The Peter McCormack Show

Latest Episodes:

How the US Dollar Shortage is Driving Global Instability with Jeff Snider - WBD568 Oct 17, 2022

Show notes

Jeff Snider is co-host of the Eurodollar University podcast and Head of Global Research at Atlas Financial Advisors. In this interview, we discuss the crazy possibility that nobody knows what money is, and as a result, nobody knows how to run or fix the economy. Central banks and governments are essentially engaged in a high-risk game of pretend.

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Every year around 800 million containers (categorised as Twenty-foot Equivalent Units, TEUs) are handled by ports every year. This represents around 80% of official global trade. Harvard has produced an incredible visualization of total global trade. They have populated the globe with the origin of exports of every type of product. Each tiny dot represents $100 million of exports. The globe is covered in a mass of tiny dots.

This complex, interconnected and shadowy web of global trade, where final products, intermediate inputs and raw materials are exchanged on a massive scale, represents about 50-60% of global GDP. The rest is made up of all kinds of activities, business investment, personal consumption and government expenditure.

The IMF predicts that the combined GDP of the world economies will exceed $100 trillion by the end of 2022. However, this is dwarfed by global wealth, which is estimated to be over $1,500 trillion. To put these numbers into context, US debt is currently estimated to be over $31 trillion, whilst global debt is reckoned to be over $300 trillion. Global finance, which helps manage and fuel global trade and debt, is expected to be valued at $25 trillion this year.

These are obvious gigantic numbers. Yet, these figures aren't the thing that should give you pause for thought. What should stop you in your tracks is that nobody really understands the workings of this complex system, let alone is in control of the resultant global economy.

Most of the global trade is conducted in Eurodollars, which is money generated outside of any control of the US or the nexus of other countries' Central Banking/Government institutional structures. Eurodollars are not understood by the major actors involved in oversight or management roles affecting global economics. That is why nobody knows how to fix the issues with the global economy. It's because nobody knows what money actually is.

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Bitcoin, The Critical Money Layer with Nik Bhatia - WBD567 Oct 14, 2022

Show notes

Nik Bhatia is Author of Layered Money and founder of TheBitcoinLayer.com. In this interview, we discuss Jeff Snider's Eurodollar ideas: how all money is credit money; why Bitcoin will be a check, but will not replace, fractional reserve banking; and how Bitcoin will complement the dollar as a generational store of value.

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Three months ago we interviewed Jeff Snider who discussed the Eurodollar system, how Central Banks aren't in control of the levers of money, and why we could be entering a deflationary depression. The show generated a huge amount of interest, particularly because despite the Eurodollar system being opaque and poorly understood, it is arguably a central cog in the global economy.

Nik Bhatia, amongst other esteemed commentators, was compelled to respond to Jeff's show. This is because Jeff's ideas and the way he presents them are enlightening and engaging. There is broad agreement regarding the unacknowledged criticality of this part of the global economic system, and the resultant challenge it presents for being able to define money.

There is also consensus that inflation won't be the runaway phenomenon some are warning of, because the impact of QE was offset by tightening in the Eurodollar market. As such, deflationary pressures could soon become apparent meaning banks should be taking more risk to stimulate growth. It is fair to state Nic is an admirer of Jeff: Nic attributes Jeff's seminal work to helping him develop Layered Money.

However, Nic does also have some important divergent opinions from Jeff. Nik believes that the banking system isn't out of control. Whilst it doesn't necessarily have the power it seeks to portray it does, neither is it an impotent bystander. The recent moves to quell inflation have only just begun in earnest. Could the Fed show that it has teeth in this regard?

What is most illuminating however is their convergent ideas around Bitcoin. Whilst presented in different ways, they both see Bitcoin's role as an important store of value. They also agree that fiat's elasticity will continue to be a desired utility. What Nik leads on in this regard is that Bitcoin can act as a vital check on fiat and Central Banks: it makes money pluralist.

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The Path of Freedom and Sovereignty with Natalie Smolenski - WBD566 Oct 12, 2022

Show notes

Natalie Smolenski is an Executive Director of the Texas Bitcoin Foundation and a Fellow at the Bitcoin Policy Institute. In this interview, we discuss the elimination of cash, the importance of Bitcoin to a free society, and the clear and present danger posed by CBDCs.

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Like the fable of a frog being not perceiving danger when slowly boiled, citizens in mature democracies have been surrendering to the steady erosion of their privacy and rights. The issue is that society now stands unknowingly at the edge of a precipice. Governments and compliant businesses are working on a technology that they will sell as providing utility but could herald the end of democracy: CBDCs.

Whilst Bitcoiners are aware of the dangers, it seems as though the rest of society, including decision-makers, are ignorant. Faster, less costly, more convenient payment systems - what's the problem many will ask. The risks of providing unfettered access to arguably the most critical component of our private data do not resonate with those who have already traded their privacy with social media companies.

But, there is obviously a massive difference between surveillance capitalism and unprecendented government oversight of individuals' financial data. And further, as Natalie Smolenski alludes to in the whitepaper she has written with Dan Held, "Why the U.S. Should Reject Central Bank Digital Currencies", adopting CBDCs could be a one-way valve: reversing political will and technology is formidably hard. Once cash has gone, it won't be coming back.

The battle is not only for democracy, it is for prosperity. The American experiment has shown that bottom up innovation can thrive in a free society. It is hard to imagine the industrial revolution occurring if feudalism was still the dominant form of societal organisation. It was the enlightenment, the development of ideas of freedom, tolerance, fraternity and rights that enabled humans to flourish.

This is perhaps Bitcoiners' most important fight. Education, advocacy and conviction are our weapons. Maintaining our personal sovereignty is the prize.

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Europe in Crisis with Lyn Alden - WBD565 Oct 10, 2022

Show notes

Lyn Alden is a macroeconomist and investment strategist. In this interview, we discuss the recent market turmoil that followed the UK government's proposed tax cuts. Why did the market reaction nearly result in the collapse of UK pension funds? What are the underlying issues? Where are we heading?

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Liz Truss became the UK's new Prime Minister on the 6th of September. She immediately worked to develop a financial package that would protect people from unprecedented hikes in energy prices. At the same time, Truss was keen to implement a long-held economic ideology predicated on stimulating growth through low taxes and reduced regulatory burdens.

A political judgement was made to prioritise promulgating tax cuts ahead of any assessment of what spending cuts would be required to balance the budget; a huge emergency fiscal package was being combined with reductions in revenue. In the absence of any other information, the market took fright: the government wasn't deemed to be in control of a burgeoning debt pile.

Immediately following the government announcement, the bond interest rates rose sharply whilst the British pound dropped precipitously. Despite government protests that the market response was due to external factors, the messaging was clear: the UK economy is becoming dangerously unbalanced. Within days the Bank of England had to react and start a £65 billion purchase programme to save a number of pension funds from collapse.

So, what actually happened? Experts, commentators and politicians have argued about the causes and outlook, whilst mortgage rates have rocketed such that emergency payments for energy costs will be dwarfed by additional mortgage payments. Is the UK economy at risk? If so, why, and what is the outlook? Does history teach us anything? And, fundamentally, can debt be brought back under control?

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Why Fiat Drives the Wealth Divide with Avik Roy - WBD564 Oct 08, 2022

Show notes

Avik Roy is president of the Foundation for Research on Equal Opportunity think tank and a policy Editor at Forbes. In this interview, we discuss how society can improve social mobility through free markets, individual liberty, innovation, social integration, energy freedom, housing growth and harnessing good deflation.

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America was built on the notion of social mobility. The 'land of opportunity' opened its arms to the world. And they came from all corners. Most arrived with little to their name. But countless stories of aspirational success followed. Hard work, tenacity, and innovation were rewarded. It wasn't perfect, but the American Dream was a theme that built a new hegemonic power not on privilege, but on the closest any major power has come to meritocratic society.

That was America up to the 1970s. Since then social mobility has all but seized up, and has even started to decline. We are now entering a period when future generations are likely to be worse off than their predecessors. Is this because governments have failed? Are the libertarians right? Do we need to unshackle humans from collective interference? Or, is there a way for society to flourish with the help of institutional collaboration?

The Foundation for Research on Equal Opportunity (FREOPP) have a mission to expand "economic opportunity to those who least have it". They provide policy advice on all the major areas of governmental concern: criminal justice, health, education, energy, finance, housing, trade etc. etc. The tools it advocates politicians use are individual liberty, free enterprise, technological innovation, and pluralism.

The aim is to make society more equal. Reducing inequality makes society more prosperous. American history is the best evidence for that. Misjudged policies and a reactive and intrusive approach from governments have allowed inequality to increase over the past decades. To change means that the status quo must be challenged.

Such change means looking forward not backwards. Whilst history can inspire, it doesn't necessarily show the way. New ways of thinking must be embraced. The deflationary forces of innovation must be harnessed. And destructive polarisation must be defeated. American exceptionalism requires a renewed collaborative spirit. Bitcoiners can help drive that movement.

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Bitcoin, Unleashing an Ocean of Energy with Nathaniel Harmon - WBD563 Oct 06, 2022

Show notes

Nathaniel Harmon is an oceanographer, Bitcoiner and cofounder of OceanBit. In this interview, we discuss how an old technology deriving energy from ocean temperature differences can provide unlimited renewable baseload energy, and Bitcoin's vital and symbiotic role.

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In the 1880s, a French engineer devised an engine that generated renewable energy from the oceans: Ocean Thermal Energy Conversion (OTEC). It works by harnessing the large temperature differences between warm ocean surfaces and cold deep waters. This can occur within relatively short vertical distances (i.e. 100m). Such differences can be used to evaporate ammonia, driving a turbine, after which the ammonia can be re-liquified in a closed cycle system.

The issue since the 1880s has been the technology has not been able to achieve economies of scale in competition with cheaper energy sources i.e. coal, oil and gas. The first OTEC plant was built in the 1930s, following which a further 14 test plants have been built at various times and geographies. But, no project has been able to overcome the hurdle of progressing from prototype to operational plant.

And yet, given the size of the ocean, OTEC is the largest untapped renewable energy source in the world. Further, given the temperature differences don't subside at night, it is a baseload supply. The potential is obviously huge. Anything that could be used to offset the capital costs of the R&D phase could lead to a new energy revolution. Enter Bitcoin.

Bitcoin mining's utility in directly monetising energy provides significant flexibility for developing a capital-efficient OTEC prototype. Such a facility would not need to be tethered to transmission lines: it would be able to exploit the best locations for OTEC around the equator. The genius in the proposal though is that OTEC and Bitcoin mining are symbiotic: access to limitless cold water means mining efficiency can be maximised.

And there's more. The production of energy in the ocean opens up all kinds of opportunities that could literally change the world. All from a technology that had all but been forgotten, but now stands to be reinvigorated by Bitcoin.

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How Bitcoin Helps Mitigate Climate Change with Harald Rauter - WBD562 Oct 04, 2022

Show notes

Harald Rauter is an environmentalist and Bitcoiner. In this interview, we discuss how UN climate change action is predicated on socio-economic scenarios that no longer apply (i.e. a cooperative world with improving equality), and how Bitcoin's trustless market-based support for the energy transition could be the solution.

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The Paris Climate Accords in 2016 set the goal to limit global warming to below 2°C, but preferably 1.5°C, from pre-industrial levels. Following this, the UN'S Intergovernmental Panel on Climate Change in 2018 produced a report setting out the impacts of global warming of 1.5°C, and the pathways to keep warming below 1.5°C.

The pathways were developed from forecasts of greenhouse gas emissions and radiative forces affecting climate change, and five different plausible scenarios of how the world may evolve in the future in socio-economic terms. These extend from an optimistic scenario where society starts shifting to a sustainable future, to a pessimistic scenario of a multi-polar world focused on national interests.

Not all of the scenarios had mitigation pathways developed. The issue is that the world has changed drastically in the short time since the IPCC produced the report: it now resembles the pessimistic scenarios for which we have no mitigation pathways. This is obviously a problem, but not one that is being widely discussed, let alone having potential solutions considered.

However, there are some working with environmental investors and policymakers who are seeing Bitcoin's utility in a new light. The world is waking up to Bitcoin being able to support energy grids, subsidise the harnessing of stranded renewable energy and utilise waste methane. What isn't commonly discussed is that it can do all of this without the need for cooperation: it is a trustless protocol with a market-based utility.

Bitcoin mining could potentially be an important factor in mitigating climate change and limiting warming to 1.5°C, in an uncooperative world. What is needed is for it to be accounted for in the open source modelling work the IPCC has made available. Once we can quantify its importance, we can educate the decision-makers, and the market should take care of the rest.

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Bitcoin & the Energy Transition with Nima Tabatabai - WBD561 Sep 30, 2022

Show notes

Nima Tabatabai is co-founder of Optimize Infrastructure. In this interview, we discuss how battery technology for energy grids, solar's overwhelming economic case, energy sovereignty, and how combining batteries, Bitcoin and solar results in the most flexible energy assets possible.

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In 2010 solar power generated 34 terawatt hours (TWh) per year across the globe. By the end of 2021, this has increased to 1,033 TWh per year. There are a number of reasons for this dramatic increase, but a prime driver is a reduction in costs. Between 2009 and 2019 the price of electricity from solar declined by 89%. The International Energy Agency in 2020 declared solar power offered the "cheapest…electricity in history".

As Nima Tabatabai states in this podcast, this drop in price is perhaps the greatest example of Jeff Booth's assertion that technology is deflationary. Research and development of solar technologies have been affected positively and negatively by crises and political dogmas. Nevertheless, since the 1970s there has been a strong 'learning effect' across the whole production process resulting in an exponential reduction in costs.

Nevertheless, the discussion of solar energy as a reliable part of the energy mix still stirs strong negative responses. Intermittency is a major concern: solar can't work at night, and it's deemed to be materially ineffective in cloudy weather and at high latitudes. Essentially, detractors state solar power supply can't efficiently fit demand. There are also issues around land requirements, input materials and waste.

But, are these concerns valid? Can solar be a reliable and sizeable source of energy? If so, what are the constraints and limitations? Could battery technology resolve concerns over intermittency? What would be needed to complement solar energy? Are our energy grids ready to assimilate decentralized power sources? And, what needs to be done to maximise the potential of Bitcoin in subsidising solar?

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Bitcoin Privacy Through Statechains with Nicholas Gregory - WBD560 Sep 28, 2022

Show notes

Nicholas Gregory is the CEO of Commerce Block, the company behind Mercury Wallet. In this interview, we discuss how they have used statechains to develop a virtual version of Opendime, the balance of trust and privacy on layer 2 protocols, and onboarding Lightning users.

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One of the most novel innovations to come out of the Bitcoin ecosystem in recent years has been Opendime. The aim was to turn Bitcoin into a version of physical cash. An Opendime, is essentially a USB stick, that can be traded between individuals without the need to confirm such transactions on the bitcoin base chain. The USB can be verified but is only redeemed by the last user, by breaking the device and accessing its private key.

Opendime enables people to use Bitcoin as anonymous, untraceable cash. The limitation is that it requires a physical transfer. That was until Mercury Wallet was launched. Mercury Wallet is essentially a layer 2 protocol based on statechains. Statechains enable the offchain transfer of UTXOs (turned into a bearer asset referred to as a "statecoin") between parties.

The limitation of statechains is the requirement for a trusted third party, in this case, Mercury Wallet. The third party is non-custodial; they collaborate as a blind partner in the cryptographic transfer of keys. Whilst there are theoretical security issues, they have been mitigated by Mercury Wallet. The issue to overcome is what tradeoffs people are willing to make between ease of use, value transfer and security requirements.

But, this is just the first of a number of growing use cases for Mecury Wallet. It enables unlimited free swaps of Bitcoin UTXOs providing privacy benefits. Through the conversion of underlying assets into statecoins, the transfer of assets using Discreet Log Contracts can be facilitated. Further, by layering the Lightning network on top of statechains, it could even enable the transfer of Lightning channels.

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Running a Business on Bitcoin with Tibor Ballai - WBD559 Sep 26, 2022

Show notes

Tibor Ballai is the co-founder and CTO of Fortris. In this interview, we discuss the challenges of running a business on Bitcoin, how Fortis enables businesses to use Bitcoin as an operational currency, and why this will be the next step in the adoption cycle.

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It is one thing for an individual to move towards converting to a Bitcoin standard, it's quite another for a company. Running a business is hard enough without having to navigate around emerging regulations and evolving technical innovations that come with using Bitcoin as an operational currency. Without professional support, many businesses will choose the path of least resistance, which will be sticking with fiat.

This is how companies like Fortris can provide material help in the next wave of the adoption cycle. If Bitcoin is to become a widely used form of money, obviously businesses will need to adopt it. Having both the expertise and enterprise applications to smooth the transition to Bitcoin adoption is what is required, and what Fortis can offer.

The thing is, there is a myriad of different internal policy and external regulatory hurdles that need to be overcome. Who can sign off transactions? How is the Bitcoin to be held? What are the tax implications, and methods to limit tax liabilities? How should payments, domestic and international, be managed? What are the means for using Bitcoin for payroll? How should Bitcoin treasuries be assimilated into management reporting functions?

These are the hurdles and questions that I am personally having to tackle as I use Bitcoin within both my media business and the football club that I run. So, I am as interested as anyone in what services companies like Fortris offer, and how they can help people like me maximise the benefits of Bitcoin without being tripped up by bureaucratic or technical issues.

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