RAOUL PAL: Dominic, we've talked a lot over the years, over email and various things. And finally we get to meet and to talk about the most bizarre subject, considering I live in a tax-free island in the middle of nowhere. We're going to talk a bit about tax.
DOMINIC FRISBY: I wish I did.
RAOUL PAL: And what I'd love to do first is just I'd love to hear a little bit about your history, who you are, where you come from, and what you do, just to frame it for people.
DOMINIC FRISBY: Well, if I'm trying to sound important, I would describe my background as eclectic. But we'll say it's unusual in that, when I was a young man, I always wanted to be a writer. And I had this theory that all the best writers started out as actors, from William Shakespeare, Charles Dickens, they were all actors first. So I decided I was going to go to drama school and train to be an actor in order to be a writer, if that makes sense.
And then, while I was at drama school, for some reason, I was the best in the class at radio. And I got signed up by this voiceover agent as soon as I left. And they had me doing voiceovers from, literally, the day I left drama school. And voiceovers, it's a weird profession. But back in the '90s, it was very well paid. And you get very well looked after. And you don't get quite treated like a celebrity, but you get treated like a very important person without having to pay any of the sort of downside of fame because nobody knows who you are.
And so it was quite a nice, comfortable lifestyle that I fell into. And while I was doing that, I had written this comic song called "The Upper-Class Rapper." And I sort of started doing it as a sideline in comedy clubs. And so I sort of became a stand-up comedian as well.
And by-- it would have been the early noughties, the mid-noughties, 2005, around about then, I'd actually made a bit of money. And I was like, oh, I want to invest it. And I started reading about everything that was going on in the world. And I went to meet various fund managers. And I got this really bad feeling off a lot of the fund managers that I met. I just got the impression they were all wanted their little 1% and 2%.
And I was reading in the early hours of the morning. I got sort of sucked into the web of gold. And I thought, I really like this gold. And I started reading about fiat money and the debasement of currency. And suddenly, things like why house prices are so expensive, and why the state is so expensive, and all these questions that it's sort of boiled away in my mind, suddenly became clear.
And there were lots of very interesting people talking on the internet-- Jim Rogers and James Turk and David Morgan and various other people like that, Jim Dines, and all these sort of old-school newsletter writers and so on. I thought, I really want to talk to these people. How can I find a means to talk to these people?
So I started a podcast. And this was in about 2006. And I found that everyone's quite happy to come on podcasts and to sell whatever they're selling for their newsletter or their own brand. But I also found that podcasting is the most fantastic way to meet people. And in an hour, sort of in the heightened conversation that is an interview, you can get to know someone way quicker than-- you get through in an hour what you would in several meetings. And the podcast was very successful. It became the Uk's number-1 investment podcast. It started out being called "Commodity Watch Radio." And then the very first person I interviewed was Jim Rogers, George Soros' partner, the man who helped bring down-- and I was like, wow.
And one of the things I quickly learned is that, mining and investment, that particular world, was actually bizarrely much more open than the media is. You think the media is all about communication and everyone's introducing everyone to everyone. But no, everyone's got their little fiefdoms in the media. And they're terrified that somebody else is going to steal their little throne.
And so it's a terrible industry for backstabbing and not introducing. Whereas in mining, all that matters is the quality of the rock at the end of the day. And it doesn't matter if you're white, brown, black, white, old, young, male, female, all that matters is the rock. And I just found that it was just much more open. And you can have serfs talking with lords in a way that you couldn't have in the media. The idea that serfs can talk to lords.
So anyway, so I rather fell in love with this new, exciting world. And you've got all these salesman characters that you find in mining who are very winning. And then, at the same time, one of the people I interviewed was a woman called Merryn Somerset Webb, who was the editor of MoneyWeek. And she said, oh, we need people like you to come and write for us. And I said, well, I don't really know what I'm talking about. Eh, it doesn't matter. Just write it. You'll learn.
And so suddenly I found myself with a column in MoneyWeek. And things just sort of spiraled from there. And then I was invited to write this-- there was a film called Four Horsemen that a guy had made. And it was a total mess. And he asked me to rewrite it for him, which I did. And it became very successful. And then I saw what was possible with that film. And it had millions and millions of views on YouTube. It was all about the global financial crisis.
And then, from there, I wrote my first book, Life After the State, which is all about how we need to reform our system of money. And then, while I was writing that, this thing called Bitcoin was invented, which was the free market providing a solution to our system of money. So I think Life After the State was like the first paragraph in a proper book that mentioned Bitcoin.
And then, from there, I wrote this book, Bitcoin-- The Future of Money, which was the first book on Bitcoin from a recognized publisher. And so I saw that the free market was providing solutions to the monetary system, to the problems of money. And so I turned my hand to the next big subject that the world needs to sort out, which is Daylight Robbery, which is taxes.
And so that's sort of me and how I got here. And this is the next book. How we save the world is by reforming our systems of tax.
RAOUL PAL: I mean, I've been looking at tax here-- as I said at the beginning, flippantly, that I live in a tax-free jurisdiction. I mean, there is nothing tax-free. There's import duties and there's other stuff.
But I've been writing in Global Macro Investor about the rise of deficits and that the outcome is going to be more taxes. But you went back in the book and looked at the history of taxes. What's the kind of journey you want to take us through to get people to understand this and then where you think this is all going?
DOMINIC FRISBY: This book actually started as a comedy show in Edinburgh. And in a zombie film, you have this idea-- one of the tropes of a zombie film is that you have this idea of a "zero patient," the patient where the virus started. The bat in Wuhan, that is the zero patient. And if you can get to the bat, if you can get to the zero patient, then the hero of the film can either find the cure for the zombie virus, or, if he kills the zerot patient-- he either finds the antidote or he kills the zero patient and the virus is dead.
I used to think that society's zero patient, if we're going to save society and fix society, we need to get rid of fiat money somehow. We need a better, sounder system of money. And I used to think that gold was the zero patient, and then, to an extent, Bitcoin.
But then I came to realize that actually the zero patient is a society's system of tax. You design a society by the way that you tax it. And I realized that there has never-- there's the old saying that the two inevitabilities of life are death and taxes. And by the way, we attribute that phrase to Benjamin Franklin. But actually it was a comedian who came up with that phrase about 50 years earlier, in a farce from 1716 called The Cobbler of Preston. But the two inevitabilities are death and taxes.
But there has never been a society without taxation. Right from the dawn of civilization, taxes, in one form or another, have existed. You didn't always pay your tax in money sometimes you paid your tax with your labor or with a share of your produce or whatever. And probably, in the hunter-gatherer societies that predated civilization, there existed this idea of a sense of duty to the greater collective.
So I started to look at the world through this prism of taxation. And once you do that, suddenly it's one of those real light-bulb moments, where the curtain is pulled back and you suddenly start to see things clearly why things are as they are today, why things happened in the past, how things are going to pan out in the future.
Once you look at the world through this prism of taxation, you just realize that not only is taxes inevitable, but behind almost every great event in history, there is some kind of tax story, often an untold tax story because taxes are boring. And you think, why is tax not taught in the same way we teach English or French or maths? Taxation should be taught at school. It's just this incredibly important subject that few people have bothered to write about.
RAOUL PAL: So what is it about tax that, outside of that-- what did you get your teeth into? So you've now got a conceptual framework, which is, OK, tax has been around forever. It's the patient zero of the financial system. It's almost how it works, right?
DOMINIC FRISBY: It's not just the financial system, Raoul, it's everything.
RAOUL PAL: It's a societal system. It's a societal structure.
DOMINIC FRISBY: Exactly.
RAOUL PAL: OK. So you get that observation. What do you want to do about it? So why the book?
DOMINIC FRISBY: Well, the book came because I was offered a publishing deal. [CHUCKLES] But it was a book that I wanted to write. I did pitch it before I was offered the publishing deal.
But yeah, it was sort of the next evolution from money. We've looked at money. And the world is aware of the evils of a fiat money, I think, now. But now we start to look-- what else? And we need to sort out our system of tax, badly, badly, badly. And if you think that every single war in history was, is, was paid for, was made possible because of taxes. Taxes paid for the war to happen.
The King levied the tax and then he went to war. And then afterwards, the reason, often, that he went to war was he wanted to conquer. He wanted to take control of a tax base somewhere-- the land, the labor, the produce, the profits. They would plunder and then they would tax. And if taxation didn't exist, it's almost like war couldn't exist. Because tax makes war possible.
And then the bizarre flip of that is that not only does tax make war possible, but war makes tax possible. It's very hard for leaders to raise new taxes in times of peace. It's almost always done with some kind of national crisis, some kind of emergency.
And some recent examples of that would be ordinary Americans didn't pay taxes until the Revenue Act of 1942, when income taxes were raised to pay for the American War effort. And there was a wonderful song written by Irving Berlin to fill Americans with a sense of their patriotic duty. And the song went, "I paid my income tax today. 1,000 planes to bomb Berlin. They'll all be paid for and I chipped in." And was ever sort of the link between war and taxes so apparent?
1914, taxes went up dramatically in the First World War, both for Europeans and for Americans. That war was also paid for by another form of taxation, which was the debasement of currency, the inflation tax, which Milton Friedman calls "taxation without legislation." The English and the French and the German countries all took their countries off the gold standard in order to print the money they needed to pay for the war. If those governments had been kept within the restraints of gold, that war could never have happened to the extent that it did.
The American Civil War gave America the IRS. And the very first income taxes in America were raised in the American Civil War. And by the way, the American Civil War, it's painted now as a war about slavery. It wasn't, it was a war about economic interests.
One of the biggest economic factors in that war were the fact that the Southerners felt they were paying unjust levels of taxes compared to the Northerners. And their tax revenue was all being spent to protect industry in the North. And they no longer wanted a part of it. It had been going on for 50 years. And they wanted to secede because they were sick of, effectively, their cotton plantations subsidizing the North. It was a huge factor in the American Civil War. And it goes virtually untold.
The Napoleonic wars gave income tax to the British for the very first time. So there's this incredible relationship between war and taxes. Every revolution in history some kind of revolt against some kind of injustice perpetrated by the tax system. The French Revolution, the Russian revolution, the American Revolution-- "no taxation without representation."
And it's not just wars and revolutions, it's bizarre things like Mary and Joseph were only in Bethlehem to pay taxes when Jesus Christ was born. They went there because Augustus Caesar levied his census. Had they not been there, Christ wouldn't have been born in Bethlehem, and Christianity could never have evolved in the way that it did. And the crime for which Jesus Christ was eventually crucified was forbidding to give tribute to Caesar, non-payment of taxes.
You look at something like Islam, historians struggle to explain why it is that Islam effectively took control of the whole of the Middle East and North Africa in about 3 decades. And when you learn that all the countries that they conquered, heavily, were sick of paying taxes either to the Romans or the Byzantines or the Sasanian Empire. And when the Islamic conquerors came in, they were actually grateful for these conquerors to relieve them of the burdens of taxation. That's one of the reasons the conquest was able to happen as quickly as it did.
And then the Islamic conquerors said, well, you can either convert to Islam or you cannot convert to Islam and you have to pay poll taxes. And if you don't pay the poll taxes, we're going to kill you. So it was a choice between death, taxes, or Islam. Everyone chose Islam. Who can blame them?
And it was like the most effective proselytizing tool in all history. And it explains this incredible-- and you know, Islam went into a sort of Dark Age from about 1400 onwards. But until the 1400s, it was one of the most brilliant societies-- innovative, full of trade, free markets, free thought, brilliant mathematicians, brilliant architecture. It contributed so much to the world. And it was built on low taxes.
And there is a relationship between low taxes and freedom. As Margaret Thatcher said, "You can't have freedom without economic freedom." And you look at the great societies in history, they were almost always low-tax jurisdictions. And there's a relationship between low tax, freedom of the individual, free speech, free thought, free movement. All these things are all interconnected. And so tax is like a measure of freedom in a way. And in a totalitarian state, the ordinary laborer owns none of his own labor. In an anarchy, he owns all of his own labor. In a social democracy, it's about 50-50.
So once you get going, there's just no end to this subject.
RAOUL PAL: Fascinating-- totally fascinating. So here we are, just having fought a global war, which is the pandemic.
DOMINIC FRISBY: The war against drugs, the war against terror, or the war against COVID?
RAOUL PAL: Well, the war against COVID had the biggest economic impact of all because we shut down the world for a year. So it was like a kinetic war. It really had a huge impact. And it's massively damaged governments. So the only answer they have is, OK, we need to think about raising taxes through some clever ways like carbon credits, carbon offsets. That's tax by a different method.
But taxes on the average person, as you pointed out, in times like this, always go up. And it may innovate as well. Where do you think we are now? And where is this going?
DOMINIC FRISBY: Well, I mean it's the problem that gold bugs have been talking about for a long time, which is that governments have been spending more than they earn. But COVID has just accelerated that in the most dramatic way possible. And I mean, we've got, the day we're speaking-- I think this is broadcast afterwards-- but tomorrow is Budget Day here in the UK. And the chancellor's talking about raising this tax and raising that tax.
But really, any money that he can reasonably raise by increased taxes doesn't even touch the side of how much they've spent. And I talk about 3-- there are 3 different ways that you tax. There's debt, which is a tax on the future. And they're basically monetizing debt now. The Bank of England is printing money and buying government-- or the Fed or the ECB, whichever central bank you like, is printing money, buying government debt. And then everyone says, well, the Bank of England owns the debt. What's the problem? It's just monetization of government debt.
But debt is a tax on the future. We only finished paying off on World War I debts, I think it was 5 or 6 years ago, in the UK. And you're like, so my taxes have been going to pay for World War I debts? And we're in similar levels of debt as we were in World War I. And that is going to be passed on to our children or grandchildren and great-grandchildren.
RAOUL PAL: And you see the trend rate of growth of GDP declines as the debt burden rises.
DOMINIC FRISBY: Of course it does.
RAOUL PAL: Because it's a tax, as you said. It's a tax on the future. So what happens is the overall output of the economy over time reduces.
DOMINIC FRISBY: Absolutely. And then they say