Markets and Contagion

Hi, this is Charles Hoskinson broadcasting live from warm, sunny Colorado. Always warm, always sunny, sometimes Colorado. Today is March 20th, 2020. It's an interesting time to be alive and an interesting time in the markets. It's a good time to make a video.

First, I want to point out something. Many of you have followed me for years, and that I keep telling the same story over and over again. I have a banner on the back of my Twitter profile, and I get asked often, "What's the point of this?" It's been years that I've had it there. Recently, Balaji made a point that resonated with me.

He said it reminds him a bit of the early 1900s. In 1910, you still had these nine royals, and the world of princes seemed immortal. However, the vast majority of them got knocked off within ten years. Why? Because things that seem permanent and stable change quickly.

It's something that people don't want to admit, but after the fact, they say, "Oh, that was obvious." When I was still the CEO of Ethereum many years ago, I tried to get a Credit Suisse account when we were in Switzerland. It was 2014, and the Credit Suisse people said, "Oh, too dangerous. We couldn't possibly consider crypto; it would be so unstable and terrible. We have a reputation to protect.

We've been here for over 150 years, and we couldn't embrace this crypto thing." Lo and behold, who’s buying Credit Suisse? UBS, only if the Swiss government bails them out. You see, the banking system in general is falling apart, and it's doing so predictably because it has always been a Ponzi scheme. You have this business where you take other people's money and use it to multiply and create money out of thin air, giving it to people all around the world.

Then you make windfall profits from it until people get a little shaky, at which point you socialize your losses and pass those losses onto society. This has been happening for years in the banking industry. We've witnessed the U.S. dollar lose more than 95 percent of its value over the last hundred years.

In the last three years alone, the supply of money in the United States has doubled. We've seen so much reprehensible behavior by the banking industry. The escape valve has been cryptocurrencies. They give us the ability to go into the digital space, take money to the next level, and put people back in charge. However, what's happened?

The governments are coming and saying crypto caused this problem—not the trillions of dollars of money printing, not the fractional reserve banking system, but crypto caused this problem. Not the rampant corruption, not the nepotism, not the U.S. warfare culture that has led to nine countries being involved in wars over the last 23 years, costing $15 trillion. None of that has anything to do with it.

No, it’s obviously the market that’s less than a trillion dollars—crypto—that's what caused all these problems. Look at Bank of America's unrealized losses: $113 billion. Look at JPMorgan Chase; it's around $40 billion. Go down the list of your bank, Google your bank's unrealized losses, and you realize how quickly a bank run can occur. You realize how quickly things can change just like that.

The powers that be try to look for a scapegoat and blame it all on crypto. We’re the solution. We've been cleaning up the mess and trying to get rid of the contagion that is fractional reserve banking. It's just that simple. You cannot base a system on a lie, on a fantasy, and then expect that system to be stable.

Every time they fail, you, me, and everyone else in the United States and the world has to pay for it. Every time they succeed on our backs, they get the money, and then they use that financial power to buy up media and politicians to convince you that somehow they’re virtuous and moral. They never have been, and they never will be. Now is the time for people to really start having that message break through. We’re going to live in a world where these banks don’t exist in this format anymore.

The solution to this upcoming banking crisis is "too big to fail," plus the same group of people—ironically, the same Janet Yellen and others who told us that 2008 would never happen again—are going to lead us to a series of bank bailouts, consolidation, and backroom deals that will make these "too big to fail" banks five times bigger. We’re running out of money to socialize these losses; we don’t have it anymore. Just look at the national debt of the United States; it’s over $30 trillion. What happens when that goes to 10 percent interest, which is heading toward that? That’s more money than we spend on our military times three—the biggest, most powerful military in the world—just to service the interest on the debt.

How can we afford that? There’s a liquidity crisis with the dollar right now. The rest of the world is trying to get off of it because they don’t want to be on this sinking ship. What is the politicians' solution? They come and say crypto is responsible.

So let me get this straight: the people who push for full reserve banking are responsible? The people who push for auditability, transparency, and immutability are responsible? The people who advocate for decentralization and resilience by design, open-source community ownership instead of ownership by the few, are responsible? The people who push for you to be your own bank, owning your own money and having control over your own assets—not some bureaucrat or banker—are responsible? Not the people who can start unlimited wars, print unlimited money, shut down the government arbitrarily whenever they want, and then give your money to their friends?

I’m sorry, we’re too far gone. We know too much. The internet is out now; we can talk to each other and communicate with each other. The reality is that this fractional reserve banking system is on its last leg. It’s not going to last; it will not survive another 20, 30, or 40 years.

It’s not stable. We have to take back our money. I’ll tell you what scares the government: get these T-bills, three-month expiry, U.S. government behind it.

What happens when we can make those security tokens, and businesses can just buy those and use them as their bank accounts? Markets will be sufficiently liquid that they can instantly convert and make payments with them. How will the U.S. government argue that that’s not safe, that their own debt is not safe?

You have full custody and full control over it. You can settle all your business accounting, whether you do payroll with it. Why would I, as a business, want to put my money in a bank that the FDIC only insures for $250,000 and hope to God that I don’t lose my deposits that pay zero percent interest or 0.1 percent? I can go buy T-bills and treat them a bank account.

That’s what security tokens give you. That’s coming. How are they going to survive? They can’t. Imagine how many trillions of dollars will leave the banking system, exacerbating the unrealized losses these banks have.

So how do you get out of it? Print more money, and $30 trillion turns to $50 trillion. What about the purchasing power of the dollar? Who cares about that? What about all the people who saved their whole lives, like my grandfather did on my mom’s side?

He worked at Dean Witter, and his wife worked at Sears. They had a little investment shop there. He went in and said, "I want to invest 20 percent of every paycheck," even though he raised seven kids—five boys and two girls. He found a way to set aside 20 percent of every paycheck on a lineman’s salary and retired a millionaire. That whole retirement is gone.

Why? Because every five years, it loses half of its value under the current monetary policy we have. It will be every three years that everybody’s savings will go to hell. So how do we solve it? Print more money, more Social Security, more of this, more of that, with money we don’t have?

Tax the rich? Great, that’ll solve it. Take 100 percent of all their money; it still won’t pay for this. It’s lies upon lies upon lies upon lies. Now we witness in real time the contagion of the system spreading: SVB to Signature to Credit Suisse, and it’s going to continue.

The antidote has been and always will be honest money, and the digital gold of the day is the cryptocurrency standard. Right here, right now, our industry is proving its worth, and it’s proving it’s worth more than all other industries combined. It’s giving you your identity back, your data back, your money back, your payment system back, your banking back, your voice back. Damn every politician who tries to take it from you and tells you for either national security or law enforcement or whatever the hell the reason is that we have to give away crypto because the alternative is a monetary collapse followed by another Great Depression, followed by total government control over every aspect of your life, every dimension of your life. But don’t worry; they’ll give you a CBDC that looks like crypto, feels like crypto, except for the fact that they can shut it off anytime they want.

If your politics aren’t the right politics, you might get deplatformed. Remember when you were posting stuff on Facebook that they didn’t and they suspended your account? Oh wait, the next generation of this is coming. When you post stuff that people don’t like, your money turns off too. How about that?

That’s America now. Did you sign up for that? I didn’t. No one did. That’s not liberty; that’s not freedom.

That’s totalitarianism; that’s dictatorship. And I, for one, am done with it. I really am. I’m done with it. You’re done with it.

We’re all done with it. The world’s done with it. These people have lied, cheated, and stolen for way too long, and they’re not going to stop until they’re held accountable. How you hold them accountable is you opt out. You don’t vote because the vote doesn’t do anything.

You don’t write a letter to the media that’s owned and controlled by the people doing this because they don’t listen; they don’t watch anymore. They’re corrupt as hell. You opt out, and the opt-out is crypto. Our industry, for better or for worse, are we perfect? Lord no.

Are we filled with scams and problems? Sure, every human endeavor is. But what? It’s honest work because we’re having to lift up the entire world economy and figure out how to rebuild the damn thing from the ground up without any help. All those domain experts who should be here to help us, they piss all over us—the Krugmans of the world—and tell us how stupid, evil, and misguided we are and how next year it’ll all come to an end.

Meanwhile, we keep our noses to the grindstone, building day by day. There’s no contagion here because we’ve been through every collapse. Ninety percent of the value down? Who cares? We’ll be back, and we are.

Oh, that dApp didn’t work? It got hacked? Oh well, time to build another one. why? Because we can, and we will, and we have.

We are now 14 years into this cryptocurrency experiment, and we’ve gone from nothing to a global movement that really has a chance at liberating the world from the banksters who took it over a long time ago. That is something worth being in, and I’m pretty inspired by each and every one of you who believes in this and thinks this is the path forward, a way out of this. It’s going to be rocky. Name brands that and love are not going to do so well. Things are going to change; they have to change because they can’t stay the same.

We’ve learned that. It’s about time that we return to first principles. It’s about time we return to integrity. It’s about time we return to transparency. It’s about time we return to equal systems for everybody—not multiple classes where everybody gets to enjoy the fruits of their particular class or the hells of them.

Instead, we return to one system for everybody because that is the way it ought to be. In the next three years, the next five years, the next ten years, here’s what’s going to happen: all those DeFi protocols are going to go through at least four or five major upgrades and be able to scale and handle transactions with billions of people. The whole notion of identity, because of DIDs and all the surrounding infrastructure, will be able to be a universal identifier that gives you your data and privacy back. It’s called self-sovereign identity. In the next three to five years, wallet solutions will give you the ability to be your own bank, and the securitization of things like treasury bills and other such things are going to get rid of commercial banking.

Markets are going to completely replace payments and change all of it. It’s coming; it’s happening so fast. We’re there; the tech is there; it’s all being implemented now. Whether it’s Cardano, Algorand, or Ethereum, you can taste it. The revolution is here.

If the U.S. bans it—hard or soft, choke point or through legislation—it’s going to go to the Middle East, India, China, Africa, and the Latin American markets. It will work its way back in because as the U.S.

is in a massive depression, over-reliant on its nepotistic, corrupt banking system, the rest of the world will be making money, being safe and secure, insulated from the contagion, and they’ll be able to out-compete. If the U.S. embraces it, all the faster we’ll see the banking system collapse and a better one come because it has to come. I’m so tired of this.

I’m tired of them laundering the money of Putin, money launderers, drug cartels, and terrorists. I’m tired of them trading against us and laughing about it in emails. I’m tired of them playing a rigged game where they make money, and we have to get the bill every time—ten times out of ten. It’s a rigged system. Every election cycle, some politician comes and says they’re going to fix it.

They’re going to pass some law—Glass-Steagall or Sarbanes-Oxley—or they’re going to pass the new thing, Dodd-Frank, and that will solve it. That will stop these guys from ever doing it again. Who wrote it? The guys who run the show, the guys who run the banks. Sorry, it’s not going to change; it never will change because they think you’re stupid.

As long as they’re able to put their hand in your pocket with no accountability, it’s the way it is. Crypto is the answer. So keep the faith, keep the fire in your belly, keep pushing forward. the picture that Balaji and I posted, things change pretty quickly. Every single person in that picture from 1910 thought they were pretty special, pretty powerful, and that they were part of eternal institutions.

By 1920, almost all of them were either dethroned or depowered, and they no longer had that divine right of kings behind them. All these banksters right now think they’re big and strong, saying, “We’ll get you out of this; don’t worry.” Well, what’s going to happen in five or ten years? The next economic collapse will have them begging you for a loan, as it should be. Once we have our freedom back and our power back, we can live a better life—all of us.

Everyone in the world—not just those who happen to be born in the right countries—can live a better life because that’s the most fundamental thing: your freedom of association, commerce, and expression, and your ability to own your own destiny. That’s the whole reason crypto exists; that’s why it continues to exist, and that’s why each and every one of us builds. Thanks for listening, everyone.