When we go to the store, we take our money and exchange it for goods and services. That is how the US-economy works. But what if there were other economies where the government didn’t have as much control, and “money” wasn’t the only thing you could exchange for goods and services?

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Here’s a transcript of our conversation:

Connor: Hey, Brittany.

Brittany: Hi, Connor.

Connor: We talked about bartering in our last episode, but I wanted to build on that and kind of continue the conversation by talking about something that is called parallel economies. So, bartering is an example of a parallel economy. What does parallel mean? It means, remember, if you kind of draw, two straight lines next to each other, they’re parallel. They’re running kind of in the same direction but to the side of one another.

Brittany: Like the house across the street. You would be parallel. Yeah.

Connor: Yep. So, bartering is an example of a parallel economy, meaning it’s kind of an economy that’s running alongside the traditional, you know, normal economy that we use money for and everything. So it’s there, it’s running in the same direction. In other words, people are getting what they want and they’re trading and they’re, you know, whatever. But it’s kind of off to the side. So that’s kind of what that means to be a parallel economy. But there’s other examples too. So, I guess we could draw numerous lines. We’ve got the normal economy, then we got bartering. We talked a little bit on the last episode, so maybe I’ll start here, about black markets. So a black market is a parallel economy as well. So again, you’ve got your traditional regulated market where the government is controlling things and overseeing things and restricting things and so forth. Then you have your bartering, which as we talked about last time, it’s kind of rare. It’s harder ’cause then you have to find someone who can offer you exactly what you want and so forth. But the black market is another parallel economy running kind of alongside, the traditional economy because this is, these are people who are trading with one another. Maybe they are things that are illegal, like if you’re in a country where guns are outlawed, but you want to keep your family safe so you illegally buy a gun to protect your family. Or, you know, maybe, you’re a cancer patient and so you buy some cannabis, from a guy, you know, because it helps you be able to eat and keep some weight on. And none of the drugs the doctors are giving you help, but in your state, it’s illegal, unlike other states. So that would be an example, you know, of a black market. Raw milk example. But in a lot of places, raw milk is illegal. And, there have been, particularly Amish people in the past who have been persecuted by the government simply for engaging in the trade of raw milk. And, you know, butters and creams coming from raw milk. I remember one, in particular, had like their whole store and homes raided by like, I think it was the FBI with guns drawn and everything because they had this raw milk kind of, co-op that they created. So, black markets are examples where it is a market. There are people, buying and selling and trading, but they’re, it either outside of the purview of the government. in other words, they’re, you know, the government is not kind of blessed what they’re doing, or they’re doing it in direct defiance of the government. The government says, you know, you cannot sell liquor. And then Al Capone and all his gangster buddies, you know, a century ago during prohibition, they continued to sell liquor. It was completely illegal and created all these battles and deaths and all kinds of problems.

Brittany: It’s crazy how criminals don’t care.

Connor: Yeah. About what’s you? Why aren’t you following the law? Well, I’m a criminal. What do you expect me to do? And so that was a black market for liquor when it was prohibited for a number of years during prohibition, and it created all these problems. So, the black market is another kind of parallel economy. Let’s go to another one. Brittany, what do you have to share?

Brittany: Yeah, Bitcoin I think is okay. It is one of the biggest ones, and maybe that’s not, it’s, well, actually, it’s kind of a black market, isn’t it, in a sense. But Bitcoin, was a way, and again, I love looking at the times things popped up. So, Bitcoin came around 2009, 2008, 2009, it, thousand eight, something like that, I think. Yeah, something like that. And 2008 was right when we were going through this crazy housing crisis where people like you and me Connor, came of age during this time. So I think there is a natural distrust of the government’s role in the economy because we saw what happened, we saw, you know, our parents, our family members, our family friends lose everything. And I don’t think it’s a surprise that it was right around that time that Bitcoin and the blockchain came into existence. Because here you have people who are scared now because they’re thinking, all right, the government has repeatedly messed with our money supply. Things always seem to go pretty poorly. The more they intervene in the economy. What if we started our own economy, and what if we made it encrypted? Like, what if we made it private so they can’t see what we’re doing? And that to me is probably one of the most powerful parallel economies that has, you know, occurred, especially in our modern time, because look at how big it’s gotten. And it’s sad to me. I remember there was a time when we thought maybe the government wasn’t ever going to be able to regulate it at all. And I miss those days because it’s been, I mean, of course, so everybody’s gotta think like, okay, the second government finds out about something, they’re gonna wanna find a way to regulate it. But there was a while there where I didn’t think, I didn’t think anyone was ever gonna have to pay taxes on it. Like, I thought this was going to be our, you know, we finally found a way. So, it has been a little sad to me to see that the government has played a role in intervening a little bit. But I still think it is one of the freer things we have. You know, there is, and I am not condoning any of this, but there’s something called the dark web where you can pretty much buy any, it’s like it’s a black market online. It’s a black market online, but you use Bitcoin to do that, right? So, Bitcoin is helping this other parallel economy. So it’s just, it’s fascinating to me what is, there’s a, the original Jurassic Park, there’s a character that says, it’s life finds a way. Yeah. That is his quote. And I love that because the free market finds a way if the economy’s not serving us, somebody will find a way to create.

Connor: Well, let’s continue from the Jurassic Park theme. The same guy, I can’t remember his name, Malcolm something in, I mean.

Brittany: Jeff Goldblum is the greatest actor of the time, but that’s right. Yes, Dr. Malcolm.

Connor: Jeff Goldblum, that’s right. I don’t know why I said Malcolm. oh, that’s, no.

Brittany: That’s his character name. Yeah.

Connor: So, in there he’s talking to the scientists or about the scientists. Yeah. He is talking to these scientists that created these dinosaurs and brought them back, and he says something like this. He says, you were so focused on whether you could, that you didn’t stop to think whether you should. In other words, he’s saying you were so focused on whether you could bring dinosaurs back that you didn’t stop to think whether you should do it. Right? And so, it’s kind of, one of these interesting things where like, yeah, you can ban or try to ban Bitcoin, but should you, right? You can punish Amish people to try and, you know, force them to stop selling raw milk, but should you, and so the government, when you have these black markets, it sees them as a threat. I mentioned on the last episode when we were talking about bartering, we mentioned the Silk Road and the 12 Hundreds, and where it was this explosion of trade. And you mentioned the dark web. Again, not recommending anyone really look into that, but it exists. And it’s important to recognize that there are black markets all over the world, offline and online, where bad things are done in the shadows. Just like Al Capone and his buddies during prohibition, we’re doing all kinds of bad things. Government prohibition does not make the bad thing stop. It just pushes it down into the shadows where it can get way more dangerous for everyone involved. And so, there’s an individual, I think we’ve talked about ’em be, before on the podcast, perhaps not, but Ross Ulbricht who created.

Brittany: We haven’t, I think we should though, at some point.

Connor: Okay. So, he created a website called Silk Road. He named it the Silk Road. And it was basically an online, you know, black market, I guess you could call it. It was a way of using Bitcoin, and cryptocurrency to be able to buy things. And so, you know, lots of bad stuff was being used on there, but some fine stuff too. And it was just a market, but the government punished him. I think he has what, like a double life sentence, in prison. Yeah. Like, he gets punished more than like murderers and people who have like, actually done horrible stuff. So it’s a very sad story. but it shows that.

Brittany: You have been teaching a lot of other prisoners about the economy and stuff though, so he’s chewing as much there’s as he can.

Connor: That’s a good lesson about, you know, turning lemons into lemonade, right? Yeah. No matter what you’re, in fact, we should do an episode on Viktor Frankl, Man’s Search for Meaning.

Brittany: Oh, yeah. We should.

Connor: You know, here’s a guy, that experienced the Holocaust way worse than what Ross is going through. And yet, despite that, he’s finding ways to make the most of circumstances, a fascinating story we’ll talk about later, but it, shows that the government sees these things as a threat, that’s why Ross was punished so severely a murder. Random murder is not a threat to the government and to the economy, but an online website, free of regulation is a huge threat. And so they punish him way, way more, excuse me. They punish him way, way more because it is, it is a threat to what the government is doing and what it’s trying to control. There’s another parallel economy, perhaps, that I wanna mention. And that’s homesteading. So self-sufficiency, basically if I have a homestead and I’m growing all my own food and, you know, producing, and I’m, you know, even spinning my own wool and clothing, and if I’m minimizing the number of things I need to trade for and buy because I’m producing a lot of things on my own, then that’s kind of a parallel economy. I mean, really any family household is kind of a mini economy, a mini business. I mean, I was thinking about this the other day ’cause we talk a lot about entrepreneurship and small business with Tuttle twins and so forth. And I was thinking, you know, in reality, every family is a small business because you’re buying and selling and you’re managing resources and you’re, you know, directing people and you’re all working together. And it’s kind of like running a little company.

Brittany: So, what does that make your kids or kids, your employees or your coworkers?

Connor: Employee team members, we’ll call them team members.

Brittany: Team members, colleagues.

Connor: Yeah, I just, need to get them to a point, like, you know, when you drive through, Chick-fil-A.

Brittany: Yes. Then I say.

Connor: You know, already say thank you or whatever, and they say, my pleasure, my pleasure. I need to get my kids saying that. You know, like, my pleasure. And so every family’s kind of a little small business. So, a family’s kind of its own little economy. And so homesteading where you kind of take it to the extremist, some people do, can be a parallel economy. Now there’s problems with that. Granted, there’s problems with, you know, right now, Bitcoin, trying to mainstream that. There’s problems with black markets, there’s problems with bartering, there’s problems with the traditional economy. There’s tons of problems with the traditional economy. So everything has trade-offs. None of this is perfect, right? But what are the problems of homesteading? Well, one of them might be that it is very difficult to make all your own stuff, to grow all your own stuff, right? In The Miraculous Pencil, we shared the story of how a pencil is made, and it requires all these people, as our listeners know, that book is based on of an essay called I Pencil by Leonard Reed.

Brittany: My guy Larry Reed.

Connor: Yep. He talks about the autobiography of a pencil. And there was an individual, I don’t remember the name of this, but on YouTube, there was this video where this guy tried to make a sandwich all by himself. And so he grew the wheat and then ground it and turned it into flour. He grew tomatoes, he raised chickens. He grew lettuce, you know, all the things, basically all the ingredients for like a, you know, some kind of chicken sandwich and, or maybe it was beef. I don’t remember, but it’s some kind of sandwich. And so all these different ingredients and, like, it took an insane amount of time, and it wasn’t that good because he was trying to do it all himself. So, our lives are better when we’re interacting with other people, when we have a division of labor, right? We specialize in what we’re good at. And then other people specialize in what they’re good at. And then we trade and then things get way bitter. We get things like cars and iPhones you know, and books and all kinds of cool stuff.

Brittany: And information.

Connor: Information even. That’s a great point. So, homesteading, even though it’s a parallel economy, one of its big problems is your living standard declines because you’re not able to do very much all on your own. You can do a lot. You can survive, you know, people throughout history have survived little families out on a homestead somewhere. So, you can survive, but you won’t probably thrive. But I think it’s also still, an example of a parallel, economy. Brittany, maybe the question for you, and we’ve touched on this a little bit with Ross Ulbricht and the Silk Road, but let’s revisit this for a moment. How do governments feel generally speaking about these parallel economies?

Brittany: They do not like them. And, they don’t like it because they don’t like being in control. It’s different than this. But, you know, Ron Paul always said that thing, don’t steal, government hates competition. But it goes back to the government hates competition. They do not like what they cannot control. And the reason black markets and parallel economies of all natures are so important is because the government isn’t involved for the most part, right? It bypasses all their silly regulations and laws that mess up our economy, and it allows people to do what people were born to do, which is exchange ideas and goods and services with each other. And they don’t need a third party to help them do that. So, no the government doesn’t like it when it loses control, so it absolutely does not like it.

Connor: I think you’re right. And perhaps that’s all the more reason why those of us who care about freedom should actually be supportive of parallel economies. Competition against the state is a good thing because if we don’t have competitive pressure if we don’t have, you know, other parallel economies that are pressuring the government, then the government is a monopoly. And then we all know how monopolies go. The quality goes down and the cost goes up. And so we don’t want the cost of government to go out, which is taxes and, and restrictions and so forth. And we don’t want the quality to go down, which means we need competition, which means we need parallel economies. If Bitcoin and crypto continue to like thrive and grow, and if people can use it to more easily transact, then the traditional economic system that has a ton of corruption and middlemen making money all over the place when they shouldn’t, and they’re taking value from people, right? They start to go away, which is why people like you and I years ago, really flocked to Bitcoin because of that promise of this very fancy word called disintermediation, basically.

Brittany: No, I don’t like, yeah, I don’t like that one.

Connor: Basically, taking the middleman out of it so that we can connect directly and trade directly with people rather than having all these middlemen. And so the promise of parallel economies is let’s connect people directly to one another. Let’s be able to buy and sell and trade like free people. And then as those grow, or as people continue to do those, maybe that’s gonna keep the government a little more honest. Maybe it’s gonna be enough of a competition or a threat to the traditional economy that some of the corruption starts to go away and gets fixed. At least that’s in theory, it’s harder in practice. As Ross Ulbricht himself, yes, very well knows sitting in prison right now. But that’s parallel economies. We talked about bartering. Now, we talked about this. These are opportunities and ideas to explore how an economy works and what it actually means for us on a day-to-day basis. So, Brittany, as always, thank you. And until next time, we’ll talk to you later.

Brittany: Talk to you later.