El Salvador has officially made bitcoin legal tender.

Some in traditional finance are calling it an experiment doomed to fail, while others are calling it one of the biggest stories in the history of cryptocurrencies…

One thing is for sure… This decision will likely have far-reaching effects around the world for years…

Will other countries soon follow suit? Could this be the big adoption catalyst that sends bitcoin soaring up toward $100K? Or will this experiment end disastrously and serve as a warning for other small nations thinking of doing the same thing?

To help us make sense of this incredible new development, Dan invited crypto expert Cam Harvey onto the show…

Cam is the professor of finance at the Fuqua School of Business at Duke University. And he's also served as editor of the Journal of Finance from 2006 to 2012, as well as the president of the American Finance Association in 2016.

When it comes to cryptocurrencies, Cam is way ahead of the curve... For instance, when bitcoin was trading between $200 to $400 per coin, Cam was giving lectures to his students about bitcoin during his finance classes.

During their conversation, Cam and Dan discuss at length what El Salvador's recent move could mean for the U.S. dollar, traditional financial institutions, and other nations that might be thinking of doing the same thing…

If you've thought about investing in cryptos and don't know where to get started, Cam says we're less than 1% into this disruption, so now is the perfect time…

In fact, Cam walks listeners through the first two steps you need to take to get started in the crypto space the right way…

He says every listener should consider entering the crypto space, because in his words:

"You can either join this revolution or get swept away by it."

Listen to Dan's conversation with Cam and more on this week's episode.

Announcer: Broadcasting from the Investor Hour studios and all around the world, you're listening to the Stansberry Investor Hour. Tune in each Thursday on iTunes, Google Play, and everywhere you find podcasts. For the latest episodes of the Stansberry Investor Hour, sign up for the free show archive at investorhour.com. Here's your host, Dan Ferris.

Dan Ferris: Hello, and welcome to the Stansberry Investor Hour. I'm your host Dan Ferris. I'm also the editor of Extreme Value, published by Stansberry Research. Today we'll talk with Cam Harvey. Cam Harvey is a very interesting guy. He's a Duke University professor who has written a book about decentralized finance.

He's a very forward-looking university professor. Can't wait to talk with him. In the mailbag today, really good, thoughtful stuff about my comments on China from last week and George Soros, requests for book titles. Lots of good stuff in the mailbag. And remember, it's a conversation, so talk to me. Leave a message on our listener feedback line, 800-381-2357, and hear your voice on the show.

In my opening rant this week, bitcoin really is a currency. Let's talk about it. That and more right now on the Stansberry Investor Hour.

So it's official. El Salvador has adopted bitcoin as legal tender, and in El Salvador, you'll walk into wherever – McDonald's – you'll walk into McDonald's, you buy a cup of coffee, and you pay in bitcoin. And you can see I've seen little pictures of cash registers and things where you can see it says the amount of bitcoin on the cash register. Now this is a little odd to me because El Salvador's currency is pegged to the U.S. dollar. So you have the same issue that I have with bitcoin as any kind of a form of payment in that it's really ultimately just dollars.

It's a payment system, not a currency. However, it's an amazing step forward for an entire country, clunky as it may be for them to do this, because as I said it's basically dollars twice removed in this case. Clunky as it may seem, it's still a huge step forward. And you know what it is? George Gilder talked about it during his interview. So go back a couple episodes and listen to the George Gilder interview.

And this is the reason I love it... it's a falsifiable experiment. That's what science is. Science is a series of conjectures and refutations. The conjectures – like we don't look at nature and say, "Oh, I see how it works, it must work this way." Nature doesn't tell us how it works. We actually guess. We have to guess how it works. And these are the conjectures.

And then we falsify those conjectures through the empirical method, through experimentation. Right? We don't learn how nature works and then get the theory from the experiment. We create the theory out of whole cloth, we make it up, and then we say that we think this is how it works, let's do it, and then we falsify it through experiments, or not. If something never gets falsified we continue to use it and do all kinds of things with it, like we did with Newton's theories of motion and Einstein's theory of relativity... any successful theory.

And that's what bitcoin is. Who the hell knows? The world doesn't give us signals and say bitcoin will work because of this. Some guy just comes up with it and we throw it out there, and then some country says, "OK, let's try this." So that's why I like this. I don't know how it will turn out. I don't know if it's good or bad.

It's a little clunky, of course, and they've used some technology to kind of take the clunkiness and the expense out of it and to reduce the transaction cost of it, which is weird. That tells you that it's other than a currency because when I take my dollars out of my pocket and I go to the grocery store and I buy coffee and cream and all the stuff that I consume, they don't say, "OK, so that will cost you the money you pay, plus a fee."

Now there may be tax, sales tax, or not depending on where you live in the United States anyway, but there's not this fee to pay for the network, right? And you get that with bitcoin. There are always transaction fees. But they've done what they can to lower that and they're working on it in El Salvador. Not everybody is totally set up for this.

For example, there was an article in the Wall Street Journal and they just talked to some people, and one fellow who owns clothing stores and he's the head of the El Salvador Chamber of Commerce and Industry, he was actually shocked by the announcement. The head of the El Salvador Chamber of Commerce and Industry was shocked by the announcement, and he said, "If a client comes in to pay us with bitcoin, I'm not ready. We could've ridden the wave in a positive way, but the way the law was imposed wasn't positive."

So it's an experiment and it'll be clunky, and that's really mostly what I have to say about it. The country jumpstarted it by giving everybody like $30 worth of bitcoin so they can use it and get involved, so it's real and concrete for them. So I like this, I think it's a wonderful experiment, and I cannot wait to see what El Salvador looks like in, I don't know, just say like five years. How will this develop in five or 10 years?

You won't get me predicting. I'm not a predictor. But it is fascinating, it is worth watching. Read the Wall Street Journal article. There's some good info in there – just gives you a little background of what people on the ground are thinking and what's happened so far. But wow, I just wanted you to be aware of it and I wanted you to be aware also that I think it is a brilliant and much-needed experiment.

Part of the problem with the U.S. dollar is there's no competition for it. Right? Sixty percent of global foreign exchange, 80% of global transactions, and there should be competition because the whole history of the dollar, certainly since 1913 or since the Fed really came into existence – it was created in 1913. It started operation a year later I think. But since then it's been down, down, down.

The value of the dollar has fallen and fallen and fallen. So something not good is happening. We had a terrible inflation in the 1970s and we may be in for another one soon. Who knows. Or not. I don't know. But you've got to prepare for it.

And alternatives to payment systems, to fiat currency, and to the centralized payment systems, we need to be doing that. We need to be doing these falsifiable experiments and not pushing political agendas, which is really what the dollar is all about. This is great stuff. We live in a very exciting time. And if you don't do anything at all with cryptocurrency, take a little bit of money and just get involved.

Get a Coinbase account. Get your own wallet. Do something. See how it works. Be informed. All right?

I'm going to do the quote of the week before we talk with our guest Cam Harvey today. This is not related to crypto, obviously. Although it is a quote from a fellow named 50 Cent. [Laughs] So there's at least a token reference in his name, right? We're going to be talking about tokens and crypto tokens. We just talked about bitcoin.

It's just an inspirational quote, and the first sentence especially just spoke to me. And I've heard this said by other people. I've read it in other places in the past few years, and it means a lot to me because the past few years I've been trying to think, well, when I was a kid and a young man and even a middle-aged man, I spent a lot of time wanting to be more like my heroes, whether it was musical heroes or financial heroes.

I've gotten into shooting lately, so now I have shooting heroes, pistol shooting and rifle shooting and things. But ultimately, it's most rewarding to be myself, to do what I believe – to do what suits me the best. I won't try to put too fine a point on it. You get it, right? Be yourself. Do what suits you the best.

And the quote is by Curtis Jackson, aka 50 Cent, the rap singer, is this: "The greatest fear people have is that of being themselves. They want to be 50 Cent or someone else. They do what everyone else does even if it doesn't fit where and who they are. But you get nowhere that way. Your energy is weak and no one pays attention to you. You're running away from the one thing that you own, what makes you different. I lost that fear, and once I felt the power that I had by showing the world I didn't care about being like other people, I could never go back."

That's Curtis Jackson, aka 50 Cent, from the book The 50th Law, by Robert Greene and 50 Cent, which I've just gotten into. This is early on in the book, but I couldn't stop thinking about that quote and I thought I'd share it with you.

All right. Let's talk about decentralized finance and crypto and let's do it with Cam Harvey right now.

So I need to talk to everyone seriously for just a minute because right now we're in this weird emotional market with a lot of fear and greed controlling what the average investor is doing with their money. That's why we're seeing a lot of money pouring into crazy investments like NFTs and meme stocks and penny cryptos. People see the markets still near record highs and they're scared of getting left behind. They want to be part of all the hot moneymaking stories we're hearing right now.

But really for most people, unfortunately, it's a bunch of crap. You're probably going to lose everything chasing speculative gains like that. Just ask someone who bought AMC stock or a bunch of Dogecoin a few months ago. It's the exact opposite of how I approach investing. That's why I'd like for you to check out a new video I just posted online at extremevaluestock.com. In the video, I'm sharing details of a fantastic risk-averse value stock opportunity that my research is showing could return about 200% over the next 24 months. I'd love for you to check it all out by heading over to extremevaluestock.com.

But please hurry, because the stock I'll be telling you about is getting close to exceeding my buy-up-to price recommendation, and once it does, I'll probably have to take the video offline. So one more time to learn the details, head over to extremevaluestock.com today. That's extremevaluestock.com.

Today's guest is Cam Harvey. Campbell R. Harvey is professor of finance at the Fuqua School of Business at Duke University and a research associate at the National Bureau of Economic Research in Cambridge, Massachusetts. He served as editor of the Journal of Finance from 2006 to 2012 and as the 2016 president of the American Finance Association. Harvey serves as partner and senior adviser at Research Affiliates, LLC, a firm we know quite well, who oversees $180 billion in client funds as well as investment strategy adviser to the Man Group, the world's largest publicly listed global hedge-fund provider.

Professor Harvey teaches both an advanced asset management course as well as an offering that focuses on DeFi, or blockchain-enabled decentralized finance, highlighted in his new book DeFi and the Future of Finance. Congrats on the book. Welcome to the show, Cam Harvey.

Cam Harvey: Thank you for having me on the show, Dan.

Dan Ferris: So we have had a few guests on, and I've talked a bit why I own some bitcoin and some Ethereum. We haven't talked at all about decentralized finance, and since you literally wrote the book on it we thought, well – and also the connection with Research Affiliates, who we've spoken to a couple of their folks in the past. We just thought, "Wow, Cam Harvey must be the guy to talk to." So just on a basic level, maybe you could start with why is a university professor interested in blockchain and decentralized finance, and then maybe you could tell us a bit about just what it is in the simplest terms and we can go from there.

Cam Harvey: So let me tell you the story about how I got interested in this particular space. So you mentioned that I was editor of the Journal of Finance, and that was a full-time job. And for seven years, I was out of the classroom. No teaching. And when I came back to the classroom, I didn't want to use the old slides that were eight years old. And we've all experienced the professor that does that and nobody really appreciates it.

So I decided to retool my course, and part of the course was on foreign exchange. And I decided, well, I want to do things that are different, and what about this idea of cryptocurrency? So I decided to inject a lecture in my course dedicated to cryptocurrency, and this is in 2015. So this is quite a while ago. And I started to kind of read the key things like the Satoshi Nakamoto paper, and I realized that this was a big idea.

And it was something that was complex. I don't have a degree in computer science – though I'm published in a top computer science journal – but not in this particular area. So my job is to prepare my students as a teacher for the future, and there are different approaches. Many professors do the case method where you study the past, and I'm very keen on giving my students a vision of the future and decentralized finance, which is a way to reinvent finance where peers interact with each other, and instead of dealing with a middle person like a bank or a broker or an insurance company, dealing with an algorithm.

And the algorithm effectively matches the peers together. The algorithm is operating 24/7 and it doesn't care who you are. You could be a retail investor, you could be a senior banker. It doesn't matter. You're just a peer. And the algorithm is completely transparent – everybody can see the liquidity in the algorithm, everybody can see the code, and the algorithm doesn't care if you're a buyer or a seller.

So that is the basic idea of decentralized finance, where you're interacting with algorithms which are called smart contracts, and effectively you bypass all of this middle stuff, all of the brick and mortar, all of the back office. All that's gone. And it opens up the possibility of having a meaningful savings rate. Like today, there's nothing that you get – like a fraction of a percent, maybe – in terms of savings at a bank. And it also, because of the gain in efficiency, lowers the lending rates.

So, it is interesting to me because it is something that is highly disruptive in terms of finance as we know it. We've been in effectively the same model of finance for 150 years, and I think that it's incumbent upon me to challenge my students to look beyond a naïve extrapolation of where we've been in the past.

Dan Ferris: I see. Your description of decentralized finance, it just sounds a lot like the basic beginnings of the description of how blockchain and bitcoin work, to me.

Cam Harvey: So you're correct. Bitcoin is a transaction mechanism that is decentralized. So bitcoin's code kind of checks the box in terms of what I initially described. So we can do a transaction from one person or entity to another, and there's no middle person that's involved there. There are people that support the bitcoin blockchain – for example, the miners – but this is really truly decentralized. And this was a foundational idea for decentralized finance.

So part of the decentralized finance is money transfer, and we can actually do that with bitcoin. It turns out that the original vision of Satoshi Nakamoto was much broader in terms of transaction mechanism, and given the cost of transacting on the bitcoin blockchain it's not really that feasible to use it for transfer unless it's a very large amount. While I was teaching this year, there was a transfer of $5.4 billion, and the fee for actually doing that was $19. And that happened within a half hour.

So it's quite remarkable. But what we do in DeFi is something beyond bitcoin. Bitcoin's blockchain doesn't have the capability of running this algorithm or smart contract. So in the Ethereum blockchain and other blockchains that are like Ethereum, what you can do is to establish what's known as a contract address. So individuals can have individual addresses, but you can actually deploy a contract and actually send something to that contract.

Think of decentralized exchange. So I want to buy one token with another token. So what I can do is I can send my token No. 1, let's say, to the smart contract. And then the smart contract sends back to me the other token, let's say token No. 2, in an exchange. So this is something that the bitcoin blockchain can't do but Ethereum can do. So Ethereum is a blockchain that allows us to deploy these algorithms, so it's almost like it's a distributed computational platform.

So people call it the Ethereum virtual machine. So it allows you to do stuff that you can't do in bitcoin. But bitcoin is still very important, and indeed – and this is really interesting and detailed in my book – bitcoin is important for decentralized finance in Ethereum, and what we do is we create tokens in Ethereum that are backed by bitcoin. So there's a lot of possibility still for bitcoin, and I don't count it out.

Dan Ferris: So what is the state of decentralized finance besides the fact that I can buy things with bitcoin? I can buy things with bitcoin, I can use Ethereum, et cetera. I guess what I'm looking for is the infrastructure. Do I experience this in my daily life outside of the use of bitcoin or Ethereum or something in a way that I don't know about, that I don't appreciate yet?

Cam Harvey: Sure. So it turns out that most of the focus, especially in the media, is on the price of bitcoin or Elon Musk tweeting about Dogecoin. So again, what you can do with bitcoin is very limited. So indeed, it's more of a store of value, that people are using it for speculation. It's an incredibly volatile store of value. So my book focuses more on the Ethereum-based applications. So in terms of what you can do in terms of decentralized finance today is fairly limited because we're I'd say less than 1% into this disruption.

So it's small right now and the user interfaces are somewhat clunky still. And again, not surprising, because this is fairly early on. So what can you actually do? And one thing you can do is decentralized exchange. So you might decide to use Coinbase or Binance, and those are centralized exchanges. They're basically brokers. So they operate within – like they deal with DeFi tokens, but they're just another broker.

So I sometimes call them CeDeFi, so it's C-E-D-E-F-I.

Dan Ferris: Right. Centralized DeFi, right? [Laughs]

Cam Harvey: So they're essentially the middle person. Very useful and very important. They play a big role. But they have to deal with the decentralized exchanges, so our DEX, D-E-X. And with the DEX, as I said, there's no middle layer. You basically hook your wallet up and you can send to a smart contract and receive something else.

So there's an alternative to actually transacting, but I think for a lot of people just the ability to get a savings that is much higher than you could get for any certificate of deposit. So some people say, "Well, I don't want to hold Ethereum because it's so volatile, so I'm not going to be able to get any of these savings rates." Well, that's just not true. What you can do is to buy an Ethereum token that is pegged to the U.S. dollar, like USDC, so it doesn't have the volatility, and you can deposit that and actually get a meaningful savings rate, maybe 5% or 6%, which is way higher than you could get today in other mechanisms.

And the other thing is the lending. What's available today is like collateralized lending, so more like a mortgage sort of situation. But that market is increasing quite dramatically, and you can see in the future a full-service sort of situation where you're effectively lending to your peers. So it's not like you're lending only to one peer. You have a small piece of many different mortgages, for example. So there's a lot of upside here, and we're just seeing the very genesis of what's happening.

Dan Ferris: So I know that of everything you just said the listener to this podcast is going to say, "5%, wait a minute. Stop right there and tell me how that works," because these are self-directed investors and savers and 5% is a huge number as you well know compared to what you get from, as you said, traditional savings vehicles, which are ultimately rooted in the interest rates that prevail in the bond market. Where does that 5% originate? Is that from transaction fees or mining, or where does that come from ultimately?

Cam Harvey: So it's actually really straightforward, that you need to take a step back and ask the question "Why are the savings rates so low at commercial banks and why are the lending rates so high?" So I think that you need to look at that first. And you look at all of the fixed costs of the banks, you look at the brick and mortar, the back office, all of the money that they need to spend supporting their legacy IT, which the code, millions of lines of code that have been basically renovated many times, a lot of it in COBOL, which is a language of the 1980s that is not taught anymore.

So this basically creates all of the cost and that drives the wedge. So that's one reason. So when you take all of that out, then you're able to basically pay the people that provide liquidity, or the savers, more. But there's a second aspect, and this is unique to DeFi, in that there's a competition for getting people to provide liquidity. And a lot of these protocols will offer a reward. So in addition to the savings rate, they will say, "OK, you're using the protocol, we're going to give you this token that's related to the protocol just for using it."

So effectively, what you're doing is giving an incentive to people that are using the protocol. So the interest rate might only be 2 or 3%, but when you factor in this extra token and the value of that, you can get much higher. And indeed, as some of these are offering double-digit, and you need to be careful of that because when it gets too high it screams risk. Right? But a reasonable case can be made that with these incentives, you can get something like 5%, indeed, some of these incentives have become so valuable that the people borrowing at the rate they're paying, if you take this into account, is extremely low.

And it could be zero. It could be even negative depending upon the value of the token. So it's quite an exciting idea that you can incent people very directly to use your protocol. It's almost as if you go out and buy an iPhone and they give you a reward of like a fraction of a share of Apple. That's kind of what's happening, and it's very easy to do.

And I can't imagine a fraction of a share of Apple happening. That's really difficult to do. Indeed, you think about trading stocks in general. We think it's so easy with Robinhood and Schwab and apps like that, but the bottom line is that it takes two days to transfer ownership of a share. So two days. In the age of the Internet, it takes two days to transfer ownership of stock, and that's just completely unacceptable.

And with DeFi, the execution and the transfer of ownership happen exactly at the same time. If you're using a centralized broker like Coinbase, then it's no different than anybody else. The centralized broker in traditional finance holds your shares in their name and the centralized broker like Coinbase or Binance basically hold your keys for you.

Dan Ferris: Right. And there's still settlement time when you're dealing with them.

Cam Harvey: Again, it's kind of like the settlement is what Coinbase worries about. You don't need to worry about it. But if you actually want to retrieve your keys, that is a different process.

Dan Ferris: Right. Well the settlement, I was just referring to my experience. When I buy these things, I notice they're available for trading relatively quickly but to sell it and then extract the cash to my bank account, I've got to wait a couple of days.

Cam Harvey: So this is one of the issues that DeFi solves, and it's called interoperability. So if I send money from my bank to my broker, it could take two days or vice versa. Where in decentralized finance, these protocols operate like Legos. So they all fit together. It's just instant. So you can jump from protocol to protocol to protocol.

So there might be one decentralized exchange, you jump from one to another to another, and it's remarkable that you can do this and everything fits together. So it's completely interoperable. Think about establishing an account at a broker. And it could be Coinbase, right? The information that you have to get if you have to transfer money.

And then it'll take maybe three or four days just to get set up. So you go to a decentralized exchange, you basically connect your wallet. It's really easy to do. And you're ready to go. That's it. And you're not sending any money to some company.

You will use that wallet to send money to an algorithm and then the algorithm will basically send something back to you. So it's a completely different model.

Dan Ferris: Cam, I'm going to ask you... can you possibly make this more concrete for us? Because right now, here's what it feels like to the average person. You know, it's just this fancy financial stuff that happens on the Internet that is kind of pure – they're pure exchanges. People are always talking about exchanging tokens or buying things with bitcoin, which is really dollars, right? Because these things are so volatile, when you buy something, you're measuring it in dollars, converting it to bitcoin, buying your something, and you're ultimately just doing dollars.

So it doesn't seem like it has its own separate tangible existence. Am I making sense there? I want to know: what's the most tangible thing that you can tell me about this? If that makes sense.

Cam Harvey: Well this is what I recommend in terms of people getting kind of involved in the area, because it is a complex area, and there's a lot of misinformation and a lot of people just are speculating, which there's nothing wrong with that. But when you're just doing the speculation, you're maybe missing what's happening kind of under the radar screen. So for people to kind of get started, I recommend two things. No. 1, go on and get like a Coinbase account. Just send a small amount of money to Coinbase and just experiment.

So Coinbase is a centralized exchange. It's really easy to deal with. You don't need to worry about your private keys and stuff like that. You just have a password at Coinbase. And basically, Coinbase has vetted the tokens that they actually trade and just makes small investments in a number of tokens. But this is important.

Try to understand what you're actually investing in. So that's really important. It's the first step. The second step is that you should establish a wallet that is outside of Coinbase where you actually control the private key. And the way to do that is to download the MetaMask, that's M-E-T-A mask altogether, wallet.

It's an Ethereum-based wallet. And again, it's very easy to use. There is a mobile version, there is a desktop version, and tens of millions of people actually use this technology. All of my students use this technology. And again, this gets you started and you can actually send as an experiment something to that wallet from your Coinbase account. So that gets you started.

Then you're a player. You've got an address both in Coinbase and in MetaMask. So you can send to people, you can have people send to you, and often what I've seen is small groups of people get together and they actually do this where they're basically sending tokens to each other just to get into the space. So you can read my book, which is a good starting place in terms of understanding the broad concepts, or you could be in my lecture, but it's different going from the theory or me talking or me showing some slides to actually doing it yourself.

And I'm talking again about a very small amount. You don't need a lot to do this. But this will get you into the space, you will understand a lot better what's happening, and once you start learning about what these different ideas are capable of doing, then you might actually start making some choices in terms of, "Well, I traditionally just invested in stocks and bonds. Maybe I should be investing in some of these protocols," either directly or indirectly.

And I think it will be very eye-opening to do this. You need to have some patience, and it's always best to work in a group or a club or something like that. But again, the user experience is not what it should be because this is so early on. And to dip your toe in the water, I really recommend that.

Dan Ferris: Cam, I hope you won't mind me kind of jumping out in left field with a question, just because while I have you here, I want to exploit the opportunity to pick your brain, if you have an opinion. I want to know if you have an opinion about what El Salvador has done. They have adopted bitcoin as their currency, and you can walk into McDonald's and buy a cup of coffee with bitcoin. And you can see on the register the thing is priced in, let's say, 0.00000-something bitcoin. To me, this seems a little crazy, because as we know certainly the dollar price of bitcoin is extremely volatile.

It doesn't seem like great currency but ultimately that is – Satoshi kind of included that in the possibilities here. So do you have an opinion on this? What do you think of what they're doing?

Cam Harvey: Let me actually talk about something related to that reasonably nearby, and that's Venezuela. So Venezuela is in a hyperinflation... has been for quite a long time. And those that are rich in Venezuela, they don't care because they've got a bank account in U.S. dollars in Miami. So it could be 700% inflation, no big deal. They're protected.

But the average person in Venezuela gets hammered by this. Inflation just attacks. It just destroys what they've got. They can't have a bank account in Miami, but they have a mobile phone. And on that mobile phone, they can have a stablecoin linked to the U.S. dollar, like USDC. So effectively, what decentralized finance has done is banked the unbanked, and the bank is their mobile phone, and the smartphone basically has U.S. dollars, and they're able to transact in U.S. dollars and they're able to basically hedge against an unreliable or irresponsible central bank in Venezuela.

And effectively, if you think of what's happening, the rich have their money in a U.S. dollar account in Florida and then a growing part of the population is turning to crypto. Effectively, you disintermediate the need for a national currency. So that's Venezuela. It makes a lot of sense. When we go to El Salvador, it doesn't make as much sense, and the reason is that their currency is always pegged to the dollar.

So it's already stable to the dollar. There is, of course, a risk that the peg could be broken, and we've seen that many times so people could be at risk. And of course, a country like Venezuela or Zimbabwe, their local currency is more volatile than, let's say, bitcoin. So even though we think bitcoin is very volatile, when you're in an emerging market, it might seem tame compared to your national currency. But for El Salvador, it doesn't make as much sense.

And if you're going to do a crypto, it would seem like why not do something that's linked to the dollar like your national currency rather than just using bitcoin? I already mentioned that the cost of transacting in bitcoin is very high, and they've implemented what's known as a layer two solution to reduce the actual transaction's cost, which I think is innovative. I think overall, the case for making bitcoin the national currency or legal tender, which is what they've done effectively, is weak in El Salvador, but I do think it's an interesting experiment. So why not try it out? Is it the ideal place to try out? No. But let's see what happens.

Dan Ferris: Sure. We love falsifiable experiments, don't we? As you pointed out, though, they're really just still using dollars, so it becomes a translation process. Right? You're measuring something in dollars, then you're translating that into bitcoin, you buy your cup of coffee, you have so many bitcoin left after that, and really you have so much dollars or El Salvadorian dollars left. And I wonder if we'll ever see a time during our lifetimes when things are actually measured in not bitcoin but something other than dollars, some other crypto, some more stable kind of crypto. Does that seem realistic to you?

Cam Harvey: It does. So actually, my book begins with the sentence, "We've come full circle," and what I mean by that is that the earliest market exchanges were barter, and barter is a peer-to-peer method. So it is decentralized exchange. But it was really inefficient to do barter. So you got a cow, you want two pigs, you need to find somebody that has two pigs. It's very difficult to do the matching in barter.

That was replaced with some sort of coinage. So that became the numéraire. You could save with it and things like that. So what I mean by "full circle" is that you can imagine a world, and this is a world that I believe will actually obtain in the future, where we have got essentially everything tokenized. So today we've got tens of thousands of tokens, and I'm talking about billions of different tokens in the future.

So you can imagine a world where on my mobile phone or whatever equivalent of mobile phone exists in the future, that I've got my vault and my vault's got a number of things in it. So it might have some Ethereum, it might have some token that's backed by gold, it might have some U.S. dollar or euro, it might have some token that is backed by IBM share equity. So there's many different possibilities. I might have a token that's backed by crude oil. There's many different possibilities of what's in my wallet.

So I go to the grocery store and let's say I want to pay in crude oil, but the grocery store isn't interested in that but they take gold. Well it's completely seamless. It looks like I'm paying with my oil. It goes out and the best possible exchange rate is found between the oil and the gold, and then the gold shows up instantly at the grocery store, exactly what they want. So in this world, it is a world of efficient barter.

So even you think about a numéraire . There's many different possibilities here, and a simple one is just the weight in gold, like how many grams. That's just an alternative price mechanism. So I think in the future, the need is not the same as in the past... given that everything is tokenized. Indeed, if you think about the U.S. dollar today, we have no idea what the true money supply is. It's totally out of the Fed's control.

Even today, we've got $2 trillion in capitalization in the crypto complex right now. So how do you count that? So the central banks, in my opinion, lost control. They are trying their central bank digital currency, and indeed El Salvador is doing their bitcoin alternative currency, but it's just too late. And I think it's going to be a very tough sell for the American public, for the government to effectively have the possibility of seeing every single transaction of their citizens.

That I think is just like a non-starter, and it's also the case when you've got a centralized digital currency that the government can basically, what we call in DeFi, slash. So a slash is where money is taken away and they can edit whatever they want to do. In DeFi, the motivation for slashing is that you put some collateral in, but you've actually done something that wasn't helpful for the protocol and you pay the penalty – and there's a penalty. So with the central bank digital currency they can edit you out of existence.

So I think that in my opinion, the central banks have sat around too long, they're researching this, they don't have a model. I think it's too late, that they've lost control. The horse has left the barn.

Dan Ferris: And yet as we speak, U.S. dollar is, what, 60% of global foreign exchange and I've heard 80-ish percent of transactions globally. It doesn't look like it's going anywhere any time soon. It doesn't look like there's heavy competition for it.

Cam Harvey: There isn't right now. This is the key. You need to look at the vector, and the vector's very positive for decentralized finance. It's very young – I said this – less than 1%. And it's not as much, "Oh well there's 60% today". That's a fact.

I totally get that. And what we need to do is think about, "Well, what will that number be in five years? What will that number be in 10 years? Is it going to be 60% and 80%?" I seriously doubt it given the efficiency of this technology. Again, to send a wire is so expensive and so insecure.

The systems, the SWIFT system, is constantly under attack by hackers, and everybody knows it's just a matter of time. It's not a very good system. It's antiquated. And there will be alternatives. Indeed, even the banks – so why does JPMorgan have its own stablecoin? So they realized that this technology can help them reduce costs, increase efficiency, and their customers are basically demanding that.

If JPMorgan doesn't change the way that they do business the customers will just leave. So JPMorgan will embrace, and other banks will embrace this technology to reduce the cost and pass some of that on to their consumers in a bid to retain them as long as possible, until they can't. There's a limit to what they can do because they are operating with the traditional centralized infrastructure. So fintech is great, it reduces our costs and makes it easier for us to do trading, it's more inclusive, but in the end, there's a limitation. The current wave of fintech, one of the speakers in my course, described it as putting lipstick on a pig.

Dan Ferris: [Laughs] Sure. Sure. A more efficient way of doing something that's not very efficient. So we've actually been talking for quite a while and I've enjoyed it immensely. I have one final question that I ask all of our guests. It is the exact same question, no matter what the topic is. And that is simply: if you could leave our listeners who are very interested in your topic today with a single thought, a single idea – you can just leave them with just one thought – what would it be?

Cam Harvey: So given that the listeners have an interest in finance, either work in finance or just have an interest in general about finance, then I'll leave just one sentence. You can either join this revolution or be swept away by it.

Dan Ferris: That is very powerful. It is one of the shortest answers I've ever gotten and one of the most provocative. Thank you for that. Thanks again, and I hope that we'll talk to you again sooner rather than later.

Cam Harvey: Thank you for inviting me. And great questions.

Dan Ferris: That was really interesting to me. It's a difficult thing. I was trying to make it as concrete as possible, but I think Cam really came up with the only answer, which is that if you don't have, just say, a Coinbase account and a wallet or something, you just aren't going to get it. There's just no substitute for riding a bike. We can talk about riding a bike all we want to, but there's no substitute for doing it.

And if you just think about money, think about how you describe money and using money to someone who doesn't use money. It's a really crazy, abstract conversation. Then they use money, it's the easiest thing in the world to understand. So I think that's really where we are at the end of this conversation, and I'm definitely going to read every page of that book because Cam's right, we don't want to be swept away. And even if he's not right, even if we're not in danger of being swept away, this stuff is coming.

It's not going away. There are thousands and thousands of tokens out there and the market cap of the crypto space, as he said, was like $2 trillion. I remember when it was like nothing, like millions or something. So yeah, I think Cam gave us the best, really, answer there. If you don't actually do it you're not going to get what we're talking about. But once you do do it, you're going to say, "Oh, I see, I see how this works."

That was very interesting just for that insight alone, among others. You know, the fact that a university professor is not just researching this stuff but actually teaching it. That was what my first few questions, I just couldn't believe. What is a stodgy, old university professor doing, talking about this stuff that completely upends the whole financial system that they've been teaching about their whole career?

It's strange to live in a time of such great change, isn't it? But it's exciting. And as we said, it's weird and abstract to talk about it and I just don't think it's easy to get around that basic problem. OK, very cool.

Let's take a look at the mailbag. There's probably questions about crypto in the mailbag and DeFi. Let's do it right now.

I want to share a quick story about a man named Ken Langone. The son of Italian immigrants, Langone describes himself as a "dumb kid from Long Island that barely got out of high school and almost flunked out of college." Langone's dad was a plumber. His mom worked in a school cafeteria. But Langone lived the American dream.

He went from $82 a week to one of the richest people in the world. Langone's most famous move was an early investment in Home Depot, which enabled him to become a co-founder of what is now the biggest business of its kind in the world with 2,000-plus stores and 400,000 employees in North America. Because of Langone's Home Depot connection, he has unique insights into the current status of the U.S. economy – the labor shortages, supply chain issues, soaring prices, and increasing inflation.

And that's why it was telling to see Ken Langone go public on CNBC recently with an alarming prediction. He also says the government is already creating major distortions and that the people they are trying to help are the ones who are going to get hurt the most. And my colleague, a former Goldman Sachs banker, Dr. David Eifrig, agrees. He says most Americans are completely unprepared for what's about to take place in our country. What exactly is going on, and what has these successful and wealthy Americans so concerned?

Go online to get the facts about this urgent warning by visiting www.loomingeconomywarning.com. That website again is www.loomingeconomywarning.com.

In the mailbag each week you and I have an honest conversation about investing or whatever's on your mind. Just send your questions, comments, and politely worded criticisms to feedback@investorhour.com. I read as many e-mails as time allows and I respond to as many as possible. You can also call our new listener feedback line, 800-381-2357, and tell us what's on your mind and hear your voice on the show.

First up this week is Steve M., and Steve M. asks, "Does not the resilience of American stocks and the U.S. dollar's status as the world's reserve currency depend at least to some degree on the insight and decision-making skills of our military and political leaders. Relevant to prepare, don't predict, our adversaries in China, Russia, Tehran, Afghanistan, North Korea, and the drug cartels to our south, I can imagine looking into their eyes and wonder if they see two-dimensional thinking. How better to prepare for what my difficult to predict? Thanks, Steve M." So it sounds like the first part of the question is aren't we backing up the U.S. dollar and by association the U.S. stock market with our political power and our military power?

And I would say absolutely, we are. Our currency is a piece of paper with an aircraft carrier behind it. And then you went on further to say you can imagine our enemies sort of looking at our own, rather shallow way of thinking about ourselves as the biggest kid on the block and having the biggest stick and all that... and thinking about how they could fight against us either maybe physically in a conventional way with conventional warfare somewhere in the world or perhaps more economically and financially. How better to prepare for what might be difficult to predict?

Ultimately, Steve, I think what you're talking about is the ongoing, endless, unstoppable degradation of the value of the U.S. dollar. And yes, prepare, don't predict. You don't have to predict the degradation of the U.S. dollar. It's been an ongoing trend at least since 1913, right? I mean, the trend of the 19th century was deflation, and the trend of the 20th century was overwhelmingly every country in the world inflation more than any other time, for every country in the world.

I recently read a little piece – or a long piece, actually – by Global Financial Data to that effect. So yeah, and given why that was so, the trend is likely to continue in the 21st century as an inflationary one. So yeah, you do have to prepare for that. You know, I'm an old-school guy so I've got to own some silver and gold, but I've also got to own some crypto. I own at this point bitcoin and Ethereum and a little bit of Solana just because I can't really know about something if I don't have skin in the game.

But the chart on Solana is ballistic. I looked at it and I thought, "Oh boy, I'm just going to buy a tiny bit of this so I can get involved," because it looks like a ballistic chart that is – you know, ballistic charts crash, right? So I didn't buy it because I think it's a good time to buy it. It looks like a terrible time. But anyway, I'm prepared. I'm prepared for whatever owning crypto gets me in the future. Right?

So that's all I got for you, Steve. Yes, prepare. Prepare for that. Prepare for whatever our enemies do that exacerbates the ongoing degradation in the U.S. dollar, and that includes owning stocks. As I've said in the past, there is nothing like owning a business that is generating 20%, 30%, or more on the capital it reinvests over time, and the compounding from that you just can't find it anywhere else. Great question.

Next is Nico L. And Nico says, "Hi, Dan. Love your show. Wonderful and diverse guests you bring as well as rants and wisdom sharing. Keep delivering great value and we will keep giving you likes and attention." Thank you, Nico. I'm apparently an attention hog. [Laughs]

Necessarily, right? On a show like this. He continues, "Inflation seems to me not without its benefits. I realize by allowing the government to have a monopoly on money printing – oxygen for the economy – it's ultimately corrupting the whole economic system. But at the same time, it provides the huge impetus for people to look for creative ways to spend the money since money is melting away like snow on a hot summer day.

"They have to spend, consume, invest, invent, and ultimately facilitate innovation and productivity which delivers the growth of wealth. What am I missing? Much appreciated. Keep up the great work, Dan. Nico L." Thank you for the kudos, Nico. I think what you're missing is that inflation is bad for business, it's bad for the economy, it's bad for valuing all that innovation that you see us needing to do.

We don't do innovation just to overcome inflation. We do innovation to actually improve our standard of living, to generate real wealth, real knowledge that we put to use making real improvements in our standard of living. And inflation screws with our ability to be able to do that. Just the simplest, most concrete way to look at this is that generally speaking, inflation hits wages last.

So the whole time everything's getting more expensive, wage earners are paying more and more and more... and their standard of living is going down. So yeah, you've got to get creative, but it's sort of like the way you've got to get creative during a war where mass wealth destruction is taking place. That's what you're missing. Inflation is a war against wealth. But it's a good question. I'm glad you asked.

Next comes Wade S. And Wade S. has a lot to say because he says, "Great opening discussion on China. I am a casual observer of China since my wife was born and raised there and I've been there seven times since 2005. I've heard others say similar things as George Soros, but the place continues to seemingly progress, to grow wealth as observed through real estate and infrastructure expansion while avoiding major economic catastrophes like depressions. I suspect catastrophe has been averted by frequent use of monetary loosening coupled with capital controls.

"Of course, that undermines market signals and the elimination of inefficiencies, but when people's lives are improving, they likely won't consider it could be much better with a free market sound money system. Things I think China has going for it, a lot of societal pressure to be either educated or rich, which motivates people to work hard. Because of the CCP messing with the monetary system and interfering with the free market, I think the next biggest drag on their economic progress is the domestic surveillance apparatus. It is more than most can even imagine and must have an enormous cost to maintain.

"One example recently heard was a Chinese Christian pastor under house arrest for a couple months... was interrogated numerous times about his missionary activities. Through the interrogations, he learned that the police had information about all his travels and the people he had met over the last 20 years. As for Soros' prediction, I thought it was going to happen years ago and gave up that thinking to have about a 7% investment allocation in China. That said, I'm growing more concerned about a geopolitical shock and have been thinking about divesting some. Regards, Wade S."

I'm going to let Wade's comments stand right there. You know what I said. I was talking about the Soros article in last week's episode, so you can listen to that if you want to know what he's referring to.

Fabian H. is also talking about that, and Fabian H. writes, "Hello. About Soros' China and particularly the cracking down and pay for education, this is an Anglo vision of China based on the system – bad in my view – that you're accustomed to in Protestant Europe, except England, but they're not a reference anymore. We don't know about paying for education. You have to qualify for high school or you go to trade school or apprenticeship, and if you graduate from high school, you can go to university.

"As far as I know, life in Switzerland, Germany, Holland, Sweden, et cetera is not so bad. That's what China wants to emulate. Parents shouldn't be happy to pay for tutoring. I don't see how this decision will have a dramatic impact on the future of the Chinese economy. On a larger view, following their decision to rein in certain companies, the Chinese government wants to impose the primacy of the government over the primacy of the economy, something lost in the U.S.

"We'll see who wins here. Again, this is more like a European model. Europe doesn't enjoy the presence of people like Bezos or Zuck, but they are not worse for that. As to Soros, he has a bias. He's at the forefront of a globalized Anglo-Saxon ambition to create a world order.

"China is a stone in that shoe. In an alternative, Europe should and could play that role, but it drags too many slackers to be efficient. I personally like alternatives." And I'll just leave it there. I can't read your other comments, Fabian. Sorry. They get a little too salty for our deal here.

But this is an interesting view to me. The fact that you're presenting Europe, which is kind of economically – I mean it's economically been kind of moribund and mired for quite some time now. They instituted negative interest rates, which there's plenty of negative interest rate debt, much of it European sovereign debt because they're trying to dig out of an ongoing economic funk caused by all of this free stuff. And you're saying free stuff is great. So I don't know.

If China wants to emulate Europe I say go for it. And this thing – you also represent what you call the primacy of the government over the primacy of the economy like it's a good thing. It's a terrible thing. It's an absolutely terrible thing. If you live in Europe and you love it, yay. I mean, I'm not saying it's a total disaster and the life in Europe is terrible, but it's economically moribund and it kind of always will be because of these things that China wants to emulate.

If parents want to pay for tutors, they should be allowed to do it. The government running everything is not a good thing. It has never been a good thing in all of history. It's always worked out badly. All the empires always deteriorate and fall apart, and the Chinese one will too someday. But I don't think you make terrible points, and I was happy to read your comments.

Mike B. is talking about our guest last week, Marko Papic. And he just says simply – this is his whole e-mail – "Great guest, Dan. Bring him back soon, especially in light of our global environment. Listened to the podcast twice. Mike B." So Mike B. listened to Marko Papic's interview twice, he thought it was that good.

And we had a couple other favorable comments about Marko. I totally agree. I feel like maybe I read too much news, and I'm going to experiment starting this week with one week of no news and no Twitter, and I'm going to see how that works out for me. But I think that you can't ignore what's happening in the world economically at least.

You have to be somewhat of a macro interested investor these days because you don't know where an opportunity is going to come up. And with bond yields completely in the gutter, in the toilet, and valuation super-duper high, you've really got to be on the lookout and you've got to look all over the world. Thank you, Mike. B.

And finally this week, Lodewijk H. – good to hear from you once again, Lodewijk – he's just asking about history and management books to read, as opposed to finance books. So management, I don't read those books, Lodewijk. History, if you're talking about financial history, the one book we should all read before we read any financial history book, the very best financial history book in my opinion, is Devil Take the Hindmost by Edward Chancellor. It's the history of financial speculation in particular, but as a history work in finance it's unparalleled to me.

He appears to have read everything [laughs] and processed it all and had something smart to say about it. So Devil Take the Hindmost by Edward Chancellor first, and then you could read things by John Brooks. John Brooks wrote Once in Golconda about the 1929 speculative episode, and he wrote a book about the go-go '60s about that speculative episode. And Frederick Lewis Allen is pretty good. He wrote a book called Since Yesterday and another book called Only Yesterday. They're sort of casual conversational histories of the 1920s and 1930s, mostly U.S. focused – almost completely U.S. focused.

So start with those, and yes, the other books – the Chancellor book is focused on global markets, but the other ones are focused on just U.S. markets and maybe go from there. Also, one final book, Bull!, B-U-L-L, by Maggie Mahar, M-A-H-A-R. Maggie Mahar's book Bull! is excellent. It's basically about the bull market from 1982 to the top of the dot-com boom. All right. Great question.

Love talking about books. That's another mailbag and that's another episode of the Stansberry Investor Hour. Hope you enjoyed it as much as I did. We provide a transcript for every episode. Go to www.investorhour.com, click on the episode you want, scroll all the way down, click on the word "transcript," and enjoy.

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Till next week, I'm Dan Ferris. Thanks for listening.

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