CVA Podcast: Thierry Arys Ruiz, AgAu.io

Transcript

[Music] hello hello welcome to today's special bite-sized episode of the crypto valley association podcast as we celebrate our 10th episode i am your host trash ahmed and let's discover together the growing trends of this fast moving space and try to shed some light on the mysteries it contains we are joined by chiari arizois ceo and founder of agau.io an electronic money system backed by silver and gold we also have with us alexander berenson professor of economic theory and dean of the faculty of business and economics at the university of basel this is going to be an exciting

one so hang in tight and let's dive straight into the world of monetary policy cherry alexander thank you both for being here how is everything uh very good i think thank you for having me um oh my pleasure so let's start this straight off by letting our audience know a little bit about yourselves and what first got you involved within the blockchain space so maybe cherry would you like to start yeah thank you so basically i am a commodity trader by profession and one of my first jobs was to do analysis on mining companies that were mining gold and i heard about mining bitcoins and about the new gold back in 2010 without too much

seriousness i looked at it because of also my libertarian entourage and then as i discovered it i kind of tried to assess what the value of bitcoin was in the early days because there wasn't really a market and because i didn't really see a standard of how to calculate how you can take an ounce of gold out of the ground for a mining company i could understand that but how could you could produce with capex and uh and hardware the bitcoins i couldn't understand it so that's the first time i heard about it i left it a little bit and then got back to the technology when i heard about smart contracts since 2017 in 2016 as well so i bought some of it in 2016. sold it

in 2017 and since then i have been working with the technology mainly basically since 2016. yeah okay great to hear alexander would would you like to introduce yourself a little bit yeah and as you said i'm a professor of economic theory but my main research era is monetary theory monetary policy and for quite a bit of years already crypto assets so the history here is i think around 2011 a colleague of mine emailed me or called me up and said oh have you heard something about bitcoin but unfortunately at that time i was saying ah this is going away this is just a little bubble and i couldn't believe at that time that this is going to be so successful as it is

later on i was lucky to have a really good student many of you probably know him fabian share his i think was in 2014 he was writing a seminar paper about it and that's when i really started to get more and more interested and working on this subject my research as a as i said is monetary theory monetary policy so i'm generally interested in money i have written many papers in money i do a lot of also consulting for central banks and so i have one leg more in this old traditional legacy world and my other leg now is um in crypto in cryptocurrencies crypto assets all right great to hear and so cherry tell us more you're organizing an event soon

an exciting event i think actually based along the lines of what alexander just said around monetary policy called the monetary reset event would you like to our audience a little bit more about this yeah thank you so absolutely and alexander is also going to be a speaker at the event he has very valuable insights also has a book that he wrote recently so i thought he was one of the experts that are going to join us we have experts from you know international organizations private sector and academia and so alexander is somehow fits in in a lot of those hats monetaryreset.net is the website this is a not-for-profit event actually to raise funds for lebanon to raise funds

directly 100 of the proceeds go to the st george hospital in beirut and i think it's bank on the topic because of there is a lot of stocks on cbdc's my own project ago agau is backed by gold so i think there is a lot of conversations to have between the different sorts of cbdc's uh but also private money what i call private money meaning bitcoin or my private initiative and so i think it's a good debate to have in order to to see what is what is the new paradigm and the new matrix of money uh to rediscover somehow money flower in all of its forms and see what are the differences the upsides and the

downsides and probably maybe the window on what could happen next for central bank digital currencies or for private initiatives like mine okay understood understand maybe alexander you can comment on the importance of education as a professor the importance of education for monetary policy and the likes well i think of course this is important also educating students about finance so that they make good decisions but i have to say first of all we are really living right now in probably the most interesting time for the monetary theories there have never been so much experimentation going on and we all have to thank actually the the bitcoin developers

that they they have basically initiated the whole discussion because i'm in this field now uh probably even 30 years and i i remember we were kind of small groups doing monetary theory writing papers and nobody was interested about it and that changed completely and now everybody talks about money uh all these options that are you know up for crap now and this was i mean for me this most fantastic thing that that ever happened okay great and i think cbdc's have a big role to play within this um and it's going to be hot topic within the event and it has been for for quite some time now and for those of you that aren't familiar with this abbreviation it means central bank

digital currencies so in a very simply put away a digital form of government-backed and issued currency so alexander maybe you can tell us the importance of the cbdc's within within today's society so i mean one thing to to understand this is not really so noble in some sense there is cbdc there has been cbdc for many years already but it was limited to the financial sector basically you had to be in a financial institution then you had access to an electronic or digital form of central bank money it's just that also the firms have no access to it now they need to hold government printed money then you have to to hold either coins or bank notes so in that sense it's not

such a big step right basically the only thing that the central banks need to do is to open accounts or to allow the people to open accounts in their at the central bank and then we have cbdc and the discussion so this would have been feasible like 10 years ago or 20 years ago you don't need blockchain or crypto crypto technology to do so but because of bitcoin because in particular because of libra i guess suddenly the central banks were waking up and saying oh maybe we have to offer something like this because otherwise the private sector is going to do it okay okay and so what do you think about that cherry is it true maybe you can tell us a little bit about why cbdc's have been so hyped up then if

they could have been created in the past well i am of the opinion that the private sector always innovates much better than more public initiatives and i think bitcoin is precisely that my view bitcoin is a private sector response of the experimentation of the central banks i believe at this time we are looking at uncharted territories when it comes to central bank policy i was discussing with alexander previously that when i was studying monetary policy finance international finance i was not aware of negative rates i didn't learn about asset purchases quantitative easing and all that so this is something that

only discovered in 2008 2009 and then since then i believe that there was a lot of moral hazard that was created by central bank policy for two reasons one is because the enormous responsibility of central banks whilst doing something for which nobody really has a response in terms of the predictive consequences of that and then also because of the inflation that is a target now didn't necessarily create inflation but rather asset inflation and that essentially pushed a lot of people on the risk curve meaning that they took more risk that they necessarily could have done

and then also the the other fact is that those who had financial assets saw their price rise artificially and so artificial interest rate artificially low interest rate is exactly what it is which is artificial so i believe in response to that the private sector really wanted to create an alternative of central bank money by creating bitcoin and i looking at history believing in gold as the true and only form of money started my initiative because i saw the opportunity there and i wanted to do it in switzerland because i thought that in terms of historical risk and legal perspective that was the best place to do it without

risking expropriation or confiscation okay okay i i see exactly what you mean and maybe just further on that point then what do you think about the people that compare bitcoin to digital gold then where do you see the contrast between gold and digital gold a lot of people let's say of the younger generations are looking into buying bitcoin as they see that as better value than actual gold today what are your thoughts about those two yeah that's true i mean it's kind of like the millennials gold i would say because it's appealing because it's new but clearly the track record of of history and the price movement and so on i don't feel like it's the same thing first of all i have to say i respect the idea of bitcoins and the ideals behind bitcoin but i do not believe in

bitcoin itself what i mean by that is that i don't think it serves as money i don't think it is money i see it more as a collectible right it's a nice invention but i don't feel like the first invention is the best one right so it's never the first car that is the best car it's not the first computer that is the best computer but that doesn't mean that cars are not good and their computers are not good obviously the technology will be used in the future but in terms of pricing and what money is which is unit of account store of value and medium of exchange it fails at all three in my opinion unit of account because a unit of bitcoin today is not really comparable of a unit of bitcoin 2009

or 13 and a store of value because of the volatility you cannot really put your rent on bitcoin right you would not want to use that unless that's the only option that you have like in the case of venezuela or things like that and then finally the medium of exchange we see that there's scalability problems and so obviously it doesn't fit there either it doesn't mean that there's enormous amounts of brains working on these problems and i am confident that at some point the crypto community as a whole will come up with a good protocol and a good form of money that could be using that technology which is what i'm trying to do but at the same time i am totally for the free competition of money

because that can only improve the quality of money in my view and so there will be failures and there would be winners and hopefully will be on the right side of history okay and and maybe just one other question about that because i think it's very intriguing uh towards our audience whereby well gold is a commodity and it's scarce and that's what brings its value right but imagine if elon musk's project for example goes to plan and he's able to go to space and mine a bunch of gold and then create an abundance of gold does that defeat then the purpose of this commodity where do you see see that floor and look from that perspective there is much more gold at the center of the earth at its core so you know warren buffett would say that you take the gold off the ground

to just refine it and then put it back in the ground i i see your point but then going back to what is the cost of production of an ounce i don't know if the cost of production of bringing that goal to it's a hypothetical obviously supply and demand would play i'm not so worried about this i think the it serves its purpose for what it is which is it's a physical element okay and then the table of elements uh you know we are agu when talking back by silver ag and what took it back by gold au the table of elements au gold is immutable in time so that means in a thousand years the gold would not move it doesn't need technology to be there we only use the technology to keep an entry ledger right

book of it but but ultimately the gold will exist beyond ourselves all right unless we de-materialize ourselves as well but the short answer would be it is historically proven that so far discovered the best alternative to fiat and the real money as far as adam smith and all classical liberals are concerned is gold okay yeah very interesting so let's put back a little bit to the digital side and and maybe alexandra you can give our audience some of the benefits then to the issuance of digital cash i think there are many benefits so first of all i think there is a demand for it there are many people that would like to hold an electronic

form you know money that is issued by the government they count right now so if you want to make payment these days you have to hold private money then there is there are benefits for monetary policy it would simplify monetary policy quite a bit i think also there's there are advantages for stability i think that it will increase financial stability and then there are some other uh benefits so i just don't see any drawback from it okay so no drawback whatsoever there are no downsides to the issuance of digital game i'm not the person who says okay we have to outlaw everything else i'm i'm totally for competing so i i think crypto is fine they should develop maybe they come up with something that people

really want to hold that's fine so it's really i think competition is good but i if i just look from the point of view of central bank i think they have to issue a legal tender that is you know that in electronic form that everybody can hold but then what about the dilemma of liberty right and the whole uh surveillance metrics that we're seeing uh in in today's day and age right yeah but this is freedom of choice at the end of the day that's why i would even allow monero and others i would just say fine if somebody has really concerns about privacy then he he should go for a private sector solution like like monero and you don't believe that the governments will impose their currency on

on their citizens some some will do certainly but many we won't do it i mean there are governments that they they don't want to do they're actually in fact quite reluctant so you have right the situation you almost have to force central banks to issue cbdc because they they believe the current system is quite fine so there is no need for change the more up you go the ladder the less they think it's needed okay interesting and uh cherry do you have anything to add to those pros and cons of digital cash well i think there is a difference between the principles of western society and what is actually really happening the principles of western society as i see them is that

freedom of private property for example and all sorts of freedom such as privacy are supposed to be guaranteed by the constitution and by some safety nets but the reality of things is that i do not see that we are in a complete free market if there is if the main target rate which is the price of money is artificially defined by a centralized institution i don't feel like that's a free market the other concern is of course you mentioned privacy and the allowance of petition you know are we really in a free market capitalist system or not and in theory we are but in practice we

are not because we we see regulations so under the disguise of protection and security the tendency is that you the governments and regulators regulate and they regulate uh to the detriment of freedom under the premise of security and we see that also with kovid in in a lot of these different measures but we see that with money more particularly and i think we touched on on a very important point which is are we politicizing money right is money now a vehicle that is being used by governments is there really an independency of central banks and governments or is the central bank there to monetize the debt the unsustainable debt has been

created by government that's a question another question is to know if we do actually have free competition of monies or not because my understanding is there is a lot of crackdown that has been done in many different countries against crypto assets and then they come and go but eventually that can be crony capitalism where only the ones in the club can fulfill the regulations or not but over the long term i would say that i'm confident that the free market will win eventually and that people will vote with their feet and with their wallets and in in this case you will translate just like for mp3s right so you had mp3s and it was illegal but that doesn't mean it wasn't used same thing for uber

so it's not because it's illegal that it's not used but it's always better when it is legal because then it allows the peace of mind for people and it allows also for people a better use of the currency so that people can use it in in the way that by vast consensus we are supposed to be using that and not financing wrongdoing i would say so it's always better to adapt to the technology since it's not going to go away to embrace it that would be my message rather than trying to crack it down because the more you try to crack it down the more creative the people become into finding alternatives and those alternatives can quickly boomerang to you by creating even more of the wrong things instead of

the good things i would say but i think at the end of the day the question is who do you trust more for example in switzerland who do we trust more the swiss national bank or do we trust facebook more i think it's true that the the free market will produce something this is coming right but i honestly in turn if i make a comparison between the swiss national bank you know issuing an electronic form of money under the law maybe some privacy law and stuff like this and libra i would go for the swiss national bank 100 i mean you can be sure that if the private sector produces something like this i mean there will be no data protection nothing they will exploit your data like you know like there is no tomorrow

you know i if i may say if i may say something there first of all i want to say that the swiss national bank according to my understanding is a private sector institution since it's quoted on the exchange unless i'm wrong and the other thing is yes of course there's a need for people to demand privacy i think you know i did 10 countries in order to settle in switzerland and that was mainly for two reasons one is the what at the time was privacy meaning uh banking secrecy and then the other thing was also you know direct democracy so that people have a say in what is happening in terms of policy so i think here the question is also to say are we going to finally have a separation of state and money okay just as we had a separation of

state and religion and then are we going to actually have a free competition of money so that people can choose and then the work then will only be to educate and to inform to the best of their knowledge for people to choose freely in a free society and that i believe is what is something that is playing out right now and in my opinion the more you are trying to fight the free choice of the free market the more the free market will come up with creative solutions to circumvent and eventually if you do it too much of the central bank you might lose the reputation that you had so much time to build on yeah okay it's interesting and diverted a little bit from the blockchain

technology part so maybe alexander how do you think blockchain technology will impact monetary policy in the future i mean that's very hard to say for me because it i so i strongly believe that you know the entire financial system will move eventually to some sort of a network like ethereum or similar i think the it's not yet settled who is going to win and this is certainly not going to have implications for monetary policy but it's very hard to say what but what i say in the meantime you know if you want to introduce a cbdc which is a totally centralized form of money there's absolutely no need for blockchain technology so you can do this as i said before you could have done this

like 15 years ago 20 years ago without blockchain technology without distributed systems because it's a centralized form of money but the long-term effect i don't know when the entire financial system moves on to to some network like ethereum i don't know what the implications are sorry do you have any comments to add to that well i think there's a difference between the different ideas that can come through right so if for example if blockchain could be a good means to do helicopter money right or redistribute directly aid from central banks into everybody and do mmt or things like that which in my view are bad ideas but they could be explored then the other thing is i remember a lecture by thomas jordan and

john taylor founder of the taylor rule about inflation and and interest rates and uh i remember the debate there then was you know how does the central bank determine its policy to to set interest rate because a lot of central banks have mentioned to be data driven but then are they and if they are then why shouldn't they put this in a smart contract so that the decision is clear transparent and we know about it so that's another use but i think it would actually defeat the purpose of a central bank political motivation sometimes or political implications since uh you know in a lot of central banks they are appointed or things like that such as in the us so it might be counterproductive

in some areas for determining policy for example because then it doesn't allow you the flexibility that you want to have but then in other areas for distributing fiat money to everybody it might be it might be a use case that they might want to explore at a later stage and and maybe that would mean to do that do i agree with that i wouldn't agree with that but but i think it could it could be one but let me say something about this again you don't need a blockchain for this like blockchain is just a distributed database right that's the strength of it you know it sends ship resistance stuff like this but the central bank you can also have helicopter money in in in the central bank suppose all of us have an account at the central bank

it's just a centralized database everybody has an account you know they just add a couple of zeroes to everybody and that's how helicopter money would would perform so you don't need blockchain for this kind of operations and you also don't need blockchain for rule-based systems we had rule-based systems in the 70s and 80s right these were these monetary rules in particular the deutsche bundespunk they had this idea you know the growth rate of the money supply has to be constant has to grow at a certain rate in order to get stability so they were really rule-based systems that they had at the time but they they failed dramatically there's a reason why we had this

evolution from this old rule-based system to the systems that we have today i don't claim they are perfect what we have today but there's a reason why we went away from this simple rules okay you know the money supply just has to grow like two percent per year and then we get monetary stability because it was simply not the case okay well it's a very interesting topic and i think we're running out of time here so feel free to check out the monetary reset event that is coming up very soon on friday where both these great speakers will discuss further these topics along with other speakers from reputable firms such as international monetary fund and i think it's going to be a great conversation

so um great thank you guys uh for coming if you would like to hear more content around blockchain technology and cryptocurrencies feel free to check out more on our website cryptovalley.swiss where we host plenty of events educational content and even provide information on how you can join our growing community so thanks again uh cherry and alexander for joining us and uh stay safe and until next time from the crypto valley in switzerland thank you thanks thank you everyone bye