Transcript of the above video: 

As the title of this video suggests, we are talking that Old Chestnut yet again, the Digital Wallet. What are we talking about with respect to this? Well, let's just jump in here. 

I first thought of making this video after reading a recent article from the Bangkok Post, bangkokpost.com, the article is titled: Digital Wallet tokens could hit scheme. This is by one of my favourite writers actually from the Bangkok Post. He writes a lot about economics and I really find a lot of what he says very insightful. I urge those who are watching this video, go check out that article in detail. That being said, I don't necessarily always agree with him but for the most part he's very sound in his analysis on economics. Quoting directly: "I bet the Government never thought of this when they thought of the Digital Wallet scheme. It probably does not make sense to it that there could be millions of people shunning pseudo money," well put, "namely Digital Wallet Tokens (DWTs). Perhaps, in the Government's mind, a DWT is almost on a par with genuine money -- fiat money."

Now let's be clear on the definitions here. If you get into the deep dive with somebody like me, I will take you back to 1912, JP Morgan, when he was testifying before the US Congress said "gold is money, everything else is bank credit." Now there are those that disagree with this: Keynesians, monetarists, etc. modern monetary theory is off on its own agenda, on its own tangent; I sometimes refer to it the way Robert Kiyosaki refers to it as ‘Marxist Monetary Theory’ but whatever. At the end of the day, I get that there are people that don't view gold the same way. It's kind of one of those "I don't believe in the Devil, well the Devil believes in you." I don't believe in Gold. Well guess what? Gold believes in you. It tends to pop back up over the years, timelessly down through the millennia because it's primarily useful as money frankly, that's one of the reasons. That said, we are talking about a whole new iteration of something called Gresham's Law which I will get to here in a minute, but note, Fiat money is different than what JP Morgan described as money which was gold - different things - but bank credit, fiat money, that's what we're talking about here when we are then comparing it to what this "pseudo money" to use the author's expression, which is well put which again is even something more attenuated than Fiat money. I mean to just give some background here, think this through for a minute. If you go back 100 years ago, we were on the gold standard which everybody shuns and decries now but if you know the history, especially after the First World War before the Second, the inter war period, when Britain had problems and crashed a lot of things because they wanted to go back onto the gold standard and they always blamed the gold standard for those problems. No, the reality was Britain wanted to go into an unrealistic relationship with gold and their Fiat money and that is what caused the problems primarily in that inter war period, again what we called the Great Depression in the United States. But again, understand this. There was a time money was backed by gold, or just was gold and sometimes silver depending on the country or the jurisdiction you were in. Okay, then it got a little bit attenuated because they said okay now we have gold and then you have this note that is then backed by gold and we sort of saw that solidified under the Bretton Woods agreement which occurred after the Second World War, in fact I think it started, the discussion started before the War even ended.

In any event they came up with the situation that we kind of have now or the remnants of it which is the dollar was backed by gold; everything else was pegged to the dollar and then international Central Banks could redeem gold from the American Federal Reserve and the American Treasury depending on circumstances, as and when it was required and then we saw the French actually do that and then we saw Nixon temporarily close the gold window. That resulted in what we're in now which is effectively Fiat money which you can say it's money backed by nothing and in a sense that's true, but it was based on this original scheme where it was backed by gold through the Bretton Wood’s system. Now we're going to even another level of attenuation. That's the point I'm trying to make with this is these digital wallet tokens aren't even Fiat money. Quoting further: “For recognition purposes I will refer to genuine money as cash,” - and again you go back even farther and what we now call cash, J.P. Morgan himself wouldn't call, or what we call “cash”, he wouldn't call it money. “Cash” is probably the right word; it's the most descriptive, accurate descriptive, word “cash” rather than “money”, in the sense of the Thai Baht note, cash in your hand, we'll say that's cash. Money is gold; we will kind of use the euphemism cash is money as well but again I want to make the distinction between again “gold is money, everything else is bank credit”. Now we move over to Fiat money aka cash which is that bank credit and now we're moving over to this pseudo money as discussed in the Post, where these Digital Wallet Tokens are coming in and I don't know what they're going to do with cash. Are they going to compete with cash? How is that going to operate? We will get into it that further. 

"For recognition purposes, I will refer to genuine money as cash.

"Wrong, very wrong.  A DWT is inferior money. I, myself, had also never thought of its second class status until I heard comments from market vendors that most of them will not accept Digital Wallet Tokens." By the way, you want to know the smartest economists? Head to the streets. They know what's really going down. 

"Quoting further: “I have the opinion that DWTs will dominate if not take over all businesses accepting DWT’s cash registers. The reason is that DWT,” again this is digital wallet tokens, pseudo money, “is that DWT recipients are fully aware of its inferiority regarding limited usage and naturally want to dispose of it before hard earned cash.” This is exactly the phenomenon called Gresham’s Law and what we saw in the past was this occurred when it pertained to paper versus metal. Now we're going into the digital era where it's pertaining to digital versus paper which is just the weirdest thing ever.

Let me go over to Investopedia, and that that is investopdia.com: What is Gresham’s Law? Quote: “is a principal that states that “bad money drives out good” and can be applied to the currency markets. The law stemmed from the historical use of precious metals to manufacture coins in their subsequent value. Since the abandonment of metallic currency standards, the theory often describes the stability and movement of different currencies in global markets.” and I want people to really be aware of this. “Different currencies in global markets”. Thailand is now about to domestically release this new thing, these Digital Wallet tokens, to compete against real money in the actual market. And let me put a sort of topical analogy on this. We've already seen what has happened to the fish stores in Thailand as a result of Tilapia being introduced into the local ecosystem and apparently it's just having a devastating effect; there are all kinds of sort of unintended consequences because these Tilapia are coming in and they are basically knocking out the natural food chain here in Thailand. These unintended consequences can have tremendous negative implications, not only terms of an ecosystem, but an economy as well. There's a reason that "Eco" is in both words - they are very similar sorts of systems. The point I am trying to make here is introducing these Digital Wallet Tokens into the Thai economy, I mean we're just doing this without really any further study? We're just barreling ahead on this and we have really no idea exactly how this is going to affect the Thai economy? But we do know what Gresham's Law is and as can be seen from this contemporaneous article in the Bangkok Post, there's already discussions that Gresham’s Law is going to kick in on this deal. That said, quoting further: “The reason is the DWT recipients are fully aware of its inferiority regarding limited usage and naturally want to dispose of it before hard earned cash.” Again, as we discussed, you can't use it everywhere; you can't use it on anything; apparently it's got a time limit on it. You can only use it within a certain radius of where you live and you can only buy certain products with it. How is it? I've been asking that forever. How is that money? Well apparently the market is asking the same question because they don't particularly want it either. Quoting further: “Most importantly, DWTs (Digital Wallet Tokens) are given to them for free.” Well let's be clear, they're not given to them for free. All of us are going to eventually have to pay the money back that they took from the budget if you will or they say they're taking from the budget or they're going to go into debt for which if they gut the entire budget, and then have to come around to next year to pay for things, they're going to have to go into debt anyway. So the way I look at it is the Government's going to have to go into debt one way or the other, either directly or indirectly, related to the Digital Wallet Token, What the author who I have tremendous respect for failed to point out, there is that they're not free. They're free, I get it euphemistically in sort of a paradigmatic sense it is a windfall to the person receiving it I guess, but again we're all going to have to pay this back eventually; it's not free money anything.” Do readers now understand why market sellers make the logical decision not to accept Digital Wallet Tokens?” Well I would hope. I'll tell you one thing. If somebody standing there offering me cash or even is standing there saying I'll do a QR code and send it to your bank account or I can give you these tokens that may or may not be usable tomorrow, may or may not be usable for the things you want to buy, may or may not be useful for you to buy those things in a given place, why would you take that medium of exchange? Why would you ever do that? No market actor would. Quoting further: “Let me give an illustration. A market vendor makes a 1,000 baht in sales per day, all in Digital Wallet Tokens, but needs 500 baht in cash for cash expenses. For a one month period, that market seller would be 15,000 baht short in cash. This 15,000 baht has nowhere to come from except savings or from loan sharks.” So again this is what scares me about this. I don't claim to know what's going to happen when you introduce these “Digital Wallet Tokens” into Thailand's economy. What I do know is we currently have a relatively balanced budget; our debt to GDP ratio is at least under 70% now. It’s hovering around the low 60s maybe going into the mid 60 percentile which isn't great. Everybody seems to have forgotten they kind of foisted a raising of the debt ceiling on us during Covid coming out of that, then they come up with this Digital Wallet, free money extravaganza that they now say they need two orders of magnitude more liquidity than presently exists in the banking system in order to bring online and yet it's not actual money. We're not being given this 500 billion baht, or 400 excuse me, 450 billion baht. We're not just being given it; checks aren't just being cut; cash is not just being handed out and in envelopes! No, you get Digital Wallet Tokens which as this author himself points out, is just pseudo money. Meanwhile, there's going to be two kinds of money in the market? This is exactly how the Soviet Union fell apart . Read the book The Oligarchs where they talk about how there were basically ledger rubles and real cash rubles and by the end of it, there was all kinds of market distortions because people were going to co-ops using ledger rubles to buy up large amounts of goods and then they would flood the market with them. Then meanwhile, the rest of the market was all messed up because it didn't have liquidity in terms of cash rubles. Again I don't I think it's out of line; I don't think it's too far off to compare this to the Tilapia situation. You let these things out into the natural economy, what are they going to do? We don't know and it's going to cost us money to the tune of all the liquidity in the system times two and we are going to have to pay it back eventually, even though we didn't actually get the same type of money. We're paying back in real money what we are getting in pseudo money. How is that a good loan? 

Now actually moving on to the Thai Examiner, thaiexaminer.com, the article is titled: Thailand finds itself facing economic and political turmoil. Top economist warns of trouble ahead. Quoting directly: "Significantly, Dr. Sompop," and I urge those who are watching this video, go read that article in detail along with the articles in Bangkok Post  I'm citing in here. A lot of good information and insight in all of those. Quoting directly: "Significantly, Dr. Sompop quickly identified the government's flagship Digital Wallet policy as another source of concern. Certainly, at this time he agreed the scheme must be proceeded with. However, there are major concerns." First of all, "must be proceeded with". Why? Why is this a “must be”? It isn't all that great for the rank and file Thais. Again it's not a debt; we're giving good money up in the long term to be given some pseudo money that creates no real value in the system, could create inflationary warping within the economy, and then on top of it we're releasing this thing into the economy that we have never really seen before and we're bringing on the possibilities of Gresham's Law, hoarding of real liquidity rather than just using it as a medium of exchange and allowing it to move the market along, sort of acting as if you will sort of lubrication if you will of the markets. No, no. We're going to turn that into something people are going to think in their minds about hoarding. That's not a great idea. Quoting further: "However, there a major concerns." Yeah, I would say so. "Firstly, it is not clear how the scheme will operate." Well yeah, that is another one. Again I'm bringing this up her. It's pseudo money and we know Gresham's Law works and as pointed out by the Bangkok Post author, it looks like that's the way it's going to play because folks in the actual arena if you will, in the economy, are not interested in engaging with this type of “money” which isn't money, it’s not cash, it's pseudo money. I think that's well put. Quoting further: “For instance, Digital Tokens will mean the smaller businesses will be parting with valuable stock but have no clear idea when or how they can convert Digital Tokens into cash.” Again Gresham's Law. And I talked about this at the beginning when all this started coming up and again we have only really been talking about this for about six, seven, eight, nine months. You know people are, it's kind of being pushed into the narrative that “well we've been talking about it a while.” Well no, we haven't. We haven't really had a good vetting of this whole thing. There's been a lot of push in the media to just gloss over all the procedure associated with promulgation of laws and programs such as this in Thailand, and then on top of it nobody really wants to discuss the economic impact of this stuff. Then on top of everything else, you have got MPs running around saying that they are going to prosecute people for talking about misinformation in connection with this thing, which why? We're not allowed to talk about something that could indebt us to the tune of two times the liquidity currently in the system? For how long, and we don't get real money out of it? We get pseudo money out of it? Again, the repercussions of this, we just don't know. I would almost liken this to when everybody said: “Oh, just take the jab!” and people kind of pushed back including myself, that said “hey we don't know exactly what this thing is all about.” This feels a lot like that. We are just being be pushed into having this being put out there and meanwhile Gresham’s Law is a good academic example of reasons why this might be problematic. Then on top of it, in a more topical news sense, we have recently seen what happens when you release things into closed systems and how they can have a detrimental impact and a perfect example of that is the Tilapia situation. These Digital Wallet Tokens, maybe they should be called Digital Wallet Tilapia or something. "Certainly, it is clear at this time, that it will not be cashed the next day." So what is that? Again what is this thing? They're trying to put us under this and put us into a bunch of debt to put us under this and do we need it? Is there any real problematic aspect with the current digital systems we have for transferring funds within Thailand? I don't see one unless totalitarian - or lack thereof - totalitarian surveillance is a problem. Meanwhile it's not real money and we're not creating any new value in the systems, so we're creating the possibility of inflation bubbles and we're also bringing on the possibility of unknown chaos in the form of Gresham’s Law when we introduce pseudo money back to back or side by side with real cash. Quoting further: “Digital Wallet concerns and potential economic repercussions. Not yet sure how it will work for retailers. Dr. Sompop spoke of the Digital Wallet being a “whirlwind” as pro-government sources have suggested. However, he explains that what is needed is a self-sustaining storm.” You know when they start just using this kind of nonsensical language something's up. What is a “self-sustaining storm”? So we're supposed to be like the planet Jupiter and have a constant hurricane rolling around? I mean what does that mean? Come on. Quoting further: “Undeniably, the scheme will leave the country's balance sheet in a weaker position.” Yeah, it'll leave it in a weaker position! We're going to suck out all of the budget, suck out all of the liquidity in order to create pseudo-money that will let be chased out of the economy, or that will be left in the economy but then all the good money, the cash money will be chased out of the economy due to Gresham’s Law. Again, I have no idea what the repercussions are of that. What does that mean? You're going to be walking around thinking you can transact with people and now you don't know? Some people you'll be able to transact with, some people you won't. And I don't want to hear the totalitarian, “well then everybody needs to go on it.” No we don't. That's called the Social Credit System; that's called the Chinese Communist Party. Is that what we want? I don't want that. And I can just hear them out there. “Well maybe we should all just go to this system.” No maybe not. I feel like Dr. Evil in what was it, Austin Powers 3. How about NO! Quoting further: "Moreover, Dr. Sompop expressed concern that policy when unleashed will run into problems." Yeah. Quoting further: "Consequently, he feared that it may become a further source of division in society." Oh, you mean we could create a two-tiered structure of people who have pseudo-money and people who have real cash and then other people who may have assets and things? I can see multiple permutations of this that go very, very bad. Then meanwhile, we are supposed to gut the budget to do this? Why? And by the way, the notion that there is some massive mandate for this in Thailand is ludicrous. You can look at the last poll okay? The dominant partner if you will in this current coalition Government, there wasn't some massive mandate to have this and then bring it in. And by the way, when they talked about it during campaign season: “oh it's going to be just a hand out, it'll be digital, you’ll get your money.” Now we find out it's surveilled, you can only use it in certain places, you can only use it on certain things, we've got to knock out the entire budget to get it, we've got it used more liquidity than currently exists in the banking system to do it. All of this stuff that I don't know that anybody signed on for.

Moving back again to Bangkok Post, bangkokpost.com, under the title: Digital Wallet scheme poses credit risk. On top of everything else, at the end of the day we're going to have to pay for this thing. They have said how much it's going to cost. There was a time it was like a trillion baht, then it came down to half a trillion. Now we're down to 450 million baht, billion baht for it. Again for what, because we're not getting the money? So where's the cash? The non-pseudo money? Who is ending up with the non-pseudo money? That's the big question in all this. The 450 billion baht that the Government is going to shell out. Who's going to get that money? Because us people aren't getting that money. We're getting pseudo-money, so who's getting the money Meanwhile, how are you going to finance it? Quoting directly: “Should the “print money” option be considered by the Bank of Thailand? The experience of Japan, particularly from the depreciation of the yen, which lost about 15% of its value in a year, should provide enough reasons for the Thai Central Bank to say no.” The point I'm trying to make here is “bad money drives out good”. We're creating “pseudo-money” which I think you could argue is bad money; money you can't use everywhere, on whatever you want and transact freely and confidentially, I don't call that money or I definitely don't call it money I want to use. Pseudo-money is probably a polite way of saying it; I would say it's bad money, let's put it that way. Meanwhile, what are the ramifications on Thailand’s economy? Do we have any idea? Because this is unprecedented. We do know that when we changed over from the gold standard to what eventually became sort of the indirect gold standard in terms of Bretton Woods and then we went another roughly 30 years, up into the 70s from the 40s to the 70s, when Nixon then temporarily closed the gold window, you know what was the same, what do those events all have in common? Those transitory events involving money? War. Significant amounts of war. In the case Nixon closed the gold window, it was Vietnam; in the case of Bretton Woods, it was the Second World War and going back even before that, it had to do with the gold standard, the First World War trying to reposition Britain on the gold standard which kind of led to the Second World War, the rise of Germany and Italy and Fascism came from the fact that there was unsound money. People did not know that they could trust their transactional medium. What scares me is I'm not saying people will think they won't be able to transact in their traditional medium should this come online. I'm asking the question do we know, and if we don't, should we just be rushing into this without doing some further study because it looks to me like the possibility of creating a new “pseudo-money” or bad money and then just dropping it into our economy, could have the same effect that quite honestly and unfortunately, we saw or a similar effect, that we saw when Tilapia was just introduced into the Thai ecosystem without any buffers, without any sort of if you will thought, to mitigating any unforeseen problems. And it doesn't look like anybody's really looking at mitigating unforeseen problems which leads me to the possibility that we could be looking at an unforeseen train if you will heading in our direction in the relatively foreseeable future.