How Capital Misallocation Warps Money with Steven Lubka

 
 

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“If everyone uses a 12-inch ruler to build a house, and then one day, the government wakes up, and they change out all the rulers for an 11-inch ruler, but they don’t tell anybody…that distorts everything in the system because you’re using that as a measure, and the same thing happens with money.”
— Steven Lubka

SHOW DESCRIPTION

Steven Lubka is Managing Director of Private Client Services at Swan Bitcoin. In this interview, we discuss how the misallocation of money by central banks distorts money, destroys capital, and creates zombie companies. Steven calls for money to be left to find its natural state within a free market.

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Society has become accustomed to the intervention of central banks in the economy. The underlying narrative is that central banks have the power to direct the economy through the manipulation of money. A principle level is through the control of interest rates: artificial adjustments to the cost of borrowing money aimed at promoting or tempering growth.

You don’t have to be an economics expert though to know that central banks' interventions seem to have become excessive. We have had a decade of near-zero interest rates. In addition to this, central banks have heavily lent on money printing to maintain economic stability: one-fifth of all US dollars were printed in 2020 alone.

These significant adjustments to the money supply set in train damaging second-order impacts. Given rising debt levels and recessionary forces, governments are seeking ways to stimulate growth. However, the economy has not been allowed to function normally for an extended period. We may therefore be in a position where significant businesses aren’t able to operate with a more natural cost of money.

Many businesses have developed in a period where the cost of money has been artificially low. This has created zombie companies, which need support to survive. This leads to a cascading series of issues: such companies divert resources from more efficient enterprises, but they are destined to fail, which destroys capital. It effectively hollows out parts of the economy.

The misallocation of capital is therefore counterproductive: short-term stability is a mirage that hides long-term systemic vulnerability. Steven Lubka’s thesis is that Bitcoin is the answer. It is a real tangible asset with a fixed monetary policy that enables price to be reflective of reality. The result is a market that can make rational decisions, build robust companies, and allow order to emerge In short, Bitcoin fixes the money.

TIMESTAMPS

00:01:55: Introductions
00:02:27: The Forrest Gump of Bitcoin
00:06:19: Capital Misallocation: what is wrong with money
00:12:37: Fundraising for the Bitcoin Policy Institute
00:18:59: Money and interest rates as representations of the real world
00:30:40: The difference between capital and money
00:36:17: The role of price in the market
00:40:05: The distortion of money by central banks
00:46:16: Artificial interest rates vs free market interest rates
00:50:14: The damage caused by artificial interest rates
01:04:53: Zombie companies
01:09:12: How Bitcoin fixes this
01:15:01: The importance of capital
01:18:33: Final comments

 

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SHOW NOTES

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