1
00:00:00,000 --> 00:00:13,140
The central bank and the government faces a choice, which is simply, do we stand aside and default on our applications, or do we print money to keep our debt nominally money good?

2
00:00:13,620 --> 00:00:18,780
We're in a spot where one false step and, you know, things can go pear-shaped pretty fast.

3
00:00:18,780 --> 00:00:27,380
When you do dumb stuff with borrowed money for 40 years and you follow an economic dogma, you eventually get to this point.

4
00:00:27,780 --> 00:00:36,280
They're financing deficits in your cash markets because they can't issue enough bonds at the long end at rates that don't blow up the debt.

5
00:00:37,000 --> 00:00:40,140
We've got exponential functions in two different directions happening.

6
00:00:40,840 --> 00:00:46,380
And that means it's going to happen like way, way faster than we think.

7
00:00:46,380 --> 00:00:51,280
I think over time, all else equal, Bitcoin probably wins.

8
00:00:54,120 --> 00:00:56,340
Mr. Luke Groman, good to see you, man.

9
00:00:56,360 --> 00:00:56,720
How are you doing?

10
00:00:56,940 --> 00:00:57,720
I'm doing great.

11
00:00:57,820 --> 00:01:00,440
Great to be back and great to catch up with you.

12
00:01:00,540 --> 00:01:02,140
Was that your first beefsteak last night?

13
00:01:02,600 --> 00:01:03,440
I think it was.

14
00:01:03,820 --> 00:01:04,480
What did you think?

15
00:01:04,980 --> 00:01:07,720
I like meat, so I like steak.

16
00:01:08,640 --> 00:01:10,300
And I certainly had a lot.

17
00:01:10,360 --> 00:01:11,380
And it was excellent.

18
00:01:11,520 --> 00:01:13,500
It was prepared exactly as I love it.

19
00:01:13,500 --> 00:01:17,260
medium rare, medium

20
00:01:17,260 --> 00:01:19,260
it was excellent, the company was great,

21
00:01:19,340 --> 00:01:20,880
the conversation was great, so I enjoyed it.

22
00:01:20,900 --> 00:01:22,320
He's like a real legit chef.

23
00:01:22,500 --> 00:01:24,640
I believe it based on how everything tasted.

24
00:01:24,800 --> 00:01:26,180
It was amazing, but yeah,

25
00:01:26,280 --> 00:01:29,500
I didn't eat much all day, so it hit the spot.

26
00:01:29,500 --> 00:01:30,260
That's just what you want.

27
00:01:30,400 --> 00:01:33,420
I got roped into playing beer pong and I was there quite late.

28
00:01:33,420 --> 00:01:35,700
I feel a little bit slow this morning,

29
00:01:35,780 --> 00:01:37,380
so if I'm slower than normal, that's why.

30
00:01:38,100 --> 00:01:38,420
Hardly.

31
00:01:40,060 --> 00:01:41,220
We've got a lot to talk about.

32
00:01:41,580 --> 00:01:43,120
I follow your work pretty closely.

33
00:01:43,120 --> 00:01:47,080
I read all the reports you put out and things are getting pretty crazy.

34
00:01:47,380 --> 00:01:50,640
Like I've, obviously you've been working this for 30 years or whatever it is.

35
00:01:50,860 --> 00:01:55,720
I've been paying a little bit of attention to macro stuff really only since after getting into Bitcoin.

36
00:01:55,860 --> 00:02:01,460
So like 2018, 2019 was probably when I really started like enjoying listening to people talking about the macro side of things.

37
00:02:01,700 --> 00:02:05,380
And it's not like it's ever seemed like it's in a really healthy spot.

38
00:02:05,540 --> 00:02:09,220
But right now it seems like it's in an absolute mess.

39
00:02:09,220 --> 00:02:12,640
Is this the worst environment you've ever seen?

40
00:02:13,120 --> 00:02:31,540
I wouldn't say worst. I would say most precarious. I think it's in sort of an okay spot at the moment. But in terms of worst, I would, you know, most precarious, where you're almost on the head of a pin.

41
00:02:31,540 --> 00:02:52,340
And any step you take in either way, there be dragons, whether it's geopolitical, whether it's debt, whether it's unemployment, whether it's demographics, whether it's – there's a whole list of things, resource constraints slash competition.

42
00:02:52,860 --> 00:03:04,720
There's just everywhere you go, it seems like, you know, if we don't know, we don't know if the next step that is going to be the step where you sort of, oops, you know, go over the edge.

43
00:03:05,000 --> 00:03:12,120
But, you know, we're in a spot where one false step and, you know, things can go pear-shaped pretty fast.

44
00:03:12,600 --> 00:03:14,820
So, like I say, there's a lot I want to go through.

45
00:03:14,920 --> 00:03:16,000
But can we start with the Fed?

46
00:03:16,720 --> 00:03:19,020
Because they've obviously started cutting rates.

47
00:03:19,020 --> 00:03:23,620
And I understand why from one perspective, like jobs aren't looking great at the moment.

48
00:03:24,480 --> 00:03:26,760
But at the same time, inflation is still above target.

49
00:03:27,080 --> 00:03:32,580
It looks like inflation is likely to come back in a more reasonable, like more sizable way over the next few years.

50
00:03:33,020 --> 00:03:38,540
Like what do you think they're doing the right thing by cutting rates and potentially continuing to cut rates throughout the rest of the year?

51
00:03:39,440 --> 00:03:44,160
It depends on which hat or which team you play for, right?

52
00:03:44,160 --> 00:03:58,600
If you play for the Fed independence, preserve the real value of the bond market no matter what, sort of the operating environment the last 40 years, then it's not the right thing to do.

53
00:03:58,740 --> 00:04:00,400
I think they probably shouldn't be.

54
00:04:02,760 --> 00:04:13,620
But if you play from the side of the much, I think the much bigger, and this is the side, this is the team I'm cheering for or playing for, if you will.

55
00:04:14,160 --> 00:04:42,120
If you go from the side of a broader strategic context where we are trying to extract ourselves from the errors of the past 30 to 40 years of economic policy, this neoliberal, globalist type of dynamic,

56
00:04:44,160 --> 00:04:54,540
And I don't know that there's anything wrong with those strategies, those theories in and of themselves.

57
00:04:54,540 --> 00:04:58,740
The issue is they've been taken far, way too far in one direction.

58
00:04:58,740 --> 00:05:04,800
And so now as a nation, the United States, we've offshored too much of our defense industrial base.

59
00:05:04,800 --> 00:05:15,140
We have hyper-financialized, and we find ourselves where it's essentially a national security threat.

60
00:05:15,520 --> 00:05:21,900
When you are reliant on China to make critical components for your military, you don't have a military.

61
00:05:22,100 --> 00:05:23,920
China backs your military.

62
00:05:23,920 --> 00:05:44,100
When you have offshored your labor and your economic system has changed or perverted the incentives of your economy such that it makes way more sense to go into finance than it does into engineering or skilled trades.

63
00:05:44,100 --> 00:05:48,260
And I say that as someone who made a conscious decision to go into finance for exactly the reason.

64
00:05:48,260 --> 00:05:54,060
The incentives were simply much more attractive for someone going into college in 1993.

65
00:05:56,460 --> 00:05:59,900
We have created these massive distortions.

66
00:06:01,300 --> 00:06:13,700
And if we look at what the Fed is doing from that side, continuing to manage the economy as they have over the last 40 years for the bond market, for the banks.

67
00:06:14,100 --> 00:06:23,320
for sort of neoliberal, globalist roadmap, if you will,

68
00:06:23,540 --> 00:06:27,960
that's only going to worsen the issues,

69
00:06:28,180 --> 00:06:30,280
the distortions in the economy it's created

70
00:06:30,280 --> 00:06:32,380
and worsen the national security issue.

71
00:06:32,380 --> 00:06:38,420
So I think from a broader construct of if we as a nation,

72
00:06:38,620 --> 00:06:40,020
and I've said this before,

73
00:06:40,020 --> 00:06:47,720
We need to decide where we want to be in five years and 10 years as a nation and even as the U.S., but also as the West.

74
00:06:47,960 --> 00:07:04,220
And we need to say, look, if we want to rebalance things, if we want to not be dependent on potential adversaries for our defense supply chain, if we want to have a skilled trade base in five or eight years, that it actually exists.

75
00:07:04,220 --> 00:07:10,560
Because a lot – the small amount that we have relative to what we need is going to age out over the next five to eight years.

76
00:07:11,240 --> 00:07:32,620
Then we need to make a decision today that looks like cut rates, run it hot, financially repress the bond market, financially repress the banks, put up some protectionist barriers so that we can bring some – we can bring some balance back to this very imbalanced economy.

77
00:07:32,620 --> 00:07:36,640
from a perspective of where we want to be in five years strategically,

78
00:07:36,820 --> 00:07:37,620
10 years strategically.

79
00:07:37,840 --> 00:07:40,700
And so I think it's the right thing to do,

80
00:07:41,600 --> 00:07:45,500
but the Fed has always been a political institution.

81
00:07:45,620 --> 00:07:46,620
It's always been a political question.

82
00:07:46,660 --> 00:07:47,260
Should we be raising rates?

83
00:07:47,600 --> 00:07:51,120
It is hyper-political now, and it feels like that's because

84
00:07:51,120 --> 00:07:52,600
we're at such a critical moment in time.

85
00:07:52,600 --> 00:07:55,360
If we don't make the right decision now,

86
00:07:56,380 --> 00:08:01,760
I think the next five years from now, 10 years from now,

87
00:08:01,760 --> 00:08:04,820
could be pretty tough, could be pretty bumpy.

88
00:08:05,140 --> 00:08:08,600
And is that right decision now basically paying in the short term

89
00:08:08,600 --> 00:08:11,380
to actually have real growth in the long term?

90
00:08:12,400 --> 00:08:13,500
Yeah, in essence.

91
00:08:13,740 --> 00:08:18,020
I think it's inflation in the short run for a rebalancing.

92
00:08:18,180 --> 00:08:21,600
Basically, there's a great quote by Lord Acton said,

93
00:08:21,860 --> 00:08:23,680
down through the centuries,

94
00:08:23,940 --> 00:08:25,980
the issue that has always swept down through the century

95
00:08:25,980 --> 00:08:28,100
and that will have to be fought once again

96
00:08:28,100 --> 00:08:29,480
is the people versus the banks.

97
00:08:29,480 --> 00:08:34,740
And I think it's a quote that defines the moment that we're in.

98
00:08:36,040 --> 00:08:40,500
Ultimately, the banks and the bond market have won for 40 years.

99
00:08:41,600 --> 00:08:55,020
Policy, economic policy in this country, be it what the Fed has done with rates, be it with the offshoring of the industrial base to lower deficits, or excuse me, to lower inflation, reduce costs, et cetera.

100
00:08:55,020 --> 00:09:07,720
It has all been done with one goal in mind, which is to subjugate the U.S. middling working class to support the real value of the bond market and by extension Wall Street.

101
00:09:08,800 --> 00:09:11,380
And that has now been taken too far.

102
00:09:11,760 --> 00:09:20,000
And so if we want to be where I think most Americans would agree we want to be, then yeah, pain is all in the eye of the beholder, right?

103
00:09:20,020 --> 00:09:23,820
It's something I say all the time is what's normal for the spider is chaos for the fly, right?

104
00:09:23,820 --> 00:09:30,540
If you own lots of long-term treasury bonds, yeah, what I'm advocating would be very painful.

105
00:09:31,820 --> 00:09:32,480
If you own Bitcoin.

106
00:09:32,680 --> 00:09:48,720
If you own Bitcoin, if you own gold, if you own productive businesses, if you're a working-class person whose wages are going to rise as fast or faster than inflation, maybe for the first time in 50 years, then that's not as painful.

107
00:09:48,720 --> 00:09:57,000
And I think as a country, we wake up and you have a more rebalanced economy, a more self-sufficient economy where you're not as reliant on potential adversaries for key things.

108
00:09:57,740 --> 00:09:58,580
It's tricky.

109
00:09:59,160 --> 00:09:59,980
It's bumpy.

110
00:10:00,480 --> 00:10:02,220
There's no guarantee it's going to work.

111
00:10:03,280 --> 00:10:05,440
We've let it go on so long.

112
00:10:05,820 --> 00:10:09,340
It's a little bit more market-driven paradoxically, right?

113
00:10:09,520 --> 00:10:14,840
Ultimately, if we do those things, there should be more inflation.

114
00:10:14,840 --> 00:10:26,260
But that inflation is a market signal telling us, hey, you've underinvested for 40 years in your industrial base, in your working class, in your skilled trades, in your young people.

115
00:10:26,460 --> 00:10:28,200
And now you need to catch up.

116
00:10:28,400 --> 00:10:30,680
And doing that is going to be inflationary.

117
00:10:30,800 --> 00:10:37,760
And that's that, you know, that is just the fallout of the decisions we've made over the last 30, 40 years.

118
00:10:38,760 --> 00:10:41,900
What if you could lower your tax bill and stack Bitcoin at the same time?

119
00:10:41,900 --> 00:10:44,380
Well, by mining Bitcoin with Blockware, you can.

120
00:10:44,840 --> 00:10:51,520
New tax guidelines from the Big Beautiful Bill allow American miners to write off 100% of the cost of their mining hardware in a single tax year.

121
00:10:51,820 --> 00:10:53,620
That's right, 100% write-off.

122
00:10:54,100 --> 00:10:59,520
If you have 100k in capital gains or income, you can purchase 100k of miners and offset it entirely.

123
00:11:00,560 --> 00:11:05,080
Blockware's mining as a service enables you to start mining Bitcoin right now without lifting a finger.

124
00:11:05,440 --> 00:11:10,660
Blockware handles everything from securing the miners to sourcing low-cost power to configuring the mining pool.

125
00:11:10,820 --> 00:11:11,420
They do it all.

126
00:11:11,420 --> 00:11:16,740
You get to stack Bitcoin at a discount every single day while also saving big come tax season.

127
00:11:17,320 --> 00:11:22,200
Get started today by going to mining.blockwaresolutions.com forward slash WBD

128
00:11:22,200 --> 00:11:26,300
and for every hosted miner purchased you get one week of free hosting and electricity.

129
00:11:27,040 --> 00:11:33,900
Of course none of this is tax advice. Speak with Blockware to learn more at mining.blockwaresolutions.com forward slash WBD.

130
00:11:33,900 --> 00:11:41,140
This episode is brought to you by the massive legends Iron, the largest Nasdaq listed Bitcoin miner using 100% renewable energy.

131
00:11:41,420 --> 00:11:43,180
IREN are not just powering the Bitcoin network,

132
00:11:43,380 --> 00:11:46,240
they're also providing cutting-edge computing resources for AI,

133
00:11:46,540 --> 00:11:47,760
all backed by renewable energy.

134
00:11:48,260 --> 00:11:51,060
We've been working with their founders, Dan and Will, for quite some time now

135
00:11:51,060 --> 00:11:52,720
and have been really impressed with their values,

136
00:11:52,880 --> 00:11:56,480
especially their commitment to local communities and sustainable computing power.

137
00:11:56,940 --> 00:12:00,180
So whether you're interested in mining Bitcoin or harnessing AI compute power,

138
00:12:00,400 --> 00:12:01,360
IREN is setting the standard.

139
00:12:01,960 --> 00:12:05,840
Visit iren.com to learn more, which is I-R-E-N.com.

140
00:12:05,940 --> 00:12:09,340
If you're already self-custody of Bitcoin, you know the deal with hardware wallets,

141
00:12:09,340 --> 00:12:14,320
complex setups, clumsy interfaces, and a seed phrase that can be lost, stolen, or forgotten.

142
00:12:14,940 --> 00:12:19,740
Well, BitKey fixes that. BitKey is a multi-sig hardware wallet built by the team behind Square

143
00:12:19,740 --> 00:12:24,920
and Cash App. It packs a cryptographic recovery system and built-in inheritance feature into an

144
00:12:24,920 --> 00:12:30,660
intuitive, easy-to-use wallet with no seed phrase to sweat over. It's simple, secure self-custody

145
00:12:30,660 --> 00:12:36,380
without the stress, and time named BitKey one of the best inventions of 2024. Get 20% off at

146
00:12:36,380 --> 00:12:38,840
bitkey.world when you use code WBD.

147
00:12:39,200 --> 00:12:41,860
That's B-I-T-K-E-Y dot world

148
00:12:41,860 --> 00:12:43,400
and use code WBD.

149
00:12:44,280 --> 00:12:45,960
And is it like Trump recently came out

150
00:12:45,960 --> 00:12:47,880
and said you can grow yourself out of debt,

151
00:12:48,300 --> 00:12:49,700
which I think you can also read

152
00:12:49,700 --> 00:12:50,980
as you can inflate your way out of debt.

153
00:12:51,760 --> 00:12:54,080
Is that what you think the administration

154
00:12:54,080 --> 00:12:55,160
are actually looking at as a real?

155
00:12:55,240 --> 00:12:56,680
Is that sort of their plan A right now?

156
00:12:57,020 --> 00:12:58,140
I think it's become plan A.

157
00:12:58,140 --> 00:13:01,240
I think plan A was Doge originally,

158
00:13:01,560 --> 00:13:03,180
which as you know, I was, yeah,

159
00:13:03,400 --> 00:13:04,940
I was looking at the math going,

160
00:13:04,940 --> 00:13:11,280
guys is, if you try to doge before you devalue the real value of the debt significantly,

161
00:13:11,420 --> 00:13:17,600
you're going to create a huge crisis. And they tried. They created a huge crisis aided by

162
00:13:17,600 --> 00:13:25,240
Liberation Day. And then they backed off. To their credit, I will say that, to my eyes,

163
00:13:25,320 --> 00:13:31,280
the senior members of this administration have been very open to course correcting relatively

164
00:13:31,280 --> 00:13:37,060
quickly, whether that be Besant, whether that be Vance, Trump, et cetera.

165
00:13:37,920 --> 00:13:42,520
Myron, they seem to take market feedback and adjust course.

166
00:13:43,020 --> 00:13:47,340
And so I do think plan A is now, we need to run this hot.

167
00:13:47,440 --> 00:13:56,060
We need to nominal growth, nominal GDP growth, and paired with Fed help, that is ultimately,

168
00:13:56,060 --> 00:13:58,460
I think, part of the rate cut dynamic.

169
00:13:58,460 --> 00:14:02,120
and get out of this the way we got out of it after World War II, right?

170
00:14:02,120 --> 00:14:03,420
We spent a bunch of money in World War II.

171
00:14:03,560 --> 00:14:04,980
Debt to GDP was 110%.

172
00:14:04,980 --> 00:14:06,540
It was 55%.

173
00:14:06,540 --> 00:14:08,320
Sorry, it was 110% in 1946.

174
00:14:08,520 --> 00:14:10,680
By 1951, it was 55%.

175
00:14:10,680 --> 00:14:11,380
How did they do that?

176
00:14:11,800 --> 00:14:14,620
Real rates in the United States were negative 13% at the lows, right?

177
00:14:14,680 --> 00:14:17,320
So bondholders got very, very repressed.

178
00:14:17,440 --> 00:14:19,600
We had capital controls, so it was a little different.

179
00:14:19,640 --> 00:14:21,480
But we also grew really rapidly, right?

180
00:14:21,480 --> 00:14:22,880
You had all these GIs coming back.

181
00:14:22,940 --> 00:14:23,620
You're building houses.

182
00:14:23,800 --> 00:14:24,700
You're rebuilding the world.

183
00:14:25,300 --> 00:14:26,560
So you can do it.

184
00:14:26,560 --> 00:14:39,540
And there are some things that are different this time, but all of those things point to we're going to need a lot hotter nominal GDP growth than the low double digits we ran at coming out of COVID.

185
00:14:40,060 --> 00:14:40,780
Where does that come from?

186
00:14:40,880 --> 00:14:41,880
How do they do that?

187
00:14:42,060 --> 00:14:46,100
Is it literally money printing, stimulate the economy in any way possible?

188
00:14:48,860 --> 00:14:50,020
That's a very good question.

189
00:14:51,020 --> 00:14:55,220
I think on the surface of it, if you're running big deficits, that's going to be stimulative.

190
00:14:55,220 --> 00:15:04,920
And that is depending on how you finance that, somewhere between stimulative and the close cousin of outright money printing.

191
00:15:05,320 --> 00:15:08,460
And it depends how you ultimately finance that.

192
00:15:11,300 --> 00:15:12,860
That's a big part of it.

193
00:15:13,280 --> 00:15:19,600
Then you get the private sector helping, in theory, with some of the things we're seeing.

194
00:15:19,600 --> 00:15:28,280
Right now, the big capital spending project du jour is AI and data centers, and that's certainly adding to GDP.

195
00:15:30,120 --> 00:15:40,660
The trick within that is that is a productivity driver, which ultimately then sort of under, you're investing faster in something that's going to remove jobs faster.

196
00:15:40,660 --> 00:15:40,960
Yeah.

197
00:15:41,220 --> 00:15:47,820
And that's a paradox that I haven't kind of solved for in my head, right?

198
00:15:47,820 --> 00:15:49,660
There's what you end up there.

199
00:15:49,980 --> 00:15:57,180
You end up with a situation where you have a moment in time where nominal GDP grows faster.

200
00:15:57,320 --> 00:16:06,760
I think stocks, as stocks grow or stock prices rise, I should say, you end up with a consumer spending binge.

201
00:16:07,700 --> 00:16:09,100
And this is kind of what we're seeing.

202
00:16:09,180 --> 00:16:10,660
This is how they're kind of trying to do it, right?

203
00:16:10,660 --> 00:16:11,800
We've got big deficits.

204
00:16:11,900 --> 00:16:14,780
So we're running still 6%, 7% of deficits at all-time high receipts.

205
00:16:14,780 --> 00:16:18,080
We're running AI and data center.

206
00:16:18,420 --> 00:16:19,780
Capital spending is really hot.

207
00:16:20,240 --> 00:16:27,400
Sort of traditional industrial spending still, like, you know, they're spending on the grid and stuff, but your ISM indices across the country are plus or minus 50.

208
00:16:27,500 --> 00:16:28,560
So they're not really humming.

209
00:16:30,460 --> 00:16:41,400
And then you've got consumer spending that is still strong, but very bifurcated amongst, you know, basically top 10%, top 20% of consumers and the boomers.

210
00:16:41,400 --> 00:16:50,460
And then sort of the bottom 50% are under pressure, I think, partly due to inflation, partly they are in the crosshairs of some of these productivity gains.

211
00:16:50,460 --> 00:17:03,060
So it is a very tricky blend to try to get there in real terms other than just straight, hey, we're going to grow 5% real and inflation is going to be 10 or 8.

212
00:17:03,060 --> 00:17:17,140
And I think when you talk through it and say it's real tricky to get there in real terms, the conclusion is ultimately, you know, CPI has probably got to go to 8 or 10 if they want to have a chance of growing out of this.

213
00:17:18,160 --> 00:17:26,380
And, you know, that sets off a whole other set of, you know, trade-offs, as the economists like to call them.

214
00:17:26,860 --> 00:17:30,960
When you were on the previous What Bitcoin Did, I would have guessed it had been a couple years ago.

215
00:17:30,960 --> 00:17:33,320
We were talking about inflation coming back.

216
00:17:33,900 --> 00:17:36,120
In fact, I think it was when inflation was still relatively high.

217
00:17:36,260 --> 00:17:40,640
But you said that it's not a 0% chance that we go to like 40%, 50% inflation.

218
00:17:41,700 --> 00:17:43,880
Do you still think that's on the cards?

219
00:17:45,320 --> 00:17:53,360
I think there's still a risk of it for some period of time

220
00:17:53,360 --> 00:17:57,480
simply because of the level of debt in the system.

221
00:17:57,480 --> 00:18:06,480
You know, all the great inflations that you see are not because, oops, the central bank was too loose and the economy ran too hot and inflation suddenly went to 40 or 50.

222
00:18:06,540 --> 00:18:07,400
That's not how it works.

223
00:18:07,400 --> 00:18:21,720
The great inflations are we have debt to GDP of 120%, and our foreign creditors are not buying our debt like they were either at all or certainly relative to the new deficits.

224
00:18:21,880 --> 00:18:24,020
And our deficits are 6% to 7% of GDP.

225
00:18:24,920 --> 00:18:26,720
And then we have some sort of crisis.

226
00:18:27,480 --> 00:18:38,740
And when we have the crisis, receipts fall, interest doesn't fall, foreigners sell bonds to get liquid, and the rates start going up in your crisis.

227
00:18:38,740 --> 00:18:42,540
And you go into a debt spiral because of the level of your debt, level of your secular deficits.

228
00:18:43,440 --> 00:18:54,580
And then the central bank and the government faces a choice, which is simply do we stand aside and default on our applications or do we print money to keep our debt nominally money good?

229
00:18:54,580 --> 00:19:03,240
And it's those times when governments are printing money to keep their debt nominally money good that we've seen the greatest inflations in history.

230
00:19:03,480 --> 00:19:07,580
And, of course, the numbers I just laid out were the numbers of the United States.

231
00:19:08,340 --> 00:19:11,120
And so is it possible?

232
00:19:11,280 --> 00:19:11,460
Sure.

233
00:19:11,540 --> 00:19:12,140
Is it my base case?

234
00:19:12,200 --> 00:19:12,500
No.

235
00:19:14,740 --> 00:19:16,260
But it would depend on events.

236
00:19:16,260 --> 00:19:24,920
It would, you know, if we get a crisis, we get a recession where receipts start to fall, GDP starts to fall.

237
00:19:26,120 --> 00:19:36,680
GDP falling with debt to GDP and deficits where they are, structural deficits, you don't, it's not a policy option.

238
00:19:37,240 --> 00:19:40,380
You have, yeah, you start to see.

239
00:19:40,380 --> 00:19:43,960
And, you know, importantly, we've seen hints of this.

240
00:19:43,960 --> 00:19:53,120
We even saw it earlier this year where, if you remember part of the plan, right, we're going to do austerity and we're going to doge and we're going to take some pain.

241
00:19:54,440 --> 00:20:09,622
And we going to Besson going to scare stocks into bonds and he going to get the tenure down Judge us by the tenure Judge by the 10 year i think this was february he said this and then we do we start moving toward we weren even in the liberation day yet we were just into

242
00:20:09,622 --> 00:20:17,422
uh march and stocks going down 10 year yields going down so far so good and like 10 days in

243
00:20:17,422 --> 00:20:22,362
all of a sudden stocks keep going down 10 year starts going up and keeps going up keeps going

244
00:20:22,362 --> 00:20:27,523
up. And then we do Liberation Day, and it comes down for a cup of coffee and then takes off like

245
00:20:27,523 --> 00:20:37,422
a scalded cat higher. This is emerging market with a fiscal crisis, having a recession, trading action.

246
00:20:38,102 --> 00:20:42,842
And had they stood aside, had Trump not tacoed, right? Trump always chickens out.

247
00:20:44,382 --> 00:20:48,463
They didn't have a choice. I think he said the bond market was getting a little queasy. Yeah,

248
00:20:48,463 --> 00:20:53,502
it was getting a little queasy. It was getting a lot more queasy. They were getting themselves

249
00:20:53,502 --> 00:20:57,362
into a position where, okay, your interest rates are going up, your receipts are going down.

250
00:20:57,582 --> 00:21:03,582
You've got a couple of weeks until you have a really bad or failed auction. And then it's only

251
00:21:03,582 --> 00:21:12,783
going to get worse and, and, and. And so their choice is sort of taco and get what we've in taco

252
00:21:12,783 --> 00:21:17,483
in April and get what we've had as we sit here, what today's October 8th, get what we've had in

253
00:21:17,483 --> 00:21:22,602
the ensuing six months, which is sort of bubble time and inflation has stopped going down and

254
00:21:22,602 --> 00:21:29,723
maybe it's ticking up a bit and gold's at almost 4,100 as we sit here and Bitcoin's 120,000,

255
00:21:29,723 --> 00:21:36,783
125,000 and stocks are at all-time highs. That's the choice. That's the trade-off to

256
00:21:36,783 --> 00:21:44,582
making the decision in April not to send the United States and by extension of us being the

257
00:21:44,582 --> 00:21:50,023
world's reserve currency and base reserve asset, incumbent base reserve asset, into a debt-death

258
00:21:50,023 --> 00:21:55,703
spiral, which would have been rates up, stocks down, bonds down, just wash rates repeat until

259
00:21:55,703 --> 00:22:01,303
you either default or you print it all. And so it is still a possibility.

260
00:22:03,063 --> 00:22:09,123
And it's one of these things where the margin of error keeps getting slimmer over time. As the debt

261
00:22:09,123 --> 00:22:15,303
goes up, in theory, there's this operating room where, okay, we're keeping inflation high enough

262
00:22:15,303 --> 00:22:23,082
that we're above stall speed where we go into a debt spiral, but we still are low enough where

263
00:22:23,082 --> 00:22:29,142
the bond market's not freaking out on the other side, right? But the rate that you need to stay

264
00:22:29,142 --> 00:22:37,822
above stall speed goes up with your debt. And the rate, whether it's a hard ceiling or it's a

265
00:22:37,822 --> 00:22:41,803
declining line of the rate where the bond market starts to go, we're done here.

266
00:22:45,283 --> 00:22:52,362
That space is narrowing. And once those lines cross, that's when you get brief moments of

267
00:22:52,362 --> 00:22:59,543
very high inflation. Now, that makes it sound like it's fait accompli versus a tail risk,

268
00:22:59,642 --> 00:23:07,283
which I realize I kind of just talked my way into. So there are externalities that could stop that,

269
00:23:07,283 --> 00:23:11,703
Right. If, you know, if China falls off the map first, right.

270
00:23:11,783 --> 00:23:27,742
Part, you know, if if if Russia falls off the map first, if we get some sort of productivity miracle, if something really happens, you know, either tech or health care, where there really is a productivity miracle that kind of restructures the economy, then there's ways out of that.

271
00:23:27,803 --> 00:23:33,582
But that's the path where that's the path we're on, where ultimately that type of decision will eventually lead to that.

272
00:23:33,642 --> 00:23:36,563
I just think there's probably a few more iterations of it between here and there.

273
00:23:36,563 --> 00:23:45,582
When I normally talk to people about inflation, one of the big concerns and one of the big impacts that it has on society is the sort of wealth inequality that that drives.

274
00:23:45,763 --> 00:23:49,242
But you're saying you think that wages will outpace inflation in this environment.

275
00:23:49,502 --> 00:23:53,362
Why would that happen when it's not happened in the past necessarily every time?

276
00:23:53,362 --> 00:23:58,783
I think wages for certain constituencies would outpace.

277
00:23:58,902 --> 00:24:06,043
I think basically you'd be taking money out of the pockets of rates traders and bankers and putting it into welders and skilled trades.

278
00:24:06,563 --> 00:24:12,623
which I think would serve to narrow some of the wealth inequality in theory.

279
00:24:12,943 --> 00:24:19,382
It is a blunt instrument, admittedly, and it's not guaranteed to work.

280
00:24:19,963 --> 00:24:27,703
But we can see the gap in wealth inequality that financialization is driven.

281
00:24:29,543 --> 00:24:30,822
It might not work.

282
00:24:32,063 --> 00:24:34,283
The thing we know is we know we're short.

283
00:24:34,283 --> 00:24:39,582
I don't know, I would have saw some congressional person say we're short 600,000 welders or something like that.

284
00:24:39,703 --> 00:24:41,662
You know, I saw the headline.

285
00:24:41,803 --> 00:24:43,723
I didn't dig into it, so it might be misquoting.

286
00:24:43,842 --> 00:24:47,123
But, you know, we're not short 600,000 mortgage bankers.

287
00:24:47,382 --> 00:24:51,242
You know, we're not short, you know, 600,000 rates traders.

288
00:24:53,803 --> 00:25:01,463
And so, you know, if we want to be able to build some of the things we want to build, you need to sort of restructure that.

289
00:25:01,463 --> 00:25:08,362
But, you know, being an old dog myself, it's hard to teach old dogs new tricks, right?

290
00:25:08,382 --> 00:25:14,082
So it's not like the rates trader is going to sort of have his salary go down because rates don't move around because the Fed's capping them.

291
00:25:14,342 --> 00:25:16,082
And he's going to go learn to be a welder.

292
00:25:16,523 --> 00:25:17,902
That's not how it's going to go.

293
00:25:18,002 --> 00:25:19,902
No, and you can't just click your fingers and do that overnight.

294
00:25:20,283 --> 00:25:21,203
No, you can't.

295
00:25:21,203 --> 00:25:29,902
And that is further tricky because the solutions to that are, well, you bring in more people to be the welders.

296
00:25:29,902 --> 00:25:43,303
But there, too, there's a delay. And sort of here, too, immigration policy of the U.S. is always framed in humanitarian concerns, understandably so.

297
00:25:43,303 --> 00:25:52,723
But I think the politicians and the economists do that from a very cynical standpoint, which is to say they don't care about humanitarian.

298
00:25:53,102 --> 00:25:57,463
What they care about is keeping inflation low. What they care about is keeping wages down.

299
00:25:57,463 --> 00:26:02,662
And that way, they can keep bond market rates low so they can borrow more money to spend on their pet projects.

300
00:26:03,362 --> 00:26:15,523
And if it requires them saying, oh, you are a cold, uncaring person because you want to restrict immigration, think about it in supply-demand terms.

301
00:26:15,642 --> 00:26:20,723
If the supply of labor shrinks, what's going to happen to wages?

302
00:26:20,723 --> 00:26:27,382
There's historically just countless – go back to extreme examples, the Black Plague.

303
00:26:27,463 --> 00:26:32,602
labor was able to dictate terms to sort of the lords and ladies for like

304
00:26:32,602 --> 00:26:41,263
decades if not centuries yeah um and again all with the greater i'm not trying to play hey you

305
00:26:41,263 --> 00:26:45,422
know blue collar versus white collar anything i'm looking at it from the united states of america

306
00:26:45,422 --> 00:26:50,662
this distortion that has been allowed to evolve in support of the bond market in support of

307
00:26:50,662 --> 00:26:55,682
washington in support of wall street has become so egregious that it's now creating these political

308
00:26:55,682 --> 00:27:02,223
problems and that you have to do something to fix it. But it's, to your point, there's no guarantee

309
00:27:02,223 --> 00:27:13,723
because the inflation market signal is a blunt instrument. But you need an inflationary market

310
00:27:13,723 --> 00:27:24,422
signal to fix what has been distorted. You have an inflation, we want to get wealth inequality

311
00:27:24,422 --> 00:27:29,422
down. How do we do that? Well, you have wages at the bottom go up and you have the real value of

312
00:27:29,422 --> 00:27:35,982
the bonds at the top come down. That can buy you time. But to your point, it's risky because

313
00:27:35,982 --> 00:27:42,402
inflation as a market signal tends to exacerbate some of those very pressures you're trying to fix.

314
00:27:42,842 --> 00:27:49,703
And yeah, I would fully concede that this is not, hey, it will absolutely work if we do this.

315
00:27:49,982 --> 00:27:53,963
It might not. We just have to try. We have to try. Well, the one thing I can tell you with

316
00:27:53,963 --> 00:27:57,082
absolute certainty is it's not gonna work we go the other way like we're already seeing that right

317
00:27:57,082 --> 00:28:01,463
we already you know uh whether it's the charlie kirk shooting whether it's the brian thompson

318
00:28:01,463 --> 00:28:08,002
shooting whether it's peter turchin had a uh who's written a great book end times uh and he tracks

319
00:28:08,002 --> 00:28:16,342
um he has a political violence uh index um as of a few weeks ago it's at the highest level uh

320
00:28:16,342 --> 00:28:23,043
since the 1860s in the united states as he tracks it right we've surpassed the 1960s

321
00:28:23,043 --> 00:28:30,322
So, like, I can tell you we're going to get a lot more of that if we don't, you know, it's like the old saying, right?

322
00:28:30,322 --> 00:28:35,543
If you don't get off the road that you're on, don't be surprised when you arrive at your destination.

323
00:28:35,943 --> 00:28:41,242
We know the road we're on, and we know we're running towards our destination faster.

324
00:28:41,242 --> 00:28:44,242
So I know a pretty high degree of certainty how this is going to go.

325
00:28:44,242 --> 00:28:53,842
So this, you know, the inflation to try to sort of rebalance things that have been imbalanced by, it's a Hail Mary.

326
00:28:54,342 --> 00:28:57,682
Maybe not quite a Hail Mary, but it's not a sure thing.

327
00:28:59,543 --> 00:29:00,943
The road run is a sure thing.

328
00:29:01,682 --> 00:29:02,082
Exactly.

329
00:29:03,203 --> 00:29:07,283
So when you talk about productivity miracles, there's a very obvious one in AI.

330
00:29:07,722 --> 00:29:12,102
I did a show a couple of days ago with an AI safety expert.

331
00:29:12,102 --> 00:29:14,623
he's actually the guy that came up with the term AI safety.

332
00:29:14,822 --> 00:29:17,462
So he's very concerned about AI,

333
00:29:18,443 --> 00:29:21,563
for one, taking basically every single job in the world.

334
00:29:21,902 --> 00:29:23,922
And then on a more extreme example,

335
00:29:24,263 --> 00:29:25,182
literally killing humanity.

336
00:29:25,543 --> 00:29:27,303
But if we just focus on the first part,

337
00:29:27,922 --> 00:29:31,922
which is like, let's say AI is as powerful

338
00:29:31,922 --> 00:29:36,063
and is as sort of disruptive in terms of taking jobs

339
00:29:36,063 --> 00:29:37,043
as we think it may be.

340
00:29:37,443 --> 00:29:39,402
Whether that's three years or 10 years or 20 years,

341
00:29:39,443 --> 00:29:40,222
it doesn't really matter.

342
00:29:40,342 --> 00:29:41,982
Like if you assume that all jobs in the world

343
00:29:41,982 --> 00:29:43,342
are going to be taken by AI.

344
00:29:44,523 --> 00:29:46,783
How do we even manage that?

345
00:29:47,023 --> 00:29:50,383
Because, again, I know the Fed is just one small part of this,

346
00:29:50,462 --> 00:29:53,443
but if they've got a dual mandate of jobs and inflation,

347
00:29:53,822 --> 00:29:55,303
they may as well just forget about one of them.

348
00:29:56,023 --> 00:29:58,602
How are we going to manage moving into this world?

349
00:29:59,982 --> 00:30:01,102
I don't know.

350
00:30:03,842 --> 00:30:08,982
I hadn't thought much about AI prior to two years ago,

351
00:30:09,342 --> 00:30:10,422
almost three years ago.

352
00:30:10,422 --> 00:30:36,303
So May of 2023, I was invited to speak at a conference out in Vancouver where I was on stage with an AI robotics expert and someone who has had a company and whose robots were already being, AI robots were already being tested by major American companies in their warehouses.

353
00:30:36,303 --> 00:30:41,462
and these robots are literally you know they would beat you know the best american chess player

354
00:30:41,462 --> 00:30:46,123
and they would you know they would literally pick up the strongest nfl linebacker with one hand and

355
00:30:46,123 --> 00:30:50,722
throw them across the room and they never need sick days and they never take time off and and

356
00:30:50,722 --> 00:31:02,242
and what this person said was that the um the pace that these robots aren't that different

357
00:31:02,242 --> 00:31:04,783
than electric cars in terms of the manufacturing process.

358
00:31:04,982 --> 00:31:06,822
They're not very manufacturing intensive,

359
00:31:06,822 --> 00:31:09,922
and they'll continue to get better at an exponential rate.

360
00:31:10,842 --> 00:31:13,982
And that in their view, you would see what they called autonomous labor.

361
00:31:15,162 --> 00:31:16,643
You know, you were already within a few years of it.

362
00:31:16,803 --> 00:31:20,643
There was some sort of labor test of like sort of just a basic functional

363
00:31:20,643 --> 00:31:23,783
of like your intelligence, your ability to pick up this box, put it over there.

364
00:31:23,783 --> 00:31:27,563
It was already approaching this sort of scoring as a human

365
00:31:27,563 --> 00:31:30,182
on a basic autonomous labor test.

366
00:31:30,182 --> 00:31:32,602
or a basic labor test.

367
00:31:33,162 --> 00:31:34,982
And that once that happened

368
00:31:34,982 --> 00:31:37,482
and you make some extrapolations

369
00:31:37,482 --> 00:31:40,162
about sort of how technology improves exponentially,

370
00:31:40,602 --> 00:31:44,143
you could see fully loaded,

371
00:31:44,383 --> 00:31:47,523
fully amortized autonomous AI labor

372
00:31:47,523 --> 00:31:52,862
at $5 an hour by like 2035 or 2032.

373
00:31:54,462 --> 00:31:56,682
And I remember sitting there going,

374
00:31:57,123 --> 00:31:57,643
oh my God.

375
00:31:57,643 --> 00:32:03,283
because I know so when I stepped onto the stage and and it was my turn to speak I came

376
00:32:03,283 --> 00:32:06,862
I was talking about just sort of the debt picture and the receipts etc

377
00:32:06,862 --> 00:32:15,422
and I said look what he just said is fundamentally incompatible with what we all know as our debt

378
00:32:15,422 --> 00:32:21,023
based system right so I was on x the other day and you know one of my one of my friends

379
00:32:21,803 --> 00:32:28,722
Tony Nash mentioned, look, you realize that if AI does what Wall Street thinks it's going to do, it's going to take all our jobs.

380
00:32:29,902 --> 00:32:31,023
I said, yes.

381
00:32:31,502 --> 00:32:36,842
And when it takes all our jobs, we're going to stop paying our mortgages.

382
00:32:37,043 --> 00:32:38,123
We're going to stop paying our car loans.

383
00:32:38,943 --> 00:32:43,842
When we stop paying our car loans and our mortgages, banks are going to start to run into trouble.

384
00:32:44,902 --> 00:32:46,422
What do the banks hold as their reserves?

385
00:32:47,322 --> 00:32:48,362
They hold treasury bonds.

386
00:32:49,002 --> 00:32:49,822
What are they going to sell?

387
00:32:51,023 --> 00:32:54,602
to offset credit losses due to people stopping paying on their

388
00:32:54,602 --> 00:32:55,943
and sell treasury bonds.

389
00:32:56,462 --> 00:32:59,402
So now you're going to have this unemployment rise,

390
00:33:00,143 --> 00:33:03,322
wage deflation, interest rates rising.

391
00:33:05,902 --> 00:33:06,623
Then what?

392
00:33:07,482 --> 00:33:08,982
Like, what do you do as a Fed?

393
00:33:09,063 --> 00:33:10,943
Like, that is an emerging market problem.

394
00:33:10,943 --> 00:33:15,143
So it's almost, I don't think,

395
00:33:16,362 --> 00:33:18,822
I think markets are actually starting to,

396
00:33:19,063 --> 00:33:20,982
like, based on conversations I've had,

397
00:33:21,023 --> 00:33:24,862
with investors, based on what I'm watching in the markets, I think markets are starting to go,

398
00:33:25,703 --> 00:33:33,943
oh, God. Oh, God. I think they're starting to see that second derivative problem. And as you know,

399
00:33:34,102 --> 00:33:38,063
we've been harping on this. I mean, I've been saying it over and over. AI is fundamentally

400
00:33:38,063 --> 00:33:44,102
incompatible with a debt-based monetary system. It cannot work. Either it's going to collapse

401
00:33:44,102 --> 00:33:48,502
or the Fed's going to have to come in and buy the entire bond market.

402
00:33:48,502 --> 00:33:50,822
Yeah, well, when you go through those scenarios,

403
00:33:50,943 --> 00:33:54,242
the only thing that it seems like they can do is UBI.

404
00:33:55,902 --> 00:33:57,523
There's already jobs that AI is replacing.

405
00:33:57,763 --> 00:33:59,883
If you're a computer programmer,

406
00:34:00,342 --> 00:34:02,402
there's a group of people that are using AI,

407
00:34:02,482 --> 00:34:03,662
making themselves way more productive,

408
00:34:03,902 --> 00:34:05,143
but then there's another group,

409
00:34:05,242 --> 00:34:06,662
probably the younger people coming through

410
00:34:06,662 --> 00:34:07,422
who are less experienced,

411
00:34:07,543 --> 00:34:10,482
that are just being replaced by seasoned developers

412
00:34:10,482 --> 00:34:11,643
using AI to develop.

413
00:34:12,082 --> 00:34:13,742
And if you're a long-distance truck driver,

414
00:34:14,002 --> 00:34:16,703
I can't imagine that job being around in 10 years' time.

415
00:34:17,663 --> 00:34:20,802
And they are one of the biggest unions in the country, I think, in America.

416
00:34:21,442 --> 00:34:26,742
So there's going to be a lot of political pressure to just give people money.

417
00:34:28,063 --> 00:34:31,343
You know, I had a conversation here last night with someone.

418
00:34:32,043 --> 00:34:38,742
And I said, listen, AI is already better than all but the top 10% of developers.

419
00:34:39,102 --> 00:34:40,143
I said, wait, wait, say that again?

420
00:34:40,863 --> 00:34:42,242
I want to make sure I heard it correctly.

421
00:34:42,242 --> 00:34:46,242
I was at a conference in Vail earlier this year.

422
00:34:46,703 --> 00:34:48,043
He said, you can take your phone already.

423
00:34:48,143 --> 00:34:49,782
Take a picture of a spot on your skin.

424
00:34:51,643 --> 00:34:53,482
It's better reading dermatologists.

425
00:34:53,563 --> 00:34:54,643
Do you have skin cancer or not?

426
00:34:55,422 --> 00:35:01,082
At that conference, they said, listen, within five to 10 years, top 20% of dermatologists are still going to have jobs.

427
00:35:01,363 --> 00:35:03,363
Bottom 80% are going to have to find something else to do.

428
00:35:04,762 --> 00:35:09,183
There's an article, or there's a hubbub this week about AI actresses.

429
00:35:09,242 --> 00:35:14,602
Some AI actresses like reading for scripts and sort of the real actresses are all losing their minds.

430
00:35:14,602 --> 00:35:27,402
And I'm not laughing at them. I empathize with it, but I recognize this because my mental model for all of this is what happened to the U.S. Rust Belt when China went into the WTO.

431
00:35:27,523 --> 00:35:36,623
China was the first AI. Everything I'm hearing from people on what AI is going to do to white collar is exactly what I heard from blue collar guys.

432
00:35:36,623 --> 00:35:54,462
I used to golf every Saturday. My late father-in-law was a Teamster union official in Cleveland, and his two colleagues that ran other unions that were Teamster unions around the city, they were like, look, what do we do about this?

433
00:35:54,462 --> 00:36:22,063
We know that they're going to be cheaper. We know how this is going to go. What are we supposed to do? And I know how that played out. And the way it played out was private UBI, effectively, as the working class got offshore to China from 2001 to 2005, is what I've called private UBI, which is, hey, we take credit standards down to nil and subprime, right?

434
00:36:22,063 --> 00:36:30,482
So you were making $30 an hour full benefits at Ford, and now you're a $12 an hour greeter at Walmart, no benefits.

435
00:36:31,043 --> 00:36:36,623
But Goldman Sachs will write you a subprime loan so you can still buy a car and a house and a bass boat.

436
00:36:36,762 --> 00:36:43,422
And your living standards, they don't change from 2003 to 2006 when home prices start to fall.

437
00:36:43,623 --> 00:36:44,883
And now you can't refinance it.

438
00:36:44,922 --> 00:36:46,363
And then Goldman Sachs gets out of that business.

439
00:36:46,363 --> 00:36:57,102
And what ends up happening is, of course, we have a deflationary whoosh, and then all of it ends up in sort of second derivative fashion on the Fed's balance sheet, which goes from $800 billion to $4.7 trillion.

440
00:36:57,742 --> 00:37:02,163
And so I look at this now and go, this is all so familiar.

441
00:37:03,023 --> 00:37:04,382
I've seen this before.

442
00:37:05,102 --> 00:37:09,123
And we've kind of already done some of the private UBI stuff, right?

443
00:37:09,183 --> 00:37:10,782
Credit standards haven't exactly been loose.

444
00:37:12,402 --> 00:37:14,643
But, yeah, you end up with what do you do?

445
00:37:14,643 --> 00:37:16,203
You're going to need some sort of public UBI.

446
00:37:16,363 --> 00:37:45,223
Well, what's the quid pro quo to that? Who finances that? Do you just straight money print it? I don't know the answer. And I would tell you, I've gotten indications that leaders have known about this problem for years, that AI, the AI sort of employment slash meaning mismatch is coming.

447
00:37:46,363 --> 00:37:48,882
And so, yeah, I don't know.

448
00:37:51,343 --> 00:37:57,242
This is part of one, you know, when we let off of like, hey, there's a no, things are kind of okay right now.

449
00:37:58,742 --> 00:37:59,563
We're on the edge.

450
00:37:59,683 --> 00:38:00,683
We're on the edge.

451
00:38:01,143 --> 00:38:02,982
And, you know, this is technology.

452
00:38:02,982 --> 00:38:06,262
So, like, we can stand here on the edge.

453
00:38:06,363 --> 00:38:09,563
And even if we don't take another step, the edge is going to come to us.

454
00:38:09,563 --> 00:38:15,563
so I don't have an answer but I could it is one of the things that makes me

455
00:38:15,563 --> 00:38:22,223
it makes me very uncomfortable one of the things that keeps me up at night is the idea of a critical

456
00:38:22,223 --> 00:38:27,023
error with my bitcoin cold storage this is where anchor watch comes in with anchor watch your

457
00:38:27,023 --> 00:38:31,823
bitcoin is insured with your own a plus rated lloyds of london insurance policy and all bitcoin

458
00:38:31,823 --> 00:38:36,002
is held in their time-locked multi-sig bolts so you have the peace of mind knowing your bitcoin

459
00:38:36,002 --> 00:38:40,563
is fully insured while not giving up custody. So whether you're worried about inheritance planning,

460
00:38:40,823 --> 00:38:45,183
wrench attacks, natural disasters or just your own mistakes, you're fully protected by Anchor Watch.

461
00:38:45,762 --> 00:38:50,203
Rates for fully insured custody start as low as 0.55% and are available for individual and

462
00:38:50,203 --> 00:38:54,942
commercial customers located in the US. Speak to Anchor Watch today for a quote and for more

463
00:38:54,942 --> 00:39:01,082
details about your security options and coverage. Visit anchorwatch.com today. That is anchorwatch.com.

464
00:39:01,282 --> 00:39:05,422
Do you wish you could access cash without selling your Bitcoin? Well, Ledin makes that possible.

465
00:39:05,422 --> 00:39:13,602
Ledin are the global leader in Bitcoin-backed lending and since 2018 they've issued over $9 billion in loans with a perfect record of protecting client assets.

466
00:39:14,223 --> 00:39:21,183
With Ledin you get full custody loans with no credit checks, no monthly repayments, just easy access to dollars without selling a single sat.

467
00:39:21,922 --> 00:39:29,902
As of July 1st, Ledin is Bitcoin only, meaning they exclusively offer Bitcoin-backed loans with all collateral held by Ledin directly or their funding partners.

468
00:39:30,323 --> 00:39:32,382
Your Bitcoin is never lent out to generate interest.

469
00:39:32,382 --> 00:39:36,082
I recently took out a loan with Ledin and the whole process couldn't have been easier

470
00:39:36,082 --> 00:39:41,102
It took me less than 15 minutes to go through the application and in just a few hours I had the dollars in my account

471
00:39:41,102 --> 00:39:42,183
It was super smooth

472
00:39:42,183 --> 00:39:47,843
So if you need cash but you don't want to sell Bitcoin head over to ledin.io forward slash wbd

473
00:39:47,843 --> 00:39:50,323
And you'll get 0.25% off your first loan

474
00:39:50,323 --> 00:39:54,343
That's ledn.io forward slash wbd

475
00:39:54,343 --> 00:40:09,205
Bitcoin is absolutely ripping and in every bull market there always a new wave of investors and with it a flood of new companies new products and new promises But if you been around long enough you seen how this story ends for a lot of them Some cut corners take risks with your money or just disappear

476
00:40:09,685 --> 00:40:13,085
That's why when it comes to buying Bitcoin, the only exchange I recommend is River.

477
00:40:13,505 --> 00:40:19,065
They deeply care about doing things right for their clients and are built to last with security and transparency at their core.

478
00:40:19,725 --> 00:40:23,465
With River, you have peace of mind knowing all their Bitcoin is held in multi-sig cold storage

479
00:40:23,465 --> 00:40:27,145
and it's the only Bitcoin only exchange in the US with proof of reserves.

480
00:40:27,605 --> 00:40:29,625
There really is no better place to buy Bitcoin.

481
00:40:29,885 --> 00:40:36,125
So to open an account today, head over to river.com forward slash WBD and earn up to $100 in Bitcoin when you buy.

482
00:40:36,585 --> 00:40:39,145
That's river.com forward slash WBD.

483
00:40:40,105 --> 00:40:41,605
AI isn't going away.

484
00:40:41,725 --> 00:40:43,185
Like it doesn't seem like it's going away.

485
00:40:43,185 --> 00:40:49,445
I was even when I was talking to this guy, I used the example of computer engineers.

486
00:40:50,065 --> 00:40:54,285
And he was like, they've gone from being computer engineers to being prompt engineers working with AI.

487
00:40:54,285 --> 00:40:59,805
but the next harsh realization is that AI is better at prompt engineering than them.

488
00:40:59,805 --> 00:41:00,805
It's almost like training.

489
00:41:00,985 --> 00:41:04,825
A lot of American engineers would complain about the times in major corporations

490
00:41:04,825 --> 00:41:09,845
where they are forced to train their replacement and then the job goes to India.

491
00:41:10,385 --> 00:41:11,385
We've seen this before.

492
00:41:12,085 --> 00:41:17,645
And you look at it and go, 1990, biggest employer in America was manufacturing.

493
00:41:20,465 --> 00:41:22,765
By far, across almost all 50 states.

494
00:41:22,765 --> 00:41:31,345
in 2024, in 38 of 50 U.S. states, the biggest employer is healthcare. Now, it's not docs,

495
00:41:31,645 --> 00:41:35,145
and it's not nurses. It's not practitioners where the growth in jobs has occurred. It's all

496
00:41:35,145 --> 00:41:45,945
in administration primarily. And to me, healthcare administration, you talk about a field that is

497
00:41:45,945 --> 00:41:49,885
uniquely suited to being disintermediated by AI.

498
00:41:50,725 --> 00:41:53,465
You know, do you think AI can do billing better than a human?

499
00:41:53,765 --> 00:41:55,445
Do you think AI can do, you know,

500
00:41:55,985 --> 00:41:57,785
reading records better than a human filing?

501
00:41:58,225 --> 00:41:59,825
Oh my gosh, it's not even close.

502
00:42:01,605 --> 00:42:04,325
And so you then you look at what's American GDP

503
00:42:04,325 --> 00:42:09,365
if the biggest employer in 38 of 50 states.

504
00:42:09,445 --> 00:42:11,585
And oh, by the way, these jobs tend to be decent jobs.

505
00:42:11,665 --> 00:42:12,405
They tend to have benefits.

506
00:42:12,505 --> 00:42:14,445
They tend to be the kind of jobs

507
00:42:14,445 --> 00:42:16,325
that you can use to buy a house with.

508
00:42:16,325 --> 00:42:21,805
This is almost like the failing of the,

509
00:42:21,885 --> 00:42:23,565
hey, we're going to get away from manufacturing.

510
00:42:23,705 --> 00:42:25,425
We're going to move into a service-based economy

511
00:42:25,425 --> 00:42:28,185
because it's higher, it's cleaner, it's less dirty,

512
00:42:28,285 --> 00:42:31,005
it's safer, and it's higher paying,

513
00:42:31,105 --> 00:42:34,185
and it's higher ROI, higher corporate margins.

514
00:42:37,425 --> 00:42:39,205
I don't have the answer for that,

515
00:42:39,325 --> 00:42:42,485
but I can tell you that 30 years of doing what I do

516
00:42:42,485 --> 00:42:45,605
and seeing bottlenecks earlier than most people,

517
00:42:45,765 --> 00:42:50,285
I'm seeing this and it puts a pit in my stomach.

518
00:42:50,285 --> 00:42:53,705
I haven't seen, I haven't felt that since probably,

519
00:42:54,025 --> 00:42:57,545
you know, 07, 06, when I look at this and go,

520
00:42:57,965 --> 00:43:01,505
oh God, like this, there's no way this works out

521
00:43:01,505 --> 00:43:03,965
without some sort of serious disruption.

522
00:43:05,505 --> 00:43:07,445
I don't know the answer to that.

523
00:43:07,545 --> 00:43:11,025
Like the things I do know is, you know,

524
00:43:11,025 --> 00:43:12,985
There's a great quote by the physicist Albert Bartlett.

525
00:43:13,125 --> 00:43:20,445
One of the biggest shortcomings of the human race is the inability to understand the exponential function.

526
00:43:21,285 --> 00:43:24,885
And so people are going to go, okay, well, this won't be a problem for three or four years.

527
00:43:26,105 --> 00:43:27,245
It's not going to be three or four years.

528
00:43:27,725 --> 00:43:28,865
It's going to be faster than that.

529
00:43:29,005 --> 00:43:30,365
And even still, that's right around the corner.

530
00:43:30,585 --> 00:43:31,525
And even that, exactly.

531
00:43:31,725 --> 00:43:32,805
It is so soon.

532
00:43:32,805 --> 00:43:37,385
And, you know, if it's 18 to 24 months, markets are going to start to care.

533
00:43:37,385 --> 00:43:44,725
your forward thinkers, your forward thinking capital with mandates that allow them to be early,

534
00:43:45,385 --> 00:43:50,265
they're going to start caring now, six months. And so then I look at it and go,

535
00:43:52,145 --> 00:43:57,145
gold doing what it's doing, where gold goes up every day ending in Y. Interesting, right?

536
00:43:57,645 --> 00:44:00,645
One of the things I would probably buy, go buy me some gold. And oh, by the way,

537
00:44:00,865 --> 00:44:05,425
Western investors are so woefully underweighted gold. It's like it's night and fun. They could buy

538
00:44:05,425 --> 00:44:09,525
gold every day for the next three years and probably finally get to a market waiting you

539
00:44:09,525 --> 00:44:21,245
know or waiting equal to the sort of people in in in the east um bitcoin because i don't see

540
00:44:21,245 --> 00:44:27,005
how you don't end up with some form of ubi like you're saying like it just is so and part of that's

541
00:44:27,005 --> 00:44:35,565
I'm so, I usually don't fumble for words per se, but sometimes there's nothing to say.

542
00:44:35,565 --> 00:44:41,445
Like, it's so obvious what's about to happen, while Wall Street has sort of right tail extrapolated,

543
00:44:41,565 --> 00:44:42,845
hey, look at all this productivity.

544
00:44:44,005 --> 00:44:47,945
Yeah, well, it's like, you're forgetting about like-

545
00:44:47,945 --> 00:44:50,925
Maximum productivity, but with no one with a job, I don't know what that means.

546
00:44:51,045 --> 00:44:55,245
And the unprecedented thing here is like, in those historic examples you've given,

547
00:44:55,365 --> 00:44:56,925
there's always something else to pivot into.

548
00:44:57,005 --> 00:45:01,145
But if AI is replacing things across the board, there is no pivot left.

549
00:45:01,365 --> 00:45:06,965
And I wonder if things like UBI have to come as almost like reparations from the AI companies.

550
00:45:08,405 --> 00:45:11,625
I don't know.

551
00:45:12,845 --> 00:45:21,945
You know, the optimistic view of it, you know, I've been accused of being a half-empty guy on this and other issues, certainly.

552
00:45:21,945 --> 00:45:45,185
But once you write tail extrapolate, once you get to that, then in theory, you're going to have the tools for a whole large number of humans to, I'm going to use sort of a, to self-actualize, to whatever that means.

553
00:45:45,185 --> 00:45:53,845
You want to educate yourself, create art, create beauty, to create architecture, whatever that might be.

554
00:45:54,065 --> 00:45:56,285
You are going to have the tools to do it.

555
00:45:57,985 --> 00:46:10,945
And the levels of disruption that that entails, most humans, that's what I can tell you from the Rust Belt experience.

556
00:46:11,305 --> 00:46:14,825
Most people don't want to self-actualize.

557
00:46:14,825 --> 00:46:17,145
They just, they want some meaning.

558
00:46:17,525 --> 00:46:18,505
They want a good job.

559
00:46:18,765 --> 00:46:20,485
They want, you know, a group of friends.

560
00:46:20,665 --> 00:46:21,765
They want social connection.

561
00:46:21,885 --> 00:46:31,065
They want sort of these fundamental human experiences that are all about to sort of just get tossed up in the air willy-nilly in the name of sort of productivity.

562
00:46:33,345 --> 00:46:38,105
You know, and the most productive thing in the world is if there's like one guy working, doing all the work, and the machines are doing it all.

563
00:46:38,105 --> 00:46:50,925
And that's, you know, that's, that's, yeah, I don't, you know, the other thing that, you know, and, and, and Jordy Visser has done a lot of work on this.

564
00:46:50,985 --> 00:46:53,565
I've seen a little bit of his work is a really good point.

565
00:46:53,625 --> 00:47:02,185
I hadn't thought of it until he brought it up was there's, there's a couple of eighth graders in a garage right now.

566
00:47:02,185 --> 00:47:04,325
and they're going to get these AI tools

567
00:47:04,325 --> 00:47:07,045
and they're going to disintermediate

568
00:47:07,045 --> 00:47:07,405
like,

569
00:47:08,605 --> 00:47:09,945
I don't know,

570
00:47:10,505 --> 00:47:12,105
some gigantic movie studio

571
00:47:12,105 --> 00:47:13,185
or like...

572
00:47:13,185 --> 00:47:14,525
That's 100% going to happen.

573
00:47:14,885 --> 00:47:15,205
And,

574
00:47:15,265 --> 00:47:18,925
you know,

575
00:47:18,965 --> 00:47:20,625
it almost does make you wonder,

576
00:47:20,705 --> 00:47:22,125
not necessarily reparations,

577
00:47:22,165 --> 00:47:23,365
but just talking through this,

578
00:47:23,485 --> 00:47:25,445
there was a period in time in the 80s

579
00:47:25,445 --> 00:47:26,005
where, you know,

580
00:47:26,045 --> 00:47:26,885
Michael Milken's like,

581
00:47:26,965 --> 00:47:29,185
hey, this revolution of junk debt,

582
00:47:29,285 --> 00:47:29,505
you know,

583
00:47:29,505 --> 00:47:30,525
and he did all the work

584
00:47:30,525 --> 00:47:30,925
and he said,

585
00:47:30,985 --> 00:47:31,145
look,

586
00:47:31,145 --> 00:47:40,505
If you look at junk debt, the premiums that they're paying, the spreads that they're paying relative to the actual default rates make no sense.

587
00:47:40,505 --> 00:47:53,725
So that was sort of the fundamental first principle of what he did was like, we can issue these junk bonds at lower rates because the default experience was lower than what.

588
00:47:53,985 --> 00:47:58,685
And then this will allow these companies to get capital, to grow, to drive jobs, et cetera.

589
00:47:58,685 --> 00:48:08,925
and early on everyone loved it and it all worked and then they started doing leverage buyouts of

590
00:48:08,925 --> 00:48:15,585
like you know the holy grail companies the crown jewels and like the elites are like whoa whoa whoa

591
00:48:15,585 --> 00:48:20,785
like you can't take you know this this little upstart firm Drexel letting these smaller

592
00:48:20,785 --> 00:48:26,385
raiders like borrow money to buy you know these gigantic crown jewel American corporations and I

593
00:48:26,385 --> 00:48:33,565
just wonder if, you know, we're starting to see symptoms of that type of blowback already, right?

594
00:48:33,565 --> 00:48:41,465
Like, you know, whether it's Hollywood, you know, already with the AI actresses, like, you know,

595
00:48:41,525 --> 00:48:48,325
oh, these working class people, you know, you know, South Park, you know, they took our jobs thing,

596
00:48:48,385 --> 00:48:51,765
right? Like, and South Park makes fun of everyone. So I don't want to make, you know, I'm not picking

597
00:48:51,765 --> 00:48:59,365
on them per se, but like, you know, when some kid comes up with an AI show that knocks South Park

598
00:48:59,365 --> 00:49:03,505
off the air, and I'm not saying that's what's going to happen, but just as an example, you know,

599
00:49:03,505 --> 00:49:09,405
like the Dirk or Dirk meme will have come full circle. And there's going to be a pushback from

600
00:49:09,405 --> 00:49:17,825
sort of the powers that be at some point, right? Of like, and I don't know, it's, what does that

601
00:49:17,825 --> 00:49:21,265
look like you know whether that you know look if these eighth graders in a garage start

602
00:49:21,265 --> 00:49:25,985
disintermediating fortune 100 companies and people's 401ks you know now in theory they'll

603
00:49:25,985 --> 00:49:34,725
switch but like there's a massive wealth transfer away from you look you a proxy of our you know

604
00:49:34,725 --> 00:49:38,105
example might be what we've seen with bitcoin right like you know it's like ha ha ha those

605
00:49:38,105 --> 00:49:43,445
bitcoiners are crazy and all of a sudden like four years later holy cow they're like a political

606
00:49:43,445 --> 00:49:48,525
force. Why? Because they have money. Why do they have money? Because they're holding a better

607
00:49:48,525 --> 00:49:53,745
money and they're a political force now. Literally, the government's talking about it.

608
00:49:54,085 --> 00:50:02,685
Not just talking about it. It is part of, at least tangentially, a design to try to help

609
00:50:02,685 --> 00:50:08,825
finance deficits, right? So the same kind of thing. I don't have an answer. I'm kind of talking

610
00:50:08,825 --> 00:50:13,365
through it. It's a fascinating question. It is. And I've got loads of other stuff I want to

611
00:50:13,365 --> 00:50:18,345
talk to you about. But just quickly, last thing on the AI thing, you brought up before in terms of

612
00:50:18,345 --> 00:50:23,905
like meaning. If everyone loses their jobs, what are they kind of here for? And Roman Jampolski,

613
00:50:23,985 --> 00:50:29,345
the AI guy who I spoke to, calls this like the icky guy risk. It's like, what do people do when

614
00:50:29,345 --> 00:50:32,965
they have lost their job? They've lost their meaning. They have to kind of start again and

615
00:50:32,965 --> 00:50:37,765
think about what they want to do. And the sort of doomer in me thinks people are just going to sit

616
00:50:37,765 --> 00:50:42,525
inside, drink at 10am and play video games. And I'm like, what does that do for society?

617
00:50:42,525 --> 00:50:44,805
It's really scary.

618
00:50:46,265 --> 00:50:49,265
I can tell you this is exactly what's going to happen because I've lived it.

619
00:50:49,405 --> 00:50:50,265
I've seen it.

620
00:50:51,645 --> 00:50:58,145
Look, in 1992, in my hometown, it's town square in my hometown, Strongsville, Ohio.

621
00:50:59,465 --> 00:51:06,645
We had late October, so right before the presidential election in 1992, we had President George Bush.

622
00:51:07,525 --> 00:51:09,085
Bruce Willis was there.

623
00:51:09,085 --> 00:51:16,185
everyone in the area was there to see it right that's how important that region was

624
00:51:16,185 --> 00:51:20,225
in terms of swing states how vibrant 2016

625
00:51:20,225 --> 00:51:28,865
i guess six presidential elections later right for 24 years on the same day that hillary clinton said

626
00:51:28,865 --> 00:51:34,145
you know i disagree with donald trump's dark version of america america is still great

627
00:51:34,145 --> 00:51:39,945
literally less than a mile from where President Bush had stood and given a speech,

628
00:51:40,505 --> 00:51:49,525
somebody walked in to an upscale brewery with an AK-47 and held it up at assault rifle point

629
00:51:49,525 --> 00:51:57,025
with his buddy with a pistol and locked the people into the freezer and made off with the money.

630
00:51:58,805 --> 00:52:04,125
And from drug overdoses being nothing in that region, and when I say that region,

631
00:52:04,145 --> 00:52:09,785
I mean, you know, from 1992, drug overdoses in the Midwest, Rust Belt, tail.

632
00:52:10,385 --> 00:52:20,665
From 2008 through 2022, nearly a million Americans died of drug overdoses.

633
00:52:20,885 --> 00:52:21,245
Insane.

634
00:52:21,245 --> 00:52:44,525
When you then factor in suicides and alcoholism-related deaths into a basket that Case and Deaton, in their study called Deaths of Economic Hopelessness in the Wall Street Journal, you were seeing death rates in those parts of the world that were rivaling the death rates seen in post-Soviet Russia in the 1990s.

635
00:52:45,785 --> 00:52:49,925
Which, another example, you lose meaning, what do you do?

636
00:52:49,925 --> 00:52:51,245
You drink yourself to death.

637
00:52:51,545 --> 00:52:52,765
You use drugs.

638
00:52:53,545 --> 00:52:54,885
You go back in time.

639
00:52:55,005 --> 00:53:01,745
I have a friend of mine who's a Native American, Plains Native American elder.

640
00:53:02,605 --> 00:53:06,645
When they lost their meaning, when they started being fenced in, so to speak, right?

641
00:53:07,485 --> 00:53:08,325
What did they do?

642
00:53:08,405 --> 00:53:09,385
They drank themselves to death.

643
00:53:10,805 --> 00:53:13,465
So the history is very clear.

644
00:53:13,465 --> 00:53:20,385
Like, there's no mystery, in my opinion, when you take the meaning of people away, what they're going to do.

645
00:53:20,805 --> 00:53:26,425
And yeah, to your point, it is very troubling.

646
00:53:26,805 --> 00:53:36,305
I don't, you know, it's one of these things where it's, I don't, I know how it's going to go.

647
00:53:36,585 --> 00:53:36,725
Yeah.

648
00:53:36,725 --> 00:53:38,845
And it makes me sad.

649
00:53:39,585 --> 00:53:51,525
And I think the thing that's sort of like some of the division in this country is New York City, some of the – there have been winners and losers, as there are in any period of time.

650
00:53:51,625 --> 00:53:55,025
But over the last 20 years of this globalization, there have been very clear winners and losers.

651
00:53:55,285 --> 00:54:01,725
And the winners have been very isolated by and large from exactly what I'm describing, certainly at the scale.

652
00:54:04,245 --> 00:54:05,885
They're not going to be isolated from this.

653
00:54:06,165 --> 00:54:07,725
They're going to witness it for the first time.

654
00:54:07,725 --> 00:54:15,585
And that kind of goes back to the point of like, you know, they have more political power than sort of, you know, the people in the Rust Belt.

655
00:54:15,745 --> 00:54:16,845
Nobody cares about the Rust Belt.

656
00:54:17,745 --> 00:54:19,885
They care about Manhattan when it comes to Manhattan.

657
00:54:20,165 --> 00:54:23,705
And oh, by the way, guess how they're going to react to it politically.

658
00:54:24,325 --> 00:54:27,625
They're going to elect, you know, Mondani's of the world.

659
00:54:27,745 --> 00:54:28,705
Yeah, 100%.

660
00:54:28,705 --> 00:54:30,285
And that's not going to make it better.

661
00:54:30,365 --> 00:54:31,785
It's going to make things trickier.

662
00:54:31,785 --> 00:54:39,085
So there are second derivative impacts of this AI thing that are simply not being thought through.

663
00:54:39,405 --> 00:54:42,945
And I don't know that it's been released, right?

664
00:54:42,985 --> 00:54:44,165
It's a virus.

665
00:54:44,365 --> 00:54:45,665
You can't stop it now.

666
00:54:47,785 --> 00:54:48,665
You've sowed the wind.

667
00:54:48,745 --> 00:54:49,825
Now you're going to reap the whirlwind.

668
00:54:52,205 --> 00:54:53,665
For good or for worse, it's out there now.

669
00:54:53,965 --> 00:54:56,065
It reminds me of the line in The Big Short.

670
00:54:56,225 --> 00:54:57,085
It's Brad Pitt's character.

671
00:54:57,225 --> 00:54:59,445
I don't actually know if this is factually true, but it's in the film.

672
00:54:59,445 --> 00:55:03,325
He says for every 1% unemployment goes up, 40,000 people die.

673
00:55:04,125 --> 00:55:09,345
And if unemployment goes up to 60%, 70%, 80%, then I don't know.

674
00:55:09,505 --> 00:55:09,925
It's scary.

675
00:55:10,245 --> 00:55:10,905
It is, right?

676
00:55:10,945 --> 00:55:13,705
It's just like, just stop fucking dancing, right?

677
00:55:14,065 --> 00:55:14,245
Yeah.

678
00:55:14,785 --> 00:55:15,225
Yeah.

679
00:55:15,485 --> 00:55:19,225
It's one of these things where you go, I don't know.

680
00:55:19,345 --> 00:55:22,285
I mean, to me, it's all about this.

681
00:55:22,525 --> 00:55:26,065
You've got to be what's coming, good or bad.

682
00:55:26,485 --> 00:55:28,745
If this all goes well, it's going to be disruptive.

683
00:55:28,745 --> 00:55:30,825
and everyone can be flexible, great.

684
00:55:31,165 --> 00:55:32,185
You got to be mentally tough.

685
00:55:33,305 --> 00:55:35,405
And if it goes how it's gone historically,

686
00:55:35,965 --> 00:55:37,465
you got to be really mentally tough

687
00:55:37,465 --> 00:55:38,865
because it's going to be,

688
00:55:39,525 --> 00:55:40,865
these effects are going to happen.

689
00:55:40,985 --> 00:55:44,605
When you take away the meaning of people and mass,

690
00:55:45,625 --> 00:55:48,365
we know how it goes.

691
00:55:48,525 --> 00:55:49,845
There is no mystery to this.

692
00:55:49,885 --> 00:55:51,365
And anyone that says otherwise is lying.

693
00:55:54,045 --> 00:55:57,005
Let's go from one slightly Duma topic to another.

694
00:55:57,005 --> 00:56:05,805
One of the most interesting things that I've read of your work recently, and I've not really seen anyone else talk about this, is what's happening in the Middle East.

695
00:56:06,065 --> 00:56:14,805
So you wrote about after Israel bombed Qatar, Qatar moving more towards China, and kind of the implications on the petrodollar system.

696
00:56:15,245 --> 00:56:17,045
Can you explain what's happening there?

697
00:56:17,645 --> 00:56:26,545
I can illuminate on what I'm hearing, which is that in the Middle East, that was seen as a bridge too far.

698
00:56:27,005 --> 00:56:56,785
that essentially it was almost like a red wedding kind of thing where they were invited under certain one auspice and then bombed in a city that is, you know, I've never been, but I'm told it is very much like a, you know, like a Geneva or, you know, it's sort of a beautiful city with kind of seen as like a neutral, you know, everyone, everyone leaves their swords at the door and comes in and, and

699
00:56:56,785 --> 00:56:58,585
negotiates in good faith and then leaves.

700
00:56:58,685 --> 00:57:02,685
And this was seen as a violation of good faith in certain circles is what I hear.

701
00:57:03,165 --> 00:57:11,825
And it was tricky as well for the United States because, you know, the first story was, well,

702
00:57:11,825 --> 00:57:12,865
we didn't know ahead of time.

703
00:57:13,725 --> 00:57:17,505
And then we, which is not a good look for us, by the way, right?

704
00:57:17,565 --> 00:57:21,565
Is we are, you know, we're the empire and we're being filled in on things after the fact.

705
00:57:21,885 --> 00:57:23,605
It's not a good look for the administration.

706
00:57:23,945 --> 00:57:25,545
Is this when Trump said they don't know what the fuck they're doing?

707
00:57:26,785 --> 00:57:28,205
Was that in response to this?

708
00:57:28,345 --> 00:57:28,705
I can't actually.

709
00:57:28,725 --> 00:57:29,705
It might have been.

710
00:57:29,825 --> 00:57:30,265
I don't know.

711
00:57:30,385 --> 00:57:31,065
I don't know.

712
00:57:33,285 --> 00:57:48,305
But I think it was not a coincidence that shortly thereafter, the Pakistanis and the

713
00:57:48,305 --> 00:58:01,405
The Pakistanis and the Qataris did, or no, excuse me, the Pakistanis and the Saudis did a mutual defense agreement.

714
00:58:02,085 --> 00:58:05,465
Well, Pakistan is a nuclear-powered country, a nuclear-armed country.

715
00:58:06,005 --> 00:58:08,465
They are a longtime close ally of China.

716
00:58:08,465 --> 00:58:37,425
And so to me, you can make the case that the Saudis just went under a nuclear umbrella of China of sorts, which I think is really interesting because people say, well, there'll never be any change in the petrodollar system, et cetera, because, well, Russia showed you can make change in the petrodollar system if you have nuclear weapons.

717
00:58:37,425 --> 00:58:38,585
That was the lesson of Saddam.

718
00:58:38,705 --> 00:58:40,065
That was the lesson of Gaddafi.

719
00:58:43,305 --> 00:58:53,725
And so viewed through this lens, I'm not saying it's the right lens, but I think it's a lens worth considering, is that, look, the Pakistanis have deals with the Chinese.

720
00:58:54,325 --> 00:58:57,265
Pakistanis now a mutual aid agreement with the Saudis.

721
00:58:58,085 --> 00:59:00,385
The Saudis don't have nuclear weapons, technically.

722
00:59:00,805 --> 00:59:02,385
Hey, we don't have nuclear weapons.

723
00:59:03,025 --> 00:59:04,345
We're abiding by everything.

724
00:59:04,345 --> 00:59:07,325
You describe this as nuclear umbrella as a service, though.

725
00:59:07,325 --> 00:59:19,945
It's a nuclear umbrella as a service. Exactly. You know, and if, hey, if the Chinese bleeds certain missile technology to the Pakistanis who then use it or transfer it over to the Saudis, you know, that's oops.

726
00:59:19,945 --> 00:59:36,005
So I just saw it as the whole daisy chain sequence, particularly in the context of what transpired in June when the Israelis attacked Iran while we were negotiating still in theory.

727
00:59:36,005 --> 00:59:45,465
and the you know it came out that the the israelis were running short of air defense

728
00:59:45,465 --> 00:59:50,745
missiles within like 10 days and the u.s had burned down 10 50 or 10 15 percent of its

729
00:59:50,745 --> 00:59:57,525
high-end air defense missiles uh helping defend israel within like 10 days of medium intensity

730
00:59:57,525 --> 01:00:11,927
combat not high intensity just medium intensity combat um to me my overall takeaway is that the unilateral advantage

731
01:00:11,927 --> 01:00:15,968
that we have enjoyed in that region, we, the United States, have enjoyed in that region,

732
01:00:15,968 --> 01:00:26,528
seems to be gone. And if it's gone, then you're moving towards a more multipolar balance. And in

733
01:00:26,528 --> 01:00:33,367
that case, to me, you're going to end up with changes to the system, multi-currency energy

734
01:00:33,367 --> 01:00:40,107
pricing, maybe even by parties that have historically only priced in dollars, more

735
01:00:40,107 --> 01:00:45,107
settlement in things like gold of energy surpluses at the central bank level, because

736
01:00:45,107 --> 01:00:48,427
it's just another example, right?

737
01:00:48,468 --> 01:00:51,087
You already, it was another violation of trust.

738
01:00:51,668 --> 01:00:56,508
When we grabbed Russia's FX reserves, I think Yanis Varoufakis, the former Green

739
01:00:56,508 --> 01:00:59,508
finance minister said, I'm not saying they should or they shouldn't have done it, but they did it.

740
01:01:00,268 --> 01:01:06,528
And when they did it, okay, then people say, fine, we're going to start buying a lot more gold

741
01:01:06,528 --> 01:01:11,547
rather than treasuries. And that's what's happened. And in the same way, I think this was seen in the

742
01:01:11,547 --> 01:01:18,968
Middle East as a violation of trust of sorts and a view of, well, okay, well, then we need to start

743
01:01:18,968 --> 01:01:25,008
making alternative arrangements or even just threatening alternative arrangements. And it's

744
01:01:25,008 --> 01:01:29,988
one of these things, I think once you see it, you can't unsee it. And so I think it's more of sort of

745
01:01:29,988 --> 01:01:39,528
a move towards multipolarity that this move by the Israelis bombing Doha seems to have engendered.

746
01:01:39,927 --> 01:01:45,427
And to put it into context, if this does kind of break down the trust in the Middle East,

747
01:01:45,488 --> 01:01:49,307
if the petrodollar system unwinds to a degree where not all oil is going to be priced in the

748
01:01:49,307 --> 01:01:54,887
US dollar, that's a potential future you see. What does that actually mean for the US bond market?

749
01:01:55,907 --> 01:01:57,067
Oh, that's a big question.

750
01:01:59,028 --> 01:02:00,387
I think there's only one currency

751
01:02:00,387 --> 01:02:01,607
that can replace a dollar on that

752
01:02:01,607 --> 01:02:03,407
as an oil currency, and it's gold.

753
01:02:03,968 --> 01:02:07,707
And so I think it's noteworthy

754
01:02:07,707 --> 01:02:08,827
that the gold to oil ratio

755
01:02:08,827 --> 01:02:10,468
has gone from like 55 to 65

756
01:02:10,468 --> 01:02:16,988
in like a month since the Israelis did that.

757
01:02:20,807 --> 01:02:22,587
What does it mean for the bond market?

758
01:02:22,587 --> 01:02:43,087
I mean, it ultimately, I think, just further accelerates a trend we've already seen, which is, as we have seen the marginal oil barrel priced outside the dollar over the last 10 years, you're going to see more of the marginal oil barrel priced outside the U.S. dollar.

759
01:02:43,707 --> 01:02:49,248
There was an article yesterday on Reuters that India is buying oil from Russia and Chinese yuan.

760
01:02:49,248 --> 01:02:58,027
like iran and india and and china are very big oil buyers they're 35 of the world's population

761
01:02:58,027 --> 01:03:04,067
right they're all both buying oil outside the dollar now like like the petrodollar has been

762
01:03:04,067 --> 01:03:07,887
like it's it's it's like you know it's like breaking it's putting a hole in an airframe at

763
01:03:07,887 --> 01:03:12,327
altitude right like it doesn't take a really big hole for you to lose pressure and start to have bad

764
01:03:12,327 --> 01:03:19,887
bad consequences. And I think that's, what does it mean? I think it ultimately means that the U.S.

765
01:03:20,008 --> 01:03:25,067
would have to either significantly shrink deficits, which it can't because the debt's too high and

766
01:03:25,067 --> 01:03:30,087
the government spending as a percent of GDP is too high. And so until you devalue the debt,

767
01:03:30,827 --> 01:03:36,508
you can't shrink your deficits without going into a debt spiral that we touched about earlier.

768
01:03:36,508 --> 01:03:41,087
or ultimately you have to run hotter.

769
01:03:41,587 --> 01:03:43,248
You're going to have to inflate away debt.

770
01:03:43,567 --> 01:03:44,688
You're going to have to nominally grow.

771
01:03:44,788 --> 01:03:45,587
You're going to have to invest.

772
01:03:46,768 --> 01:03:48,707
And so to me, I think ultimately, what does it mean?

773
01:03:48,727 --> 01:03:52,027
It just means the real value of treasury bonds.

774
01:03:53,067 --> 01:03:57,788
And I would, as a proxy for that, I'd look at GLD over TLT, right?

775
01:03:57,847 --> 01:04:00,927
The GLD ETF, the gold ETF over TLT, long bond ETF,

776
01:04:00,927 --> 01:04:04,468
which is going vertical now.

777
01:04:04,468 --> 01:04:07,527
the gold is crushing along the treasuries,

778
01:04:08,047 --> 01:04:10,008
I think it's going to accelerate.

779
01:04:10,468 --> 01:04:12,727
It doesn't necessarily mean that the price of treasuries

780
01:04:12,727 --> 01:04:13,948
in a vacuum has to crash

781
01:04:13,948 --> 01:04:15,307
because there's a number of different levers,

782
01:04:15,307 --> 01:04:19,347
but I just think the real value of the treasury market

783
01:04:19,347 --> 01:04:24,288
will deteriorate more and perhaps faster

784
01:04:24,288 --> 01:04:25,607
as a result of that.

785
01:04:25,968 --> 01:04:27,488
So one of the reasons I ask that is,

786
01:04:27,688 --> 01:04:29,788
obviously, this administration

787
01:04:29,788 --> 01:04:31,768
has been very open to stablecoins.

788
01:04:31,768 --> 01:04:45,427
And I wondered if they can try and plug some of the hole in the treasury, the demand side of the treasury issuance through stablecoins, through the proliferation of stablecoins and trying to spread those basically as far and wide as they possibly can.

789
01:04:45,887 --> 01:04:46,627
I think that's the plan.

790
01:04:46,927 --> 01:04:48,527
I think ultimately-

791
01:04:48,527 --> 01:04:50,127
Has that become the almost new petrodollar system?

792
01:04:51,067 --> 01:04:52,468
Yes, is the short version.

793
01:04:52,547 --> 01:04:53,448
I think that's the goal.

794
01:04:53,788 --> 01:04:55,668
I think that's what they would like to have happen.

795
01:04:58,567 --> 01:04:59,508
Can it work?

796
01:04:59,508 --> 01:05:04,448
I think, number one, let's call it what it really is.

797
01:05:05,207 --> 01:05:13,968
We can't issue long-term bonds anymore at rates that we can afford that don't blow up our existing debt and put us into a debt spiral.

798
01:05:14,207 --> 01:05:21,508
So we are going to let stablecoins, which are near-cash equivalents, proliferate.

799
01:05:21,508 --> 01:05:30,127
proliferate. Translation, we are going to finance our deficit in near cash markets.

800
01:05:30,468 --> 01:05:35,567
We're running a 7% deficit. We're going to finance it near cash markets.

801
01:05:37,688 --> 01:05:46,288
Now, stablecoins yield zero, short-term rates in the US still, whatever, four-ish.

802
01:05:46,288 --> 01:05:51,327
I wouldn't be surprised at all if the

803
01:05:51,327 --> 01:05:53,427
administration, if this is successful,

804
01:05:55,027 --> 01:05:59,188
if you don't get Besant to come out in some sort of

805
01:05:59,188 --> 01:06:03,288
non-transferable

806
01:06:04,027 --> 01:06:07,008
or non-redeemable T-bills

807
01:06:07,008 --> 01:06:10,748
into the stablecoin market, which is to say everything in a

808
01:06:10,748 --> 01:06:14,207
stablecoin is non-redeemable

809
01:06:14,207 --> 01:06:17,248
and they're not going to yield four,

810
01:06:17,307 --> 01:06:18,448
they're going to yield 30 basis points.

811
01:06:19,468 --> 01:06:22,148
And he will have reduced the deficit from seven to,

812
01:06:22,907 --> 01:06:24,847
once you have enough of the bonds in there,

813
01:06:25,107 --> 01:06:28,407
from seven to four, like that, right?

814
01:06:28,448 --> 01:06:29,387
Because so much, whatever,

815
01:06:29,587 --> 01:06:31,668
a trillion and a half of the deficit

816
01:06:31,668 --> 01:06:33,327
on a gross basis is interest.

817
01:06:33,327 --> 01:06:35,148
And if you finance enough of it,

818
01:06:35,327 --> 01:06:37,168
the math is oversimplified.

819
01:06:37,288 --> 01:06:40,788
But again, let's not lose sight of what we're doing here.

820
01:06:41,768 --> 01:06:43,768
And by the way, when you take rates from four

821
01:06:43,768 --> 01:06:45,027
to 30 basis points.

822
01:06:45,127 --> 01:06:46,468
Now it's really like,

823
01:06:46,508 --> 01:06:49,307
it is like that far

824
01:06:49,307 --> 01:06:51,867
from financing in cash markets.

825
01:06:52,327 --> 01:06:53,527
30 basis point,

826
01:06:53,648 --> 01:06:55,327
three month T-bill and cash.

827
01:06:55,488 --> 01:06:56,488
They're like kissing cousins.

828
01:06:56,508 --> 01:06:57,288
Basically the same thing.

829
01:06:57,387 --> 01:06:58,248
They're the same thing.

830
01:06:59,207 --> 01:06:59,907
And again,

831
01:07:00,067 --> 01:07:01,587
this is what has to happen.

832
01:07:02,047 --> 01:07:03,407
This is not,

833
01:07:03,508 --> 01:07:04,748
I'm not trying to reflect badly

834
01:07:04,748 --> 01:07:05,527
on the Trump administration,

835
01:07:05,727 --> 01:07:06,148
best in any.

836
01:07:06,627 --> 01:07:07,748
This was in the cake.

837
01:07:07,807 --> 01:07:09,268
When you do dumb stuff

838
01:07:09,268 --> 01:07:11,127
with borrowed money for 40 years

839
01:07:11,127 --> 01:07:12,788
and you follow an economic

840
01:07:12,788 --> 01:07:20,207
dogma of globalism and neoliberalism, the way we have done so for 40 years to such an extreme with

841
01:07:20,207 --> 01:07:24,207
no balance, you eventually get to this point. And you could take it even broader and say,

842
01:07:24,207 --> 01:07:29,008
this is what you do. Fiat currency systems end up financing in cash markets.

843
01:07:30,448 --> 01:07:36,168
And then the inflation inflates away the debt. This is what they're talking about doing.

844
01:07:36,887 --> 01:07:41,107
The stable coin aspect and the sort of new petrodollar side of it is essentially

845
01:07:41,107 --> 01:07:46,488
taking the Europeans' heads. We're barely keeping our heads above water and debt and basically taking

846
01:07:46,488 --> 01:07:49,607
the Europeans and so the rest of the world, shoving them underwater and standing on them and be like,

847
01:07:49,607 --> 01:07:57,307
okay, we're okay now. And we would be for a bit, but to me, I think it's super important for

848
01:07:57,307 --> 01:08:04,407
investors. It's a great, someone said it to me once, said wisdom is calling things what they are

849
01:08:04,407 --> 01:08:08,087
or seeing things for what they are, not for what they're called.

850
01:08:08,867 --> 01:08:15,047
And so stable coins, new petrodollar, dollar wrecking ball, all this stuff,

851
01:08:15,288 --> 01:08:22,748
they're financing deficits in near cash markets because they can't issue enough bonds at the long

852
01:08:22,748 --> 01:08:27,748
end at rates that don't blow up the debt. And as an investor, once you understand that, you're like,

853
01:08:27,748 --> 01:08:32,868
oh, you can get enraged about it or whatever. I know what to do with that. I absolutely know

854
01:08:32,868 --> 01:08:37,007
to do with that. There's a guy, a friend of mine called Mark Goodwin, who wrote a book called

855
01:08:37,007 --> 01:08:43,107
The Bitcoin Dollar in sort of 2021. And he called this back then. And it seems like that book is

856
01:08:43,107 --> 01:08:49,428
playing out exactly as he wrote it. But if for anyone listening who is like, holy shit, what do

857
01:08:49,428 --> 01:08:54,428
I do? I mean, we know Bitcoin's the answer. You talk about gold a lot. It's funny because the first

858
01:08:54,428 --> 01:08:58,727
time you were on the show, I was having a look, it was five years ago. And you were sort of

859
01:08:58,727 --> 01:09:02,788
interested in Bitcoin, but you were still a little bit hands off. And now when I read your pieces,

860
01:09:02,868 --> 01:09:08,947
every one of them finishes with, buy gold and Bitcoin. So is the answer literally as simple as

861
01:09:08,947 --> 01:09:16,007
that? The way things have evolved, the average person should probably have, in my opinion,

862
01:09:16,748 --> 01:09:24,888
20% of their liquid net worth in some combination of gold and Bitcoin, depending on their risk

863
01:09:24,888 --> 01:09:33,047
tolerance, age, proximity to retirement, et cetera, right? Because obviously, I think over time,

864
01:09:34,388 --> 01:09:38,447
all else equal, Bitcoin probably wins relative to gold.

865
01:09:41,688 --> 01:09:48,288
But there's ways maybe it wouldn't, but let's set those aside. But Bitcoin in the meantime has been

866
01:09:48,288 --> 01:09:54,067
proven to be far more volatile, and that matters for the average investor. But yeah, I mean, the

867
01:09:54,067 --> 01:09:59,167
way things have evolved and the way things are evolving with AI, especially, right? Because we

868
01:09:59,167 --> 01:10:02,248
can just talk about the debt side and you're like, okay, we can see what they're doing.

869
01:10:03,328 --> 01:10:10,107
But AI is accelerating this. That's the tricky part around, you can see interest never sleeps,

870
01:10:10,208 --> 01:10:12,868
right? It's a compounding interest. It's the eighth wonder of the world. It's just going up

871
01:10:12,868 --> 01:10:17,828
and up and up. And that's why they are having to issue more of the shift, more of the debt into,

872
01:10:18,428 --> 01:10:24,027
it's why Besson came in and he doubled the run rate of treasury buybacks that Yellen was doing.

873
01:10:24,067 --> 01:10:27,188
Like, and mostly shifting from long end to short end.

874
01:10:27,248 --> 01:10:28,868
Like, it is what it is.

875
01:10:28,928 --> 01:10:30,248
I would be doing the same thing.

876
01:10:30,308 --> 01:10:31,607
He's not a bad person for doing it.

877
01:10:31,727 --> 01:10:32,567
Math is a math.

878
01:10:32,727 --> 01:10:33,987
And it's the stuff he said he didn't want to do.

879
01:10:34,007 --> 01:10:35,127
It was the stuff he didn't want to do.

880
01:10:35,188 --> 01:10:35,348
Yeah.

881
01:10:35,407 --> 01:10:35,708
You know what?

882
01:10:35,727 --> 01:10:37,987
I want to go play in the NFL.

883
01:10:38,308 --> 01:10:39,768
I don't want to fly commercial.

884
01:10:40,547 --> 01:10:40,748
You know?

885
01:10:41,487 --> 01:10:41,768
Sorry.

886
01:10:42,148 --> 01:10:42,288
Yeah.

887
01:10:43,348 --> 01:10:44,607
The math is the math.

888
01:10:45,208 --> 01:10:51,808
And when you look at the math as a math, and then you overlay the stuff we're talking

889
01:10:51,808 --> 01:10:57,947
about with AI, that's the really tricky part where we've got exponential functions in two

890
01:10:57,947 --> 01:11:04,667
different directions happening. And that means it's going to happen like way, way faster than

891
01:11:04,667 --> 01:11:15,447
we think. Will the stablecoin thing work? Maybe. I don't know. I mean, he needs to get trillions

892
01:11:15,447 --> 01:11:21,547
into stablecoins. Where is he at today? 300 billion, 400 billion? It's not happening fast

893
01:11:21,547 --> 01:11:28,788
enough he needs to be at like two trillion by like mid next year um and that has implications

894
01:11:28,788 --> 01:11:32,828
right because that means he's got to issue the state the t-bills and the stable coins got to

895
01:11:32,828 --> 01:11:39,308
get issued and those are like you got to start you know and oh by the way you know the banks one of

896
01:11:39,308 --> 01:11:44,107
the one of the provisions of the genius act is that the banks can use reserves to back stable

897
01:11:44,107 --> 01:11:50,027
coins well the whole reason qe wasn't like wildly inflationary you know and and i and lots of other

898
01:11:50,027 --> 01:11:55,788
people, and this was pre-FFTT, I was just a sales guy on a desk. I thought it would be,

899
01:11:55,868 --> 01:12:00,167
but then as you read up and as time has gone on, it hasn't been as inflationary as feared,

900
01:12:00,308 --> 01:12:06,227
not by Whitechart, because essentially so much of it was sterilized in bank reserves. Banks were

901
01:12:06,227 --> 01:12:11,368
paid a bribe by the Fed to basically take the money they gave them in QE and just hold it.

902
01:12:11,368 --> 01:12:20,467
if stable coins start being used in day-to-day life as you know banks are issuing them back by

903
01:12:20,467 --> 01:12:27,107
reserves you're mobilizing trillions in reserves and now just ascribe a modest money multiplier to

904
01:12:27,107 --> 01:12:33,607
that all the qe inflation that that was you know the although there was feared and never arrived

905
01:12:33,607 --> 01:12:42,107
is come in like a freight train is as our friend lynn would say so like and again this was always

906
01:12:42,107 --> 01:12:51,388
in the cake there is no like the math is the math and that's why i say the events like you need to

907
01:12:51,388 --> 01:12:57,388
you need to protect yourself like this you know we all enjoyed the party you know whether we voted

908
01:12:57,388 --> 01:13:04,268
for it or not right you know your boomers and and silent generation are getting 70 percent of record

909
01:13:04,268 --> 01:13:09,047
tax receipts and entitlements and yes they did pay into that they didn't pay that much for it all

910
01:13:09,047 --> 01:13:13,648
you know there's been inflation of services etc they're they're taking out more than they put in

911
01:13:13,648 --> 01:13:19,027
that's why it doesn't are what they are and and oh by the way our politicians spent their money

912
01:13:19,027 --> 01:13:25,487
as as they put it in they're spending our money as a print so yeah i mean it's it's somewhat

913
01:13:25,487 --> 01:13:30,388
cliche like yeah you need to own gold bitcoin but like you need to own going to bitcoin we're in that

914
01:13:30,388 --> 01:13:34,808
part of the cycle it just is what it is and i hope you know after it's over then you know i can leave

915
01:13:34,808 --> 01:13:39,148
a note in my will for my grandkids or great grandkids and say listen there's going to come

916
01:13:39,148 --> 01:13:45,727
a time around you know 20 85 and you're gonna you know you're gonna want to start buying some

917
01:13:45,727 --> 01:13:51,428
some some gold again um and i'll be done with it for for the rest of my life and you know it's just

918
01:13:51,428 --> 01:13:52,768
it's the arc.

919
01:13:53,248 --> 01:13:54,127
That's all it is.

920
01:13:54,388 --> 01:13:55,648
Golden Bitcoin is just the arc

921
01:13:55,648 --> 01:13:57,268
to get you through this monetary storm,

922
01:13:57,348 --> 01:13:58,127
this monetary flood.

923
01:14:00,107 --> 01:14:03,007
And I write about it a lot more

924
01:14:03,007 --> 01:14:07,487
because that's what's happening.

925
01:14:08,667 --> 01:14:09,587
It's accelerating.

926
01:14:09,907 --> 01:14:11,648
Like, the water's up to my knees

927
01:14:11,648 --> 01:14:12,848
and I'm still coming in.

928
01:14:12,888 --> 01:14:13,808
It's like, well, okay,

929
01:14:14,348 --> 01:14:16,268
get busy building the arc faster.

930
01:14:16,868 --> 01:14:17,388
It's funny though.

931
01:14:17,487 --> 01:14:18,388
It seems like the world

932
01:14:18,388 --> 01:14:19,467
is now waking up to this.

933
01:14:19,467 --> 01:14:21,627
JP Morgan came out with their debasement trade.

934
01:14:22,087 --> 01:14:23,768
The only thing that I'm not sure about with that

935
01:14:23,768 --> 01:14:24,688
is if it's even a trade,

936
01:14:24,768 --> 01:14:26,567
because that assumes you get out of it at some point.

937
01:14:27,567 --> 01:14:29,788
Is there a world where you do see selling your gold?

938
01:14:30,107 --> 01:14:30,407
Sure.

939
01:14:31,667 --> 01:14:33,047
When does that time come?

940
01:14:33,567 --> 01:14:37,888
For me, gold specifically,

941
01:14:38,067 --> 01:14:41,348
I look at it as what's the price of the dollar, right?

942
01:14:41,547 --> 01:14:41,907
Ultimately.

943
01:14:42,227 --> 01:14:44,808
So one of the metrics, as you know,

944
01:14:44,828 --> 01:14:45,967
I've published a number of times,

945
01:14:45,967 --> 01:14:48,407
is the market value of US official gold

946
01:14:48,407 --> 01:14:51,768
relative to the foreign-held portion of U.S. Treasuries.

947
01:14:53,547 --> 01:14:57,087
And with this magnificent gold rally that we've had,

948
01:14:57,828 --> 01:15:00,447
that ratio is 11%.

949
01:15:00,447 --> 01:15:02,487
In other words, if at market price,

950
01:15:02,667 --> 01:15:04,167
all U.S. official gold, if we have it,

951
01:15:04,167 --> 01:15:04,828
I'm assuming we do,

952
01:15:05,727 --> 01:15:07,947
collateralizes our foreign debt at 11%.

953
01:15:07,947 --> 01:15:13,487
In 1989, that was 20% as the Berlin Wall came down.

954
01:15:13,567 --> 01:15:15,027
We went into our unipolar moment.

955
01:15:15,348 --> 01:15:17,248
It bottomed at like 6%.

956
01:15:17,248 --> 01:15:26,607
the long-term average is 40%. So gold would have to rise nearly 2x from here just to get to the

957
01:15:26,607 --> 01:15:31,627
1989 level. So it would need to rise nearly 4x to get to the long-term average. And if we had an

958
01:15:31,627 --> 01:15:37,208
honest-to-goodness dollar crisis, like we did in 79-80, that was a dollar crisis. And gold was at

959
01:15:37,208 --> 01:15:44,047
the market value of US official gold was 135% of our foreign-held debt. In other words,

960
01:15:44,047 --> 01:15:47,587
foreigners could have showed up with their treasuries and said, give us gold.

961
01:15:48,688 --> 01:15:52,047
And the U.S. still would have had a third of its gold left over after they had extinguished

962
01:15:52,047 --> 01:15:58,507
all foreign debt of the United States. That was a gold bubble. We had 135% backed foreign debt.

963
01:15:58,828 --> 01:16:03,888
Today, it's 11. And things are not getting better. They're getting worse. And oh, by the way,

964
01:16:03,888 --> 01:16:11,248
in 1980, 30% debt to GDP, 2% fiscal deficit. Entitlements were nil. We still had an industrial

965
01:16:11,248 --> 01:16:16,527
base. Things were great. And they had the ability to raise rates to 15% to defend the dollar.

966
01:16:16,808 --> 01:16:20,987
We can't raise rates. They tried to raise rates to four to defend the dollar,

967
01:16:21,667 --> 01:16:25,888
and everything went pear-shaped. All of a sudden, they're doing BTFP and this and that and what

968
01:16:25,888 --> 01:16:31,027
have you. So there's no ability to raise rates to defend the dollar. It's all going to have to.

969
01:16:31,127 --> 01:16:35,607
So the answer to the question is, it's 11% of foreign held debt today?

970
01:16:35,607 --> 01:16:42,748
I don't know. The very earliest I would think about selling any gold would be that 20% number,

971
01:16:42,907 --> 01:16:48,027
but it's dependent on events. If we're seeing things evolve such that there's actually a path

972
01:16:48,027 --> 01:16:53,987
forward to fiscal austerity versus just run it hot, okay, maybe 20% is a number. More likely,

973
01:16:54,467 --> 01:16:58,987
I probably wouldn't even consider until 40%. Now, 40%, that gets you, what is that,

974
01:16:59,688 --> 01:17:05,487
$16,000 gold, $15,000 gold? I would probably take some out there. Maybe I would lend some to

975
01:17:05,487 --> 01:17:09,667
the federal government at $15,000 gold.

976
01:17:09,928 --> 01:17:14,208
Or maybe I'd buy some farmland at that point or something, some other more productive asset.

977
01:17:15,067 --> 01:17:18,468
But it's about the price of the dollar in real money terms, in gold terms.

978
01:17:19,667 --> 01:17:23,607
Bitcoin, I think, is a newer asset.

979
01:17:23,607 --> 01:17:24,627
I think it's going to be more volatile.

980
01:17:28,648 --> 01:17:33,468
For me, it's all about what's the price of the dollar, what's happening.

981
01:17:35,487 --> 01:17:40,727
And with Bitcoin, there's also a geopolitical hedge, right?

982
01:17:40,828 --> 01:17:43,308
And I never thought, look, I'm not going anywhere.

983
01:17:43,367 --> 01:17:44,047
I'm staying here.

984
01:17:44,328 --> 01:17:46,627
Like, I love this country.

985
01:17:46,848 --> 01:17:48,248
I was born and raised here.

986
01:17:48,388 --> 01:17:49,188
I'm an Eagle Scout.

987
01:17:49,348 --> 01:17:53,808
Like, I'm not leaving, right, for the meme.

988
01:17:53,928 --> 01:17:54,428
I'm not leaving.

989
01:17:54,507 --> 01:17:55,167
I'm not fucking leaving.

990
01:17:57,708 --> 01:18:00,688
But it does give you some optionality for periods of time, right?

991
01:18:00,688 --> 01:18:07,407
like you know uh in a way that gold doesn't simply because you know it's hard to fly somewhere with

992
01:18:07,407 --> 01:18:13,007
any real amount of gold it's really easy to fly anywhere with enormous amounts of bitcoin or it's

993
01:18:13,007 --> 01:18:19,007
really easy to send you know bitcoin over a zoom call to friends family etc around the country in

994
01:18:19,007 --> 01:18:28,527
a way that is just impossible with gold so for me it's all about multi you know what's the valuation

995
01:18:28,527 --> 01:18:32,308
of the dollar sort of relative to these assets.

996
01:18:34,748 --> 01:18:35,848
And what am I watching?

997
01:18:36,007 --> 01:18:36,648
What am I seeing?

998
01:18:37,007 --> 01:18:38,348
Like, are things getting better?

999
01:18:38,407 --> 01:18:38,947
Are things getting worse?

1000
01:18:39,007 --> 01:18:39,648
What's the political?

1001
01:18:40,708 --> 01:18:42,788
And unfortunately, sort of across the board,

1002
01:18:42,828 --> 01:18:46,928
a lot of the metrics, I think I wrote it a couple weeks ago,

1003
01:18:47,007 --> 01:18:48,007
like two weeks ago.

1004
01:18:48,007 --> 01:18:49,828
I'm still buying gold and Bitcoin every week

1005
01:18:49,828 --> 01:18:54,367
because the other side of that is,

1006
01:18:54,487 --> 01:18:56,607
when do I want to buy dollars relative to gold and Bitcoin?

1007
01:18:57,328 --> 01:18:58,848
You know, hey, it's Friday.

1008
01:18:59,188 --> 01:18:59,928
Do I want to buy gold?

1009
01:19:00,067 --> 01:19:01,748
You know, I want to buy dollars and sell gold in Bitcoin.

1010
01:19:02,848 --> 01:19:04,428
No, based on what I'm saying, no, not yet.

1011
01:19:04,708 --> 01:19:05,828
So I'd have to start seeing that.

1012
01:19:05,907 --> 01:19:07,208
And I think the prices are way higher

1013
01:19:07,208 --> 01:19:10,148
before that balance is in my own mind.

1014
01:19:10,547 --> 01:19:12,928
Yeah, I think that's probably the perfect place

1015
01:19:12,928 --> 01:19:13,667
to close out, Luke.

1016
01:19:13,727 --> 01:19:14,627
I've really enjoyed this.

1017
01:19:14,667 --> 01:19:15,708
I think we should close the show,

1018
01:19:15,888 --> 01:19:18,027
how you close every article, buy gold in Bitcoin.

1019
01:19:18,627 --> 01:19:19,828
Buy Bitcoin first, though.

1020
01:19:20,768 --> 01:19:21,788
Where do you want to send anyone

1021
01:19:21,788 --> 01:19:23,127
who's want to hear more about you?

1022
01:19:23,447 --> 01:19:24,587
Sure, thank you.

1023
01:19:24,587 --> 01:19:31,788
If you're interested in hearing more about our different research products, fftt-llc.com for more information.

1024
01:19:32,067 --> 01:19:41,507
And as you know, I'm on the – I almost called it the tweeter, which is – I'm on exit at Luke Groman, L-U-K-E-G-R-O-M-E-N.

1025
01:19:41,607 --> 01:19:42,027
Love it.

1026
01:19:42,127 --> 01:19:42,888
Thank you for this, Luke.

1027
01:19:42,907 --> 01:19:43,447
This has been great.

1028
01:19:43,567 --> 01:19:44,188
Thanks for having me on.

1029
01:19:44,328 --> 01:19:45,487
We've got a fun few days ahead of us.

1030
01:19:45,667 --> 01:19:46,027
Absolutely.

1031
01:19:46,248 --> 01:19:46,428
Let's go.

1032
01:19:46,708 --> 01:19:47,027
Absolutely.

1033
01:19:47,027 --> 01:19:47,308
All right.

1034
01:19:47,428 --> 01:19:47,788
Thanks, man.

1035
01:19:54,587 --> 01:20:24,567
Thank you.