 Today's talk the title is fake news fake money and living in a world without authority so fake news has been in the news a lot lately and You have all of these accusations swirling around right? The established media the New York Times the Washington Post They're pointing fingers and going these purveyors of fake news primarily at internet-based sites and internet-based sites are pointing right back and Going Do you remember Judith Miller anybody who remembers Judith Miller? Yeah There are WMDs with aluminum tubes in Iraq bullshit So fake news Happens on both sides right and that's really the perplexing thing. How did we arrive in the world? Well, we can't even tell what's true and what isn't You see well established Backbones of authority and truth like the Washington Post and the New York Times or even CNN and Fox News and other TV CBS and ABC and what are they doing? They're cheerleading for a war based on false premises and That was just last week again Not Iraq Syria this time right and you're like did we learn nothing? Did we learn nothing? We didn't learn anything. How do we arrive at this world? Why do we have this debate over fake news and part of it has to do with the rise of the internet in the early 90s so Work with me here. Let's walk through the steps The internet didn't disrupt newspapers and TV companies By Stealing their audience for news that came much much later first the internet Disrupted their sources of most profitable revenue and For newspapers that was the classified advertising section that was where they made most of their money small business advertising in the classified section and The internet came along and Craig Craig listed that shit right just completely undermined it Oh, you can do all of that free and it's instantaneous and boom and suddenly All of their most profitable revenue disappears and the newspapers have to adopt and Then it happened again with TV. They started losing Advertising revenue to the new popular websites that were getting more eyeballs So they started losing first the local and small advertisers who were able to position ads targeted to specific demographics and Audiences because they could get much more fine-grained information TV is a one-way thing. You have no idea who's watching, right? and With the internet they could really target advertising so TV starts losing advertising revenue too So what do they do, you know trim the fat right trim the fat So in newspapers, that's oh journalists. We don't really need them So no foreign desk cut that investigative journalism cut that, you know, what's selling more papers? You know ask Judy and the astrology section and infotainment and cartoons and sensationalist news and if it bleeds it leads and inexorably the long down trend of The news industry started they got it their foreign desks They got it their investigative journalism. They got it their fact-checking. They got it their copy editor desks until what was left Was a bunch of interns running around Copying the press releases of powerful corporations and presenting them as fact and Right-taking notes when someone who seemingly was important said something not questioning any of it and just writing it down publishing it as truth fake news happened because the very basis for producing truth Was removed from the very institutions whose job it was to produce truth and this caused a very weird situation Because until that time How do you know if something's true? well The New York Times said it The Washington Post said it it was on CBS Surely they have fact-checked it therefore. It's the truth The fundamental basis for discovery of truth was to examine the source You go to college You're writing an essay. They say What are you basing this argument for give me citations source your argument? Where are the facts and? If you took a headline from the New York Times and sourced it they go, okay great That's a citation. That's valid. It's a valid source We used the issuer to Determine the quality of what they issued we looked at the authority of the news based on the authority of the Institution that said it Because that was a good model that was a good heuristic that gave us a good false positive false negative ratio It was a bet It was a way to say I can't fact-check all of that, but these people have so If I read I Will become not only educated but also informed and Now we're in a situation where the people who watch the most TV and read the most newspapers Are the least informed part of the electorate? How did that happen? Because the institutions are still standing their authority is still standing in some ways The basis of credibility is still there They still have the big buildings and the lots of circulation and big name But the mechanism that delivered truth is no longer there the mechanism that ensured quality is no longer there or is Significantly eroded and what's their response to that will try harder No, they turn they look at the internet and they go your fake news and Arguably a lot of the stuff on the internet is fake news because it never had any of the mechanisms of producing truth But the internet that has none of the mechanisms and the newspapers that no longer have any of the mechanisms and now Producing truth on a relatively equal basis Every now and then some blogger on covers some incredible story that nobody's noticed And it is the truth and the networks pick it up and every now and then The institutions of traditional truth fall flat on their face and deliver a bullshit to us packaged in a fancy name and People start questioning whether they should believe anything What's the option where do you go from here? Do you have to evaluate every fact for yourself? Do you have to build into your critical thinking the fact-checking department that they fired? How do you go about evaluating every piece of knowledge as? Fact or fake news Well There's an easy heuristic If the esteemed leader of your political party says it's fake news it's fake news Now we outsource fact finding to The tribes that we belong to if the tribal leader says that those guys are lying. We just go with it, right? Happens in Bitcoin too tribalism is part of the human nature But what's really interesting is that what just happened in news that has left an entire generation of people now Unable to discern truth from fiction easily manipulated through propaganda What I'm going to suggest today is that this is about to happen to money This is about to happen to money. How do you know? Money is valuable. I get asked this question every time I do a seminar about Bitcoin Especially if there's people in the audience who are new they say but Bitcoin isn't backed by anything This thing I have in my pocket. It says central bank of blah blah it's backed by The nation the queen the king the parliament the GDP of my country or the goal that we have in our vaults You don't have any gold in your vault They still think there's gold in the vaults many people do it's a common misconception most of my understanding of money comes from myth it is Just barely removed from the level of myth that is Santa Claus we have this constructed fantasy about money that we have received as children and Then as adults when we notice inconsistencies we kind of just shore it up with some Rusty nails and some planks to keep it in place and we try to keep the the illusion and as part of that We adopt these preposterous ideas Such as oh, there's gold in the vault. So then if the yeah, it's it kind of works. I don't know don't Go make your room. Don't ask me any more questions, honey. I don't understand money either We had a heuristic and the heuristic was if a stable democratic government based on some broadly free principles Sanely manages the economy if they say it has value it has value and that's a great heuristic that removes the Necessity for us to independently evaluate Every note that comes into our hands You know, will this still be worth $20 tomorrow? Okay, not this one because this one was counterfeit as I told you before but this other one this one's real Will this still be worth $20 tomorrow? Yeah, I will be worth $20. Maybe not buy you $20 in today's money Maybe we'll buy you $19 80 in a year and you don't really notice that so that's okay But you trust you trust that it's still going to be there unless you're Greek or Cypriot or Venezuelan or Argentinian or Brazilian or from Zimbabwe or from the Ukraine or from You know just keep adding to that list. It's happened so many times one day you wake up and you discover that the banks are closed and The bank government is on TV and they say people don't panic everything is under control And when government official says that you know Panic That's the time To panic now. It's about who gets to line up in front of the bank because they're not opening next week as they promised The temporary emergency measure will become a permanent emergency measure Guaranteed every time so line up and run for your money in the bank and suddenly the institution of money has crumbled And now what do you trust? Now you go back to basics things that you can examine and validate for yourself gold chicken rice salt sugar Whatever you can get your hands on or the other country's money US dollars hard currency right and So the concept of money is one of those things that primarily holds value because we attribute The value as a direct result of its issuance by a trusted authority and we outsource our own Determination of value to this trusted third party and what happens when that trusted third party stops delivering on that promise on Purpose by accident through mismanagement or deliberately who knows but one day that phrase that seemed so meaningful and strong and Satisfying The full faith and credit of the United States government America the full faith not just some of the faith the full faith and credit of the entire United States of America Satisfying okay compared to this one the full faith and credit of The National Bank of Zimbabwe Do you cry? Do you laugh? Do you run? What do you do at that point that sentence? No longer has much weight to it right that thing that you put all your faith in Because they give you their full faith and credit and in return you give all of your full faith and credit in return Every time you receive one of those bills You are giving credit You're giving them a product or service in return for the bill. That's credit You are giving faith your full faith and credit and your full faith and credit is based on absolutely no rational thinking other than You somehow believe in this thing that's printed on it the full faith and credit. I Have a prediction This sentence is going to become increasingly untenable not just in the hot spots Not just in the backwaters not just in the developing nations in the third world as we used to call them But in many places Simultaneously 220 trillion dollars of debt say that the phrase the full faith and credit is ringing hollow all around the world and what happens When they can no longer shore it up Because Bitcoin is not going after Replacing national currencies. Oh, no Is doing something far more dangerous It's encouraging people to put their savings Outside the system and that is the worst thing you can do to assist them based on full faith and credit We are taking away the credit and the faith By presenting an alternative that some people will find more useful and in some places where the full faith and credit of the National currency has been damaged. They will flock to Bitcoin as a Valuable alternative because they know That it's safer and we're seeing that happen. We saw it happen in masses after November 8th in India when Narendra Modi demonetized 86 percent of The country's money Where's the faith now? No full faith Can you print on the money the 14 percent faith and credit of the National Bank of India? We took out 86 percent so that leaves 14 percent this money is backed by the 14 percent of faith and credit of The of the National Bank of India doesn't sound so good people flock to Bitcoin So just like it wasn't bloggers Challenging the truth of news that created This dichotomy of fake news it wasn't better news gathering that undermined the newspapers It was Undermining their advertising revenue cutting off their feed Cutting off at the knees really and then forcing them to adjust their news gathering to the new level of income. They had What happens when Bitcoin does that to banks? Because when they say close all the doors and keep all the money in and There's one door. They can't close because it's Bitcoin and the money keeps leaking and they say Put the minister on television Tell them everything is going to be fine The Yuan will not be devalued any further the full faith and credit of the people's Bank of China is behind this currency and then a month later It's devalued another half percent and that's happened eight times the past year and at some point You're like that doesn't count anymore. I'm taking my money elsewhere And a few people do and a trickle of billions of dollars has fled into Bitcoin from the Yuan and The insidious damage is doing is not in offering a better way for Chinese people to buy things To invest in companies to transact with each other it's undercutting the very source of revenue and Value and stability of a national currency By removing the full faith and credit of the people and putting it in an alternative currency by taking their savings and Instead of putting it in a deposit account where it becomes the basis for fractional reserve lending They're sucking the liquidity out of the economy and that is the worst thing you can do With an economy like that So what are they doing next? What the hell can they do now? Drag the finance minister on TV dear citizens drug dealers terrorists pornographers Criminals and most importantly those really nasty people who live in the country next door are Undermining our nation through this Fake currency Bitcoin the fake money They are in a criminal conspiracy to damage our economy Don't trust it do not invest your money in this Bitcoin. It's fake money. It's backed by nothing Fake money fake money fake money. They cry and scream and protest fake money You think that's not happening. It's happening right now Watch translate if you like what Venezuelan said about Bitcoin just a few months ago fake money in Fact they said It's the Colombians doing it right, it's always the weirdos next door who speak with a funny accent and you know soft tacos instead of hard tacos Abomination and so the cry starts slowly at first fake money fake Money fake money Bitcoin is considered fake money in a few places in the world. Where do you think it's considered fake money? Not here. Nobody's called Bitcoin fake money here Certainly no official would do that. They'd rather it remain an obscurity But in Venezuela Bitcoin is fake money in Zimbabwe Bitcoin is fake money and they write articles about it in China They've tried it a few times hasn't played very well with the audience In the absence of institutional authority There is no basis for evaluating whether money is real or not or is there and What is fake money in real money? Who knows? Are we back in the same conundrum? Are we back in the same situation where we can no longer tell the difference? Is this just like fake news? Do we all have to discover the truth for ourselves? No Because money has markets and markets Discover truth. That's what they do. That's what a market does So if you want to know if Bitcoin is fake money or the Bolivar is fake money You have an easy test You take your Bitcoin and you take your Bolivar and you take them to someone on the street And you say how much will you give me for this and If the official exchange rate for the Bolivar is five times less than the unofficial exchange rate and If the official exchange rate for Bitcoin carries a 20% premium the market is telling you exactly which money is fake the market discovers truth and No matter how many pronouncements and currency controls and bank bans and bank holidays and Demonitization incidents you do no matter how big you try to make that wall that damn Once it's got a little flow a little pimpric and water is flowing through it will make that hole bigger and The truth will come out and the truth will be evaluated by the market and you can call Bitcoin fake money and the market will say well, I'd rather take that fake money than your fake money on November 8th in India the price of Bitcoin went up and maintained a 22% premium Against the rupee over any other currency in the world and I always asked When I went to India Why is Bitcoin so expensive here? Why is Bitcoin so expensive? Are the exchanges making obscene profits No, they're not they're not allowed to do arbitrage individuals are doing the arbitrage and so I explained It's not the Bitcoin that's too expensive if I go Down the street right now with US dollars and buy Bitcoin the price that they will give me is the exact same price I can get in San Francisco. Bitcoin's price is exactly the same But if I give them rupees they're gonna want 22% more rupees. It's not the Bitcoin price that went up It's the rupee discount that went up the rupee price collapsed by 22% Because Bitcoin could be moved across borders to settle the arbitrage difference And then you're stuck with rupees and you can't move them and the fact that you can't move them Imposes an immediate 20% discount that money is worth 20% less because it is not portable and portable is one of the three characteristics of what makes currency and you just lost one of them Actually too because you do monetized most of it Rupees are trading at a discount against Bitcoin Bitcoin is the stable price The market is telling you This is more real money than that stuff and So the market discovers truth and it tells us But be ready because we're going to start hearing this again and again and again as economies collapse as Currencies get into crisis and it's happening even in developed nations. It's happening in the European Union It could happen here in the US dollar. Who knows? The markets are trying to correct the situation They're going to create a flow of money going out into Bitcoin people will start removing Their full faith and credit from the system and putting it in safe haven assets gold silver Bitcoin whatever and as soon as that happens You'll start seeing the articles in the newspapers in the news media, you know the fake news telling you about the fake money and Maybe you can't tell the truth about what is fake news and what is isn't fake news But you can always tell the truth about what is real money and what is fake money? And the easiest way to find out is to go out on the street and ask the market and the market will tell you The truth. Thank you