The Blockchain Debate Podcast

Motion: Corporate bailouts and capital market rescues make sense, II (Jonathan Padilla vs. Nick White)

June 03, 2020 Richard Yan, Jonathan Padilla, Nick White Episode 11
The Blockchain Debate Podcast
Motion: Corporate bailouts and capital market rescues make sense, II (Jonathan Padilla vs. Nick White)
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The Blockchain Debate Podcast
Motion: Corporate bailouts and capital market rescues make sense, II (Jonathan Padilla vs. Nick White)
Jun 03, 2020 Episode 11
Richard Yan, Jonathan Padilla, Nick White

Guests:

Jonathan "JP" Padilla (@JPadillaCA)
Nick White (@nickwh8te)

Host:

Richard Yan (@gentso09)

Today’s motion is “I largely approve the US government’s fiscal and monetary response to the ongoing economic crisis.” 

We recently had another debate on a similar topic, between Qiao Wang and Jimmy Song. 

While Qiao argued for the pro-establishment view, he still saw lots of issues with the government’s intervention in the markets. In the debate, Qiao was playing the role of a devil’s advocate, to help the crypto community understand the pro-intervention perspective. 

In today’s debate, however, the pro-intervention guest (Jonathan "JP" Padilla) is a Kenseyan, has worked for the Whitehouse, and is very supportive of the government actions during the ongoing crisis. 

The anti-intervention guest (Nick White) today is also not a hard-core libertarian like Jimmy from the previous debate. So today’s debate is more consensus-building than that previous debate.

Be sure to also check out our previous episodes too. We’ve featured some of the best known thinkers in the crypto space.

If you would like to debate or want to nominate someone, please DM me at @blockdebate on Twitter.

If you like the show, please give us five stars on iTunes or wherever you listen to this.

Please note that nothing in our podcast should be construed as financial advice.


Source of select items discussed in the debate:

Show Notes Transcript

Guests:

Jonathan "JP" Padilla (@JPadillaCA)
Nick White (@nickwh8te)

Host:

Richard Yan (@gentso09)

Today’s motion is “I largely approve the US government’s fiscal and monetary response to the ongoing economic crisis.” 

We recently had another debate on a similar topic, between Qiao Wang and Jimmy Song. 

While Qiao argued for the pro-establishment view, he still saw lots of issues with the government’s intervention in the markets. In the debate, Qiao was playing the role of a devil’s advocate, to help the crypto community understand the pro-intervention perspective. 

In today’s debate, however, the pro-intervention guest (Jonathan "JP" Padilla) is a Kenseyan, has worked for the Whitehouse, and is very supportive of the government actions during the ongoing crisis. 

The anti-intervention guest (Nick White) today is also not a hard-core libertarian like Jimmy from the previous debate. So today’s debate is more consensus-building than that previous debate.

Be sure to also check out our previous episodes too. We’ve featured some of the best known thinkers in the crypto space.

If you would like to debate or want to nominate someone, please DM me at @blockdebate on Twitter.

If you like the show, please give us five stars on iTunes or wherever you listen to this.

Please note that nothing in our podcast should be construed as financial advice.


Source of select items discussed in the debate:

Richard:

Welcome to another episode of The Blockchain Debate Podcast, where consensus is optional, but proof of thought is required. I'm your host, Richard Yan. Today's motion is: "I largely approve the U.S. Government's fiscal and monetary response to the ongoing economic crisis." We recently had another debate on a similar topic between Qiao Wang and Jimmy Song. While Qiao argued for the pro-establishment view, he still saw lots of issues with the government's intervention in the markets. In the debate, Qiao was playing the role of a devil's advocate to help the crypto community understand that the pro-intervention perspective. In today's debate, however, the pro-intervention guest is a Keynesian, has worked for the white house, and is very supportive of the government actions during the ongoing crisis. The anti-intervention guest today is also not a hardcore libertarian like Jimmy from the previous debate. So today's debate is more consensus building than that previous debate.

Richard:

Be sure to also check out our previous episodes too. We feature some of the best known thinkers in the crypto space. If you would like to debate or want to nominate someone, please DM me at block debate on Twitter. If you like the show, please give us five stars on iTunes or wherever you listen to this. Please note that nothing in our podcast should be construed as financial advice. I hope you'll enjoy listening to this debate. Once again, I get involved in the conversation a bit more than I normally do. Let's dive right in!

Richard:

Welcome to the debate! Consensus optional, proof of thought required. I'm your host, Richard Yan. Today's motion: "I largely approve the U.S. Fiscal and monetary responses to the pandemic-induced economic crisis." To my metaphorical left is Jonathan Padilla, or JP, arguing for the motion. He largely approves the U.S. Fiscal and monetary response to the pandemic-induced economic crisis. It will be interesting to hear his perspective, given JP's previous experience working for the government. To my metaphorical right is Nick White, arguing against the motion. He largely disapproves the U.S. Fiscal and monetary response to the pandemic-induced economic crisis. He represents the crypto native stance on this issue.

Richard:

JP and Nick, I'm excited to have you on the show. Welcome.

JP:

Wonderful to be here. Big fan of your work.

Nick:

Hi Richard, thank you for inviting me on the podcast.

Richard:

Here's the bio for the two debaters: Jonathan Padilla, or JP, is co-founder of the Future of Digital Currency Initiative at Stanford University. He is also the head of blockchain strategy at PayPal. He was previously a partner at Coruscant Capital, a technology focused firm at the intersection of finance, emerging technology and government. He also had experience working for the federal government, including at the Office of Communications at the White House and in the office of the Democratic Senator Mike Honda.

Richard:

Nick white is co-founder of Harmony, a blockchain protocol that implements sharding and proof-of-stake to achieve radical improvements in scaling speed and cost. Before Harmony, Nick served as senior AI specialist at Hong Kong based AI accelerator, Zeroth.aI. He holds a BS and MS in electrical engineering from Stanford.

Richard:

As usual, the debate has three parts: An opening statement from both sides, starting with JP. The second round is the body of the debate with me directing questions to the debaters. Both sides are highly encouraged to follow up with their opponent after hearing answers on the other side. And of course, they're also free to respond to each other's points raised during the opening statement. The last round is audience questions selected from Twitter. And we'll end with concluding remarks from both debaters. Currently, our Twitter poll shows about 20% against bailouts and market rescues. And 70% in favor of them. We will have a post-debate poll, and whoever tips the ratio more to their side wins the debate. Okay, let's get started with the opening statement. JP, please go ahead.

JP:

Right. Thank you, Richard. As a full disclosure, my talk today, and my positions do not reflect in any way the positions of PayPal as a company. I am doing this entirely in a personal position, and in my capacity at Stanford University's Future Digital Currency Initiative. I think it's important when we think about the response the federal government has done, is basically look back at history and think about the opposite of what would have happened if the government was doing nothing. The modern monetary and fiscal approach to these types of crises starts with the Great Depression, which basically occurred under the presidency of President Hoover in the late 1920s. In that situation, government effectively did nothing while the macro economy collapsed. The Federal Reserve System was not fully developed and monetary policy wasn't really an option.

JP:

And the White House from an ideological point of view, felt that intervention into the crisis that was the Great Depression and the stock market sell off, was not warranted. Basically the people in the businesses could handle this themselves. And that's the counterfactual we're looking at. If we're looking at situation about economic intervention in the context of what we're dealing with right now with COVID. So it wasn't until several years later in many, as many economists who argue World War 2, that the U.S. Finally emerged from that economic crisis. And it kind of had a full recovery with lots of folks going back to work and being able to really focus on the business and the economy of the Republic. But Franklin Roosevelt then in the 1930s with the alphabet soup, a number of initiatives, was to basically look for ways to use federal monies, to stimulate work, to ensure people could eat and have a roof over their heads. And mitigate more widespread disruption to the macro economy. That became a textbook analysis -- basically Keynesian economics and the approach to kind of get government and society as a whole out of these really big negative externalities and outcomes.

JP:

I have a lot more experience personally, working in the Obama administration on the Economic Recovery Act, TARP, that dealt with the bailout in 2009, 2010. In fact, one of my chief duties was reporting on the situation regarding infrastructure investments with basically the Recovery Act to senior administration officials. And in that kind of situation, it's about spending money smartly. Now I will concede this initially. I think there can be a lot of debate over if the U.S. response with stimulus one, stimulus two in regards to COVID, if that was probably the most effective. And I think we can have a conversation about the nuances there. But overall, a lack of response, given the situation we're now approaching, I believe what would leave the economic toll on most Americans to be not only an economic crisis, but frankly, a national security crisis as the underlying fabric of the economy would collapse, civil society would lead to unrest. And the U.S.' position in the global order would be challenged.

JP:

So in response to this motion, I fully believe that fiscal and monetary response to the pandemic and new economic crisis is a requisite for responsible government. And even if there are disagreements over the efficacy of certain actions, the overall positive impact far outweighs the opposite of doing nothing. Just look at the data as it's been shown over the past couple of weeks, unemployment now stands at over 14.7%. That figure will likely increase to over 20% when the main numbers are revised in early June. And we're now in a situation right now where state and local governments are completely tapped out of their reserves. State of California had a $35 billion projected surplus two and a half months ago. Today that figure stands at over a $58 billion deficit. And those types of proportional numbers are being seen across state governments as well.

JP:

So just keep in mind economic and stimulus benefits, those aren't just going to those, aren't just going to large corporations, but they are designed to go to states and individuals, to provide a social safety net. And that's the real interest there in the long-term. I'm looking forward to getting more to these questions and go into depth here. But from an overall view, I think it's, it's a moral responsibility for the government to respond and failure to respond would leave the economy in a much, much more damaged position in the long-term, and have a greater negative impact on society as a whole.

Richard:

Well, thank you, JP. Nick, sounds like you've got your hands full. We'd love to hear your response. Go ahead with your opening statement.

Nick:

My position is that government intervention can be beneficial, but it should be used as a last resort because the truth is that economies are very complex things. And they tend to defy top level control. And that's exactly what intervention is. And in fact, a lot of these top level control, acts of control, end up causing fragility and instability in the economy in the long-run. And furthermore, I would say that these acts of intervention are always sold to the public as things that will benefit them directly. But the reality is that oftentimes the people who are the winners, the benefactors of these interventions are the large corporations that made bad decisions, bad business decisions, and not preparing for inevitable times of crisis. And so, the people that end up bearing the cost of intervention are often taxpayers through either an increase in tax or an indirect tax of inflation. And that's exactly the problem that we should try to avoid at all costs. I look forward to delving deeper into all these points I just made later on in the debate.

Richard:

Thank you, Nick. So before we move on to round two, I actually have a quick comment based on what JP mentioned. So what was interesting is that, I actually did some reading recently about the juxtaposition of FDRs economic policy and Herbert Hoover's economic policy. It seems that Hoover actually did his own share of economic intervention as well, but perhaps not in the right way, and not as aggressively. For example, FDR took us off the gold standard and aggressively started printing money. On the other hand, Hoover actually wanted to balance the budget by tightening the monetary policy. But Hoover intervened in the economy in two very strange ways. One was he demanded that companies not lower wages for workers. So then companies had no choice but to lay people off. And then Hoover also had very prohibitive tariff that he said, and that basically invited retaliation from other countries, which subsequently reduced the amount of export by U.S., Which ultimately hurt companies and workers. Anyway, yeah, I think what I said still is in support of what you said in terms of intervention being helpful, but it's just that I think this economic history of Hoover having some kind of Laissez Faire approach, hands off approach, on the economy turned out not to be as simple as I originally thought. So I just wanted to point that out.

JP:

Richard, I'm happy to respond there. I think that's absolutely right. Hoover's approach was much in line with European austerity that we've seen over the proceeding, five to six years. And there are different ways to approach economic crisis, and intervention can have a lot of different flavors. And we've seen that both on the austerity side and efforts being done there in Europe and in parts of Asia. And then we can see the intervention is from a Keynesian style. So, I completely agree. I think Hoover's contributions are, are overlooked, but sometimes I think the right mix is required for the crises before us.

Richard:

Perfect. Let me move on to round two with questions from me. So JP, starting from you, first question is: So the Fed's excessive money printing during crunch times without tightening during recovery inflates assets, such as housing and stocks. As a result, these two asset classes become less accessible to Main Street. Therefore borrowing seems like a rich person's game. This widens the wealth gap and causes many social problems. What is your reaction?

JP:

I think that's actually right. I mean, I'm a Democrat by the last 20 years of my upbringing. And I believe that intervention is actually critical in times when we have economic crisis, wide amounts of unemployment and the need to have a more robust social safety net. But at the same time, that means you have to have responsible public policy, in the interim. And we have not seen that over the course of the Trump administration. The tax cut that was enacted in 2017 into 2018. Most see that is egregious public policy, that most rational people will see that as egregious public policy, and that basically was not designed for the long-term benefit of the people. But, as a complete corporate giveaway to the large wealthy individuals, I would look towards the policies set forth by President Clinton, the late 1990s and the policy set forth by Obama/Biden from 2009. And into 2017, where, when we did have an economic crisis, we spent appropriately, we spent where it was needed, but in the long-term, fiscal restraint was required when things subsided.

JP:

And we saw that with, making sure that the tax rates were commensurate to ensure coffers and that budget deficits were controlled for, in the long-term. To your core question, though, about, inflation on assets like housing and stocks, I think that's accurate, and I'm not going to disagree with that in terms of those assets, you're getting further and further out of reach for most Americans. I think that's exacerbated by the economic structure we see now, which is that many people are congregating in high-wealth urban centers like New York, the San Francisco Bay area. And that's only causing a more vicious cycle where the most high paying jobs are going to areas that can least support large amounts of population growth. We can have a long debate about those issues. I think we talk about how do we fix it.

JP:

And I think that comes down to prudent fiscal policy. I mean, the truth is, and this is going to be an unpopular statement. You need to raise taxes. Tax rates in the 1950s, top marginal rates were in some instances above 70% and that led, we still had insane, robust economic growth, and we had people paying their fair share and we'd had individuals positioned to basically make sure that we had a fiscally solvent government. I'm a firm believer that if we keep on printing money, it only further devalues the dollar. And it creates a situation where more and more of our budget deficit will go to pay down simply the interest, not the principal on what we owe for creditors. The United States benefits because we're the world's reserve currency, but that's even in question, as we're seeing out with the digitization of the RMB.

JP:

So we need to have good prudent fiscal policy, but that argument that we can't spend in the short term on real crisis, it creates a fallacy where that type of logic will lead to unnecessary austerity. And frankly only further exacerbate the income gap because the people that are going to be most hurt in this type of economic crisis are not those with large amounts of disposable income or capital. But those who are living paycheck to paycheck, who are already the most vulnerable and least amongst us. So I'm looking for public policy with compassion and a heart. And I think taking a path towards austerity while leaving people behind is an unacceptable policy outcome.

Richard:

And I don't want to put words into Nick's mouth, but it feels that he's not necessarily disagreeing that helping the poor and the downtrodden is the wrong thing to do. It's more about giving money to companies and expecting some kind of trickle down economics. But enough from me. I'd love to hear some kind of feedback from Nick if he has any. Go ahead.

Nick:

So one of the things that JP just brought up is, who's actually going to be the one that pays for this. And at the end of the day he mentioned taxes, that's one way to pay for it. And there's also just the sort of implicit tax of inflation and who are the people who are really, footing that bill. And I actually think that it's the everyday people. And if you look at taxation, there's a whole scandal around the fact that it's the ultra wealthy, who are able to create all these intricate legal structures and trusts and estates, and able to avoid paying taxes at the rates that they should be. And meanwhile, it's the middle-class and lower-class is actually paying a much higher proportion of that burden. And so, when these interventions happen, the end result is, sure, maybe it does benefit them in the near term, but in the long-term, they're the ones that end up paying for it.

Nick:

And inflation is another good example of that. All the people who are wealthy enough to hold assets, to hold equity in stocks or real estate, they see their assets increase in price. So they don't have that same problem, whereas wages or the people that just live paycheck to paycheck. We have a small amount of cash in the bank. They're the ones who see their purchasing power decrease. So how do you think about paying for these things in the long-term in a way that that's fair? It's still unclear to me that's I think been the biggest failure of previous interventions like TARP. So that's my stance.

Richard:

Okay. By the way, Nick, just to be clear though, when you talk about intervention here, are you against any form of intervention, such as any kind of handout to companies or to individuals during this COVID crisis? Or is your viewpoint a little bit more nuanced than that?

Nick:

It's more nuanced than that. I actually know -- I have friends who run small businesses and I know that some of the interventions, the CARES Act and PPP have actually helped them sustain their business through a dramatic drop in sales, due to the coronavirus lockdown. So, and I know that that's really positive for the economy. I wouldn't want to see an evisceration of small businesses around the country. But on the other hand, if you look at, what the Fed is doing, buying high yield debt and junk bonds and propping up different corners of the market, it doesn't seem like that directly benefits the average person. It seems like it benefits, large corporations and banks that are holding these bonds. So I'm not flat against intervention of all forms, but I definitely think that it kind of gets out of hand. And the thing is, unfortunately, the deeper that you go down this path of stimulus and intervention, the harder it becomes to unwind because you start to create these interdependencies and these structural fault lines where all of a sudden, it just all becomes a lot more fragile, I would say. So the farther down you go to this path, the more zombie companies there are that are barely scraping by servicing the debt that they owe, and the greater the chances that you'll have a large scale fire. I think it's better to have smaller scale fires that burned down smaller portions of the economy so that the whole economy stays structurally sound, but we're just creating a bigger backlog of economic pain in the long-term.

Richard:

So that's helpful. JP, any comeback?

JP:

I don't think Nick's necessarily wrong. I mean, inflation isn't hidden tax that a lot of Americans are going to pay. The interesting thing right now, though, is the rate of inflation. If you're looking at historical norms is much lower and it arguably should be a lot higher, but because of technology and its impact on reducing costs to consumers across a number of different sectors, may it be medicine or food production or whatever it might be, inflation has been historically lower than I think what a lot of people would expect, given how much more money is being printed. I think it's an interesting debate that something economists should probably take a deeper look at, 'Cause I agree there are concerns there for the macro economy.

JP:

When it comes to your TARP and the Recovery Act. It's an interesting situation where the United States government actually made billions of dollars on some of these investments in companies, may it be AIG or even General motors. And we're doing similar things with the airlines right now, it's not a free giveaway of cash. They're being required to keep people on the payroll and they're going to be required to give over, equity grants as we did with TARP with GM, to those airlines. So there's a decent chance the government will actually make a profit and we're doing this in a much more responsible way instead of just handing a blank check to large companies.

JP:

Last, we'll say two more quick things. One, you'll be beyond the printing of money, and that's mostly fiscal policy. We haven't really spent a lot of monetary policy and the most exotic thing the government's done with the Fed over the last 15 years of the introduction of Quantitative easing, which is basically the Fed buying bonds from the U.S.Treasury. And you simply can create $800 billion out of thin air. And even I think that's, I'm not a full economist, even I think there's probably some long-term ramifications of QE, but in the short term it's been a useful tool and the Fed is going to be starting to buy initial bonds from local governments to help keep local governments afloat. So this isn't just large U.S. treasury. It's filtering down to states and municipalities, which are going to frankly be the hardest hit with the least amount of reserves in the short term.

JP:

And the last thing I'll say is a lot of this comes down to information. I'm a firm believer that digital assets and cryptocurrency will be a boon towards productivity and increased efficiency of services and payments there's things that can be done with smart programmable money. If we had a CBDC, central bank digital currency by the U.S. government, that could allow for scalpel-like approaches to fiscal and monetary interventions that if available right now, a good policy maker could use those tool sets to be much more effective in how they approach these interventions. And I agree with Nick that, we could be smart about these types of things. You could have the benefits of intervention, one mitigating some of the downsides of the long-term taxation, both in terms of inflation and taxes.

Richard:

Yeah. JP I'll just tag on maybe two points on my own. So first of all, I totally concur with the observation on inflation. So the theory that inflation was going to become massive after the '08 bailouts, after the money printing, actually did not materialize. So that sort of led to this more benign view on how these quantitative easing policies are going to affect the decrease of purchasing power. And in fact, this led to the extreme version, which is the MMT, modern monetary theory, espoused by some parts of the political class right now. So that's number one.

Richard:

Then the number two is JP's point about the government actually making money out of quote unquote, building out some of these companies. So aside from the fact that, there are these strings attached to bailing out airlines, the tarp program actually indeed made money from forcibly injecting money into the equity of various banks. So you basically kind of got in at the very bottom of the market, and gave the market a shot of confidence. And as the market recovered, the government made a cool buck. And aside from that, there's also penalty too. So I was reading some stats about hundreds of billions, of dollars around the world being paid up by banks to the government as penalty remitted for their various types of behavior during the financial crisis. So, yeah, so I actually just want to tack on those points. So Nick, feel free to respond here, or we can move on to other questions too, because I'm sure you'll get a chance to address those points in answering these other questions too.

Nick:

Yeah. I just want to tack on that, JP brings up a very good point, which is that the technology has been a deflationary force and that it reduces the cost of goods and services. And I think that's fundamentally a really good thing. And that might be one reason why we're not seeing inflation that we would have expected. But on the other hand, I also challenge that CPI, as consumer price index, is actually a very good, a good measurement of inflation. Is it possible that the way in which we're trying to get a grip on what inflation actually is is flawed. Because it just seems that the average consumer is actually getting stretched more and more thin. Even if like top line inflation is not registering anything, it appears that the average consumer is getting deeper into debt, and basically a higher proportion of Americans are living paycheck to paycheck.

Nick:

I think part of that is that globalization and technology kind of drive the automation and sort of offshoring of the lower pay jobs in America. So it's so complicated and every economy is so interconnected and there's so many moving parts that when we simplify it into just, hey, inflation, is this one number, you lose a lot of the context of the broader picture. And I feel like, and I don't have very much data to back this up, but it does seem to me anecdotally that the average American hasn't really benefited from an increase in the technology decreasing the price of goods and services. So I feel like the deeper we go down this, even if inflation isn't necessarily registering, there's maybe a hidden economic cost that's not measured.

Richard:

Yeah. To add to that, I actually agree that inflation is probably not the best measure for people's livelihood. If you think about the rising costs in terms of medical expense and student loans, these are the ones that are either the major factor in driving people to become homeless, or a major factor to deter consumption for millennials and the later generations. And it just seems that somehow these aren't factored into the CPI calculation. Actually looked into it in my own time, and rental is actually part of CPI and miraculously, the CPI reflects that rental price has not been going up significantly. And I believe some fraction of healthcare and student loan payment were actually captured in CPI, but it just seems that that metric does not jive with the narrative that we hear about -- how these two major cost items are crippling people's living. And, but ultimately tying back those to the government bailout in narrative, I think that basically easy money is what fuels debt creation, and debt creation is part of what makes it easy to have these student loans coming about. But that's a long winded answer to support Nick's point of view there.

JP:

I think CPI is outdated. I mean, this is based on formula from various government bureaus from the 1940s and 50s. So it needs to be updated. And a lot of the stuff I won't go into detail, you just mentioned in healthcare and student loans, I think that the accretive effect of years of bad, actual government policy that's led to really, really bad inequities. And as bad as it is, it's not technically tied to intervention is as it is to crisis. So I won't address those. That's a whole another debate you can have Nick and I back for that one.

Richard:

So let's move on to the next question. And this one's for Nick, despite abysmal macroeconomic indicators, the stock market has largely recovered from its March lows. And it seems to price in a V-shaped recovery. There's now a narrative about how the market confidence has been restored, thanks to swift and bold actions from the Fed. So for now, at least QE seems to have been the right thing to do. Do you agree with that? Your thoughts?

Nick:

Well, certainly if the Trump administration, it seems like it's worked because it's obvious that he is so fixated on the market indices like S&P and NASDAQ, et cetera. And he should be, because as a political candidate, there's a high correlation between market performance and basically the way that people feel about your presidency. So, I mean, it makes sense that he's emphasized so much, hey, we need this stimulus to turn the economy back around. And really the way that he measures the economy is equity's prices. But that said, equity prices are meant to reflect the future, right? You assume that the market is efficient and investors are smart. They know what they're doing. And so if people are willing to buy stocks at these prices, it means that they're pricing a recovery, as you said, they're optimistic that things are gonna turn around.

Nick:

If we're able to open up, open the economy backup tomorrow and go back or within the next few months, maybe one or two months and go back to normal. I think that we may actually see somewhat of a V-shaped recovery, but my fear is that this coronavirus is not solved yet. And by opening up, we're gonna see yet again, another sort of resurgence of the outbreak, and we may be forced to close back down. And in that case, then what did we do? Did we do another round of stimulus? It's really hard to know. So it kind of depends on what happens with this virus. And that's still an unknown for everyone in this instance. But if let's say it does open up and things go, well, then it may have been right, because it carried people through. It carried some small businesses through a time when sales absolutely imploded. But I just don't know if it's in the end going to be enough to carry through this desert that we're currently in.

Richard:

JP, do you have anything to add there?

JP:

Yeah, I'll just say, I actually agree with Nick in terms of, I think equities are bad metric to view the recovery and the economic system in the U.S. I mean, Dow Jones, it says 30 companies, the S&P500 it's 500 companies. These aren't all the American economy. Granted there's a lot of wealth concentrated there, but 64% of net job creation over the last quarter century came from small businesses, firms employing fewer than 50 people. So when it comes to government intervention, I think we look at the loan program has been offered by the SBA. Yes, there have been issues getting systems and large companies taking advantage of those. And many of those businesses are now being forced to give back money, but those types of programs, created by Democrats and Republicans to keep people employed are absolutely critical to the long-term viability of the economy. So I think Nick and I can agree that equities are a bad judge, but I don't think that detracts from the motion, which is intervention you to keep the economy solvent.

Richard:

Okay, cool. So my two cents there. I definitely agree that the stock market is not necessarily a great index for the health of the economy. After all, the S&P500 consists now very much so of big tech. Not entirely, but a huge amount of wealth is actually in the big tech, which is the definition of making things more efficient by using more machines than humans. And so that's number one. Number two is that even if the stock market is doing well, the average American has zero stock ownership. So this kind of wealth effect actually does not benefit them. And lastly, I think that if the stock market were to be some kind of prognosis for the health of the economy, I am truly baffled, because the fundamental macro economic indicators simply do not tell a very rosy story at this point. And a lot of this inflation might be just speaking to the Fed monetary assistance that's being put into the system and artificially propping up asset prices as a result.

Nick:

Yeah, I would say that we won't know if we had a V-shaped recovery until we see unemployment numbers rebound and improve. That's actually where rubber meets the road, the equities prices, and they may just be popped up because of the fact that, yeah, there's just a huge injection of liquidity. Where else is it going to go? And anecdotally, I'm just hearing more and more about layoffs every week. it started with services, sectors, restaurants, or travel industry, hospitality, which would be obviously the most directly impacted by something like the coronavirus. But now it's even hitting tech companies, Uber and Lyft and Airbnb are laying off almost a quarter of their workforces. So, and I don't think you just turn around and hire back all those people, a few months down the road, it takes a long time to get back to where you were. So in a lot of ways, I don't think it can be a V-shaped recovery in a lot of those more authentic economic indicators.

Richard:

Okay, Nick, and by the way, in the more libertarian view, when disasters happen, the view is that let the weaker hands die and whoever had systematic problems or did not have enough cash on their balance sheet, they probably, were doomed to fail in a disaster, man-made or not. And so the idea there is that, this is called creative destruction-ism. Do you subscribe to that view? Do you think that that should be what's happening and the government should not be coming into resuscitate the weak unnecessarily?

Nick:

Yeah. It kind of fits in with what Nissim Taleb talks about, in this concept of antifragility. And that is that you need some turnover, you need destruction in order to create something that's more stable, something that is stronger and more resilient. So in an economy where you're constantly bailing out weak companies, then you're going to create more and more structural fragility. And that just continues on itself until it becomes unsustainable. So I definitely agree to that to some level. And also I think that in bankruptcy law, as I understand it doesn't mean that the entire corporation needs to be dissolved. I mean, that sounds very, very destructive, right. As I understand it, the equity holders get wiped out, but the debt holders and whoever else can take back over, and try to restructure and try to recapitalize the company for better. So I feel like painting this picture of like, oh, well, the alternative to bailout is complete destruction is also not accurate. There's a middle road that obviously it is more destructive than the bailout, but it allows for new leadership to take hold and perhaps new, more sound policies and, organization of the company.

Richard:

Okay, great. Go ahead JP.

JP:

I'll simply say, yeah, I don't necessarily disagree with it. I mean, I think when people think of the term bailout, they, feel that the government is propping up a number of different industries. And this is systematic. I mean, the United States is not in the governance, setting up, basically state-owned enterprises as we've seen in mainland China. It's far from it. And the creative destruction that I think Nick is talking about is still very much taking place in the macro economy. But there are examples of critical industries that, if they were to fail, would cause numerous repercussions across supply chains, and have a destructive effect across a number of different factors. And General Motors is a really, really important one to point out. General Motors had got out of business in the fallout of the Great Recession nearly a decade ago, that would have led to a multiple effect of job loss as across that entire auto industry, and would have left the United States without a major company that is now profitable, and has returned to its prominence as the largest American auto creator.

JP:

So there's this notion that, of these extra ordinary, negative externalities that are being brought in. And if there wasn't this kind of pandemic crisis, there'd be no debate whatsoever about the government bailing out these companies. They would simply have to restructure, or go out of business. Just look at Sears. Sears, one of the largest companies out there, it was a household name for generations in terms of the consumer retail. That fell apart, given their whole business model and their crisis. It was never brought up that the government would intervene, try to bolster and save that company. Creative destruction did take place.

JP:

Juxtapose that to the status quo. You have some of the larger American airlines across the board that would go out of business. I mean, that's, those are tens of thousands of hundreds of thousands of jobs that would be lost. And this kind of notion of vulture capitalists would come in and buy up the pieces, and do that and screw over workers in the interim. That's the fear of many policymakers is that it's not just the company itself, it's the people with their pensions and their investment of time and energy, and these entities and protecting them from individuals who would otherwise prey on these quote unquote carcasses of companies. I think it needs to be in a context of how these things are done for the broader picture.

Richard:

One counterpoint though, to JP, your view, though, it seems that, I think job loss is inevitable in the age of automation to Andrew Yang's point. So he firstly acknowledges that, that is the trend and his solution is to do UBI. And someone once did a study of the amount of employment of the top 500 companies in the States. And the number of employment has dropped significantly because of the efficiencies being introduced by tech. So it just seems that every crisis is an opportunity for companies to cut the fat, to invest in money-saving mechanisms, to prevent having to hire more people. And it's just basically an opportunity to reshuffle the workforce, and some jobs will be permanently lost. And it just seems that what the government is doing in these interventions is to just delay that inevitable destruction, right? So I think the view of a libertarian would be, you know what, let's just let that process happen. It's going to be painful. And the way to forestall the riots, the social unrest is to do handouts, a crude way of putting it, do UBI's.

JP:

It's a fair point. I would say that I think you're looking at continued trend towards automation that will obviously open up new industries, but there needs to be retraining and retooling in the interim to do that. A great example of this and the status quo that's not a pandemic-type crisis is trade adjustment assistance. We obviously have lots of trade. I'm a proponent of free trade. I think that's good for the economy in the long-term. I thought Trans Pacific Partnership was vital not only to our economic interests, but our geopolitical interests. And, the criticism is that that destroys jobs. And if we don't allow for some of these trade efforts to take place, I think that actually the cost to consumers is actually quite high in terms of, you're going to pay a hundred thousand dollars per job. Say if you don't allow the trade, as opposed to providing the trade adjustment assistance was designed to basically allow workers to retrain and find ways to be productive in the new global economy. So it's not about hiding. It's about trying to address these issues front on. I just think the situation as it stands with an extraordinary Black Swan type event requires extraordinary government action that normally we would not even consider in the normal course of business.

Richard:

I think the effectiveness of the retraining programs is up for debate. There's some stats about how the retraining has not been all that effective. So the pessimist view, again, is just that these jobs will be lost at some point, the government is only making it less painful. That's all, but let's move on to the next question for JP, there is a significant amount of complaint from the crypto circle about how the fiscal and monetary stimulus mostly direct funds to corporations and Wall Street. Instead, the funds should go directly to citizens. Your reaction to that complaint.

JP:

I don't necessarily disagree with that. As I said at the very beginning, I think the stimulus bill and CARES could have been structured much more efficiently. I think there was a lot of political maneuvering between the Republican administration and the Democratically controlled house. And I frankly feel that the Republican administration probably got more of what they wanted. And we see that the conversations with Mnuchin, Senator McConnell, and some of the other senators on the Democratic side, Senator Schumer, for example. And I think could it be more effective? A hundred percent agree. But let's look at what actually was done in terms of some of these investments in people. Some people call them a giveaway, and that's up for debate. I think the bulk of what we're seeing money go to is, is very much focused on stimulus checks. That's going out $1,200 a pop to people based on their 2018 taxes, for folks making under $80,000 a year, that ensures people are getting relief, who probably are most in need for it.

JP:

And then the bulk of funds, which have been completely, basically used up already, are these loan programs, small, medium sized businesses to keep people employed. I think that's a great program. I think it's a program designed to keep people with the job, low interest and no interest loans, depending upon how, the mechanism [inaudible]. And if the business goes out of business, there's ways for that debt to be basically completely wiped out. So I think that's a way to structure it with an incentive to keep people working well, making sure that the zombie issues that I think you and Nick have talked about are mitigated, but I won't disagree with the crypto community. I think they would be negligent to say that this bill was as good as it could be.

JP:

I think the bill that was passed could be much, much stronger and could have done much more to benefit average everyday Americans, I think restructuring to what was done in continental Europe, Canada, where you had effectively short term UBI for those impacted by the pandemic would probably be a much better course of action to get money into the hands of Americans. But I'll use this point to speak, frankly, the United States government, it's not set up to be smart and decisive on this. I've been open advocate that the U.S. should move towards the digitized dollar. And the ancillary infrastructure regarding the wallet and these types of things on smart programmable money would have offered policymakers both monetary and fiscal interventions that would have yielded less money being spent and more effective results to everyday citizens. So that would be my response there. I think politically speaking, this [inaudible] boondoggle, but the goal of getting people relief is happening, albeit slowly.? I do think everyday average Americans will need additional relief, given the tail this pandemic will be longer than most people probably originally projected.

Richard:

Okay, great. And by the way, just a quick point on digital dollar. Is the main utility that the money would arrive in the right hand sooner than a check. Is that it? Or is there something else?

JP:

Yeah, that's the very beginning of it. I think from programmable smart money, you're going to have near instantaneous arrival in people's accounts, you could allow for recurring contributions to those accounts. And at the same time, you can do everything from data tracing to really making sure the money is only spent on certain types of things, replacing food stamps and other types of government programs there. So there's a whole host of things that can be built upon a digital dollar infrastructure that allow policy makers much more scalpel like incisions for the US economy.

Richard:

I think the pros and cons of digital dollars is a good topic for another debate. So thanks for bringing that up. So move on to the next question. So for Nick, during the great depression, the Hoover's administration took various measures seemingly in line with the crypto ethos of self sovereignty and sound money. The government let thousands of banks fail and tried to balance the budget, which some think worsened in the downturn. On the other hand, FDR took the opposite approach. He backstopped banks with federal loans and did significant amount of deficit spending, while decoupling USD from gold in the process. And this eventually jump-started the economy. So a lot of what the current regulators are doing is following FDRs' playbook to prevent a depression. So this is that not sufficient evidence for why the government intervention is crucial in getting the economy going again?

Nick:

I don't know enough about the exact history of the Great Depression, and what Hoover and FDR did exactly. But I will say that, markets and economies are reflexive. And what that means is that each participant, their decisions and their actions are influenced by what they think the rest of the economy's participants are doing. And so you kind of have this effect where if people lose confidence, it's hard for them to regain it. And there's a sort of a systemic problem of, hey, no one believes that, the economy is good, so they don't want to invest in starting a business. They don't want to start taking risks again. So in that context, I think it can, it may be helpful actually for someone with authority like the government to come in and try to re-instill trust, try to re-instill confidence in the economy, so that people start to want to participate, want to take on risk.

Nick:

And that might then kickstart the sort of forward momentum again. Without any intervention, it probably would happen eventually, but it may take longer. So I'm not completely opposed to intervention so far as it might be able to re-instill confidence and boost the economy sooner, but it's very nuanced, right? You have to do it with some level of restraint. You can't be spreading money everywhere. You can't do it in a way that is irresponsible. So there's a balance, is what I'm saying.

Richard:

Okay. JP, do you have any followups?

JP:

I would generally say I agree with, with Nick on, on that point, I don't think we're that far apart. I would just add a point now, Niall Ferguson, who's a professor and a fellow right now, over at Hoover, wrote a wonderful book called the Ascent of Money that talks about some of the evolution of monetary policy and the concept of money over the past five centuries. And, it's one of those things where the competence of banking systems and the ability to how solvent systems are, is absolutely critical to capital markets. And making sure we have robust capital markets, is incredibly important to a functioning economy. The example that Ferguson likes to give is that the UK had an established capital market system that allowed them to finance war. The French were unable to basically match the financial capital of the United Kingdom in the 18th century. That's one of the decisive reasons that we speak English and not French right now. The monetary system is in place to support government. So, it may seem small to think about just the banks, but the banks are the very cornerstone and access points for so many Americans into broader capital markets and how these things work.

Nick:

Okay. If I can add one point...

Richard:

Of course.

Nick:

... So intervention insofar as it can re-instill confidence and solvency and whatever else is is good, but you have to be sure that later on when you rein it back in, when it's appropriate. And I think one of the problems with the 2008 intervention is that, they started trying to reduce the balance sheet. They started trying to raise rates again. but as soon as they did, bad things started happening. Things started breaking immediately. They kind of got the signal that there's something not quite right. if the economy is healthy, they should be able to raise interest rates. And so that's kind of the fear is that if you go down that path of intervention, you have to have the strength to actually impose the unpopular counterpoint, which is to tighten monetary policy and, restrict the economy a little bit.

Nick:

So yeah, as long as there's a balance, but I think the problem is we haven't had the political will. I think no one in power wants to be the bearer of bad news. I think that's kind of one of the problems with the political system is that, hey, well, I want to get re be elected in four years. So I don't want to be the one instituting and unpopular policy in the short term. We're a little bit too short-term oriented, and that's kind of what leads us down this path of no one wanting to fix the problem. and sort of set the economy back on the right footing.

JP:

Yeah. I'll simply say, I saw austerity take effect in Greece. Germany was a big proponent of austerity over the last half decade. I think it's put them in a better financial situation 'cause there's more capacity to lower rates, and there's more capacity to be generous in times of a lack of opportunity, you can do the type of investments. But I think that's actually a not core function of government intervention. I think that's more a function of our political system. President Obama was very much focused on making sure we had a solve and budget as much as possible post recession. And if you look more locally to Governor Brown in California, people deride Governor Brown, because he was stingy. In fact, he was stingy the led to California, having tens of billions of dollars in surplus and, being able to pay down debts and being responsible with governance. So I think Nick, you and I see eye to eye there, it's simply not directly cogent to today's motion.

Richard:

Okay, perfect. Let's move on to the next question. And that's for JP. It seems that some systematically important companies be they in financial services or essential industries, such as airlines, are holding the public hostage by requiring fiscal or monetary bailout every time they get in trouble. Or else, they cause massive layoffs or disrupt production of essential goods or rendering of key services, which can have damaging ripple effects throughout the economy. Of course, corporations have control over Washington in other ways, such as through lobbyists, and super PACs. Your thoughts on our seemingly corporatist political system through threat or bribery, quote unquote, bribery, that results in these bailouts seemingly good for company executives and shareholders at the taxpayers' expense.

JP:

I think that's actually pretty accurate. I'm not gonna disagree with most of that. I think there's some nuance there to go into, but I'm a firm believer in McCain-Feingold. I believe citizens United is next central threat to the Republic. I think there is too cozy relationship between large corporations and policy makers, but that is not directly cogent, I think, to today's debate. That's a systematic, that's its own debates focused on systemic issues in Washington. And trust me, having worked in politics and serving the government for over eight, nine years of my life, I can see it firsthand. Every American should be engaged with the process. Every American should be involved, because it is the voice of the people that will be the greatest agents against those, those tenants of potential corruption. And, right now, the sad reality is Americans don't give a damn. Americans don't care about the process, and you get for the government you pay for, which is one that's not overly effective. And that doesn't have the interest of most common Americans at heart.

JP:

I say that pretty directly, I think no Americans who were not involved in the process led to the election of the current administration, which I honestly believe is one of the most egregious affronts to our democratic system in the history of the Republic. That being said, in terms of corporations and the actual process of bailouts, the banks, they were all forced to basically give out large amounts of warrants. And there were limits on bonuses and dividend payouts in the 2008, 2009 crisis. Banks were incentivized to pay back that money very quickly, so they could go back to normal, normal operation. Government makes money off those warrants. And the same thing applied to the general motors and AIG. In terms of the recent, for airlines, who are generally disliked by most people in government, just as much as the average American, but those are lots of service sector jobs, and it's an industry that is facing frankly, a Black Swan event. And so I would disagree that if they're getting special treatment, it's the whole industry that's getting attention from government, not just American, United, Delta. It's really even the smaller airlines and they're getting attention here.

JP:

So I think that's obviously something that needs to be addressed. And even the companies. I give credit to Secretary Mnuchin here. Even companies, large businesses that got bailouts, that are loan guarantees they weren't supposed to, or being forced to give money back. And that's obviously because political pressures would apply. So I think we can agree that there's too cozy of a relationship with corporations, lobbyists, and government, but that's not directly impacted businesses here. You probably see more issues of, with PPE procurement than you deal with actual interventions in terms of bailouts.

Richard:

Yeah. I feel that I actually am in agreement that there are smarter ways of bailouts. So basically you have all these strings attached. You deter the firms from paying exorbitant bonuses or dividends prior to fixing their problems, similar to what you said in 08, 09 crisis. So I'm in generally in agreement with that. So Nick, anything to add there before we move on to a question for you?

Nick:

Yeah. I think that one of the points that, we haven't brought up very much, but is really relevant, is the fact that over the last 10 years, since 2008, many of these large corporations have structured huge payouts for the executives in the form of stock buybacks and stock options. And I think it sends a really bad signal to bail out these companies in some ways, you're actually paying for the enrichment of the executives and of course increasing this whole disparity of wealth. I can't remember which company, but I think it was one of the airlines or maybe it was Boeing. They performed the equivalent of $80 billion worth of share buybacks over the last 10 years, or maybe it was 50. And now they're receiving a bailout, of almost about the exact same amount of money. So had they been more prudent with their cashflow, and not been pursuing these sort of under the table, kind of rewards for executives, then they may not have needed this bailout at the end of the day. And if you pose it that way, it almost seems like a direct cash transfer from taxpayers into the pockets of executive and the wealthy elite. So that's one of the aspects of this whole thing that to me really, it has a very unsavory feeling around it that can't go on. And I think there needs to be some form of clawback or there needs to be some way of holding those people accountable.

JP:

I think I agree with you. I think, we've seen this in the current iteration of the stimulus to airlines is that they're going to be banned from having dividends potentially paid out. There's going to be bans on stock re-purchases and there'll be limits on executive compensation in the bonus, which has primarily been an equity compensation. So it's in line with what was done in 2008, 2009. There were very aggressive safeguards put on large banks and GM. A lot of these entities, I firmly believe, if a business ever takes out a bailout, they should never be able to do a stock repurchase again. It's just transferring money back to the corporate entity or towards, large shareholders. That being said, the dividends aren't all bad. A lot of folks on fixed incomes rely on dividend stocks. They kind of keep their ends meet. So, just to look at the other side of the aisle, I mean, that's definitely a smaller percentage that's [inaudible] wealthy, but a lot of Americans do rely on dividend bearing, funds and stocks to survive retirement.

Richard:

So my last question for Nick during this round. It is often claimed that Bitcoin or decentralized finance or DeFi offer up a better alternative to the current financial system. Describe for us what this new system will look like. How is it fundamentally different from the status quo? How does it cure the ail of the current system?

Nick:

Well, this is a really great jumping off point into a fascinating topic. So decentralized finance, I think it's still very early on and it's still evolving. I think the grand vision is really to build an alternative financial system in which there isn't any centralized control. So there wouldn't be an issuing, and there wouldn't be a federal reserve there. And most of financial services would basically be market driven market based. And I think that ultimately what this will lead to is a more robust financial system where there won't be hidden. Well, I don't know, actually I still think there could definitely be structural insecurities and there could still be collapses. I mean, even recently when the Ethereum price collapsed a lot of the primary DeFi protocols, for example, MakerDao experienced, huge disruptions and loss of funds. So it's not perfect.

Nick:

And that will take a long time to mature, but ultimately I think what we'll see is there will be automation. There will be greater transparency. Because everything is more market driven. There will be a place where any kind of opportunities, or any risks that have not been accounted for, will be arbitraged out faster. And I think that leads to greater stability in a long-term. So I think there are definitely advantages to decentralized finance. Is it poised to take over everything and does it solve every problem? I don't think so. I think in an introduces its own problems, but it does, it is attractive in the fact that it seems like it can be more robust, it can be more efficient, more automated. and I honestly think that market mechanics are wonderful and that's what capitalism is really based on. So I think that it, it can possibly be more effective in the long-term.

Richard:

Thank you, Nick. Actually, before moving on to audience question, I had a follow up question for JP based on a comment he made. He said something about Germany being very prudent with its finances, having abundant reserves to address a downturn. Do you think Germany is also as the sort of country that would be a little bit more ruthless in terms of dealing with their zombie companies, quote unquote zombie companies, that wouldn't be able to weather a storm? I'm just not familiar with the way the government is being run there and their stance against this sort of bailout. Are they more egregious, less egregious? How do they deal with bailouts from the government's point of view?

JP:

I'm probably less familiar with, the exact bailout structure in Germany, but I can say that their labor market is much more heavily regulated. And it's, it's one of those things where employees actually in union members of specialists in the boards of large, large corporations, they can appoint Volkswagen ... You have to have several union reps on the board of the company. So they're much more cautious when doing hiring. And those types of interventions are generally seen as a chance to completely restructure with the government, either getting more benefits for the workers, you're taking more types of equity grants that we saw what the U.S. did the last decade. That's much more common. So there's definitely much more stringent requirements, if there is going to be a bailout, given how the German labor market is structured.

Richard:

Interesting. All right. So let's move on to the audience question. We have a question from someone named Young Bitness. And his question is quite terse. How does crypto solve this? So I think Nick sort of touched upon that with his point about DeFi, but given the fact that both of you have been and are in the crypto sphere, what are some other thoughts that you'd like to add, in terms of how crypto interacts with this particular topic?

JP:

I'm not sure crypto in and of itself will solve for a lot of these, these types of structural issues. I think applications of blockchain and distributed ledger technologies will have a lot more potential. I think the advent of stable coins and those types of works, by a number of other actors in the space, especially when adopted by central banks can provide the type of smart program of money I talked about earlier on. But I also think more broadly outside of government. I think things that are focused on, debt formation, capital formation, like digital securities and those types of efforts, will open up markets and open up abilities for consumers to enter into these types of arenas that are not currently found. I'll give a very concrete example. The price of doing an IPO on the Hong Kong stock exchange is about 5 million USD. The price of doing a commensurate capital formation using digital securities about 500,000. So that reduction in cost, is very, very dramatic and allows people to go access capital markets that would otherwise, they would not be able to access in status quo. So, I think the word democratization is overused, but definitely the opening of capital markets and yeah, a broader number of people participating is a benefit to the broader economy and global system.

Nick:

And Nick, your thoughts?

Nick:

My point is basically that these kinds of events, we will have an impact. So how can crypto potentially soften the blow or make it better? I think that one of the things is it offers people access to a store of value, right? So if inflation is in fact, one of the side effects of intervention, now you have access to assets that potentially could offer a safe haven for you to store your wealth. it's still very early. So I don't know if, I would necessarily recommend for people to put all their money, but it democratizes access to, a safe Haven type of asset. another piece that if you think about decentralized finance, what it does is it turns the power over the financial system from, a handful of places. And that's really not just a pool of power, but also a pooling of risk. And now while the coronavirus problem is not necessarily a financial problem, it is resulting in exposing a lot of the risks in the financial system. And so the centralized finance will sort of spread that risk among a broader set of participants. So I think that it potentially makes the catastrophic cascading effect of financial instability. It can reduce that. So that's, that's my thought about how crypto can help.

Richard:

Okay, great. We're now at the round of concluding remarks, thank you for a fascinating debate. JP, would you like to go first?

JP:

I would say this in closing, I think there were real issues and real efforts we have to address collectively. I think a lot of people have legitimate concerns over how interventions are being done. And they're real issues about how I think the last couple of stimulus bills are structured by the Trump administration. No, I'm not going to argue that. I think we can agree on that. And the conversation here that being said, I contend to the motion that government intervention, they'll do more good than harm. And that if we look at history, the counterfactual of doing nothing will lead to wider spread issues and cause more, and the negative harm to a average average Americans, frankly, people beyond just even the U.S. So it's, it's mission critical. We stay the course and we try to work within this system to reform it and be smarter about how we spend our finite resources. I think the advent of digital assets and the technology that could be utilized from blockchain DLT, if used properly, will allow government to be smarter about its interventions, and allow greater levels of accountability. And if we have smarter interventions and greater amounts of accountability, I think those are the things that, if done properly, will allow people that have more confidence in their institutions. And we'll demonstrate that our current policy makers are stewards of our finite resources.

Richard:

Perfect, Nick, your concluding remark, please.

Nick:

I think that it's not black and white, neither side is purely, right. There's gotta be some kind of middle ground where we agree that intervention is necessary in extreme circumstances, but there's also the danger of intervention going too far and not practice for. And ultimately if intervention is done correctly and it is allowed to be reined in, then it can be positive. But if we continue down this path indefinitely, then I think it leads to greater pain and greater disruption than actually just allowing the market to absorb the impact upfront. So I think there are points on both sides and we'll only really see the effects years down the line. Things take time before they result in manifest. So the history is being written right now.

Richard:

Perfect. Thank you guys so much for coming on. Where can our listeners get in touch with you?

Nick:

Best for me is LinkedIn. Just look up Jonathan Padilla. On LinkedIn, and I generally try to be pretty responsive and that's the best way to get in touch with me.

Nick:

The best place where you can go and get in touch with me is on Twitter. I'm Nick White, with an 8 instead of an i on white, at Twitter. So if people want to direct message me or tweet at me, I'd be happy to engage in a conversation.

Richard:

Perfect. Thank you guys so much for coming on. I've definitely learned a lot. I hope you enjoy the conversation as well. So thanks a lot, guys.

JP:

Okay. Bye.

Nick:

Bye Richard.

Richard:

Thanks again to JP and Nick for coming on the show here on my thoughts, as I reflect upon the debate, JP reminded me of the fact that the government did make a profit out of the tarp program, not to mention the hundreds of billions of dollars of fines. The banks had to cough up since the global financial crisis, the forced equity investment in banks via tarp was a classic move of distress. Investing conceived under the leadership of then Treasury Secretary, Hank Paulson, who happened to have been a seasoned banker, that's familiar with these tricks. This was an example of smart bailouts. This was also an example of the government capitalizing the private sector in times of trouble, and then demanding that capital back during recovery, as Nick pointed out.

Richard:

Separately, I do see economic crises as events that accelerate permanent job displacements companies that fight for survival need a margin of safety on their bottom line, and we'll find new ways to cut costs, or else they get out competed by startups with superior unit economics, that also seem to be able to tap unlimited amount of VC money these days. Basically, labor is getting replaced by machines and each crisis expedites that irreversible process. Government bailouts essentially try to slow it down, by saving a few companies or a few jobs here and there, but ultimately can't stop this development. I'm not sure what the right solution is, but this process, if unaddressed will worsen than the jobs problem, and threaten to tear apart the country's social fabric.

Richard:

Anyway, what was your takeaway from the debate? Don't forget to vote in our post debate Twitter poll. This will be live for a few days after the release of this episode. And feel free to say hi or post feedback for our show on Twitter. If you like the show, please give us five stars on iTunes or wherever you listen to this.

Richard:

And be sure to check out our other episodes with a variety of debate topics, Bitcoins' store of value status, the legitimacy of smart contracts, DeFi, POW vs POS, and so on. Thanks for joining us on the debate today. I'm your host Richard Yan, and my Twitter is @gentso09. Our show's Twitter is @blockdebate. See you at our next debate!