Welcome to the Wiggin Sessions. I'm your host Addison Wiggin. I have with me Joel Bowman, a good friend of mine, who's been a world traveler, as long as I've known him. It's been going on for over a decade now. Joel is hosting a podcast himself for Bonner Private Research and he's been a prolific writer on libertarian economics. And when we were working together, he was very prolific on Bitcoin, so much so that he went and sought greener pastures elsewhere because we needed more than just Bitcoin news. That would've been different today I suspect. But welcome, Joel. It's always good to talk to you. And I read a couple of your pieces over the weekend and I realized I hadn't talked to you for a while, so I wanted to get you back on and see what you have to say.

And I'm just going to start the introduction by saying that you have traveled around the world with Anya, your wife, Anya Leonard, who is host of Classical Wisdom and also your daughter, Frieda. The last time we spoke, we put in pictures of you guys traipsing to different parts of the world that most people would have to open an Almanac to find or an Atlas. And one of those places was Western Ukraine. I wanted to start off this conversation just by asking how you ended up there and what your thoughts were. I remember when you were writing from there, it was more long before this invasion began.

Yeah. Yeah. Well first of all, thank you very much for inviting me on and taking the time to read my weekend scribbles in the Bonner Private Research Substack space. But yeah, you're right. We have been a bit of a nomad family, my wife, daughter, and I for the past, well certainly since all of my daughter's life and some years preceding that. But a few years ago, I think it was 2018, we were doing a European tour of countries that we hadn't seen before, which ended up taking us to some out of the way spots, including Moldova and Lithuania. And we did find ourselves on the Southwestern border between Moldova and the Ukraine. This was when our three-year-old daughter's very first visit to a political separatist region.

It was something of a flagship event for our young family. And so the region in question is known as Transnistria. It's run by a couple of ex KGB goons, I guess you would say. Well, you would say that from the safe distance of where I sit down here in Buenos Aires. Probably wouldn't mention that pejorative when in the region itself. But yeah, it's a very, very, very interesting place. It's often referred to as a throwback to the Soviet era because the people there vote reliably and ferociously along separatist lines. They have their own Transnistrian ruble. They have their own postage stamps, their own passports that they issue, which are not good for international travel, but serve as a place of pride in every Transnistrian person's home and files. They're off the SWIFT. They were ahead of sanctions before it was cool.

They had already sanctioned themselves into this dark hole of Soviet era non-banking and yeah, weird trade stuff. There were convoys, I remember when we first rolled in the back of a car that we had a driver take us in there. And Anya, you mentioned my wife, and Frieda, and I were sitting in the back of this car and Anya and I looked over at each other at one point when we were passing about a mile long convoy of Russian peacekeeping tanks, "peacekeeping tanks."

Russian propaganda television. But yeah, I mean, this is the age we live in. The lie was canceled. The lie became the truth. And it's a very Orwellian process where we scrub the archives of the past and we don't allow ourselves even the opportunity to get the full both sides of the argument. Now, for fear of asking the wrong question or hearing the wrong answer. To go back to your question, as I wrote on the weekend, when I hear people talking about the brave Ukrainians whose mettle is being tested, and it seems to me that there is no end to pain and suffering there.

And goodness knows that it's difficult for us sitting in the comfort of our homes and libraries to even imagine what these poor people are going through. But when I say things like sanctions imposed by Western corporations, righteously, conspicuously, indignant, Western corporations. A long laundry list of the who's who of listed companies in America and elsewhere, a lot of those have imposed consequences on people in Belarus and people in Russia who have nothing to do with this conflict, who would wish it away tomorrow if they could, who have no love for Mr. Putin, nor Mr. Alexander Lukashenko, often referred to as the last dictator in Europe. And just as a quick side note, I remember during that trip, actually, we traveled to Belarus and we stand in an Airbnb in Minsk and for anyone who's ever been behind the former Iron Curtain, even countries that have been liberated for a long time, it's a drab and dreary undertaking. It's full of brutalist architecture.

And the people have often been terrorized for a generation or more. There are a lot of victims on the other side of these borders as well. And so we stayed in this Airbnb. A delightful young host had us in her apartment for a week or so while she stayed with her mom, I think. And when I think of all the good work that Airbnb is doing in the Ukraine by waiving its fees and you've probably seen that people are renting apartments in Kyiv and elsewhere in Ukraine to get money to the Ukrainians, I think also of my host in Belarus, where Airbnb has shuttered operations and they've shuttered operations in Russia. And I just can't imagine that military strongmen like Misters Putin and Lukashenko are feeling the pinch when it comes to individual private citizens who are being victimized by actions of governments on both sides.

Again, it's just not really clean cut, but if you mention the poor people in Belarus, you're seen as a white Russian sympathizer or a muscovite or something like this when it's a really simplistic way to view things. And as we all know, the people are not their government, despite what the propaganda that we hear. Even in the West, the government is not all of us. The government are individual actors often out for their own benefit. And then there's the rest of us.

Yeah. Yeah. I was writing about that last week too. Coinbase, which is the largest trading platform for cryptocurrencies, remains open in Belarus and in Russia for that exact reason is that the sanctions are imposing the most difficult conditions on everyday citizens, but they can still use cryptocurrency, through Coinbase for example, to get what they need. Basic living conditions. But let's talk about the sanctions on a broader scale. We already had rising gas prices and oil prices were already on the way up. But then we had this weird pivot towards blaming the...

We had this weird pivot towards blaming the Russian invasion for inflation. There were obvious supply chain issues with getting oil and gas to where it needs to be in Europe, mostly, but even into the United States. So gas prices at the pump, that's the thing that everybody seems to worry about the most because they can't drive even during a pandemic, they were already on the rise, they were already on their way to $7. I remember one of the headlines that Bill wrote in Bonner Private Research, it was probably two weeks ago before the invasion even began, that we were already headed to seven bucks. But now conveniently the rise of the pump is blamed on the invasion.

Let's just talk in general about sanctions and how effective they can be? Other than affecting individual citizens on the ground, doesn't change the fact that Putin is waving the nuclear card around.

Well, I mean, we talk about these supply chain disruptions and that has been this kind of bugaboo in the press as a kind of distracting action from the real cause of inflation, which Mr. Friedman said is everywhere and always a monetary phenomenon. Those fires, those embers rather, had long been stoked before COVID came along and before whatever the problem before that was and the problem before was that. That's long been in the pipelines. But it doesn't seem that we have this very convenient sort of anti hero or villain, Bond type villain, that we can just kind of point the finger to. And we say, oh, you didn't do well in your piano recital, well Mr. Putin, Russia... Whatever is going wrong in your life, you cheat on your wife, well, Mr. Putin, what are you going to do? It does seem now that we're blaming a lot of the things that were essentially self-inflicted wounds on parties who, obviously war and this invasion and the increasingly tightening energy markets and raw materials. The raw material distribution channels have not helped the situation, but we were doing everything to hamper ourselves, and by ourselves I mean those in the West, long before Mr. Putin came along.

But to the specifics of the consequences of both his actions in Eastern Europe and the sanctions that have subsequently been imposed upon him, I'm not sure if we've quite thought through these well enough. We've already seen very, very tight energy markets, both in the US and in Europe as a result of many years of misguided policy seeking to wean the West off of its hydrocarbon based economy toward a kind of greener so- called renewable energies. And even last year, long before Mr. Putin's encroachment on the Ukrainian border, we saw a huge catastrophe in Germany, Europe's number one customer for Russian gas through the Nord Stream pipelines, we already saw that Germany had pivoted away from its nuclear power, it had gone heavy on its renewable sector. And it turns out that sometimes the wind doesn't blow and sometimes the sun doesn't shine and they had to revert from very unreliable renewable sources of energy back to, not even the nuclear power which they had taken offline, not even back to coal power, but to burning lignite, which was worse than all of the above. So, not only did they have much higher prices, they also had much dirtier fuel and they had much less geopolitical stability because of their reliance on a belligerent sovereign state in Russia.

Now we see, as I think Germany was kind of on board with turning off the spigots for Nord Stream 2, and there was some talk about Nord Stream 1. But I think now the latest is they've come out and said, well, actually Germans do need their homes heated during the winter and we're with Ukrainians all the way except when it comes to turning off our heat. So yeah, this is a deep trench that we've dug ourselves. And obviously these actions aren't helping, but there's plenty of blame to go around and we deserve some of it too.

Yeah. On day two of the invasion they attacked a TV tower and they were ineffective, they weren't able to shut it down, but the other target on day two with the missiles was the pipeline that goes right through Kyiv and they were successful in blowing that up, and that just shut down all transportation. That's been my suspicion, I'm no geopolitical expert or anything, but has been my suspicion all along is that with a pro Western government in Ukraine the pipelines going from Russia to Germany have been an issue. They're taking their tax as the gas flows through and Russia, Putin in particular was not very happy about that.

Then the rhetoric that he spun up about Russian defense and Russian nationalism was really just a result of economic pressures that were being put on because Ukraine stood in the way of an open European market. I want to say another thing too, which I think is funny. It was written up by Brian Maher in the Daily Reckoning and he was citing Martin Armstrong, who's another economist that we associate with, that Armstrong had nominated Putin for the Nobel Prize in medicine because in 48 hours, he cured COVID. Nobody talks about COVID anymore, we got the occasional report on how many people are hospitalized. Ukraine's the whole story right now. It's just funny too, though, how quickly the narrative either crumbles in the case of the pandemic or gets spun up in the case of Ukraine.

Yeah. Just one point to say about the energy markets there. I spoke recently with our mutual friend and colleague Byron King who is, far more than far more so than I am, clued up on international politics and obviously the geologists and just kind of all around man of letters. But, he was speaking about not just the energy that Europe and the West relies on from this extremely interconnected global market of which Russia is a significant part. But also, other raw materials that come from Russia, including things like industrial metals, titanium, nickel, which I think went limit up today. All of these metals which are going crazy, a lot of which by the way, are needed for the so-called savior of this energy revolution and that is to say electric vehicles. A lot of the base components that are needed for lithium batteries and, I'm no engineer, but all of the various inputs that go into assembling a very complicated machine like an electric vehicle, a lot of those are to be found in what before were potentially a hostile geopolitical environments and now are heavily sanctioned no go zones. Once again, we've kind of shot ourselves in the foot here.

I saw Mr. Pete Buttigieg just on the news, I think it was today or yesterday, advising Americans who were feeling the pinch at the pump with 5, 6 and marching towards $7 per gallon and gas that hey, the news is good and the cloud has a silver lining because you can all go out and buy an electric vehicle now. This kind of struck me as the, let them drive Tesla's moment for... A lot of people are trying to make ends eat and the economic echelon of people that are hurting at five bucks a gallon maybe that doesn't include Mr. Buttigieg, but it also doesn't include people who have just a spare of 30, 40, or 50 grand sitting around to go out and get the new model Tesla or whatever it happens to be. I felt like that was kind of salt in the wounds for people who were already struggling and just demonstrated how purely out of touch elected leaders are with their constituents.

Yeah. Another pain point that gets talked about a lot is the price for groceries. So people were complaining about rising milk prices. I was actually in a local grocery store about two weeks ago, and I was standing there looking at, I think, I was buying ground meat because we were going to make lasagna for the Super Bowl, that's exactly what we were doing. There was a woman standing next to me and occasionally when you're in the store, you stand next to someone who thinks that everyone around them is their best friend and they just talk to you. I come from a reserve of New England background when somebody's talking to me, I'm like who? Are you talking to me? But she was like, oh, I was just in New York and they have all this stuff chained up, you can't pick your own meat. You got to get somebody to come over and unlock it because people are stealing this stuff. Price is going so high that it's like gold. She was just talking, I think she was talking to me, but I think she was talking to anybody who would listen. I was thinking about it, one of the things that has been sanctioned is the exportation from Russia of fertilizer. They produce something like 23% of the world's ammonium nitrate, which is a component in fertilizer for any of the crop growing farmers in Europe or in the United States. That's a quarter of the fertilizer the world needs is no longer available. If we think the prices were already rising because the Fed or the Treasury in collusion dumped 7 trillion dollars into the economy last year, wait until farmers can't get fertilizer and crops actually start diminishing.

I think across the board Russia is a large country and there's a lot of different geographical regions with commodities that the world needs. As much as we might think Putin's a madman or might incite world war three with nuclear bombs, just like with the pandemic, the economic impact of these sanctions is going to be a politically motivated travesty that interrupts the way the economy actually functions in the world. One of the guys I played tennis with this morning was trying to find a pair of tennis shoes that could fit his feet and he was in a store and he figured out which one to buy. They didn't have any in stock so we went online and he couldn't get the tennis shoes he needed until something like June, and he was upset about it. We're so accustomed to just in time supply of the things that we depend on, not that anyone depends on tennis shoes. But we're so accustomed to that now we're starting to realize that if you impede the economy for a couple years and then you have a war that threatens the global trade balance even more, things could get pretty ugly.

It's very interesting and instructive as well because as people who have either have visited, spent time in, or just kind of followed along with the Argentine story over the years, Argentina didn't wait around for the international community to impose sanctions on it for the past 70 odd years, since the beginning of the Peronist era. They essentially said if anyone's going to be doing any sanctioning here it's going to be us and will be sanctioning ourselves. They have spent the past 70 years imposing trade restrictions on themselves, imposing currency controls, imposing limitations on all kinds of economic activity, the likes of which the West is now seeking to impose elsewhere. But Argentina scored an own goal and continued to do so.

Just on the inflation front, the official figure here is 50% per year, meaning that half of your savings get wiped out every year if you just sit in the Argentine peso. Which of course nobody does because few people like to see their state whither away the value of their hard earned. So the Argentines, unlike many people around the world who have enjoyed long periods of relatively stable currencies in Australia and in where you sit in the US and folks over in the Europe zone, what have you, 50% inflation means that For example, I went to a restaurant the other day and every restaurant now has these QR code menus because I don't know COVID lives on physical menus or something. Anyway, I'm zapping my QR code menu and the waiter after I'd selected a bottle of wine for my, let's say, dinner because I wouldn't be having a bottle of wine at lunch I selected a bottle of wine and he had to come back afterwards and tell me that the price had changed and would I mind refreshing my menu. They were just redoing the menu that day and the price had already changed. We're just at 50%.

We're just at 50%. A few decades ago in the late '80s, we were at 2,000%. Where people, shopkeepers, clerks would come along and inform you of the updated price of the goods that you had in your basket while you were standing in line. Your money would literally be losing value from the back of the line until the time that you reach the counter. That has all kinds of knock-on effects, and not the least of which is that nobody plans for the future other than to get the hell out of that currency as quickly as possible and into any other alternative. Here, that tends to be real assets like farmland or apartments here in the capital city, or in the past few years, crypto, which helps, to varying degrees, circumvent some of the capital controls for people who have offshore bank accounts, for example.

But yeah, the people here have been sanctioning themselves for a couple of generations, at least. They're pretty well adapted to it. Life goes on here.

When I came down here, when we first arrived here in 2010, the exchange rate was about three and a half pesos to the dollar. Officially now, it's 100 to the dollar, but unofficially, which is to say, actually, it's more like 200 to the dollar. It got up to 220 just a couple of weeks ago. The way that works is that there are all kinds of currency controls that are imposed upon Argentines who would look to divest from their peso. The government's motivation is control.

To keep the population corralled in its peso. Don't kind of let them out. Make use of it. Make them transact in it. Make them save in it because then they can steal the value from it. But for obvious reasons, there is a thriving black market for any and all alternatives to the peso, including US dollars, which greenbacks are still king down here for the time being. People pay an enormous premium in order to get out of the pesos and into dollars or euros or what have you.

Interestingly, they pay different rates for bills of different denominations. $100 bill will get you a certain rate, but if you only have $20s or $50s, you'll get a lesser rate because there's not as liquid a market for it. They're not as desirable. Actually, they're very, very particular about the condition of your $100 bills as well. Some stores put those little markers on them to test if they're counterfeit or whatever. If you bring any of those, some black market exchanges won't take them here because they think maybe they've been monkeyed with or they won't be able to offload them as easily.

You go into these, they're called cuevas. Bill wrote about this today, actually. They're called Cuevas, which literally just means money caves. They are de jure illegal, but de facto just kind of widely acknowledged. To the point where the state has outlawed them, but actually appoints policemen to stand out front of them to let foreigners know that they're safe and to give them some assurances that they won't be mugged in the street before they go in and change their money so you go-

He's a fascinating guy for many reasons, but he's a keen startup investor. He's been in the crypto space for a while, but he and I had, what I hope, was an interesting conversation for our listeners about these parallel economies. You touched on it before with rumble, but whether in the communication space or the banking space, there are these alternatives that are starting to open up, what some are calling parallel economies. I think, to go full circle back to Russia and the sanctions and all this kind of stuff, I think these controls, and now by sovereign actors ... I mean, we haven't even spoken about this, but that are now effectively calling into question the validity of reserve assets on central bank balance sheets. That could have enormous consequences.

For other geopolitical players that are looking at the West and the United States having just essentially frozen $630 billion worth of Russia's dollar assets or foreign currency assets, they might be looking at like, "Hey, hold on a second. If I'm China, and all of a sudden I see that Russia can liquidate or move or transact it's $630 billion worth of foreign exchange dollar-denominated assets. I have, oh, I think $3.2 trillion on my own ballot sheet." All of a sudden, I have to factor in a kind of risk premium to those holdings.

If they're not as easily transactable, or if they carry some kind of unadvertised liability to them, then we start to get into a ... we started out talking about an arms race here, but we start getting into a kind of scenario where we might be playing chicken with D.C. and Beijing confiscating currencies around the world or demanding some kind of currency-like allegiance to their particular geopolitical interests. All that I mean to say by that, is that the global banking system is going to be under a lot of stress in the near future. The parallel work-arounds to that are going to, I think, start to look a lot more attractive to people who don't want to live in a world of permission-based money.

Well, and the natural answer to that would be cryptocurrency, bitcoin being the sort of A brand, Ethereum close behind. But even in that arms race or currency race, currency wars as Jim Rickards would call it, China has outlawed any kind of cryptocurrency. I was just writing a piece about how Kazakhstan was one of the largest Bitcoin mining countries in the world because energy was cheap. It got even more business because China had outlawed Bitcoin and they share a border. A lot of the bitcoin miners moved from China over to Kazakhstan. It ultimately resulted in a revolt from the people because so much energy was being used to mine cryptocurrencies that they couldn't heat their homes anymore and they took to the streets and revolted against the government. Then the government went in with the army and started shooting people in the streets. That only happened a couple months ago in mid-January.

But what do you make of it, if we do have this currency war and cryptos are an alternative for individuals or corporations. MicroStrategy is famous for dumping a bunch of money into Bitcoin. What of China banning it? I think a fear, and I hear this from just average, I wouldn't call them average, but individual investors that I know are still skeptical of cryptocurrencies because they fear that the government could come in and ban it all together or regulate it in some way that neuters it from its alternative asset class from the US dollar.

I think that's a legitimate concern. In fact, I wouldn't be surprised if in the near future we hear some kind of narrative peddled by the Psakis of the world and other babbling mouth pieces on finance talk shows that Bitcoin is the preferred currency of Mr Putin. Therefore, anybody who is aligned with this is, in some manner, aligning himself with the Axis. This will be a perfect opportunity for those central bankers whose rice bowls are threatened at present to leverage the prevailing sentiment against Mr. Putin, deserved negative feelings toward Mr. Putin to swipe out at something else that they don't like and that threatens their kind of raison d'être.

Well, to go back a little bit on this, it has historically been a pretty good bet to invest in things that China bans, to a certain degree. Google, Facebook, a lot of the big tech growth sensations of the past 10, 15, 20 years have been locked out by China. That hasn't hampered returns for investors. I was speaking with, again, to go back to my conversation with Adam Sharp the other day, he works with some folks, some gentlemen at HIVE Blockchain Technologies. He was telling me that they saw a huge windfall after China essentially shuttered, or made illegal, mining operations in the Middle Kingdom because, all of a sudden, the hash rate collapsed. You had a huge proof-of-work incentive in the marketplace to take up that computing power that was no longer able to be met by China's big, industrial-scale Bitcoin miners.

There was an opportunity for places all around the world that could harness cheap energy, wherever that happened to be, in order to kind of pick up that slack and get a big payday. They have mining campuses, I think they call them, in Iceland, in Sweden and up in Canada that are adjacent to hydroelectric facilities. They're able to channel through ... I'm no electrical engineer, but through an operation that's far more complex than my comprehensive capabilities of understanding, they're able to somehow capture some degree of that capacity and turn it into a storage of value. Now, people will have complaints against Bitcoin's ability to function as a store of value, given its volatility in the past, say ... I mean, it's only 15 years old.

As we know, all 15 year olds are pretty volatile, just by nature, but it's certainly a lot less volatile than siphoning off energy that just dissipates that you cannot use. That's a big problem with renewables is being able to store energy. It goes essentially to zero if you don't use it. This is a way to store some value or to convert some of that energy into a store of value and then use it elsewhere.

I feel like in the short term, there's going to be no shortage of bad news for cryptos. It's this kind of my enemy of my enemy is my friend-type deal. I'm sure that all of the other central bankers around the world are going to pile on and kick crypto while it's down all the way, not even down to its lows of 18 months ago or whatever it is. But yeah, they'll pile on. There could be more and more pain in the short term, but I couldn't imagine over the long term, as there are increasing stresses on the viability of sovereign nations to hold foreign reserve assets on their balance sheets and to conduct business as usual, trade as usual in any kind of reliable and predictable manner.

As we move more into the era of central bank digital currencies, these CBCDs, we're not going to see more demand and more appeal for truly decentralized cryptocurrencies. What central banks are offering up and what is Ms. Saule Omarova, the one-time leading candidate for the comptroller of the currency in the US. We haven't heard much of her since, but it was a case of never calling Saule. She had, this Kazak-born, Moscow-educated Marxist, was having nocturnal emissions over the idea of a central bank digital currency as a means of being able to control everybody's transactions and to monitor everybody's transactions. This was a case of the very, very worst of the fiat components of government-issued currencies hybridized with the very worst of the surveillance state impulses, where you could be tracked, your purchases could be cut off.

Obviously, we've seen what happened to people who participated in unwanted rallies and demonstrations in Canada or contributed to protests through GoFundMe. We're entering an era, I think, of permission- based currencies, which begs a whole litany of other questions, including what is private property? If you can't use what you own, do you really own it? Are you just renting it? Are you existing only by the good grace of our central bank overlords? I think all of those things go into a long-term, bullish case for crypto, but I can certainly imagine that there could be scenarios where there's a lot more pain in the short term for the markets.