In This Episode
Buck is joined by best-selling author and satirist P.J. O’Rourke to discuss what’s next for the Trump administration if the stalled Senate health care bill fails…and why the Russia investigation is most likely headed down the “Whitewater rabbit hole.” Paul Vigna of the Wall Street Journal and author of The Age of Cryptocurrency: How Bitcoin and the Blockchain Are Challenging the Global Economic Order tells Buck and P.J. about the one company that could make bitcoin mainstream overnight.
Male: Broadcasting from Baltimore, Maryland and New York City, you're listening to the Stansberry Investor Hour.
Male: Tune in each Thursday on iTunes for the latest episode of the Stansberry Investor Hour. Sign up for the free show archive at investorhour.com. Here are the hosts of your show, Buck Sexton and Porter Stansberry.
Buck Sexton: Welcome, everybody, to the Stansberry Investor Hour. I am Buck Sexton, a nationally-syndicated radio host, former CIA analyst, and usually we'd be joined of course by the man himself, Porter Stansberry, but he is away on vacation. So we are joined by the wonderful, the formidable, the one and only PJ O'Rourke, who I'm sure many of you are – if not all of you – are quite familiar with. PJ, thank you so much.
PJ O'Rourke: Well, you're so welcome, as long as nobody asks me for any investment advice.
Buck Sexton: PJ like me is a political guy, and PJ's obviously a well-known writer, columnist, author. Am I leaving anything out? Do you play the ukulele? Anything you want to tell everybody about?
PJ O'Rourke: [Laughs] No, no. I'm pretty much innocent of the ukulele I must say. It's just that filling Porter's shoes is kind of difficult. I feel like I should hold forth on some major investment issue. And so the best investment I've made lately was I took my wife out for dinner on Mother's Day and a left a $20.00 bill in a suit pocket and I found it this morning. So I haven't lost anything.
Buck Sexton: [Laughs] I think that's actually as investments go pretty sound.
PJ O'Rourke: Yes, yes, it's better than a lot of people are doing.
Buck Sexton: [Crosstalk] We are going to be talking about cryptocurrency. We've got an expert joining us from the Wall Street Journal in a little bit. So folks will get some market-specific discussion going on there. But in the meantime, I kind of want to talk about healthcare just for a minute just because this is supposed to be the beginning of all of the agenda. This is what the Republicans were supposed to get done. And as of this week, it's maybe the Senate Republicans will have an entirely new healthcare plan, and that will be the chain reaction for tax reform, for budget reform, for all of these great things. It'll obviously have a major economic impact. Except some people are saying, "Well, step one is not even going to happen."
PJ O'Rourke: Well, yeah. I mean that scenario that you just laid out does smack slightly of candy-flavored rainbows, flying ponies, and such.
Buck Sexton: Yeah. I don't know why we're supposed to think it's going to get better. Go ahead, PJ.
PJ O'Rourke: Yeah, no, I just – I'm having exactly the same trouble with the Republican bill as I was having with Obamacare all these years back, which is has anybody read this bill.
Buck Sexton: I don't like to be the guy who is the naysayer. I don't want to be the one that's – although I don't know; do you like to be the naysayer, PJ? [Laughs]
PJ O'Rourke: Yeah, sometimes.
Buck Sexton: Sometimes I like to be the naysayer.
PJ O'Rourke: I mean nay – something that needs to be – I've got teenage kids and no is an important – sometimes it's the only part of my vocabulary.
Buck Sexton: I do think it's been a fascinating political shift that after years of being told that we were going to have a repeal and replace of Obamacare, in fact, there were, as you well know, dozens of votes taken in the Congress by Republicans that didn't go anywhere because they weren't the majority of the time to repeal Obamacare. And then they finally have the majority in the House and the Senate and they're like, "Whoa, hold on a second. We're not really going to repeal this thing."
PJ O'Rourke: We're not really going –
Buck Sexton: We're supposed to be okay with this.
PJ O'Rourke: Well, that's simply because it's a benefit program and it is politically in a democracy it is extremely hard to take away any benefit that you've given. And this was always the conservative argument going way back. I mean this was the conservative argument against all benefit programs, including Social Security was that you – well, yeah, I mean by all means let's help poor, old people. Actually Social Security was a pretty successful entitlement program in terms of eliminating poverty among the aged. And it's not like the aged like when they get a government benefit go out and spend it on crack. I mean they spend it on kidney dialysis.
But the conservative argument against this dating back to the 1930s was once you have opened the gate here to the government giving stuff away, you're never going to be able to shut that gate again. The entire herd of American money and power is going to run through that open gate in the fence and you're just going to have to give more and more and more to people. The whole relationship of the individual to the state will become one of client to patron and give me more or a little kid to parents with the cookie jar.
Buck Sexton: The Republican party I think has also signed on for this idea, whether they want to say it openly or not, that the government has a role in providing people with healthcare, that that's now – and I don't mean providing it like if you want it; providing it as in you have to have it. Whatever happened to the unconstitutionality argument?
PJ O'Rourke: Yeah. Entitlements are – they are a mandatory intrusion. I mean it's one thing to help people in disasters or poverty or even help them when it's their own behavior that's caused a problem. It's not a bad instinct. But once the machinery of government entitlements comes into play, [laughs] this wealthy friend in England – and she had a kid, and the government insisted on sending her £15 a week to buy baby food and diapers because they put the entitlement program in and it was ridiculous. Of course she didn't need £15 a week. But they didn't basically know how to stop this.
And it's the same with me. I'm of Medicare age, and really I mean things like the drug benefits, they ought to be means tested for me. I go in to get a medication, the medication costs like $50.00. Okay, I paid into this thing all my working life. I want to get a little something out of it. But then I look at what I pay for the drug and it's like $9.00. Well, I could kick in another $10.00. What we really want from healthcare from a government healthcare system I think, and I don't think this is outside the parameters of our libertarianism or conservatism; we want to make sure nobody is beggared by their medical bills.
Nobody should lose the house because of ill health. The boat, maybe, but not the house. And there's got to be a simpler way to do this than the horrible Obamacare bill and what looks to be as nearly bad as a Republican bill if we can ever figure out what that Republican bill is.
Buck Sexton: What do you think about tax reform by the way? They've been promising this. They've been talking about it since, well, the first weeks after Trump one that election that everyone said he wasn't going to win, and we've been told that the best part of it is going to be a corporate tax reform, really a lowering of the corporate tax that will bring it in line with a lot of industrialized economies currently have. You think we'll get there?
PJ O'Rourke: Yeah. Our corporate tax is – yes – is way too high to compete internationally. It needs to be brought down not to make rich people richer but to make America more economically competitive. And the other thing is it's always important to remember, I mean this is an issue I don't think has been brought up since Goldwater's time is the corporate taxation is double taxation. I mean you tax at the corporate level and then you tax the people who get the dividends or the long-term capital gains, you tax them again. And also for people who are protesting against the one percent and stuff, corporate taxes don't make up much of government revenue and most government revenue comes from personal income taxes.
Buck Sexton: And yet we're being told as of a couple of weeks ago by I think it was Senator Hatch that the 15 percent rate that Trump wants for the corporate tax rate, which is currently 35 percent, I mean that does seem quite a bit.
PJ O'Rourke: Yeah, and you wonder why they look for ways to avoid paying it. If your personal income tax rate were that high, you'd be looking for ways to not pay it, too.
Buck Sexton: Yeah. They didn't even go with a flat tax or even a fair tax despite that being something that a lot of folks on the right talk about as a dream scenario. Trump Administration comes in. They say they're going to simplify. And I just wonder if they don't get this done, if they can't get the 15 percent corporate tax rate, it seems to me to be an indicator that we shouldn't expect individual rates to be going down substantially any time soon either, which may have some real effects on the market and hiring and everything going on.
PJ O'Rourke: Oh, no. Yeah. No, no, we shouldn't expect – I mean because this lowering of the corporate tax rate, I mean this is something that should be bipartisan because the traditional Democratic base of labor unions and working folks and blue collar, they are hurt by this high corporate tax rate every bit as much as Wall Street fat cats. And incidentally, Wall Street fat cats voted for Hillary anyway. This should be an absolute no-brainer. We've got to get our corporate taxes in line with the corporate tax in other industrialized nations or we just can't compete and that's going to mean the loss of jobs. And besides, when you cut the taxes on corporations, this is not – corporate earnings go to investors. They don't go to the top-paid CEOs. Well, I suppose indirectly they do, you know. But it's not like Goldman Sachs is the main beneficiary of this. It's the entire American economy is the main beneficiary of this. If they clasp hands across the aisle on this no-brainer, I don't think they could pass a bipartisan resolution for motherhood and apple pie.
Buck Sexton: Whatever happened to the debt as an issue that conservatives and libertarians cared about by the way?
PJ O'Rourke: Hey, that's a good question.
Buck Sexton: I haven't heard anyone mention the $20 trillion – I thought that was a thing, PJ. I thought that my generation, actually my kids' generation was going to be saddled with this terrible debt that would destroy economic prosperity. We were hearing that in the Romney versus Obama era, and somehow it has completely fallen off the map. And I know that some of the wonkier types out there get excited about the savings that the Republican Senate healthcare bill is supposed to give via Medicaid changes, changes to the Medicaid structure in 10 years, but it's really a decrease in the increase in spending.
PJ O'Rourke: Yes.
Buck Sexton: No one seriously talking about stopping the increase in spending that's going on. What do you think happens here? I feel like both parties are just like, "You know what? It's bad politics to say that you've got to eat your peas, that you've got to pay for this stuff. It's just better to put it off into the future."
PJ O'Rourke: Yeah. It's like say you've got a kid, and the kid's got a drug problem, and it's like the political attitude toward our national drug problem would be debt; we're addicted to debt; because that's the most pain – you're going to spend a ton of money with the federal government. You've got a couple of ways to do this. You tax the living heck out of everybody. That's what they do in a place like Denmark. But there are only a few million Danes, and they sort of all agree on what they want to get back from the government. I mean trying to sell free PhD's to Americans is not the optimum route.
So you can tax the heck out of people. That's painful. You can inflate the currency. That's painful. Or you can borrow money and kick the can down the road. And that is the most politically tempting thing to do. We've given into the temptation, so it's like you've got a kid with a drug problem and first you decide to do an intervention and to send him to like a program that really restricts his freedom. That would be high taxes. And then that doesn't work. And so then what you decide to do is try to alter his lifestyle and his friends and give him new associates or make him join the Marine Corps. [Laughs] And that's the option that – that's the inflation option. And finally, you just give up and you buy him heroine.
Buck Sexton: That's I suppose an option.
PJ O'Rourke: Yeah.
Buck Sexton: You think that's where we are? You think Uncle Sam is at the buying heroine for the American people stage so to speak when it comes to debt?
PJ O'Rourke: Yeah. Well, you know, when you're buying heroine for your kid, you know you're not getting any fentanyl , you've done the due diligence, you've done the drug testing on it, you know what kind of dosage he's going to get. And so this is so much better than having him buy it in the back alley out on the street, right? Never do anything with your government that you wouldn't do around the house.
Buck Sexton: Yeah. I just don't see when this all of a sudden comes to a halt in a way that isn't too late, right. That's – I know people warn about this. And I'm surprised that the right has had such a – well, the whole Trump movement has not been focused on debt as an issue. It wasn't really talked about much at all during the Trump campaign.
PJ O'Rourke: That was interesting because there was a certain over-enthusiasm and rigidity and naivety to the Tea Party movement. The Tea Party movement was not perfect and it could be disruptive in a not-so-good way. But I've got to say this about all the Tea Party people. They were serious about stuff like that.
Buck Sexton: And I just wonder what happened to all that enthusiasm for dealing with long-term debt and financial obligations.
PJ O'Rourke: Yeah. That's really an excellent question. So we're just kind of giving into the permanently inflationary Keynesian economy where money is essentially worth nothing and there's no – you just ride with it. And, yeah, I mean sooner or later it's going to cause a crisis. Now what we don't know, of course, is when and how much of a crisis. And it could be a slow-rolling crisis. I mean we could have – look what has happened to Great Britain's role in the world over the past 100 years. It's not like there was a moment of terrible crisis where everybody in England starved. It's just like a slow erosion of power and influence and kind of a static standard of living, gradual increase in class tensions, a kind of slow decay like the last 300 years of the Roman Empire.
Buck Sexton: Yeah. A series – people forget, there was a series of barbarian invasions. It wasn't just like one thing happened one day and all of a sudden Caesar was a joke. They tried to buy them off for a while. The erosion of borders though I should note was also a part of the Roman Empire's collapse.
PJ O'Rourke: Yeah, although you're talking to essentially a pro-immigration guy. After all, at the end of the Roman Empire, essentially it wasn't Romans. It was people who had become part of the Roman civilizations. They themselves were mostly Gauls, even Germans, Celts. And what worries me about immigration is that we're not integrating people into our society anymore the way that people like our families were integrated into American society whether we wanted to be or not.
Buck Sexton: Talking to our friend, PJ O'Rourke, here. PJ is coming to us from New Hampshire, and obviously you're listening to the Stansberry Investor Hour. Just a little look ahead for everyone. We will be joined here shortly by Paul Vigna. He is a markets reporter for the Wall Street Journal. And we're going to talk to him about cryptocurrency, which I am fascinated to get into.
But before we go into the world of cryptocurrency and hacking and hackers and all that stuff, PJ, Russia, the Russian investigation, got to ask you about it. Where do you stand on that in general right now? We've got multiple Congressional investigations, a special council with the former FBI director. You have an entire press corps that is really opening rooting for a criminal prosecution of a senior Trump official and impeachment if they can get it. What's your take on all this? Where are you? Where's PJ O'Rourke on Russia collusion?
PJ O'Rourke: This is like – remember like the Clintons and Whitewater? This is the situation with Trump and the Russians.
Buck Sexton: I was in grade school but yeah. [Laughs]
PJ O'Rourke: Yeah. [Laughs] You were in grade school. I got you. I only wish I could say I was in grade school then. I was unfortunately doing this very same thing for a living. In fact, I went out to Arkansas to try and investigate. And it was just like – it was the mouse maze without any cheese at the end of the experiment.
What's happened here is the Russians, yes, they did want Trump, not because they were particularly in love with Trump or because they thought they could influence Trump but because they knew where Hillary stood on the Russian position and they figured anything was better than that. It's funny; the Russians were a little bit like American voters.
Buck Sexton: I was going to say. I'm kind of with Russia on anything but Hillary.
PJ O'Rourke: Anything but Hillary, right. They were totally on board with the way we all felt. [Laughs] It's like, "All right. We'll try – hey, we tried smart with Obama. That didn't work. So let's try stupid." [Laughs] You know, give it a toss, you know. So anyway, the Russians, yeah, they were in fiddling. But, look, this is a country that kind of like – it's kind of a dumb-looking country from outside but you've got to remember that this is a country where chess is a spectator sport. They're not stupid. They may be clumsy, foolish, maybe they can't build buildings that will stand up to a level and a plumb bob, but they're not stupid. And I'm sure that all the stuff that they've done has like six levels of plausible deniability.
And the other thing is we have no evidence that the Russian in fooling around and testing the parameters of the American – and fiddling with the different voting systems and stuff, we have no evidence that they actually affected the outcome.
Buck Sexton: Yeah. That's still to this day the case. So, no, I'm wondering through at what point do the – see, here's the thing. And, PJ, you've been a journalist and a writer for a while, a long time. I've never seen anything like this before, and I think there's a willful blindness on the part of some of the biggest media organizations in the country. For example, they make mistakes, there are retractions. Sure. That's just the nature of the business sometimes. But they keep making really blatant errors and they look like malicious errors because they're all in the same area of reporting. They're all dealing with Trump and Russia.
PJ O'Rourke: Well, they are malicious areas. I mean the whole Trump phenomenon was an anti-elitist thing for good or for ill. And that remains kind of an open question, for good or for ill. I'm no big Trump supporter myself. But what do media people – media people consider themselves to be elites. In fact, they're probably the only class of elites in America that actually consider themselves to be elites because they're kind of insecure. I mean I've been a journalist all my life. It's not the world's most high prestige job nor should it be. I'm no brain surgeon. I'm no rocket scientist.
So I'm insecure about my feeling of elitism. And when a nationwide anti-elite movement and let us not forget that there were two of them, not only was there Trump but there was a Bernie Sanders phenomenon, this really shakes media's fragile self-esteem. And so it's not necessarily all conscious, but they have a visceral hatred of Trump that comes out in their actions. They're not sitting around plotting and planning this. It's just like a natural psychological reaction to Trump. And there was something of this on the right with Clinton. I mean we on the right just hated the Clintons, not wrongly I may say.
But I think this Russia investigation goes down, I have seen this before. It goes down the Whitewater rabbit hole. Yeah, somebody will be – some low-level person will be indicted. A lot of people will be smeared. An enormous amount of government resources will be wasted. In the end, you won't be able to – you'll know there's something dirty going on with the Russians, maybe something dirty with some Trump associates, but it's never quite proved and never, of course, quite disproved.
Buck Sexton: Now this is not a question, PJ – PJ, this is not a question for which there's a right or wrong answer but I'm just curious to get your take on it. What percentage of original Trump supporters, meaning people that were with him during the primary and are certainly with him to this day in terms of voters, if you had to guess, and this is unscientific, everyone. This is just I'm giving – I'm pulsing PJ here. Just what percentage do you think would, if they found out that Trump was – didn't do anything illegal per se but encouraged some Russians through some intermediary, "Yeah, do whatever you can to mess up Hillary. That sounds great." Which as far as I'm – I'm assuming that's not a legal issue if he was kind of vague about it and that's that.
PJ O'Rourke: Yeah. Yeah. Yeah.
Buck Sexton: What percentage of Trump voters do you think would not –
PJ O'Rourke: Who would rid me of this troublesome priest?
Buck Sexton: Yeah, but what percentage of Trump voters do you think would not care?
PJ O'Rourke: 100.
Buck Sexton: Even if that were true you think 100? [Laughs] Okay. I think it's a substantial percentage.
PJ O'Rourke: You know, probably the –
Buck Sexton: I think they would say you've got to fight dirty against the dirtiest politician with Hillary Clinton ever. I think that's what they'd say.
PJ O'Rourke: Yeah, I think that's probably what they'd say. I mean when you – Trump was elected as a disturbing force, a disruptive force. I can't – even the most avid Trump supporters didn't have that much I don't think respect for the guy personally. I mean I remember talking to a lot of them during the election. I said, "Don't you think this guy's kind of vulgar and rude?" And they go, "Yeah. And that's just what Washington deserves." Nobody really wants this guy at their house for dinner.
So when you elect somebody to disrupt things and then the media comes back and says, "Gosh, he's disrupting things." Are you upset? That's why you voted for the guy, to shake stuff up.
Buck Sexton: I've noticed that it's like – or at least people think with quicksand you move more and it gets worse. I don't know if that's true or not. But I've seen enough adventure movies where –
PJ O'Rourke: Yeah [crosstalk] fortunately not have a quicksand experience.
Buck Sexton: Yeah. I've never had a quicksand experience either. But, you know, "Don't move, you'll only make it worse." With the media, the more upset they get, the more they say Trump is destroying the country, that he's vulgar, that he has thrown off all –
PJ O'Rourke: The more support they build for him.
Buck Sexton: Well, the more they love it actually, which is what I think is what's driving MSNBC, CNN, The Washington Post, The New York Times completely insane because –
PJ O'Rourke: Yeah, well, of course what's driving them mainly is profit. Their readers and their viewers really like this stuff. So they put out more and more of it.
Buck Sexton: Well, CNN though was supposed to be – as a former CNN employee, PJ, you know they're supposed to be in between FOX and MSNBC, right?
PJ O'Rourke: Yeah –
Buck Sexton: [Crosstalk] But they're not doing that. And that's why they're number three now.
PJ O'Rourke: No. When CNN was started, Ted Turner would fine employees if they ever used the word foreigner because this was supposed to be a global neutral news service, just the facts, ma'am.
Buck Sexton: I don't know if you can find any editorial difference between a nightly broadcast right now on CNN and what you see on MSNBC. And so I think that's driving –
PJ O'Rourke: No, they found that there was profit to be had or at least they think that there's profit to be had. But, yes, this is exactly the wrong approach to Trump. I mean if I were in charge of an anti-Trump campaign, and it might come to that depending on what the guy does. I do not – still all along I've worried about his volatility and I continue to worry about it. But anyway, if I were leading the charge against Trump, it would be the quietest thing that you ever heard. I would be like sort of saying, "Ever since the Clintons, the White House has just – the dignity of the office has just been on its way down." I'd be blaming the Clintons for it and I'd be saying, "It's time for a new dignity and new seriousness. Let's get a Bush brother back."
Buck Sexton: Well, I think you also allude to a very important part of this whole day in and day out food fight that's going on on the TV screens and on the front pages of the newspapers when it comes to Trump, and that's – you can't be one of those outlets or even one of the personalities that are tent poles, the big names at some of these places, who were making excuses for Clinton, for Bill Clinton specifically when it comes to vulgarity and truthfulness –
PJ O'Rourke: Yeah.
Buck Sexton: And then turn around now and say, "Oh, well, look at Trump." I have people calling on radio. They say this all the time. They say, "The media wants to be – they want to be all nice and sweet now, but we know that that's just an act." So –
PJ O'Rourke: Yeah. I mean in terms of vulgarity, Clinton and Trump are just – they're brothers from another mother, you know.
Buck Sexton: [Laughs] Yeah, I guess, if you say so, PJ.
PJ O'Rourke: They're really very – I mean they're very similar types. I mean they have a very different approach. One is like charm offensive and the other one is just offensive offensive. But really it's the same guy underneath it.
Buck Sexton: Oh by the way, PJ, before we bring on our friend from The Wall Street Journal to explain cryptocurrency and Blockchain and all this interesting stuff, did you see this poll by the way? This just came out this week. 42 percent of Americans want the president, want the federal government, want Donald Trump to forgive their student loan debt. There's a $1 trillion student loan bubble out there.
PJ O'Rourke: Yeah. Well, who wouldn't want to have their debt forgiven? Actually if people were telling the truth, the figure in that poll would be 100 percent. But what you want isn't always what you should have. That's the – I mean if you were to ask the same people, "Is everything you want everything you should have?" And they're going, "Mm, there's my marriage to be considered so maybe that waitress down at the steakhouse, mm, yeah I want but should I have?" [Laughs] So it's all in the way you phrase a question like that I suppose. But, yeah, but it does looking on the gloomy side of that, it does indicate that people have just come to feel that the government is the answer to every question.
Buck Sexton: I was going to say, PJ, that there's a problem with – of the analysis I often hear this when it comes – you get a lot of – and I don't know if you're one of them, but a lot of folks out there who are of a different generation who go, "Oh, these Millennials. They take on all this debt. They're so –"
PJ O'Rourke: Kids today.
Buck Sexton: Yeah, kids today. Get off my lawn, all that stuff. Although, PJ, you have the bearing of a man in his late 30s so there's that.
PJ O'Rourke: Well, thank you. That's very nice of you to say. But I'm not. In fact, I'll be 70 this year.
Buck Sexton: [Laughs] There you go, PJ. PJ is well preserved, everybody.
PJ O'Rourke: I am fully of the "get off my lawn" [laughs] age category.
Buck Sexton: But here's what I think is an interesting – a different perspective about this. And by the way, I'm somebody who decided to go join the circus by becoming a media person instead of going to business school and it was mostly because I was going to have to take out huge loans to go to business school, and I looked around and given what had happened on Wall Street, I said, "You know, I think I'm going to try something else out here. I think I'd rather get a paycheck than go into debt for an advanced degree." So I have limited sympathy for the student loan debt bubble, especially when it comes to advanced degrees because I think people believe that this is a panacea and it'll make all their problems go away if they just –
PJ O'Rourke: A magic key, yeah.
Buck Sexton: Yeah, exactly. But the other side of this is that we have an arms race going on now for degrees where people – an undergrad degree is really what a high school diploma was 30 years ago. It's – more and more people get them now. And so there's –
PJ O'Rourke: Right, and a high school diploma is little better than a rap sheet.
Buck Sexton: Yeah. I mean it's – there's upward pressure now on these degree programs but also the – people who say this is a silly idea that student loan debt would be forgiven, I just say to them, "Well, if Goldman Sachs can get the federal government to give AIG 100 cents on the dollar to bail them out, I don't see why it's bizarre for Millennials or people who are in student loan debt to think, 'Well, why can't they just wipe away our stuff?'" I mean financially or not it doesn't matter. They view it a political lever.
PJ O'Rourke: You really can't, like I say, you really can't blame people for saying they want the government to forgive the debt. I mean that's what the government's been going around doing with GM [laughs] and all these other big players.
Buck Sexton: Well, yeah. Why should people have mortgage forgiveness programs, PJ, for those who got underwater mortgage –
PJ O'Rourke: Yeah, and not have college degree. After all, a big mind is more important to the nation than a big house.
Buck Sexton: Well, see, this is the recognition of this generation that the single most powerful economic force in America is government power.
PJ O'Rourke: Well, yes, they're right. They're not stupid. I mean of course they've realized it. And they've lived through this – and if you think about a Millennial today, what's their experience with the marketplace? They've seen first the dotcom bubble and then it's like the Wall Street crash and international financial crash and government bailout. I think back to the lessons of my youth and it was like – Ike was president and the lessons of my youth were to stick a quarter every week in the Christmas club book and buy saving stamps at school.
But this does move back to a question, and this really bothers me, is why the living – and I say this as with three kids in private school, one in college and two in the lower grades – why does this cost so much? I mean I went to a state college. I went to Miami of Ohio. It cost me for each year of college all in, tuition, room and board, beer and cigarette money, date night for the movies, it cost me $2,000.00 a year to go to college. Now you've got to adjust that for inflation. This is 50 years ago. But still even if you use like a multiple of seven, what is going on?
Buck Sexton: Well, this is why I always say to people – my dad tells stories. PJ, my dad's your contemporary and he tells stories – I guess I just said that. But, yeah, he tells stories about how when he was in school he would do summer jobs and that was a way to save for school. If you're in most undergrad programs in the country right now, you're going to have to do summer jobs for about the next 50 years or you're going to have to get a summer job as a partner at a law firm.
PJ O'Rourke: No kidding. Yeah. I mean I could conceivably – fortunately, I didn't quite have to because I had some scholarship help – but I could work in the summer and maybe do some part-time work during the school year delivering pizzas and stuff, and I could have just made tuition, room, and board. I could've – I mean I did essentially with the help of some scholarships, and they weren't full rides. But I did – I basically managed – I think I had student debt. I did take some loans. And I had student debt when I got out of college it was like about $3,000.00, $4,000.00.
Buck Sexton: That's not bad.
PJ O'Rourke: I remember the payments on it every month were $35.00.
Buck Sexton: Sounds doable to me.
PJ O'Rourke: Now even back in those days where $200.00 a week was a damn good wage.
Buck Sexton: Oh, the cost of – they've done a dollars-to-dollars comparison. They've done many of them. And the cost of a college degree I think in just the last decade, although I'm going from memory, has – or maybe it's the last two decades – has gone up about 100 percent. It's twice as expensive.
PJ O'Rourke: Yes. Oh yes. It's just erupted. I mean I can't believe – we've been looking at college stuff first for my eldest daughter and now for my daughter who'll be a junior in high school next year. So we're on the college – and it's just, yes, the expense. And of course, we fall into that perfect category where we're too well-off to get any government aid but we're not so well-off that $40,000.00 a year is something that you just laugh off.
Buck Sexton: And also there's a lot of these kids who are taking on loans. I know some people here in New York City who one of them is actually the barista/bartender at one of my favorite gluten-free spots.
PJ O'Rourke: Yeah.
Buck Sexton: And they have advanced degrees. But when you ask what the advanced degree's in, they will say, "I have a master's in –" and I'm not even – they have a master's in women's and gender studies.
PJ O'Rourke: Yeah, right.
Buck Sexton: Unless you want to train other people in women's and gender studies, that's not a particularly useful – the marketplace does not tend to reward that decision.
PJ O'Rourke: No. And schools tend to push kids into the direction of majoring in modern dance or what in my day we called underwater basket weaving.
Buck Sexton: No, it's an issue. And also when you look at the $1 trillion student loan bubble, I think no one – there's some deep cultural and nobody really wants to address that the college – a four-year college degree – first of all, it's too long [crosstalk] –
PJ O'Rourke: No, and there's plenty of blame to be spread around. I mean people aren't shopping for education the way they should be. Schools are grossly overcharging. The government is given all sorts of incentives in terms of the money it's given to higher education for them to charge more. The government's made it much too easy to get these loans. Yeah. It's – there's blame to be laid in every direction.
Buck Sexton: PJ, I just want to let everyone know who's listening that we're hoping they will subscribe to the Stansberry Investor Hour on iTunes and also on Google Play. Those are two ways to subscribe. iTunes is a great one, but also if you like Google Play you can do that. And, PJ, for a second before we get to our esteemed guest, can you tell us a little bit about American Consequences?
PJ O'Rourke: We're working. We're about to come out with a second issue. This really had to do with Porter's idea, and Porter felt that there were all sorts of really great, brilliant analysts at Stansberry Research, and I've got to say I've been working with Stansberry for like a couple of years now, and he's right. I mean they are brilliant analysts and they're really interesting people and they don't all agree with each other. They have tremendous training, tremendous knowledge. And Porter felt that we needed a way to get this out besides just the investment newsletters. Yeah, it was fine to apply all this intelligence, all this education, all this analytical ability to individual investment questions in the newsletters, but it would be great to let these guys – guys, and I'm using guys in a generic – these men and women –
Buck Sexton: You are man-splaining, PJ.
PJ O'Rourke: What's that?
Buck Sexton: You're man-splaining.
PJ O'Rourke: I'm man-splaining. I am man-splaining. Yeah. Well, I'm a man. What can I do? And it would just be great to give these people a larger scope to talk about bigger issues, the underlying issues. So the first issue that we did of American Consequences concentrated on central banking. The second issue which is about to come out will concentrate on cryptocurrency, pro and con and in between. My own lead piece on this is The Blockhead Confronts the Blockchain. And then the upcoming issue, the third issue, will be focused on these weird, new corporate structures where the corporation doesn't really seem to make any money and yet the stock is flying high and what's going on here or if the corporation does make money it doesn't return much of that money to its investors like the Amazon model. It plows it all back into world domination. But then there are these corporations with huge valuations who are still basically have never turned a profit. So that's going to be our concentration. And then we've also got some features and some cartoons and stuff. It's not all mono-topic, you know what I mean. So I don't know. I've man-splained myself breathless.
Buck Sexton: [Laughs] Okay, folks. It looks like we have Paul Vigna from The Wall Street Journal on the line. Paul is the author of The Age of Cryptocurrency: How Bitcoin and Digital Money are Challenging the Global Economic Order. Along with coauthor Michael Casey, Vigna demystifies cryptocurrency, its origins, its function, and what you need to know to navigate the new cyber economy. Now Bitcoin and Blockchain is a subject that a lot of Stansberry readers have been asking about. So we did some research, reached out to Paul, and he was kind enough to give us some of his time today.
As I mentioned, Paul is a market reporter for The Wall Street Journal with 20 years of journalism experience covering equities and the economy. He's also a writer, editor, and host for the daily web show Money Beat. Paul's been a guest on the FOX Business Network, CNN, and the BBC as well as a well-regarded expert on Bitcoin, cryptocurrencies, and Blockchain technology. His latest articles for The Journal include Why You Won't Be Buying a Coffee with Bitcoin Anytime Soon and Forget an IPO: Coin Offerings Are the New Road to Startup Riches. Please welcome to the Stansberry Investor Hour Mr. Paul Vigna.
Paul Vigna: Guys, thanks. Thanks for having me. I'm very happy to do this.
Buck Sexton: PJ, you go first, sir.
PJ O'Rourke: Well, Paul, explain this to us. [Laughs] I guess what I need explaining most is the Blockchain technology that under – I mean we can talk about Bitcoin pro, con, whatever, but underlying this cryptocurrency, there is an electronic technology called Blockchain and that's all I know.
Paul Vigna: Yeah. All right. Well, okay, look. The first thing I want to say is – and sometimes I forget to say this to people so I'm saying it at the outset because this is really the most important thing to remember about all of this is that this is totally experimental. This is a giant live experiment in developing a new kind of technology. And it holds some great promise and it could be a really good thing but we're far away from a point where this is a proven technology that is being used every day and it's part of your life and that kind of thing.
So you have to keep that in mind because I think people see a lot of things happening in cryptocurrencies. They see this bank is on board with this experiment. This bank is on board. Bitcoin is up 1,000 percent or whatever the percent and they think, "Oh my God, this is really happening." It's really happening but it's really an experiment. So just keep that in mind and then we can kind of move on and talk about all of it. Briefly –
PJ O'Rourke: That's interesting. So this is not like the steam engine as we knew it in locomotives before diesel came on. This is back at the very beginning when Thomas Watt has got this reciprocating piston with tolerances of about an inch on each side.
Paul Vigna: Well, yeah, you know if I had to put it in those terms, the analogy, I might say we're at the point where you're in your little town with dirt roads and everyone has a horse and a buggy and you've just seen your first car come down the road and you're saying to yourself, "Oh my God, what is that thing? That is a tool of the devil. That thing's got to be banned. We can't have it on the road. It's dangerous for the horses. We got to get rid of it." But it's there. That's kind of where we're at. These things –
PJ O'Rourke: Or you could be like – this actually happened to my grandfather. My grandfather was born in 1877. He was a wagon repairman, a buggy repairman, and he saw his first horseless buggy. And his reaction was exactly the opposite. He's going, "I am with that. No more getting –"
Paul Vigna: Well, that's where we are. And, yeah, you're right. Some people are with it and some people are against it. And it's a very different way of thinking about a number of concepts. So the main – I'd say the most important feature of this technology is this idea that you have an open ledger which is basically just a database that is maintained by a network of computers that are all running the same exact software. They all have the same exact copy of the database. Every time a transaction goes into the database, a copy of that transaction goes to every single computer on the network.
What that does is it creates this situation where anybody can verify the database. Anybody can verify the transactions. But nobody has absolute control over it. So rather than have a situation where – and a good example of this is like you think about the centralized servers where all our personal information is stored and it's on one server and a hacker gets into it and they take it and it's gone, this is different in that the data is not held in one server. It's held on every single server, every single computer on the network so that it is harder to manipulate that data if you get your hands on it. So that's the most – and I don't even think I'm kind of explaining it in a way that makes it as clear how groundbreaking this is. This is an idea of taking control of these networks away from centralized servers and moving them out to a decentralized network.
And that is sort of a – it could be, again, it is an experiment if it works, but if that works it really could be sort of a sea change in just how we record data, how we store data, who has control over that data. And I use that personalized information; the better analogy probably is what happens in the financial system because that's where Bitcoin comes from. It was an idea of getting around banks where you have a situation where banks are – this is what led to the financial crisis – banks are trading these exotic securities that nobody has any real information on and they manipulated the data and they did it to a terrible degree and we had a huge financial crisis.
With this decentralized database, nobody would be able to do that. All the information would be in public sphere. All the information would be independently verifiable by anybody on the network. And it just creates a very different dynamic than what we're used to.
PJ O'Rourke: Now that is like –
Buck Sexton: Paul, can I ask a question by the way? I also – sorry, PJ, I just want to say that Paul's the author of The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order. So if we're going to have him on the podcast, I think we also should be plugging his book on the specific topic. So that's –
Paul Vigna: Great. That's a great idea.
Buck Sexton: Yeah. So give me a mulligan. Give me another shot on that one. But also, Paul, why is it that Bitcoin can't be counterfeited? This is what I don't understand. People say it's made online.
Paul Vigna: Right.
Buck Sexton: Why can't people just make more of it the same way that we – I know that right now people talk about the fed and printing money and they're not actually printing money. It's on a computer screen anyway. But why can't Bitcoin be – yeah, this is what I don't get. And apologize, PJ, for jumping in with this one. But I –
PJ O'Rourke: No, yeah, no, you're –
Paul Vigna: No, no, it's a great one, Buck, because it kind of – it sort of is a core concept of this. So when they built Bitcoin, the guy who built it was this sort of pseudonymous character. No one knows his real name. He went by the name Satoshi Nakamoto. He designed it with a hard cap of 21 million Bitcoins. That was all that would ever be created. And each one of those is divisible to I think the eighth decimal place. So it's almost endly divisible, like you can have smaller and smaller portions of a Bitcoin. But the idea is you have this hard cap, 21 million Bitcoin. Why can't it be counterfeited is your question.
Because of what I was just describing, this sort of open database, what happens is every single transaction on a Bitcoin network is recorded in the open database. Every single transaction is instantly verifiable by anybody on the database. So anytime a Bitcoin is moved, everybody knows it. And it is recorded and it is sort of hardwired into the history of Bitcoin. That's what the – when people talk about the Blockchain, essentially what they're talking about is this open database. Once it's in there, it cannot – the history cannot be altered. And the history can't be altered because everybody has the exact same copy of the history.
That's why each individual Bitcoin cannot be counterfeited because if you did it everybody would know it because it's all open. It's not hidden. Now not to get too complicated, what you can do and what people have done is you can create your own copy of Bitcoin. I mean it's open source software. So anybody can take the software, adapt it, put whatever features they want in it, and create their own kind of Bitcoin and you have a lot of those. They call them alt coins and you have somewhere north of 700 of those. So you can have different versions of Bitcoin existing, but you can't have two – you can't counterfeit one single Bitcoin for that reason because everything is open and is verifiable if that makes sense. I hope it does.
Buck Sexton: Mm-hmm. Yeah. Absolutely.
PJ O'Rourke: Yeah. So the idea was to create something like a finite supply of gold that would anchor the currency's value?
Paul Vigna: Right, exactly, yeah. I mean – and you know, Bitcoin's entire existence and history is really a reaction to the existing monetary system and the existing financial system. I mean it's designed to get around things that the creator at least saw as problems. One is an inflationary currency, which is what most of fiat currencies are. They're not on a gold standard. They're not on any real standard.
PJ O'Rourke: They're fiat money.
Paul Vigna: They're fiat money, right. So, yeah, that's why Bitcoin was created with that hard cap of 21 million Bitcoin. It was designed to be a stable currency, to be essentially deflationary I guess. The other idea was that by having this open ledger, by having these transactions that could be verified by anybody, you wouldn't need this third party. You wouldn't need a bank. You wouldn't need a central government standing behind the currency. Everybody could – can see it. Everyone can understand it. Trust me, it's hard to understand the mechanics of it, but in terms of just whether or not a transaction is there, you can trust that if the transaction was there, you can trust that the history is there. And what that allows is that it allows you and I, Buck, or you and I, PJ, or any of us to transact directly.
You're not going through a bank. You're not using a third party to settle your transactions. We are doing it directly between each other. So the idea was to totally get around the banking system, which is pretty radical.
Buck Sexton: Can I ask, what's interesting to me is what you're talking about here and for everybody listening, we're speaking to Paul Vigna who's a markets reporter for The Wall Street Journal and author of The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order. And, of course, I'm joined by may main man, PJ O'Rourke, author, international man of mystery, and pundit extraordinaire. Paul, why is that what you're talking about seems to be an absolute transparency and yet when people these days online criminals and all the rest, when they want payment, right, they want sometimes Bitcoin. We saw this with ransomware I believe that some of the big ransomware cases recently, they said, "Well, pay me in Bitcoins."
Paul Vigna: Yeah.
Buck Sexton: So there's this perception that Bitcoin is – while you're saying it's all out there for everyone to see, it also is somehow not really traceable or at least it's a way to move currency without the government being able to stop it.
Paul Vigna: Yeah. I mean – you're right. And it sounds like a contradiction but it really isn't. There are just two different features of it. One is the transactions themselves are completely open. It's the identities of the people using this network that are shielded. And the way they're shielded is that you don't have to – like if you go to the bank, right, and you open up an account, they're going to want a lot of information from you. They're going to want your birth date, your Social Security number, your address. Basically they want everything about you and then they have that information.
With Bitcoin, none of that information is required. The only thing that is required when you have a Bitcoin wallet, which is the online account, and this is in the purest form of Bitcoin – if you really wanted to be a Bitcoin purist, what you would do is you would download the Bitcoin software itself, which has a wallet attached to it, an online account attached to it. The only thing you need to operate that is the private key. Every wallet has a public key and a private key and it's just basically an encrypted string of numbers and letters. And if you have the private key you have access to that account. But that is the only thing you need to access that account. None of your identifying information has to be attached to it. And that's why some people use this to try to move money anonymously.
Now, the trick of it is, fellas, as I explained because every transaction is in the public realm, the trick of it and law enforcement figured this out pretty quickly, the trick of it is that every transaction is recordable and can be followed. And if you're in law enforcement, the real beauty of this is that if you can attach an identity to that transaction history you then have that person dead to rights, and that is especially what happened in the case of Russ Ulbricht who was running the Silk Road website which was this online drug bizarre. They eventually had a bead on who he was. They figured it out and once they were able to get their hands on him and get their hands on his computer which had his server which had the transaction history they had everything they needed to convict him.
So it actually is not as good for committing crimes as you might think it is. It's okay I guess if you're going to do it like if you're sort of a very small person just going online to buy some drugs or something that you think you're going to fly under the radar, but if law enforcement gets a bead on you and they get this transaction history and get your private keys, you are done. You are going to jail.
PJ O'Rourke: You're toast.
Paul Vigna: So it's a very mixed bag for the malefactors.
PJ O'Rourke: Now let – the other thing that interests me about this, it's secure, it's transparent, it's private. So how is it that things have gone wrong with Bitcoin? And I'm thinking particularly about Mt. Gox. Am I saying that right?
Paul Vigna: Oh sure. Yeah. Mt. Gox, right. Well, I mean Mt. Gox was the first major trading site, the first major exchange. What went wrong with it is that the guy who was running it knew nothing about financial networks. He was basically a gamer and he did not understand how to secure money, how to store money, even Bitcoin, and it was a very poorly built exchange and platform. And some hackers just went in there and broke into the account and just took the money out. And by the time he realized that this was going on, it was too late. It was gone. The money was – it was just taken. It was moved from his account into their account.
And this is another feature of Bitcoin. One thing that makes it – listen. It's supposed to be like digital cash, right. It's supposed to be an online version of cash. And one feature of that is that once these transactions are done, once these transactions are put into that history I was talking about, they cannot be altered, which means that once a transaction is completed and confirmed it is done for all time. So if you lose your Bitcoin, if someone gets into your account and takes it, it's gone. Unless you can find that person and force them to give it back it is gone. There's no back fees in Bitcoin. It's not you're calling your credit card company and say, "Hey, I'm a victim of fraud," and they just erase the transactions.
In Bitcoin, that doesn't happen. Once a transaction is confirmed and completed, it is done for all time.
PJ O'Rourke: So it is eerily like cash in that respect.
Paul Vigna: Yeah. Oh absolutely. Yeah. Like if you lose your private key, it's gone. Like that's it. You're gone. The money is absolutely gone forever. And even people who are pretty savvy have gotten hacked from time-to-time and have lost money. I mean, it's – and that's a problem. So you have other exchanges that have grown up since Mt. Gox that use a different model. And there are some protections for consumers and they're more like traditional banks. And with those, you end up – you do have to give more information to them. You do have to – they adhere to the regulatory standards of anti-money laundering laws, they know your customer laws, and you do have to provide more information and they're a little more traditional.
And this is sort of what you're seeing in Bitcoin now is this sort of movement between – it's almost like a sliding scale of how Bitcoin-y you want to be. Like you can be the person who is essentially your own bank and you have your own wallet and you've downloaded the software and you're anonymous and you're completely out there on your own, or there are services that are much more like traditional banking services and you can access one of those, too. So it's kind of a sliding scale of privacy and services if that answers your question.
Buck Sexton: [Crosstalk] Can I ask why do Jamie –
Paul Vigna: I'm sorry. The problem with Mt. Gox is that Mt. Gox was just a terribly run site and the guy didn't know what he was doing. In the years since, a lot of the exchanges learned from that and a lot of them have much better features, much better security, and it's much harder to get into them, and they don't suffer the same kinds of just catastrophic hacks that Mt. Gox did.
Buck Sexton: Jamie Diamond says Bitcoin's a terrible store of value. Warren Buffett says it's a mirage. Your response, Paul?
Paul Vigna: Well, look. My response is first off, as I'm sure PJ will understand, especially, and Buck, you will, too. Look. I'm a reporter. I'm a journalist. I'm here to talk about Bitcoin and try to explain it as best I can but I'm not necessarily here to defend any point, you know what I mean?
Buck Sexton: You're not an evangelist, I get it.
Paul Vigna: I'm not an evangelist. However, what I would say to that is when Jamie Diamond made that comment, it was a couple of years ago, and since then, J.P. Morgan itself has gotten very much on board with the idea of the technology. They're not Bitcoin advocates for Bitcoin itself, but the technology they are keenly interested in, and they have a number of projects going on that make use of the concepts behind it. And a lot of Wall Street is doing the same thing. They're trying to figure out what is good about this, what is bad, how can we negate the bad and use the good, and how can we make this work for us because what they do see is an option, I mean this is – it's taking a process out on Wall Street right now is still very manual and very labor-intensive and digitizing it, atomizing it all almost, and making it very immediate.
There's one startup that their tagline was, "The trade is the settlement." And the idea is that as soon as you – traditionally, if I buy a stock or a security or some other asset, derivative or whatever, it could take days for that to settle, and there are a lot of intermediaries that that has to go through and a lot of people hold some portion of that transaction for several days. The idea with this is that it goes through automatically. It is confirmed. You have this open network, this transparent network that makes that happen very fast and very cheap and Wall Street is really entranced with this idea that they can take a lot of processes now that take them days and cost a lot of money and make it very cheap and very automatic. And they're trying to do that in a way that still preserves that sort of transparency and opacity that market's love to have. I mean the markets are really about information, right. If you have it and the other guy doesn't you have the advantage.
Buck Sexton: Right.
Paul Vigna: So the banks are trying to still figure out how they can use this sort of open network and still kind of twist it in a way that it will still have some of that transparency. So, look, I'm not trying to say that they're all corrupt. I'm saying that if you're a bank, you don't want everyone to know what your order book looks like. So they're trying to figure out a way to do all that but they're very interested in it. So, yeah, Jamie Diamond made that statement and it was a couple years ago, and since then, there's been a big sea change in how Wall Street looks at this stuff. So – but that's how I would respond to that.
PJ O'Rourke: Well, that was actually going to be my next question was if you're looking into the future on this, it sounds to me like the underlying technology might be of greater value to large institutions in terms of lowering market friction and speeding up market settlements and also avoiding arbitrage situations. That looks to me more like the future of the Blockchain than Bitcoin ATMs all over the place and everybody buying their organic kale with Bitcoins.
Paul Vigna: Yeah. It will probably be the case that in 10 or 15 years, this technology will be underneath a lot of what we do on a day-to-day basis. And we won't really even realize that it's there, that it's operating. Right now, Bitcoin is held out as this sort of very mysterious, very esoteric, very anti the man kind of product –
PJ O'Rourke: Establishmentarian in a way.
Paul Vigna: Yeah. I think you'll have a situation where you will have this technology in a lot of places. You will have it in some very decentralized systems. You will have it in some very centralized systems. It will probably be underneath a lot of what Wall Street does. Again, as I said at the very top, if the experiment pans out it'll probably be underneath a lot of what you do on a day-to-day basis but you won't really realize it, kind of in the same that you turn on the sink, you turn on the tap in the sink in your kitchen and it works. You don't really understand how the indoor plumbing works –
PJ O'Rourke: Right, you never think about the amazing amount of machinery that's behind that.
Paul Vigna: Yeah, you don't think about the indoor plumbing. You don't think about what that little elbow underneath the – you know, the little elbow in the drain pipe does. You just know that it all works. And I think in 10 or 15 years we'll probably have that kind of a situation with this technology.
Buck Sexton: Well, how long is it before I'll be able to get my nonfat latte with caramel drizzle and mocha soy additives and pay for it via Bitcoin? Or a better example, how long before when PJ's in town I can say, "Give my friend here your finest single malt and here's some Bitcoins my good man."
Paul Vigna: Yeah. I wouldn't hold out for it being this year. [Laughs] I'll say that.
Buck Sexton: Sorry, PJ.
Paul Vigna: Will it ever happen? I tend to think it will, but I don't know exactly when that will be. Probably not for a while – probably not for a while [crosstalk] –
Buck Sexton: So what can you buy with Bitcoin though right now? I mean if someone's listening and they're like, "I want to go try this thing out," how do you do it?
Paul Vigna: Yeah. Well, the more interesting thing for Bitcoin I think, too, is what it will be able to do for you online, where you would be able to use it online I think ultimately will be sort of the more interesting question. And there are several websites that take it, probably one of the more prominent ones are Expedia, Overstock. The one that people talk about all the time, which would be a complete game-changer for Bitcoin would be if Amazon ever said, "Yeah, we'll take Bitcoin." That would be the day that this thing really does go mainstream for obvious reasons. It's Amazon.
But that's – I guess the two places to look for this, and again, it's still very limited. I think I saw some report that said less than half a percent of all people in the U.S. have ever even used Bitcoin in a transaction. And that's probably true. It gets a lot of attention. It gets a lot of media attention. I think it's a very exotic story and it attracts people and that's what attracted me to it. But in terms of how much it's used on a day-to-day basis, it's still very, very small. But I think the places you want to look for it catching on, assuming it does catch on, are online and mobile. If you start to see it take off in those places you will know it's really becoming a thing.
And so that's just for Bitcoin. The other thing is to see if any of these other sort of Bitcoin – I don't want to say clones – but versions of Bitcoin take off. A big one people talk about is Ethereum. That's one to keep an eye on. Again, not really huge –
PJ O'Rourke: Right, but they just lost a whole bunch of ether.
Paul Vigna: Yeah. Well, yeah, it's really down right now. [Laughs] It was up from January to the middle of June it was up by I think about 5,000 percent. And now it's down about 50 percent. And that is just, look; these are still – that's another thing. Keep in mind, if you're trading these things, keep in mind these are still small, relatively illiquid markets that are extremely volatile and they are very rudimentary. They're very –
PJ O'Rourke: [Crosstalk] Yeah, big VIX on this.
Paul Vigna: Yeah, they're very rudimentary compared to what we have in the traditional capital markets. So if you're an adrenalin junky these are great. If you're a mom-and-pop retailer who's thinking I need something to retire on, I don't know that these are so great for you.
PJ O'Rourke: No. Yeah.
Buck Sexton: PJ, have we – anything else for Paul?
PJ O'Rourke: I sort of foresee a future of kind of limited use of this. But the Blockchain thing that you were talking about which is the – you know, we could be doing a lot of our ordinary transactions with Blockchain technology behind them and never even know it the way we have no sense when we use our GPS of the amazing amount of rockets and satellites and billions of dollars of stuff that's gone into finding grandma's house.
Paul Vigna: Yeah. The other – the interesting one is what would be the extent to which this technology can be used to sort of undergird the whole Internet of Things idea, right, this idea that we're going to have all these connected devices. Your immediate question is, "Well, who's going to control the data?" Who's going to be – and 'cause if it's one or two central servers, that gives them an incredible advantage over – I mean that's just – it's almost astounding the idea that you could have one or two people controlling all this data and all these devices. So the idea is that, well, rather than having that sort of centralized control, what if we had a decentralized control? What if all the data was stored on a Blockchain-like network and people at IBM are especially big on that idea. They're going to try to build that out that way. And that would be a very interesting use of this technology.
PJ O'Rourke: This interests me for one particular sort of big-picture reason is that a lot of the history of the modern economy starting with the beginning of the industrial revolution and right down to now has been about a decentralization of power and production is that things that could only be controlled by the aristocracy in the 16th, 17th century have – just the automobile, I mean the power of mobility and independence put in the hands of – the Model T put in the hands of ordinary people, we've seen a whole history of empowerment of individuals by technological advances. And I think this fits into that general pattern.
Paul Vigna: Oh, yeah, you are absolutely right. And I think when you start looking at it in those kinds of terms, it becomes a lot more understandable. Look. For hundreds of years, we have had systems and hierarchies and networks that really only worked if they were centralized. You had to have somebody at the middle of it sort of controlling it to make it work because of what – just the technologies we had at the time. And those centralized systems work very well for us for hundreds of years.
Technology is absolutely changing that. And you've seen it – it's funny who gets it, who got it instinctively are corporations. Corporations understood supply chains instinctively. Corporations understand tax regimes and where they can go to get better deals. They understand those things instinctively. And they're going to get this technology instinctively as well and they're going to start figuring out, "Oh, is this something we can use in our supply chain? Is this going to help us on that front?" You do see a general decentralizing trend in technology.
I mean think of it this way. When I was growing up I knew people in my town and maybe I had relatives in a town far away and I knew two people in that town. My children are growing up. They're online. They know people all over the world.
PJ O'Rourke: Yeah. Yeah.
Paul Vigna: Like their friends are all over the world.
PJ O'Rourke: Or another example would be broadcast television.
Paul Vigna: Yeah.
PJ O'Rourke: I remember getting our first television and we had one channel. One. And eventually we got an antenna and we had three channels.
Buck Sexton: Right.
PJ O'Rourke: One of which was Canadian. [Laughs] And if you look at – I mean that was – the network system that I grew up with in the '50s and '60s is gone forever due to this technological decentralization.
Paul Vigna: Yeah. I mean, look, I'm old enough – what I remember is being a kid in the '70s, and I guess we had 9 channels so we were very advanced, right.
PJ O'Rourke: Yeah, right, yeah.
Paul Vigna: I mean you still had to get up off the couch and turn the knob and that seems archaic now. But I mean you're right. Technology is sort of changing our culture and I think that the Bitcoin and Blockchain is going to sort of seamlessly fit in with that eventually. And it's really interesting, too, is I would like to say that kids get it more often than adults, but that's not necessarily true. I know people who as adults came to this concept of Bitcoin and decentralized money that isn't backed by a government and immediately just took to it. So it's not necessarily an age thing but it is definitely sort of a cultural trend.
PJ O'Rourke: You know, that sort of surprises me about my own kids. While they're very adept at getting my printer to work when it has disconnected itself from my desktop, when it comes to something like the nature of currency they haven't got the slightest idea. I've been trying to explain commodity currency and fiduciary currency and fiat currency to my kids and they look at me with blank surprise. [Laughs]
Paul Vigna: Right. Yeah.
Buck Sexton: Gentlemen, we're running a little short on time if we're going to keep this to the Stansberry Investor Hour. So do you have any last calls from you, PJ?
PJ O'Rourke: No, I think, hey, you know, we just actually learned some stuff, Buck, you and me.
Buck Sexton: [Laughs] Yeah. I'm sitting here, I'm taking notes.
PJ O'Rourke: Thank you, Paul.
Buck Sexton: All right. Paul Vigna, everybody, for The Wall Street Journal, author of The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order. Paul, thank you so much.
Paul Vigna: Yeah, no, guys, it was great. I appreciate it.
PJ O'Rourke: Paul, very good to meet you by phone. Hope to meet you in person.
Paul Vigna: Yeah.
Buck Sexton: Absolutely.
Paul Vigna: Listen, I'm in the city all the time. So –
Buck Sexton: We'll have you back. Thank you, Paul.
PJ O'Rourke: Excellent.
Paul Vigna: Okay. All right, fellas. Thanks a lot.
Buck Sexton: Let's go out and buy some beers with Bitcoins.
Buck Sexton: Thanks a lot. There we go.
Paul Vigna: There's a bar. You can do it so [laughs] –
PJ O'Rourke: Okay. All right. Probably in Brooklyn.
Buck Sexton: All right. Have to check that out. Field trip.
Paul Vigna: All right.
Buck Sexton: All right, thanks, guys. So, PJ, you are back next week as co-host of the Stansberry Investor Hour. Our Porter is setting a world record on his fishing trip, right?
PJ O'Rourke: Yeah. I understand Porter is – it's a carp tournament, right?
Buck Sexton: Is it? I don't even – I was just guessing. Is he really in some kind of a tournament? I just figured –
PJ O'Rourke: No. No, I think he actually is off deep sea fishing but I'm going to send him this e-mail about how's the carp tournament doing. And I always found a piece of Wonder Bread wadded up on a bent pin was –
Buck Sexton: I know enough about fishing to know that I don't think you go deep sea for carp. But, you know, hey, I don't know.
PJ O'Rourke: Actually that would be scary. You can go deep Great Lakes.
Buck Sexton: I was going to say I don't know where exactly he's on vacation so if he's hanging out in the Mississippi Delta area and he wants to go out for some big carp, Porter is a man of many talents. But by the way, we do have scheduled for next week assuming he doesn't have to go hang out with Elon Musk or something for the weekend, which can always happen, but we are schedule with my old friend and boss, Glenn Beck to join us next week. So, PJ, that'll be a lot of fun.
PJ O'Rourke: Yeah. I'm really looking forward to that. I have never met Glenn and I've got a lot of – I mean he's an incredibly interesting guy _____ _____ _____ like really agree with and really disagree with, you know.
Buck Sexton: Yeah. So I think that'll be a really interesting Stansberry Investor Hour. And by the way, to sign up for PJ's new American Consequences magazine, all you have to do for those listening, go to investorhour.com and look for the signup box. It is fantastic. The first iteration of it was great.
PJ O'Rourke: It's free. Let's not – yeah, let's get it right out front. Its most attractive feature is it's free.
Buck Sexton: It is free. So that's an investorhour.com, American Consequences. PJ is the editor-in-chief. I actually submitted something to PJ for it this week as well. So we'll have something up for you there. We don't have a mail bag for everybody this week. But I'm sure we've done something that you want to let us know your thoughts on. If you have a question, if you have advice, comments, a haiku, pithy commentary, whatever you got, [email protected] –
PJ O'Rourke: Dirty limerick –
Buck Sexton: [Laughs] There you go. [email protected] And if we use your question on the show we will send you some Stansberry Research swag. So with that, I'm ready to close it out here. PJ, where can people go to either just follow you, read more of your stuff – not follow you in a creepy way but follow you professionally?
PJ O'Rourke: Well, I like them to go to the bookstore and buy one of my books. I'm old fashioned that way. My most recent one is about this last election and it's called How the Hell Did This Happen.
Buck Sexton: How the Hell Did This Happen by PJ O'Rourke. Check that one out. And also if you have the time you can listen to me in national radio syndication five days a week 6:00 to 9:00 Eastern. Buck Sexton with America Now is the show. If you don't have it in your local radio market you can listen on the iHeartRadio app or go on iTunes and download the show. So with that, this is Buck Sexton signing off. PJ, thank you so much.
PJ O'Rourke: Well, you're very welcome. It was fun, Buck. And I thought Paul was absolutely great. I have a much clearer idea of what's going on in the cryptocurrency world than I did at the beginning of the hour.
Buck Sexton: A phenomenal guest on an incredibly important but also complicated subject. So this has been the Stansberry Investor Hour. Everybody, we will see you next time.
Male: Thank you for listening to the Stansberry Investor Hour. To access today's notes and receive notice of upcoming episodes, go to investorhour.com and enter your e-mail. Have a question for Porter and Buck? Send them an e-mail at [email protected] If we use your question on air, we'll send you one of our studio mugs. This broadcast is provided for entertainment purposes only and should not be considered personalized investment advice. Trading stocks and all other financial instruments
[End of Audio]