreement should

be a legitimate type of contract that’s the real agreement the real dis the real uh not not uh some kinds of loan

agreements I I I imagine like if you have a bilateral risk it can be it is okay but the problem is of this

kind of loans as you say like the IU on re fractional reserve uh you don’t have

the risk for the bank like just uh the pot because it’s not owned by the bank

but I mean okay for the Rothbart and title transfer theory okay for contract theory the general issue because loans are just

one type of agreement no I know they’re not special so the question

is is a a transfer of a future owned resource a valid transfer

that’s the real question i think they in which way you say valid

uh like enforceable and and binding yeah i mean well not just it’s not binding

but it’s just is it is does it have legal effect if if I transfer to you

um let’s let’s take let’s just forget money for a second because money is so corrupted by the state that that that

that’s a issue let’s just talk about a piece of gold if I if I tell you um

um you do this favor for me then I will I transfer to you in a year an ounce of

gold if I happen to own it at that time but I don’t have any gold now but I think I’m going to make some money um so

in one year I’m transferring to you uh the title to 1 ounce of gold that I own

in one year so is is that in your view a

legitimate way to transfer title to this gold like if I have the gold in one year

does that mean now you become the owner of that gold um yes i think it’s enforceable as you

have the gold but if you don’t have correct there there there is a problem i I would use not a problem it’s not a

problem i but I know what you mean but there’s not a problem it’s just what happens i mean you can only transfer you can use uh something that can only be

consumed by the moment they are provided like services for example I transfer to you today gold uh for a service tomorrow

and you cannot perform today and give me tomorrow you need to perform tomorrow no no no no no a service can a service is

like a promise of performance let’s say okay okay let’s let’s unpack that because that’s a good example so G give

me the exact example you’re imagining i pay you up front for a service oh okay okay so I’m paying I’m paying now okay

i’m transferring the title now and for you to browse to m for example tomorrow

okay not today because I need to Oh well let me let me ask you first of all why would I pay ahead of time why just why

why would I pay ahead of time oh just because I want to because I don’t I will not be here tomorrow to pay you for

example okay is so the then the question is when I transfer this this money to you now am I doing it conditionally or

unconditionally uh you are doing it conditionally okay so who owns the gold uh in this

case uh you own the gold when you perform the service if you don’t I can claim the gold back

like let’s say let’s say that I ownership or possession you are saying

ownership in the way I I’m trying to figure out both so So you’re saying you own an ounce of gold and I pay you to

mow my loan yeah but you’re my loan tomorrow to mow your loan tomorrow now

the moment you hand me the gold do I own the gold or do I just have possession you just have possession okay okay so

you retain title i retain title you have retain possession it’s not it’s not

conditional the condition is so here the way this structured is you’re saying I’m just handing you I’m handing you uh

possession or retention of the gold but you can spend it but I’m I still have ownership of it and as soon as you mow

my lawn then the ownership converts to you so you’re making a future conditional a future conditional

transfer of title to the gold yeah and there is a bilateral agreement in this case it’s not bilateral why not be

because there’s no there’s no there’s only one title being transferred title to the gold uh well but you have the

expectation of service hold on it’s it’s conditional but it’s not it’s not Look every every future transfer is

conditional mhm but just because there’s a condition doesn’t mean that there’s an exchange

i think there is an exchange gold for services there’s a there’s an economic exchange but there’s not a legal

exchange oh okay i I get it you are

differentiating no I think that is was the my doubts because why should

be a a legal exchange or should not be a legal exchange when you have a um economic ex

exchange because econom see the way I look at it

is okay you have to go back to basics is the is the study of human action

right every human action is the use of a means to achieve an end correct yes a

value when we characterize what we see people doing their behavior we characterize it as an action that means

we are guessing at their at their purpose at what they’re achieving we don’t know for sure but we’re taking a

guess at the reason why they’re doing what they’re doing but we know they’re doing it for some reason to achieve some

end right so the the reason that you transferred future title of your money

to me um is for some reason but it could be

any number of reasons um let’s take a simpler example you give me um a future

ounce of gold just no let’s not complicate i’m I’m I’m

thinking of a unil a clearly unilateral thing like a gift like let’s say you give me an ounce of gold as a pure gift

right now just to because it’s your birthday yeah or just to make me smile or to make me happy mhm so you’re you’re

doing it for a reason that’s your purpose so that’s your end now if you give it to me conditionally upon me

performing a service then your reason is to motivate me to perform the service

but it might also be to help me out because I’m your friend or it might also be uh you want to spend the money on me

instead of some status down the road i mean you have might have a bunch of reasons for doing what you’re doing or to not pay for example HOA fine or

something like that so yeah yeah but the point is the point the reason the point

the fact that you have a reason or a motivation for doing what you’re doing doesn’t mean that it’s an exchange i

mean you can care you can call it an exchange economically and economically we can say that okay you’re not doing it

as a favor you’re doing it to get something back and what you want in this case is not title to something I have

like you’re not buying something from me like my my cow but you’re trying to So you’re not trying to motivate me to pro

to assign a title to you that would be an economic and a legal exchange you’re doing it to motivate me to perform a

service by the promise of and the and the way you motivate me is you only give me the

title if I do it so you make the title conditional the transfer conditional now you could have done it another way you

could have given me the gold and the title to the gold but then you could have had a second transfer saying that

if you don’t if I don’t perform the service then I have to give you the gold

back so in that in the period between when you give me the gold and when I perform the service or when I’m supposed

to perform perform the service I actually own the gold and I’m free to spend it and then if I spend it and I

then I don’t perform the service then I owe you some gold back but I don’t Yes because it’s funable yeah well it’s not

that it’s funible it’s just that uh it’s just that I I’ve already spent it and and so it’s gone but the point is you

know so you don’t want to transfer it to me unconditionally you want to transfer

i mean because otherwise you know I I won’t have any money to pay you back if I don’t perform so that’s how contracts

work yeah i know i know uh but at the same uh in the same pace like I should I would not give you the gold if you do

not give me a promise for example and I I don’t know if you Yeah yeah but okay I agree with that but the pro the promise

is not not it’s not legal in the Rothbart system the promise is just Mhm um it’s just your proof that I my

intention is pure and that I’m likely to perform yeah and if you don’t do it you are just like through you are you are uh

cheating you know you are just defying yeah i could be not legally but yes I could be dishonest or I could be lying

to you um but your safeguard is that you didn’t transfer title to the gold to me

so you get the goal back yeah the the idea that I would say it’s like um

uh I think uh I recognize promises as some kind of economic good for example

I wouldn’t call it good i know what you mean it’s it’s it’s it’s a it’s just one of the factors you take into account

when you assess the credibility of the person you’re dealing with yeah no not

Yeah promises reputation all all this kind of stuff it it comes to mind when

you you want to close of course but but that but that plays into your motivation which is okay that’s your personal

business but it just means you have a motivation for your actions if if for example if you donate an ounce of gold

to a charity or to the let’s say you donate an ounce of gold to the Mises Institute Mhm it’s a gift but it’s based

upon their broadcasting their by their reputation their intent and their ideas

for example in how they will use the money but it’s not really something that

they can uh that they they can breach the contract if they don’t do that you’re just resting your hopes on that

yeah I know that there there will be a donation that is why I asked you about can I let’s say uh enforce a gift that

is why I asked you because I don’t see that as a gift in your natural exchange

and the idea that you gave me about a loan for example I give you money in the present and then you give me money the

the same money and plus some in the future as um as a by let’s say a by

unilateral contract like two unilateral contracts in the same in the same paper

let’s say uh it sounds to me just like um a way to circumvent this like uh um I

I don’t want to offend but it’s like something that’s something that a lawyer would tell me you know yeah I know i

know but the reason is I’m trying to break it down so we can because we’re we’re kind of having a revolution kind

of like a a radical theory here so we have to break it down now I I do agree that it’s that these these these title

transfers are related they’re not like they’re not they’re not in a vacuum um

exactly that is why I think they should not be seen as just unateral because

like Yeah yeah if you don’t give if you don’t give give me the money first for example if I take a loan from you and

you don’t give me the money first why should I pay you well well I think in in practice most

most service contracts you you don’t pay the person ahead of time most cases oh I know for or for example like let’s say

make just a package uh you you cut my loan today and in in in 10 days for

example it’s a package I just paid double two times it’s the same thing

with employment you have someone who’s an employee they’re a regular employee yeah know I know I just say like I can

it’s it’s a complex it’s a yeah it’s a complex exchange of uh yeah employment

is not there’s no such thing as employment that’s a legal category let’s just call it uh an ongoing um it’s an

ongoing um um set of title transfers and

permissions so for example the employee the employer

gives permission to the employee to use the employees the employer’s facilities

like you know I can go into work and use his equipment and his office and the

conditional title transfer is if you perform effort labor for me 40 hours a

week I will pay you the following salary so that’s a conditional future title transfer of money and that’s an ongoing

thing right i pay you once a month i pay you once a day i I pay you every two weeks whatever the deal is but if the

employee doesn’t show up for work or does a bad job maybe maybe the employer doesn’t pay him

for the last two weeks of work because he didn’t fulfill the conditions for the title transfer right yeah no I I I get

it like I said life is just not what is on paper i get it but um the main idea

that I think it’s important to say in this case is like um it’s like I think

we are not talking about the main point anymore not not as an offense or anything like that it’s just like my

main point is the limitation and I think the limitation about this is uh what

what is the point of having um a risk-free uh um uh

exchange with someone that should take the risk like there there is no way like

what I think is when you have this fractional reserve and user in this case you are just uh getting isn’t of risk

because all the money you are dealing is not yours you are just like a a guy in between that is profiting from both ends

in this case there is so are you are you connecting are you connecting usery and fractional reserve banking together now

I always do like did that in the beginning like uh uh the idea of of

let’s go for fractional reserve so because I think the fractional reserve is just a a consequence of the the the

extrapolation of this kind of economic activity which is lending money um you

have a problem which is you need to have money to lend it you know so what do you do with fractional reserve you create

money of thin air like you create the title let’s say okay but you don’t you don’t have to in fractional reserve

that’s only no no uh I I say in a way you take the uh you take an amount of

money and you just start to create the titles and then you just give the titles as it was money but they’re not titles

they’re well hold on why are you calling an IOU a title uh it’s just like uh I

call a title because you want the assets back you know you you don’t want it back so again you don’t want it back you want

future that’s why every you have to look at the loan as a simple loan is two

transfers right it’s a transfer in the present which is

unconditional and it’s made because of another transfer being made by the by the uh by the borrower of a future title

transfer yeah but this promise This is what is being in in some way exchanged in some

not a promise it’s not promises can’t be exchanged look well let me let me let me

just try one thing real quick and then I’ll let you go on because I think you’re complicating it by fractional reserve i think we should talk about

loans in general but if I think if you take an example of a non-money

thing it makes it clearer because when you talk about a loan for money money is fungeible so if I give you $1,000 now I

want $1,000 plus interest in the future so people people say that you’re paying it back but you’re not really paying it

back because the it has been spent already right exactly that is my problem about uh user because there is no way

for you to Okay but we I I digress sorry but let’s let’s take let’s take an

example that I think avoids that let’s say that I I you want to you need a h

you need a hammer as part of your new business because you don’t have a hammer mhm and

you promise me that let’s say you’re making screwdrivers okay you’re going to have a factory making

screwdrivers but you don’t have it yet so I I I give you a hammer in exchange

for a future a future set of screwdrivers that you’re going to make someday so I’m giving you title to a a

present hammer and you’re giving me a future title to two screwdrivers in in

one year mhm so there’s no interest there’s just a future good being

exchanged for a present good yes correct now because there’s no interest in fact

we could do this in a barter society where there’s no money so there’s no money yes yes so there’s no favor

economy for example you would say there’s no such thing as usery no there’s no way to describe this as an

unfair transaction because I give you hammer now you give me two screwdrivers in the future is that an that is not

that is not well that is not the main point that I make because my problem is not interest per se it’s like the li the

limitless is uh no no but I just want to make sure we agree on this do you agree that that would be would that be a valid

contract in your view uh I think it would be a valid contract no no problem about that but there is the risk of not

being able to produce a screwdrivers for example that’s what that’s the risk of any future good i agree with you exactly

uh the problem is when you put when you try to use this risk and put back into

the let’s say the to the guy who took the loan i think that is a a problem because you are

taking the future but you don’t want to take the risk of the future what do you tell me what you mean give me who who

doesn’t want to take the risk uh when you have uh the the scenario that I explaining for usery or fractional

reserve you are trying to you’re trying to let’s say

uh use contracts in a way to bend the asset for you to be have a riskless

future for example I can get I can charge you the I can charge you the

money in the future because I lended you money that I in some in this case I don’t own because I just holding for

someone house and then I want you to pay me back with interest okay but the problem is hold on hold up hold up let’s

let’s be for the people listening and when I transcribe this let’s identify exactly we’re talking about let’s say a

bank and a and a and a and a um uh a guy who saves the money in the bank and the

guy we have we have we have a customer who’s a depositor so-called yes a bank and we have a borrower someone who’s a a

creditor of the bank or a borrower of money from the bank someone who takes the loan yes so so the so let’s say A is

the A is the is the customer and A gives an ounce of gold to the bank to to keep

for him well if it’s to keep then the bank can’t loan it oh yeah you have this

this one too have you can have this distinction too yes h you have to make the

distinction because if if if if I deposit money with the bank as a

depositor then the bank is safekeeping it the bank doesn’t own the gold I own the gold yes so the bank can’t deposit

theft yeah and you can deposit it as a way to to take some what is the name

interest over there over this like if I want interest if I’m in if if I’m if I want interest so I I I deposit my money

with the bank but I actually loan my money to the bank and I lose title to the money and the bank gives me an IOU

instead correct the bank gives me as the customer an IOU saying I owe you 1 ounce

of gold correct yes and then and then the bank loans out 90% of it to other

people hoping to get paid back the amount loan plus interest and then use

some of that to pay me back correct in parts because people then most of the

times it’s not a it’s not a physical asset is just mo mostly is a digital

asset like say when we’re talking about money today it’s not like that’s why I wanted to avoid it gets too complicated

I know the problem are you talking about wait are you talking about today statist money the fiat system or statist money

yes the whole I agree the whole system is corrupt as it is now it’s yeah the

problem that I said is corrupt because it’s the whole system is made for the

the bank to not take the risk so the the depos

He he tied the risk into the customer and the borrower but he never takes the

risk and if he takes uh he just like defaults on the on on his obligations

most of the times or the state saves it i know it’s you don’t agree with that but that is the point that I’m making

the state the state does one second the state saves uh oh he he saves the bank for like for example oh yeah yeah no I I

agree I know you agree with that the point that I’m making it’s like uh what I see is this kind of interaction on

where you take them for example the the good thing about the bank is he’s the

both the borrower and the lender in this interaction so he has the both yeah that’s it’s called That’s why hold on

that’s why it’s called credit intermediation that’s the reason why That’s the reason why people deposit

with banks is because they’re not good at lending to other people so they give it to the bank the bank loans it out and

then the customer gets a cut in Brazil it’s uh it’s illegal to do that like I

you should not lend to people yeah i cannot make a private loan over here in Brazil okay even if you could make it

you’re still not Yeah you still might want to give it to a specialist okay fine yeah I know the ju just like a side

point but what I saying is the bank does it but in a way to limit its u uh it

tries to take this money try the IUS and the titles and everything and do not

have the future risk associated with that and when it has uh sometimes they

default and there is no way to take this money back you know I know there is a risk for the for the operation no

problem about that the problem is the the whole system is made in a way that uh a person would not take the risk and

my question I totally I totally agree hold on I totally agree with that but it seems like you’re criticizing the no my

point is uh the this avoidance of risk on which you cannot avoid for example as

even Rothbart and Hopper agree with me uh if you try to make this uh by

contract avoidable risk you have like a a new contract in my

opinion you’re you’re you just froze oh did you heard me yeah I think we we both

were we both for a minute but but I think so go ahead so you said that yeah the point like that that is my point

like you agree with me that you cannot like divorce the the future assets from

the risk and it’s this kind of operation has a intrinsic risk that cannot be

u secured i think they insurable if if I’m not mistaken that I said like I I

know this literature but I I read in Portuguese so sometimes the words get scrambled but yeah uh what I’m saying is

like if you make a contract on which you try to describe in a way that you

divorce that this contract does not make any rational sense i don’t I don’t disagree but the yeah I I just I agree

that but this is just another way of explaining what’s wrong with the current system i no the problem is that what I

want to point out uh with this questioning line of questioning is uh as

I’m not like a well spoken not that well spoken in English I’m just trying to use

some Socratic method is like uh shouldn’t you agree with me that uh the

the this risk free uh uh is risk-f free in this case because it’s just like a

um it’s just a legal manipulation let’s say a contractual manipulation should not be valid because it’s yeah that is

my point this kind of context hold on but but for a lot of reasons I mean the basically it’s not risk- free it’s just

so the government is the lender of last resort and so we’re creating what’s called a moral hazard correct and so

exactly yeah I totally agree this is the problem with the whole system of deposit insurance I I just we just took like the

the main problem uh and one that we both agreed Then I would just want to boil

down to uh this characteristic like uh should I be able to loan you uh

money uh and giving you all the risks of your future

payment it does not make sense do you mean should you be able to do it in today’s system or in No no uh in a

private system that that is my question so let’s talk about it in a private system yes I think you should be able to

do anything that’s not fraudulent so um as long as these aren’t real in in my

sense it’s like when when I borrow uh I borrow I give you the money and I take

your future let’s say your IOU there is a a risk against this

IOU right you cannot yeah but hold on hold on you I thought you said you read Doug French’s book and you agreed with

the legitimacy of a loan secured by an asset so the the guy lending money to

the borrower is taking the risk that he might not be able to re be repaid and the asset might not be enough to pay him

back he’s taking Yes what I’m telling you is like because you can then walk free but if you just put the risk back

into the guy who took the money then you have a problem because uh I first I

think this contract is invalid but I do not have like a strong argument over that i just I think doesn’t do not seem

like a a a rational contract as justifiable demand uh the second part is

when you have this kind of structure you create a moral hazard for people to

exploit that for expropriation and slavery because okay well well okay hold

on I think so the pro let’s talk about these issues one at a time because you’re mixing several things together um

if one of your objections is this in inalienability argument we can talk about that

but I think most contracts where there’s a future payment of future title to

something don’t always involve um a type of slavery it just involves No I’m not

saying it does i’m saying like when you when you try to use a contract as a

resource to to take the risk and put back to to the to the borrower the risk

of his future payment then uh you have a problem here because where is the limit

for this that is why I go back to the inability

let’s talk let’s let’s talk about a real world example so let’s imagine there’s no state there’s no central bank there’s

no fiat money there’s only sound money not real world but okay like there is a

state there is but no ju just joking but I know but I already agree that in today’s system that the whole banking

system creates moral hazards and everything about it is unjust um the

fact that I I know I’m not I’m not I’m not like attacking you saying like you are a bank lover or something like that

i just saying I think uh this structure is is uh it’s intimately tied with this idea

that I’m I’m poking about that I call I get it i get it but you you keep saying

there’s a problem and that’s fine that you sense a problem but to identify something that’s a violation of rights

in a libertarian sense you have to identify an actual some kind of violation of someone’s rights and so the

fact that some people organize their affairs so that the risk is moved from one person to the other in a way is none

of your [ __ ] business do you know what I mean it’s like if people want I get it but well murder is not my [ __ ]

business too like you can murder murder violates murder violations i know i know i know i get it but it’s not my business

but why should I have a stake on what you’re doing to your wife no no no what I mean is what I mean is if you can

identify someone’s rights being violated that’s fine yes that is what I’m trying to do okay so So let’s take a I I say is

like what I’m saying about comparing to murder like if I if I can prove that is a violation uh does not I don’t care if

it’s a private matter for example you killing your wife or you hitting your wife totally agree i agree but but most

contracts because it’s a private matter that is like enshrined that is my point

i totally agree but a contract is usually between two people yes and if if there’s disclosure and there’s no fraud

then their rights are not being violated and then the question is how does it affect other third parties and does it

violate their rights so for example in the in the on the in the Rothbartian literature on this by Hapa and others

yes they they have two criticisms of fractional reserve banking one is the

one is the um uh the criticism I would agree with that um uh it economically it

makes no sense and it just wouldn’t merge absent state support of it the other argument is that it’s some kind of

fraud or it causes inflation or it’s a duplic duplicate externalities because it’s a distortions in the economic uh

yeah but then they’re saying that that has an effect on other people but I think that’s actually that’s actually not true

because so the way I look at it is in a free system there would be banking would

be would have two different functions i don’t think it would be the same thing you would have warehousing right which

is the safeguarding of funds owned by depositors and gambling let’s say which

you just make a No no no no i’m not even talking about I’m talking about the two legitimate functions in a free market

one would be warehousing of deposited funds right no no problem about that in

that case I do believe that for efficiency reasons not with Bitcoin but with with gold for for

efficiency reasons it would make sense for the bank to coingle the funds so that because they’re fungeible and it’s

cheaper to instead of having everyone have safety deposit boxes you put in one big box yeah yeah that’s called

irregular versus regular deposits in the Roman law which Huertto do talks about correct yes I I know it i did exchange

mail with him about that yet but I I’m planning to i already Yeah and that’s in like chapters one and two of his of his

of his book um Yeah theory of money and credit don’t that’s sorry I have the

book over here it’s a big money banking cycles yeah uh it’s a really good book I

have over here i will not take it because I don’t want to take out and so basically in a preocciety we could

imagine what I have over here one second

it was nearby my typewriter uh this book over here I just have in

Portuguese that is a problem so I get a bit scrambled but

yeah currency banker credit and economic cycles this one

and I actually think he goes too far but that’s a different issue because he he’s like the hop he wants to go too far and he wants to outlaw it but I understand

why but I so I think his first paradigm is correct that the way to look at this is that there’s nothing wrong with

having a depository institution hold the funds of depositors and co-mingle them but then every

depositor has a prata ownership interest in the deposited funds correct sorry what is the word it’s it’s a Latin word

pro prata pratta Pratta it’s separate in proportion okay

for for the ratio yeah so if the bank has one 1 million ounces of gold then

yeah yeah I have a portion of this gold yeah I don’t I don’t own a particular piece of gold but I own that fraction of

gold that the bank has and because they have 100% reserves there’s no risk of default

or only if you get uh robbed in this case or they could have insurance the bank could have insurance for that

because That’s that’s an insurable risk yes now by the way for Bitcoin I don’t

think that I think that the need for the need for such such a function is much lower in Bitcoin you can have you can

have your own coins or you can have Coinbase store it and it’s much cheaper so it’s a and and Coinbase theoretically

could could segregate each deposit they don’t need to be comingled i mean maybe they could be but maybe they are but

they but Bitcoin is not something is not um what is the word you said about the

comming and non-commingled you it’s like Bitcoin is not a piece of gold for

example I want this piece of gold uh locked away no it’s just like a number is a no no but but but in principle I

could I could so I I might have like two bitcoins right now and I keep them on my

treasor correct mm Mhm but I could give it to a depository company to hold it

for me and I may pay them a little fee but it’s still a particular Bitcoin unit

um but there is Yeah I I know what you’re saying but like Bitcoin is not a particular unit it’s just a balance

there is no like a Bitcoin number and a serial number for the Bitcoin it’s just a balance well every every Satoshi is

identifiable no well it’s trackable but not uh not identifiable in a there is no

let’s say serial number in this way well my my well I don’t I don’t know the detail all the bitcoin is parata in this

way there is a point it might be but there’s there still would be a distinction

conceptually and functionally between me comingling my Bitcoin in a

big account that Coinbase holds for the customers and me having uh my identifiable one segregated some kind of

way yeah like you can put everything in one wallet or have many wallets yeah but

but my point is with banking as it exists now for gold

they’re they’re vastly different because the cost of an individual safety deposit box is greater than the comingling which

is why we do regular deposits instead of irregular or sorry vice versa we do regular yes

but but with Bitcoin it might not make a difference I don’t know but the point is you can see that it’s just a way for you

to use the the what is the name the wallet but the bitcoin bites itself is not uh it’s not something in any case if

I hire a company to hold my Bitcoin for me whether it’s the regular or irregular

deposit is it’s just a detail the point is that function might exist in a free market but it would still be a lot

cheaper and easier than for gold correct yes I agree okay but that function is I

don’t know if you call it banking or what it’s called let’s just call it depository function like warehousing function Now you could also see the need

for credit and credit intermediation on a free market where you have a bank

which receives deposits but they’re not deposits they’re actually loans from customers and they want to get interest

so they’re using the bank as credit intermediation and they they get IUS exchange they don’t have title to their

Bitcoin they have an IOU for their Bitcoin right yes and then the bank

loans most of the bitcoins that it receives to other customers hoping to make an interest correct

yeah but there is a moral hazard over there for example you in my opinion you can you are the one who chooses which

loan you make and you don’t have um uh your risk assessment is to push

the risk outside of the of the bank the institution so that means that means that if that that I’m stupid if I loan

my money to a to a bank in your opinion I’ll not say prop properly that but it’s

like uh the bank does not have um let’s say uh properly uh incentive to

make to be responsible with your money they can help you like they can give you money but in the end it’s unstable well

well that that just mean that just means that the institution of credit intermediation would not work on a free market i don’t think that’s true but you

might be I think it work but in in a not in a premium but in a discount for

example uh what we call factoring in security uh here in Brazil uh we have

the factor for example for checks checks is a future payment order you know um

and you when you have a check like you you you present a check to the bank and the bank give you uh the the face value

of the check what happens some people want the money now and not in 60 days so

they exchange the the the check for a discount over its face value for example

of course but but yeah but you’re using you’re using the current system as an example but we were talking about But you can do that in a in a free market no

problem people did that even before hold on so that’s the So that’s the question okay so then the question of

what’s called money substitutes arises right so in a free market system money would be let’s say Bitcoin would be

money okay now is if if I do not agree with

that but okay let’s let’s wait why not why why don’t you agree with that uh I don’t like the problem about Bitcoin

becoming money in my opinion is we had we need to have one of two i already

made a video about that uh or Bitcoin destroys the legacy and then we have a fundamentally

different economic system or it gets absorbed so we have some kind of gold

system gold gold standard back uh but a digital gold standard back but it’s we

do not solve the main problems about uh fractional reserves and stuff which was

the main I mean I don’t know what system you’re talking about then because you’re talking about the current system you’re talking about a future system that is

not bitcoin bitcoin system bitcoin uh uh if bitcoin becomes money and let’s say

the dollar get gets down or gets absorbed by the bitcoin two two things should happen in this way

or bitcoin uh gets triumphant in in in its principles for example there is no

more fractional reserve fiat money and stuff like that and and Bitcoin is um

fundamentally change the the legacy system or it gets absorbed and in the

second third layer it starts to get printed and there are a lot of people from Monero who already made this this

you just tell tell me what system you want to talk about tell tell me what the money is in this free market system you’re looking oh go for gold gold is

safe okay so we have a future money we have a future system where gold is now money yet again correct yeah we can go

with it so now so now there would be definitely a need for warehousing of gold so you would have the warehousing

function that Herto do describes where I keep my I keep my gold in a local

depository bank but the contract is I own the gold

the bank doesn’t own the gold correct yes and if it uses for loans it’s wrong

it would be it would be it would be theft okay so there’s no problem there and

there there might also be the need for credit intermediation where instead of me loaning my Bitcoin to someone else to

make a return your gold gold sorry so well let’s take a Do you think that in

this future society it would it should be legal for me to loan my to you

i don’t think like loaning is illegal per se but the problem is the limits of

loaning and hold on hold on i’m going to go inside i’m going to go back inside my my my Wi-Fi keeps breaking i’m going to

have to stop smoking hold on come on Bella i’m going to move inside hold on mhm i gotta finish this in slide

um no problem just uh I’m gonna have better

okay let’s let’s let’s so in this future gold money society we have some need for people to

um use warehousing to store their gold correct yes and and people can loan gold

no problem what I’m telling there there is a fundamental difference between factoring and securing a gold check

let’s say for example I have hold on let’s not get the check you’re complicating with checks checks is a whole different issue um um I don’t even

know if there would be such a thing as checks in a uh in such a world because checks um checks is a status sort of

doctrine in a way you know negotiable instruments this whole idea I think checks are they got created by the

Templars if I’m not mistaken well I I I want to start from scratch and make sure everything is compatible

with libertarian principles i mean I don’t know if checks um um it depends on what you mean by checks

right you you you should look up the concept of negotiability which I think maybe a status doctrine which would only

work negotiability is an important concept of what’s called um uh

commercial paper checks are just one type of commercial paper okay yeah that

that is that is what I’m talking about but but that those rely in modern law on

the concept of negotiability and I’m not sure that’s actually something that’s not people haven’t given enough

attention to that as libertarians because libertarians tend to take for granted all these institutions that have

arisen like for example like they take fractional reserve banking for granted

they take the practice of you getting paid interest for what they call a deposit and they call you a

depositor they take that for granted but we’re we’re saying all that is fraudulent and and is creates a moral

hazard i agree with you on that but by the same token there I think there may be something with the very concept of

negotiability i’ve only written on this a little bit but negotiability means for

example that the check is valid even if there’s fraud in between anyway it’s a

complicated thing do but do you know what I’m talking about a little bit with negotiating yes yeah we had this

discussion here in Brazil for some time about like if there is a a robber in the

middle we call is the robber in the middle problem but but the but the reason the bank I believe the what’s

happened is the banking system and the state’s legal system they want they want

the commercial practices that are built around the state monopolization of the

banking industry and fractional reserve they want that to work so they want so they say but it’s it’s impossible to

work so they they try to bend reality yeah yeah so what they say is that what they say is um so if if I write if I if

I if I have an account at a bank where I have money in there i can write a check

to you that is my per that gives you permission to go to my bank and it says

Canella is the I forgot the term drawer or draw e or the of the same anyway I

give a check to you and that means you can present it to my bank and they will pay you on my order right yes in your in

your behalf yeah but the government to make that piece of paper basically like legal tender so

that you can you can instead of instead of going to the bank you can give it to another party you can endorse the check over to another party and they endorse

that check over to another party and down the chain the the government wants that final person to be able to rely

upon the original promise so they can take it to the bank and get it get the money out so they invented this doctrine

of negotiability which blesses this as like this legally special binding document

whereas in normal libertarian property title theory I believe

um if there’s a guy in the middle that makes up the check then there’s no um or

actually I I got this a little bit I’m simplifying it a little too much what it says is if the original guy that

writes the check has a defense like like a contract defense

saying “Oh I want to stop the check because the guy I’m paying didn’t perform the service.” Once you once you

send that check out you can’t stop it anymore you can’t you raise the defense

um now if the check is totally fraudulent then the check is not good because I didn’t I didn’t write the

check that’s a whole different issue mhm my point is I’m not sure if we can re So I I think the concept of the pro but

anyway the problem with checks now is that they are they are an issue to they’re an order to the bank to

give the person I wrote the check to permission to get some of my money out

of the bank but the problem is it’s not my money in the first place because I I turned the title over to the bank i what

I’m really doing is giving a promisory note to you i’m not giving title to you

because the system has corrupted these things yeah uh like back in back in if

I’m not mistaken uh in the before the banking system like the the modern

banking system the checks is like the holder of the check has a

um has a check was emitted by the bank against

itself yeah so so like you deposit the gold

let’s say in Rome then you go to Jerusalem then you present the check and

take the your gold back minus a fee right you got a fee subtracted by the

service cost for fing the gold and stuff like that uh what happened then we just

make the check into um into a personal uh we just personalize the check like

instead of being a institution the institution becomes became the intermediary for this checking system uh

but the checking in general is not the problem the problem is the institutionalization on which you

create this openings for fraud and the systematic openings you know but but but

if if we take our our imaginary world where the central bank is gone there’s

no fiat money and there’s gold okay so there would be one role for warehousing

th those could not play any role in expanding the money supply and fraud because they just hold the money correct

Yes a holding company let’s say now if I again if I have a Bitcoin and you you

have a business and you want to start a business um and you don’t have any capital to start your little business

there’s two ways I could help you number one I could I could give you the money

and take an ownership interest in your business right that’s one way to do it like investor yes i’m an investor i

become a shareholder and you give me 10% of your company and I give you 1 ounce of gold and if the company go default

tough luck like and if the company makes a lot of money I have 10% I you have 10%

yeah you are 10% of the profits that’s a normal business right yeah you are betting on my idea and my capabilities

in this case now I know that I know that safety moose and other people are hostile to the concept of credit which I

am too a little bit but not as a libertarian um they think that the institution of of of of loan owning

would almost disappear in a Bitcoin world which I I exchanged some messages with Amuz and and saw his uh lectures

and part of it is because he’s trying to justify this usery thing that the Muslims have but I think and and this

hostility towards banking and I do think that the the whole concept of credit would be radically changed in a bitcoin

or a gold world a fiduciary world in this case yeah time preference would

change so maybe no one would like I wouldn’t buy a house with a mortgage age I would just save money rent an

apartment and save money go i would save gold and when I have enough gold I just buy a house with cash okay or buy a car

with cash maybe that’s the new world i don’t know but the point is and and maybe I won’t loan money to you for your

business i would take it a an ownership interest in your business but I think there still might might be a role for me

to say “Okay instead of taking an interest in your company I’m going to loan you 5 ounces of gold for your

business and you promise to repay me 5 ounces of gold in the future with

interest.” Do you have a Do you have a problem with that

um I don’t have a problem with that the problem is what if you can’t pay well so

that there’s two ways you can do it it could be unsecured or it could be secured yeah i think the unsecured is is

where is the what I see as the problem let’s say because if it’s But no but no

but you said you like Doug French’s idea of walk away which means Yeah uh the problem is uh I think when it’s not like

you have uh let’s say you have um you give me this loan and you put a a

lean I think is the name we call in Portuguese a grai uh you put a lean against my house so I cannot sell my

house without communicating you and you approving that because it’s giving as a as a security if I’m not mistaken that

would be the name um this kind of loan it’s okay because

if I don’t pay you uh you can enforce against my house no problem if I don’t

give anything as as for you to put a lean

on and then I don’t pay you you have only let’s say two options you need to

go against my alenable goods for example my house in any way but you don’t you cannot take against uh someone who

already had a has a lean against it because then you’re going to be aggressing against the other guy you

know uh and if I don’t have anything else because I’m bankrupt I have more

depth and leaned goods than than available goods for you to to liquidate

uh then I just go bankrupt and you cannot collect that is the point that I think you can’t connect you can’t you

can’t collect now but you might be able to collect in the future in the future yeah the problem I need to be able to to

produce enough in the future but I can not produce yeah that just means that it’s possible that you can never maybe

my my loan is a bad investment i mean it’s a bad Yes exactly the problem that I say is like if you try

to get out of this risk for example say no you become my slave or I have a I

have a lean against um I don’t know your like your children should pay me then or something like that it’s not a it’s not

a possible contract because you have this risk that you cannot avoid well

first of all first of all I know you cannot put against the children i just No no no but yeah so that’s not But

there’s no way to get rid of risk anytime that that is my point yeah but it’s impossible to and if you make a

contract on which there is something impossible this contract does not have any sense i know but you’re you’re

thinking of contracts in the in the in the standard way as a contract is a binding obligation that uh is is like enforcable

or not but again the Rothbart I don’t know if you agree with exactly with the Rothbard title transfer theory of

contract i have some problems with Rothbart but like I I think it’s mostly right but uh as Rothbart just wrote a

lot of stuff and changed his mind after for example I agree that’s that’s why I took the part that made sense and I I

expanded in my most recent article i think that’s the best way to frame the I really liked your your book about about

this like after I I read it on the chapter six or or nine I don’t remember

now about alienability yeah uh I just reformulated my argument because I was trying to use the idea of consideration

and I was like okay alienability is way better is way more solid yeah right but

however I wrote another chapter since then which is going to be in a book the David Hton is editing which is coming

out later but it’s already on my website so it’s like that chapter nine but it’s got some I think it’s got some

clarifications and improvements and that’s sort of my main it’s on my website it’s called the title transfer

theory of contract so that’s the really one I point people to now because that one has explicit

identification of where Rothbard kind of went wrong and how to how this theory

flows from libertarian property rights theory and contracts um that’s that’s my

current view of these things um now but the point is you don’t view

contracts as binding obligations so when you say it’s it’s an impossible contract

that’s more of a reason for courts not to enforce contracts now because they

view them as binding obligations and so they’re they’re going to scrutinize these things if you just view it as a an

alienation of title to a future thing then either you have a sufficient uh

communication of your consent to do that or you don’t yeah but my point is I agree with that

in the condition that is alienable i agree and so you can’t the problem that I’m saying is like we are

constructing contracts alienating something that you you couldn’t not that

you shouldn’t but it’s not is not like what like what for example if I make a

not saying that we are doing but like the theory is allowing in some way for example slavery I slavery contract

because we have you cannot alienate your body I agree with that you can only so you agree with

me if I make a contract with you that that alienate my body this contract does

not matter if it’s uh I’m informed and consent it’s not a contract

um well a contract is just the word we use to describe two things it’s not a

valid agreement it’s it’s not it’s just a let’s say a word play it’s it’s like

when Hoa says about a master arguing it’s slave a little bit like that yeah

so if if I say I promise to be your slave or if I say I hereby give my body to you it’s just not a valid contract

because it’s not an alienation of title to my body those words don’t alienate title to my body i do exactly no the

problem that I’m saying is like uh some some contracts some written documents

are doing it but um like that is my main point but in a

um in let’s say in um a pernicious tacet

um not so open way but it’s not like not so open because the guy is conspiring to

enslave you but it’s like this is the main idea is just that is how we do it you know I know but the reason I started

this and I mentioned bankruptcy and and inalienability is I I sense that this where you’re going with this now I will

concede that there is a I’ve I haven’t written in detail on this I do have a couple footnotes where I say that there

there could be an argument where the inalienability of your body um is

effectively being alienated if your title transfer is so extensive that it

impoverishes you so much that you’re basically enslaved yeah you cannot Yeah or you are you you die by starvation

because you cannot put food in your mouth because you should be expert exactly and I mentioned that so there

could be a limit i think there could be a limit but that’s a different limit than the user limit and that’s a

different limit than this uh than this limit of trying to shift the risk these are all different considerations and by

the way I think I agree they are different but I think they just uh regress to the same point maybe if you

try to shift the risk uh you are trying to enforce a contract that you are like

the risk is not dissociable for the operation that you are making but if you write the contract on which you are you

you are trying to enforce in this way it’s not valid it’s not

well I don’t know if it’s valid now but so here’s the question if I if I say listen let’s take our our previous

simple example i give you my hammer now and you give me two future screwdrivers

now I think in in general the legal system of a free society should should

recognize that as a valid way of of of assigning title to the future screwdrivers in general yes if the

screwdrivers exist the problem is when they don’t exist no no so let’s let’s

take this so now let’s say I go to get the screwdrivers from you but that’s all you own in the whole world right like

all you own is these two screwdrivers and you’re bankrupt otherwise and you you say “Well I should I should keep

ownership of these screwdrivers because if you take them from me now that’s that’s turning me into a bankrupt person

and I can’t survive.” No the the bankruptcy is not a problem in the my vision it’s like for example I just have

one screwdriver let’s say then I give you one this is the only one I have and you want to to take another another

stuff that you It’s not that I want to take it it’s that you agreed to that so when when I gave you my hammer you

agreed to give me two future screwdrivers and you But I cannot agree to give you my buddy no no but you can

agree to give me three screwdrivers yeah three four infinite but hold on you

could agree to say listen in in one year I will give you two screwdrivers if I don’t have the screwdrivers then then I

will give you future screwdrivers equal to interest basically yeah in a in a proportion yes yeah so

but this those are all conditional and they’re all uh uh uh but they’re they’re

determinable identifiable yes but they’re empty they don’t have any security against it which is why I think

that in some cases the lender would say “Okay I’m going to go after you for 10

years but after that I’m going to write it off.” Yeah like there I think my point is you

cannot enforce it and there is a there is a really uh it’s complicated thing

like it’s not that I say every contract should be enforcable but if you have a a

wrong uh a wrongful alienation uh you just want to reverse

it but not enforce it for example as as the the hammer is not a consumable good

you should be able to to just retract the agreement instead of screwdrivers

you just give back hold on hold on but that’s that’s possible but maybe the hammer is consumable maybe the hammer’s

No I know the nails would be consumable in this example but what I’m telling is um uh if if you have like an invalid

uh invalid um contract for example you take me as a slave for example and I do

a lot of work for you and stuff but then for some mistake I break something and you want to punish me and I say I don’t

want to be a slave anymore you know I I change my mind you’re going to say no you you are my slave and you need to

stay here and you need to pay for everything like you cannot agree with that you cannot I agree that’s my whole

argument is that inalienability is a thing and that’s why I disagree with Walter Block i agree with you yes and I

and in this point I agree with you but what I I see is like uh what do we have

when you have um uh this kind of interests and um let’s say impossible to

fulfill agreements you you have the same problem but in just a whole new package yeah but

but but so what hap what would happen in reality is people that have an

expectation of getting a future payment somehow they would factor into account

the reality of what they can enforce and they yes they’re depending upon your body performing a service they know that

they can’t enslave you so they’re going to they’re going to base their contract upon conditional future conditional

future title transfers and you need to have this risk or that’s the point every

Yeah every contract that depends upon getting paid from a future thing is always inherently necessarily risky

because the future is uncertain i agree but the problem that I’m telling you is like if I make a contract with you that

I just try to avoid the risk this risk the mind risk to you what do you mean

what do you mean by try to avoid i don’t know when I when I say that try to avoid is like if I written in a contract and

if I make a legal agreement with you that I try to write off my risk onto you

i don’t know what that means to write it off um as I said if I uh if you default I

still can go against everything that you have even your body like does not make you can’t no you can’t go after their

body it can only be against alienable things exactly so I always have this

risk and if I try to say that I don’t uh like the contract is uh is being

fundamentally Wait a second hold on a second even if slavery agreements were enforceable they’re still a risk they

aren’t there’s still a risk even if I could enslave you yes I can I can die i can get I can get a disease i know so

every time I I’m counting on a future performance of a service or the

future there’s always a risk the future in in the reality you have the risk what

I’m saying is like you can put on paper that you don’t have and you expect them something else or something else or

something else and you No but that just means that that just means that when I when I do a commercial deal I’m trying to minimize my risk there’s nothing

wrong with trying to minimize risk no not nothing wrong trying to minimize so but sometimes to you want

to let’s extinguish something that cannot be extinguished like you want to alienate your own risk against someone

else that is I think is is a bit absurd about the modern banking system because

it’s a is a the modern banking system the uh the fractional reserve all this

kind of stuff is just a way to try to make it so and uh I think that there is

like um hoa even talks about that in the brief history of man which is not a

economic book in in the same sense but uh the concept of the primordial scene

of humanity that he says about uh uh security getting corrupted into a state

and you can have a a monetary uh the monetary system or the credit

system to be uh corrupted into a fidiciary system or

a what I would call system it’s possible like just because in history we had a

problem over over justice and

uh justice and what is the name and security like uh armed forces in this

case does not does not mean that the state could arise for other reasons too and that is one of the points that I

want to to to throw some light over well let me let me suggest something one

of my friends two of my friends um Jeff Bar they know they know Doug very well by the way jeff Bar he’s an attorney in

Las Vegas and Lee Agllo who’s another attorney in Las Vegas um and Doug to

some extent they’ve all been talking for years about their opposition not only they

agree with I think Hapa well some of them agree it’s uh it’s chopping a bit

your internet damn I’m inside i don’t know what I can do um uh

how about now yeah it’s now now it’s a bit better please continue your your friend Jeff Bar and Yeah and and Leah

Glo and Doug French they they oppose um they oppose the concept of corporations

because they think corporations with limited liability give rise basically to the

business cycle because they um they cause uh they

they separate ownership from control and again the the corporations the the

investors and corporations are trying to have their key cake and eat it too in a sense right yeah that happens on trust

systems if I that makes sense and and so they they think that um

um um I forgot where I was going with this but there’s a connection to

um to this idea of trying to eliminate risk by pushing it

onto other parties um um and in the case of corporations you could make some

argument for that because there’s third parties that could be harmed by acts of the corporation and then they can’t

pursue the shareholders so I think there’s something wrong with there’s something wrong yes I I I totally agree

with that thank you very much for this for this leader i need to take the names now

that is my that is my like I had this conclusion uh last week that

is like it’s a proto conclusion for in my set but that is like the logical the logical conclusion of my

point like corporations should not exist they haven’t written much they keep they’ve been planning this for 10 years

so they haven’t done it yet but I’ll send you their email and you can talk to them about it oh please do it but I’ve

written and they disagree like I’ve written in defense of the corporation because I think that ultimately the corporation could be constructed by

contract alone um and anyway it’s a whole different argument but um

um I just think ultimately the issue is when you when you have a conditional

future transfer of title it it should generally be effective that’s all and I

think what you’re sensing is that you can use that reductionist view

to use lawyer tricks to help people do something that they shouldn’t be doing right um but yeah not not not going

against the lawyers in general yeah yeah yeah no no but it could be too clever yeah it could be too clever and it could

be obscuring the reality uh is a systematic exploitation because you make the system in a reductionist way and

then you have like this gap that people use the exploit as a feature

yeah and so Sean like Sean Gab has written on this himself and some people in England they oppose corporations for

this thing they think you shouldn’t separate like if you’re going to invest in a corporation you should be on the hook and you should have uh control and

you should have responsibility and liability for everything they do um and I think sometimes there’s a leftist

impulse there like they think that this would keep giant corporations from existing in the first place because if

everyone’s going to have liability they wouldn’t invest in it so maybe they’d all be smaller that’s all fine i don’t

know but uh what the world would look like in a free society um but I don’t

think we should engineer shareholder liability to to come up with the output

the outcome that we want which is smaller corporations and instead of large ones yeah not not for the outcome

like I I want I want a fair system that is a point so yeah if that means there

we have no corporations and billionaires no problem if that means that no everyone become a billionaire no problem

too yeah yeah that’s my view too that’s my view too um Um anyway I forgot what but I I wanted

to mention that too because I think it ties in here to some some degree yes it ties perfectly that it’s like it’s this

kind of discussion that I I want to ferment in in inside of the libertarian

circles i didn’t even knew that people are talking about that because here in Brazil we don’t have this uh um or we

don’t have in the same way a trust you know when you make a trust to your and I

become the trustee and then you have some assets inside the trust and I control it we don’t have that that is

illegal activity over here and when I start to discover about but I have I have thousands of pages in my computer

about this and how to set it up and how to do it and when I start to go

uh like I want to open one for myself I just get like dead in the tracks like wait uh this thing can protect me

against the state against the the expropriation of the state everything

but it can protect me against lawful expropriation in a free market to let’s say in a fair expropriation for someone

for someone that I wronged i can get not be expropriated by it so that does not

make any sense to uh to be like so

uh uh to be defended on in a in a libertarian society like in this way

because it’s it’s configured to to be to be a defense against the state and it opens up to be a defense against

everything so so so in these loan agreements and and now I think I remember the connections because the

bank is a is acting like they’re they’re taking money from depositors and they’re loaning money to creditors but the bank

in a sense has no liability because in the end they can just go bankrupt and walk away yeah and walk away the bank

can walk away i can’t so if you say because of this systematic risk that’s generated by this system and you don’t

you think there’s something a problem with it

who whose rights is the bank is is the bank violating is it the is it the rights of the depositor or the rights of

the borrowers i think it’s both but not in the same way so if I if I borrow

money from the bank I shouldn’t have to pay it back because I’ve been cheated

there is a problem that I was talking because if I don’t pay back the bank

cannot pay the the the deposit back but

if like I keep playing the game the bank can just start to take more money and and make a even bigger problem so there

there is a what I call a Kazinski trap on I don’t know if you’re familiar with

Ted Kazinski the Una Bomber oh yeah the Una Bombber

said like well we need to stop I not I do not agree with him i just say that is the Kazinski stripe because then you

just start to go you start to become a a silly Russianist or a revolutionary and

I’m not on which they say like well the modern society is so so not so so bad

and so bad that it’s justifiable for me to blow up people to warn about the

problem so would it be justifiable let’s that is aisk trap in the way i I don’t

know the answer for that but if people Yeah but but let’s take the banking system for example um I agree there’s a

moral hazard now because the bank I won’t say they can’t go bankrupt but

they can be bailed they can they know they can be bailed out by the government because of deposit insurance correct

yeah and the shareholders are untouchable in some way well the shareholders Yeah but the again so this

ties into the other thing limited liability but um but and I think

the problem is not on limited liability by itself you like put limit liability down

but the problem is the exploitation of this concept I think it’s the problem we are reducing everything and then you

then you open up for this uh for these errors and the state does not care why because it can that’s why you want a

holistic approach and not to reduce things to their indiv individual parts so you can get away with it you want to

say “No look at what’s really going on here.” Yeah and if I just keep reducing every time or start by a limited

framework then uh lawyers can just go in and just destroy everything yeah but the

way I see it is libertarian I know you are a lawyer but I’m not trying to do this i But the way I look at it as

libertarian thinkers we can say listen we can reduce it so we can analyze the separate parts and we can identify we

can identify where the problem is and that is why I say the problem is not on interest itself not in limited liability

on itself not in banking itself like uh the pro there is another pro but we

don’t we cannot even it’s hard to define it’s hard to but no but it’s not I think you can you can identify the problem is

in the problem is two things number one no the the when I say define is like

it’s hard to put a name on We don’t have a word for it well I think

that the word is so um we can we can describe the symptoms the effects in the

uh but well well one problem is that a bank gets to treat

customers as depositors and as lenders at the same time so that’s a problem

with the state’s legal system and the state’s courts went along with this to permit the government to have

fractional reserve banking right number two the other problem is the government is there as a lender of is is uh to to

bail to bail out the depositors and the bank through deposit insurance so

deposit insurance clearly is a violation of libertarian rights because it’s essentially taking money from taxpayers

and giving it to the depositors i’m sorry the the shareholders and to the

bank right or to the or to or to or to the uh saving the bank is always wrong

no problem about that that is so we can ident if we got rid of deposit insurance for example then we because we believe

in Austrian theory we believe that the fractional reserve bankers are wrong the free bankers are wrong that they think

that a a FRB system a free banking system would be stable we think they’re wrong we think it would not no it would

collapse which means that there would be bank runs and there would be no government to bail them out and soon

people would learn that it’s a very risky thing to put your money in these things and and the practice would die away it wouldn’t be problem yeah in my

opinion it would be seen as a Ponzi scheme i agree so too and the reason it’s not seen as a Ponzi scheme number

one is because right now the government bails out banks and so we don’t see we don’t see the result of it being a Ponzi

scheme and number two because the government has mangled the law and they

treat depositors as both exactly depositors and that is not because of Rothbarty and title transfer theory no

it’s not but but the problem is it’s it’s get it gets murky in some ways because we are trying to reduce it to

analyze but yeah yeah yeah but but yeah yeah but if you reduce it to analyze it like I do you come up with the result

that we should have separate functions in society one function would be warehousing another would be credit

intermediation but there would be no fractional reserve banking possible under this system and there would be certainly no federal deposit but we we

still have the possibility of this cracks that I say that people exploit as a feature you know i don’t think so i

don’t I don’t think so because exploitation I mean exploitation not in the way that leftists would say I don’t

think there be a way there wouldn’t be a way to manipulate the system to basically get something for nothing it

wouldn’t be possible yeah these new constraints I think they they will help a lot to to avoid it but I think is uh

is not just that it’s not like just a it’s not a simple answer let’s say oh we

just need to to divorce the this this structure over here and then it’s solved

obviously right but yeah like um I think it it kind of is simple i think if you

basically require disclosure so there’s no fraud and you understand the way money really works and you understand

that free free banking cannot work in a free society then there’s no there’s really no problem to solve and and also

if you understand that there’s inalienability and any bank any credit contract you have is enforceable only

against identifiable future assets that are part of the contract then what’s the

problem and by the way the contracts are not simple they can be complicated it can be you pay me money in the future

and if you don’t have it you pay me future money or you pay me money out of your assets that you own if I can seize

them as long as you agree to that ahead of time I don’t see a problem with that yeah that is not the main problem

because then you have a limited limited loan in my opinion the problem is um

this kind of um I say the the word user just to to

say invalid loan loan contract like this uh trying to take something that you

should not uh they are well received for libertarians in some way people do not

even uh people do not they they just go like oh practice

servant and you should shut up because you’re coming you know if you start to question like oh I think this contracts

are they do not make sense this structure this corporative structure does not make sense they oh are you

against business how can you tell yourself a libertarian you know yeah yeah yeah and this is one of of big

problem and you don’t see that being discussed openly like you are telling me

new information right now about this Jeff Bar Leah Golden Shan Shan Gambit

and and telling us uh someone who because

there is another problem but linguistic vice um for

example the translations uh libertarianism is not the same thing here in Brazil because we have lots of

People do not read in English most of people do not read but a few person read in English so what

they know is about translated articles and translated books and the problem is

why they would translate something really technical and specific if you want to convert the maximum number of

people as possible for your idea and then try to filter up people to learn

English and do stuff so we have this distortion over here and it’s a in a

good way because it filter out a lot of let’s say

u uh useless discussions because here in Brazil is a different system

but in the same way we contaminated everything and and simplified oversimplified so that is what I’m not

saying that I’m I’m I’m floating above that i I think I in some way I’m affected by it because a lot of my

understanding over libertarianism beca came from uh Portuguese sources and I’m

not saying like the guys who are translating doing everything is they are a bunch of let’s say conspirators trying

to withhold the truth against us but it’s just like well specialized knowledge do not sell

and they have a economic interest to sell books and stuff so I think this

this kind of discussion should uh should be more um mainstream let’s say that

that is why I’m I’m I’m doing these writing making videos try to contact you

even uh I’m thinking about in the future to contact Mr hopper but I don’t want to

bother him so much as he’s already Well I’m gonna I’m gonna see him in a week in in Istanbul so if you got a question for

him I’ll ask him oh um if you if you I I would ask a favor okay what if you could

summarize these ideas in a better way and explain to him i think I think I’ll try I’ll I’ll try to I’ll try to

describe it and maybe get him to record a fivem minute thing if he wants to i’ll let you know oh I I would love it

because I I was saying like I think in uh by using his ethics you you can

arrive in this in this conclusion some sort of conclusion of that we need to re revise everything you know at least a

revisionist call we we can get into it but people are like in Brazil said oh ha

never said that so as I don’t have like let’s say the the the holy word of the

pope of libertarianism I should about protest okay why don’t you do this why don’t you do this um um and I need to go

in a minute so what I propose is this um I’m going to I’ll put this up but I’ll give you some links for you to look at

and then we can you can you can follow up on them and we can talk further if you’d like and uh email me or send me

like a one paragraph summary of what you want me to say to him and uh uh although

I kind of have an idea but just tell me what you think what you want me to say and uh and then we’ll we’ll follow up

later after I put this up okay no problem uh if you can give me the links of Jeff Bar Leah Golden Sean Gambit

Douglas French already have I’m planning to Yeah I’ll I’ll send you privately some stuff but I’ll put it in my show

notes when I’ll put this up in a day or two uh you’ll see it there too but uh actually Jeff Bar and I we did about a

two two or three-part discussion about some of this on my podcast uh last year

um and we talked about some of the limited liability stuff there too so you can that’s probably the best place to

get their stuff no I I’ll go against like a bloody hound don’t worry i’m not

even recording videos anymore because I’m being consumed by this topic all right let me send you some links and

I’ll put them in the show notes and uh and we’ll follow up later okay but um thank you very much for your time Mr

canella okay we’ll talk next pleasure all right yes byebye bye