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I wouldn't want to be in Besant's seat trying to manage all these deficits and just watch Congress continue to pile on more and more spending,

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have absolutely no solution for Social Security, which I've paid into all my life.

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And suddenly they're talking about, oh, we're just going to start cutting it.

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What do you mean cutting it? It's not even keeping up with inflation. Are you kidding me?

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They have a pretty big problem in front of them here, and it's obvious what the solution is.

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It's just how are they going to do it?

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What acronym are they going to put on it?

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And can they get away with it in a way that doesn't cause a massive spike in the separation

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of wealth in the short term?

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Another thing that's happening, Danny, is people are, they have fully 100% embraced

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the debt-based economy and they live on debt.

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The first quarter Fed, New York Fed numbers came out and credit card delinquencies, 90

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day delinquencies are, they're matching the 2008 levels now.

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let's talk about the fed james i i have this it's been super interesting to see what's happened

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since water's come in because it's not been what i expected i don't think it's what been what most

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people expected but one of the most interesting parts of it i've been watching and i i have an

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inkling as to what's going to happen next is are they going to start lying to us about inflation

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and when i say lying to us like we already know that cpi is like a bit of a cook number

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but they've got this inflation task force now.

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And are they about to start sort of overtly lying

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about what's happening?

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I mean, I talked about this a long time ago

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where I think we're so used to the 2% inflation number.

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We've just become conditioned to it.

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It's a frog boiling, you know,

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kind of just turn up the heat a little bit.

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Yeah, inflation is kind of normal.

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You need inflation because you will need people

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to spend money for goods

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in order to keep the economy going, all that.

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people to buy into it. I had an argument with somebody about this, you know, years ago about

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how inflation is just, it's insidious. You don't, you don't need it. It's just part of a debt-based

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system. It's what, it's a reality. And, you know, people become conditioned to it. So once you get

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them to that level, and we've talked about this before, how the Fed was asked, Powell was in a

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congressional hearing, and I can't remember who asked him, but they were like, you know, why 2%?

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Like, where does that come from?

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And he gave this long, drawn out answer that had to do with the neutral rate and everything.

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It was like, he just completely obfuscated the answer, which was because that's what we can get away with.

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You know, it's that people don't notice it.

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Three, four, five, 6%, you start noticing that come out of your paycheck because you go down the street to get groceries.

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And you're like, oh man, that's a lot more than last month.

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And my wages haven't gone up yet.

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and so i'm like i'm now i'm suddenly behind and so um two percent is and there's a there's a saying

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it came from your end your area of the earth where australia decided in the i believe it was in the

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early 80s that you know they they kind of they stated that number i think it was new zealand so

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i'd never heard this before um i saw it that's right alan farrington wrote an article recently

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and mentioned that's the first time i'd ever seen it but apparently it's like a central banker in

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new zealand who got asked in an interview on tv and just said two percent and that's where the kind

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of the whole mythology around two percent started yeah and i don't know if it became it was because

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that was that was kind of matching the the the expansion of the gold supply um for mining but

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in any case i i wrote about this a long time ago i said look there people are conditioned two percent

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They're going to kind of say, yeah, somewhere around two or three percent.

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And then eventually be somewhere around three, three, four percent.

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And they'll just kind of let it slide.

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And people are like, oh, well, inflation is a little bit hotter now, whatever.

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But then they just get on with their lives.

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And part of the issue here, Danny, is that when you have an oppressive fiscal system like this, people are struggling just to survive.

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Like they don't have time to dig into why this stuff is happening.

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I understand it.

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They're just trying to be like, what do I need to do to make more money to feed my kids, put clothes on their back, pay for the car, pay for the rent, and just keep going?

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They're inundated or they're just overwhelmed with that need.

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And then the two working spouses and double salaries, and now you're paying for childcare.

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It's just overwhelming.

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So the answer is, that's a long way of saying, yes, I think they're going to change the definition.

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Now, I thought that they would kind of gravitate towards a 2% to 4%, 2% to 3% range.

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We're going to be on there because it's really hard to hit a target and it's subjective.

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We're going to call it a range from now on.

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That seemed like the shortest putt to me, but changing which measure you want to use.

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So Warsh has been quoted as liking the trimmed mean PCE, which is the it's the it's the other type of CPI, the PCE, the pricing index that measures goods and services.

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and the trimmed mean is you're just throwing out the outliers. So if energy is way up on one month,

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you throw it out. If rent is way up, you throw it out. And that way you get to a point where like,

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ah, well, those are kind of outliers. The problem with that though is historically,

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it's been kind of a canary in the coal mine that, oh, energy's way up. That's going to push

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everything else up or housing's way up because of something else structurally going on. And that's,

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everything's kind of moving that direction. And so, um, it ends up being that it's a lagging

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indicator and then the way down and you throw them out, well, it's a lagging indicator the other way.

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So over a long period of time sure It smooths it out but it misses um it misses moves And since we already in we we we using data that already lagging So now we lagging the lag And then not only are we lagging the lag but then you got these meetings that are lagging that and their decisions And once you start putting something into place then the effects of that is lagging

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So it just produces a mess like we saw in 2020 and 2022 when we printed all that money, goods and services started going up in price.

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They blamed it on transitory inflation from bottlenecks of, you know, manufacturing and supply chains.

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And they were wrong.

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I mean, flat wrong and way, like way behind the curve.

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so that is kind of the concern here and and one of the things that he said he's going to do is

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like with this way a new way of figuring out inflation is go back to what he says first

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principles he starts a task force but what do you think the first principles he he's trying to get

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to are because i don't think i don't believe that he's going to get back to sort of the first

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principle definition if me and you sort of started talking about inflation well i think he's saying

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first principles he's talking about okay let's look at the market as a whole and dynamics around

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it and you cannot deny that AI can be disinflationary or deflationary. Like you just

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can't deny that. It's, uh, it now, um, whether or not that flows through to pricing remains a

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pretty big argument because of what Lynn talks about all the time, which is fiscal dominance.

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And when you have the government paying for goods and services up the wazoo and we have,

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We're running multi-trillion dollar deficits on the back of 39, almost $40 trillion of debt, servicing that debt, then having to reissue all that debt.

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That's just borrowing upon borrowing upon borrowing, and it's driving the economy.

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And so first principles would say, yeah, but this is all going to be disinflationary or it's going to be deflationary at some point because you've got these LLMs that are going to be doing the work of multiple people.

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And especially when you get into agentics, you know, where you've got agents, everybody's got an agent. And instead of me hiring, you know, an accountant to do my books for my business and an accountant to do my taxes, I can just have somebody come in and check the work of the AI to make sure it's right, check it off and, you know, pay him a smaller sum of money.

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And so it'll take up whose jobs?

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It'll take up the jobs of the people who are working for him, compiling all that data and putting into the models, into the programs to kick out the numbers.

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That's all done automatically now.

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And so obviously you're seeing layoffs at places like where they have data entering or just simple analysis.

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You're seeing a slowing hiring there.

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Does that mean that we're going to lose all the jobs?

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No, but you could see how that becomes,

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like you're doing more work for less effort, clearly.

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However, the money is still,

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it's going to be spent one way or another.

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I'm going to spend it on an AI agent

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or I'm going to spend over here on a person,

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maybe spend less on the agent, obviously,

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but this is going to go into Anthropic or OpenAI

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or, you know, Grok.

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And then the next thing you know,

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you've got an increasing separation of wealth. So it's just, I hear him on the first principles.

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I get it. I agree. We should be looking at first principles, but you can't parse out the principles.

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147
00:12:50,175 --> 00:12:57,275
bitkey that's bitkey.world and use the code wbd how does he prepare for that future that we are

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heading into because like clearly ai is going to have a more important role in the jobs market going

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forward, like undeniably already is like block have already got rid of a load of workers.

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I saw BitGo have got rid of a load of workers like this is already happening.

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So is it that he can ignore inflation numbers for now,

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knowing that disinflation or deflation is coming in the future?

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I don't think it's ignoring.

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I think it's just putting everything aside and waiting.

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You know, like that's why I think one of the one of the big reasons that he doesn't want

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to give guidance is because he knows that things are changing rapidly here.

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And it's going to be difficult to anticipate that.

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I can't anticipate.

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It's way too complex to figure out.

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It's just, I mean, when these things came out, Danny, when I, you're too young, but when I had a BlackBerry, which was just, it was basically a messaging tool.

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They didn't have, they didn't have screens on, they just had a little text screen on it.

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But when that stuff, when that came out.

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Well, not that young, James.

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And this is the, this is the late nineties. So when this came out though, I, I, we all thought,

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wow, this is going to make us, this is going to make it so much easier to get work done. And

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you're going to be able to be productive and get stuff done in shorter period of time. And that

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wasn't really the case. All it meant is that you're going to have more work piled on top of

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you and you're not going to have any working hours. You're literally going to be on the clock

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all day, every day. I mean, I was trading in Australia at 10, 11, 12 o'clock at night.

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I mean, I was at dinner trading Australia in Dallas and I'm sitting there with my kids. I'm

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on the, I'm on my BlackBerry, you know, trading Australia. I'm like, this is insane because at

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two o'clock in the morning, I'm getting phone calls on my cell phone now from Europe. And they're

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like, Hey, it's going to open here. What are you thinking about that? I'm like, I don't, it never

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turns off now. And that's what this has turned into. Instead of it being, oh, it's going to be

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a great productivity tool. It's going to make everybody work less. No, it just means everybody's

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on the clock now. So what does that mean for AI? I don't know. And that's why it's difficult to get

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a gauge of what's really going to happen. So that is a long way of saying that I think that's what

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he's trying to do is just give himself time and say, we're going to look at the data. We're going

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to make decisions that are data dependent, just like the last chairman Powell did. And we're going

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to not really talk about it. We're going to see what comes in. Now, if he changes the inputs though,

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and says, well, this data is a little bit different than it was six months ago, because I think it's a

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little bit better way to look at it. He's the chairman of the Fed. That's his job is to decide

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what they're doing and what they want to see and how they want to digest what.

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So, but he's also got a job of getting everybody on that board of governors and the officials,

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the Fed officials who are voting in each of these meetings to get on board to whatever

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he's thinking.

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And they can have a collective vote on it rather than just have a fight and then have

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a bunch of dissension.

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And it's just not going to be healthy.

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So I think his challenge is multifold. And so where he comes out, I believe, is not raising or lowering rates in the next meeting or two. I just don't see it happening. Could he raise rates later in the year? Well, sure, if we see a continued uptick in inflation, but I just don't think that's going to happen.

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I think with a resolution in the Middle East, oil coming back down in price, producer price index numbers coming down, which means that that's going to feed through to the CPI.

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Remember, that's what pushes all first because the producers start raising their prices.

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Then the consumer, you know, then the manufacturers are raising their prices.

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Then the stores are raising their prices and they're trying to get those margins and keep some sort of margin and it passes on to the consumer.

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and so it and then it unwinds backwards the other way right so we'll have to we'll have to see what

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happens but i think that's what he's going to do and i just don't think that there's an impetus for

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him to act right now i think he's going to be sitting on his hands for a little bit when he

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came in everyone expected him to be super dovish want to cut rates and he's actually come in very

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hawkish so far um is this all strategy is he basically trying to be like look i'm not just a

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Trump puppet, this is still an independent thing, and trying to get the other board members on side?

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Or is the data telling him that he can't do what he wants to do?

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No, I think that that is definitely a part of it. I think he wants to be seen as independent,

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that he's not a sock puppet for Trump, as Elizabeth Warren called him in those hearings,

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the confirmation hearings. I think he wants to be seen as independent, strong. He came across as

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kind of hokey, you know, the way his language was just down to earth, just a hokey little,

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you know, we're going to have a little family fight about this and, you know, and so, um,

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I think he wants to come across as just an independent, thoughtful guy. Um, but not going,

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not going to do the bidding for any of anybody. Now that said he has breakfast weekly with the

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Treasury Secretary. He and Bessette know each other, know each other well. And so, you know,

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Bessette has his own issue here. He's like, I'm rolling this debt. I'm rolling $12 trillion of

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debt in the next year. And then I'm going to have to do it again the next year. And next,

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and there be trillion So he understands that every single month that they keep Fed funds high is it just it continues this ongoing deficit and increase in

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deficit because you're rolling these bonds off. You've got longer term bonds that are maturing

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along with all of these T-bills that they piled up because Yellen was playing chicken with the Fed

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and she screwed up, not, not, um, she didn't term out the debt. She didn't push out the,

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to, to longer date and maturities when she had the chance to fair that we're looking back to,

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you know, hindsight 2020, but she also saw us print $5 trillion and she had been the chairman

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of the fed. She, she must've known that was inflationary, but she got behind the curve there.

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She didn't just hurry up and get out on the curve a little bit and on all those months and

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quarters that she could have issued longer term debt at lower yields, but she didn't do that.

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And Bassett was highly critical of it during the campaign about that. But now he's in the same spot.

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So do you think he's going to have a pressure on the Fed and on Warsh to, hey, we got to get these

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rates down? Well, most people think that that would be the case. However, if you recall, when

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Powell did cut rates by 100 basis points right before the election, what happened to the 10-year

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treasury? The yield went up 100 basis points. Why? Because the bond traders, they didn't swallow it.

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They called the bluff. They're like, no, no, no, no, no, no, no, no. You're going to

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cause inflation here. And that means that I'm going to have to be paid more yield on the longer

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end of the curve to get a real yield on my money. So you can cut rates all you want. And, you know,

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and you could talk about how the treasury, how the mortgage rates are going to come down if you

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cut rates, but it's not the case. And the fact is, if you just look at the 10 year hovering around

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four and a half percent here. It's gotten up to just about five percent and it's backed off. But

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the reality is the bond traders understand that we are in fiscal dominance and we have an issue

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here of having to issue more and more and more debt to pay for all the deficits that we're

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running. And so they're not buying it. They're just not biting on that hook. And so what happens

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from here? Well, that's why we have to be watching, Danny. I think that this rate, it's almost noise,

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almost. All this rate talk is noise. Because the real issue is, when do they come in and start

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buying bonds again. Now they're buying T-bills to replenish bank reserves and in order to make

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sure that the general account is topped up. But they've backed off that a little bit.

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And the treasury is buying what's called off-the-run paper in a regular treasury buyback,

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which is not, it's not regular in any way, shape or form. Yeah. There's the balance sheet. Exactly.

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So we have to watch that. And you saw it's ticking up here since the end of last year and it's going,

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it's ticking up slowly, but it's not rolling off. So what are they doing? Well, every single

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mortgage-backed security that matures are taking, instead of taking that money and just taking out

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of the system, they're going back and using that money from that they're getting from,

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you know, they're basically the Fed is getting money from the treasury for the maturity of these,

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you know, basically they're getting money for the maturity of the bonds, the T-bills,

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and they're getting money for the maturity of these mortgage backs. And they're turning around

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and taking those mortgage back money and plowing it back into bonds and into T-bills. So that's

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why this is still expanding because, you know, at a lower rate, it's not expanding at a higher,

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but if you split out the treasuries versus mortgage backs, you'll see that the mortgage

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backs are coming off and the, and the treasuries continue to, to rise. So as a, as a, you know,

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as an asset split, but that's, what's going on. So this is what we're watching. We're watching

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that closely to see, okay, when do they really start? When do they really start buying here?

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And are they doing some sort of yield curve control or, you know, operation twist?

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Because go back, if you leave that right there, Danny, just leave that right there.

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Go right before 2020.

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You see a little hump there?

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Yeah, that's where we got into that.

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That's where we got into the repo crisis.

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The repo crisis, yeah.

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Where there's a shortage of dollars.

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Well, guess what's going on around the world right now?

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Look at the U.S. dollar.

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You know, it's not at all time highs, but it is up over a hundred bucks again. And so, um, you know, that's a, that's a signal that there's a shortage of dollars around the world that other central banks need dollars.

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And so, you know, what is the case now is that you're watching Japan. The whole Japan experiment is, man, that has gotten to a point where this is a real issue.

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you've got rates going up, you've got the, the yen collapsing in the face of it, which is telling

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you that basically it's telling you that investors in Japan, they don't believe that the, that the

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rates are high enough for them to be compensated for the risk of continued expansion of, of spending

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out there. And so, you know, I'm not saying the yen is collapsing,

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but I'm saying the confidence is falling in it and people don't want to

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be holding in. And so that is, that's another issue. So, and you're just seeing all these

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things play out in real time. I would not want to be in either of those seats. Let's put it that way.

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I wouldn't want to be in Besant's seat trying to manage all these deficits and just watch Congress

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continue to pile on more and more spending, have absolutely no solution for social security,

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which I've paid into all my life. And suddenly they're talking about, oh, we're just going to

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start cutting it. What do you mean cutting it? It's not even keeping up with inflation. Are you

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kidding me? You know, like you've got to be joking. So you'll have an uprising here if we do that.

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Especially with people who really, really, really need it. But so these guys have, they have a,

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they have a, they have a pretty big problem in front of them here. And it's obvious what the

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solution is. It's just, how are they going to do it? What acronym are they going to put on it?

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and can they get away with it in a way that doesn't cause a massive spike in the separation

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of wealth in the short term see the thing i don't understand about that like because obviously you're

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saying that they can print money and and that'll get them out of this hole and i can understand

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from say percent's point of view why that would be attractive but if the fed is independent why

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would wash want to do that because his dual mandate is inflation and jobs right so like

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Pricing jobs, yeah, exactly.

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So, and at the moment, like,

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Bersent's in this problem where he's rolling over debt,

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it's costing him an absolute fortune.

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But why does Walsh care about that?

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Or why should the Fed care about that?

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Why do you feel like they have to be

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sort of accommodative there?

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Well, this is a great question.

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This goes back to first principles.

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Why does he care about inflation?

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Why?

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Why does he care about inflation?

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And, you know, so some people have to deal with it

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for a little while.

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Why do they care about it?

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First principles.

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They care about it because his job is to instill confidence in the U.S. dollar, period.

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The job of the Treasury is to do the bidding of Congress, figure out a way to issue debt and borrow enough to cover all that spending or to manage the Treasury in a way that if we were in, somehow we got into, we got away from deficits and we had a surplus to manage that surplus.

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with investments or whatever, but that's not the case. The case is the entire balance sheet of the

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treasury is, you know, the only growth that's happening there right now is on the debt side

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because we're not repricing gold primarily. You know, but so when you look at the, you look at

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the Fed and you look at the treasury, those are the first principles. That's what their jobs are,

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to manage the spending on the treasury side

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and to instill and keep confidence in the dollar

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on the Fed side.

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And so, you know,

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when the Fed has to find a way to do that,

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so they use inflation,

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the inflation he's got,

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they know they must manage,

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they have to manage inflation and have inflation.

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There's just no way around it

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with the debt-laden economy that we have

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or the system we have here.

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I mean, the math is just working heavily against these guys. And I think what they're hoping for, Danny, truly, I think these guys are both hoping that, man, this AI will be so disinflationary that we could just keep printing money and, you know, buying debt.

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and we're kind of backdoor our way out of this

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because what we'll do is we'll have a productivity miracle

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where you have an increase in productivity

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without having to increase all the spending.

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I don't get to that math myself.

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Why not?

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What stops you from getting there?

329
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Well, I mean, think about it.

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If you have a productivity miracle,

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meaning there's,

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And so what you have robots and AI basically doing all this work for very, very, very little cost. And then prices go down, you know, or like if you had like, if you had a deflationary shock to the system, which again, I think that would take us getting to AGI, you know, or close to it.

333
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where these computers are just so much smarter than us that, you know, that we're not, um,

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that we, that we can't be employed, but what are you going to have? You're going to have

335
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universal basic income. I mean, you've got, you've got on one side, you've got, uh,

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Elon Musk saying that people are going to be paid a lot of money. Like everybody's going to

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be wealthy. You're going to have an abundance of high income, universal high income. Right.

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So, but, you know, how do you, so how do you get there without pain in the middle? How do you get there without unemployment, without a spike in unemployment benefits and costs the government there? And then, you know, a massive spike in deficits and spending there.

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I don't know and then what are you gonna have like a handful of companies paying all the taxes that

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that the government needs to take in to to pay down its debt I just I can't get to the math and

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maybe it's because I'm I'm not smart enough um but it just I just don't see how the productivity

342
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miracle would get us there um it's interesting have you ever seen have you ever seen this chart

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i'm gonna pull up i'm gonna pull up two things actually and see if see if you've seen these

344
00:31:13,350 --> 00:31:19,630
because this is really interesting um i'm gonna pull them up together and this is kind of what

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i think this is what everybody's afraid of and this is a great article it was years and years

346
00:31:26,470 --> 00:31:48,801
years ago that I read this I was saying 2010 or 12 or something Um and I was like wow that be really interesting if that was if that I couldn you know I just kind of dismissed it So but you see this So the intelligence staircase

347
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have you ever seen this? No, I don't think I have. Okay. Well, down here on the second step

348
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of this huge staircase, you've got an ant, right? Then a few steps up, you've got a chicken. Then a

349
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couple steps up, you've got a monkey. And then a couple steps up from there, you got us, the human,

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right? And it seems like, I mean, we're, you know, so much smarter than this ant. And we're, you know,

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about eight or 10 steps above it, give or take, right? And then when you, but this is the scary

352
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part. The scary part is that's artificial general intelligence up there. And we're down here.

353
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so this is what's scaring people and this is what i think is you know when we get to there i don't

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how are we going to handicap what what happens there i i don't we're not smart enough you know

355
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we're smart and there's almost no point at that point like we're not we're not at the wheel

356
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what's that we're not at the wheel at that point it doesn't even matter what we think we're not at

357
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the wheel so i don't how can you say that we we don't know what's going to happen we're smart

358
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enough to know that we're nowhere near what artificial general intelligence is going to be.

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But I mean, so anyways, that was a little bit of an aside. But the point is that I think these guys

360
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have a very difficult path ahead of them. And which means that they're going to move slow.

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That's what I think. I think they're just going to move slow. And that's what I'm expecting. I do

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not expect shocks. I don't expect them to come out and do something without people, you know,

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just as a surprise. I don't expect wars to just come out and, oh, Fed, you know, I'm sorry that

364
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Trump said to cut rates. I'm going to cut them. Like, I just don't expect that.

365
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I would expect it to happen on the balance sheet side before it happens on the rate side,

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because the rates are just so front and center. Nobody's like, who's talking? Do you see anybody on

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CNBC or Bloomberg talking about the balance sheet of the Fed, how it's been expanding,

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how they've been buying T-bills, how they've been, they've got that treasury buyback system going,

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that they're buying old paper to get, you know, more money in the system back, you know,

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more velocity in the system by having paper moving. No, they don't talk about that. It's

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too confusing. It's too many acronyms. It's just, you know, so that's, that's where I think it

372
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00:35:45,401 --> 00:35:46,821
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391
00:35:47,201 --> 00:35:49,341
Tether Gold is now live alongside your Bitcoin

392
00:35:49,341 --> 00:35:51,481
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393
00:35:51,921 --> 00:35:53,821
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394
00:35:53,821 --> 00:35:55,521
in the same way that you do with Bitcoin.

395
00:35:56,461 --> 00:35:57,661
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396
00:35:57,841 --> 00:35:59,101
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397
00:35:59,261 --> 00:36:01,381
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398
00:36:01,381 --> 00:36:03,521
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399
00:36:03,941 --> 00:36:07,101
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400
00:36:07,101 --> 00:36:10,641
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401
00:36:11,161 --> 00:36:14,081
That's ledn.io and use the code WBD.

402
00:36:14,401 --> 00:36:19,141
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403
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404
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405
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406
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407
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408
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409
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410
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411
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412
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413
00:36:53,241 --> 00:36:54,861
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414
00:36:55,521 --> 00:36:58,801
Let's discount the artificial superintelligence for a minute

415
00:36:58,801 --> 00:37:02,181
and let's just say they did get a productivity boost from AI

416
00:37:02,181 --> 00:37:05,121
that did kind of give them some breathing room

417
00:37:05,121 --> 00:37:08,201
and meant that they could kind of tread this path a little bit more carefully

418
00:37:08,201 --> 00:37:10,361
and get to where they want to be over the next five years.

419
00:37:10,701 --> 00:37:12,321
What does that mean for the real economy,

420
00:37:12,441 --> 00:37:13,321
like for real people?

421
00:37:13,701 --> 00:37:16,301
Is it just more of an exacerbation

422
00:37:16,301 --> 00:37:17,221
of the K-shaped economy?

423
00:37:17,621 --> 00:37:19,201
Is it more permanent underclass

424
00:37:19,201 --> 00:37:21,001
and more people that do well who are the asset holders?

425
00:37:21,681 --> 00:37:22,361
I think that is.

426
00:37:22,661 --> 00:37:23,241
I think it is.

427
00:37:23,321 --> 00:37:24,921
I think it's the people who are in,

428
00:37:25,941 --> 00:37:29,041
that chart I showed you is what people are scared of, right?

429
00:37:29,061 --> 00:37:29,561
And they don't want it.

430
00:37:29,581 --> 00:37:30,001
They don't want it.

431
00:37:30,021 --> 00:37:30,501
They don't want it.

432
00:37:30,641 --> 00:37:31,381
Get away from me.

433
00:37:31,381 --> 00:37:31,841
I don't want it.

434
00:37:31,841 --> 00:37:32,561
I don't want it.

435
00:37:32,621 --> 00:37:33,181
I don't want it.

436
00:37:34,181 --> 00:37:38,021
And you need to embrace it

437
00:37:38,201 --> 00:37:50,841
For example, my son was working in cybersecurity, got out of college, got hired pretty quickly, and was working in cybersecurity.

438
00:37:51,221 --> 00:38:06,812
He was on what called the red team where they get paid by companies to find ways to break into the companies and show them where their weak points are their vulnerabilities And his company tragically shut down because of a death of the founder

439
00:38:06,812 --> 00:38:11,292
But when he went back to go get hired again, I was like,

440
00:38:11,372 --> 00:38:12,452
so what are you going to do?

441
00:38:12,512 --> 00:38:14,672
He's like, there are no jobs, none.

442
00:38:14,872 --> 00:38:17,792
He said Anthropoc came up with something that they don't even need us anymore.

443
00:38:18,972 --> 00:38:22,032
And he said, so I said, well, what's your plan?

444
00:38:22,712 --> 00:38:25,972
And he said, I'm going to embrace AI and figure it out.

445
00:38:26,212 --> 00:38:28,532
And I'm going to be in that world somehow.

446
00:38:29,112 --> 00:38:32,512
And I'll use my past skills to get there.

447
00:38:33,232 --> 00:38:40,112
And, you know, went headfirst into it, Danny, like for eight months, been doing nothing

448
00:38:40,112 --> 00:38:48,252
but learning and studying and learning and studying, you know, living on a ridiculous

449
00:38:48,252 --> 00:38:49,892
shoestring budget to get there.

450
00:38:49,892 --> 00:39:09,472
And he got hired to, so what he's doing is he's advising an industrial company in Dallas-Fort Worth on their AI hardware because they need help to understand it.

451
00:39:09,472 --> 00:39:30,292
So there's a perfect example of he's not coding. He's not a prompt engineer. He's not using AI to come up with marketing tactics. He understands the technology well enough and the hardware around it to help this company get to where it needs to be.

452
00:39:30,812 --> 00:39:33,132
Well, that job wasn't there two years ago.

453
00:39:33,232 --> 00:39:35,152
One year ago, there was no job there.

454
00:39:35,232 --> 00:39:37,612
They literally created that job and hired him.

455
00:39:38,332 --> 00:39:39,952
And so that's what I mean.

456
00:39:40,012 --> 00:39:41,692
Like, so the people who embrace it,

457
00:39:41,732 --> 00:39:42,812
they're gonna stay with the economy.

458
00:39:42,932 --> 00:39:44,072
They're gonna keep going.

459
00:39:44,172 --> 00:39:46,172
I mean, the internet changed things.

460
00:39:46,592 --> 00:39:49,592
Yeah, it meant you didn't need the same kind of transfer.

461
00:39:49,592 --> 00:39:52,572
It changed the way big box stores operated,

462
00:39:52,852 --> 00:39:54,212
retail stores operated.

463
00:39:54,532 --> 00:39:56,232
So it changed it.

464
00:39:56,552 --> 00:39:57,612
People lost jobs,

465
00:39:57,612 --> 00:40:04,652
but then they regain them in other areas and other people realize, oh, now, okay, drop shipping and

466
00:40:04,652 --> 00:40:09,492
Amazon and Walmart, like everything's being sent out because I've got just, okay, I'm going to be

467
00:40:09,492 --> 00:40:15,192
working in a different area now. And so you just have to adjust. You have to embrace it and adjust.

468
00:40:15,352 --> 00:40:19,012
And so the people who do that, they're going to continue working. I believe, I think it's going

469
00:40:19,012 --> 00:40:27,112
to create jobs that we can't even imagine right now. And so, but, but again, I do think you're

470
00:40:27,112 --> 00:40:31,712
right that these big companies, the people who are involved with them, the people who are doing

471
00:40:31,712 --> 00:40:38,572
well with AI are doing the jobs of four, five, six, eight people. And so now they're getting paid

472
00:40:38,572 --> 00:40:45,692
the same as two or three people would get paid. And so they're doing well. And people who have

473
00:40:45,692 --> 00:40:51,532
assets and all the big companies, the wealthy people, the K-shape, the top leg of the K is

474
00:40:51,532 --> 00:41:00,652
going to continue to grow. And that's not just productivity. It's also because of just the sheer

475
00:41:00,652 --> 00:41:04,812
amount of money they're going to have to print. And what does it do? It raises asset prices.

476
00:41:05,452 --> 00:41:09,452
And then it feeds into the economy and it feeds into consumer goods later.

477
00:41:10,632 --> 00:41:16,752
But that's kind of what, again, what I expect. And that does concern me for the economy as a whole.

478
00:41:17,772 --> 00:41:21,312
It's a good time to be a high agency person. That's awesome that your son's done that,

479
00:41:21,312 --> 00:41:29,232
though. That's cool. If you take AI out of the economy right now, how is the US economy doing?

480
00:41:29,532 --> 00:41:34,272
Because you hear lots of numbers about how it's performing quite well, but is that all being

481
00:41:34,272 --> 00:41:40,532
propped up by these AI companies? No, it's being propped up by the asset holders, the boomers,

482
00:41:40,692 --> 00:41:48,132
the older people, and the people who have assets, Gen X, and some of the millennials who are doing

483
00:41:48,132 --> 00:41:53,832
well enough that they're, they're, they're driving the economy. Um, the, you know, it,

484
00:41:53,952 --> 00:41:59,652
I don't know what the exact stat is, but it's, it, the, it's pretty good rule of thumb to say that

485
00:41:59,652 --> 00:42:04,192
80% of the spending is coming from 20% of the economy, something, you know, along those lines,

486
00:42:04,192 --> 00:42:13,012
the, um, the 80, 20 rule, but it's, it's, that's what's happening. Um, and you could see it when I,

487
00:42:13,012 --> 00:42:18,792
when I go out to dinner, I mean, I'm surrounded. It's not a bunch of kids. You know, you used to

488
00:42:18,792 --> 00:42:23,392
be, I have a pretty good mix of people in a restaurant, young people on dates, maybe in

489
00:42:23,392 --> 00:42:30,152
their twenties and some thirties and maybe a party of, uh, of 10 people like together that are

490
00:42:30,152 --> 00:42:36,872
having a girl's night out or a guy's night or just whatever. I, it's just like, I don't know

491
00:42:36,872 --> 00:42:41,132
what it's like around you, but around here, it's like, it's just a bunch of people my age and older

492
00:42:41,132 --> 00:42:46,332
and that, you know, you look around, it's like, there's a lot of silver hair in the, in the

493
00:42:46,332 --> 00:42:51,152
restaurants. Like there's, it's just an older demographic and it's the demographic who has

494
00:42:51,152 --> 00:42:55,532
assets. And I think that they're driving the economy. It's just, you can see it every day.

495
00:42:55,532 --> 00:43:02,452
And so, um, you know, I think that, but that's, that's really what's been happening and wages

496
00:43:02,452 --> 00:43:10,992
have lagged, but another thing that's happening, Danny, is people are, they have fully 100%

497
00:43:10,992 --> 00:43:19,012
embraced the debt-based economy and they live on debt, you know, and even if they're renting,

498
00:43:19,612 --> 00:43:26,912
they're using credit cards. And so again, here's another number that's severely lagging. The first

499
00:43:26,912 --> 00:43:32,672
quarter Fed, New York Fed numbers came out and credit card delinquencies, 90-day delinquencies,

500
00:43:32,952 --> 00:43:40,472
they're matching the 2008 levels now. And that's with people refusing to pay their student loans.

501
00:43:40,992 --> 00:43:45,572
So you've got student loans defaults, which is expected.

502
00:43:45,692 --> 00:43:46,892
People are just like, I'm not paying it.

503
00:43:47,092 --> 00:43:48,092
I can't get a job.

504
00:43:48,152 --> 00:43:48,772
I'm not paying it.

505
00:43:48,932 --> 00:43:51,052
And so, and then the second one is the credit card.

506
00:43:51,132 --> 00:43:53,212
So what do you do when you start getting into trouble?

507
00:43:53,692 --> 00:43:57,132
Well, you're not going to stop paying your, you're not going to start paying your car.

508
00:43:57,212 --> 00:44:00,772
You need to have a car to get your job or groceries or drop your kids off at school or whatever.

509
00:44:01,632 --> 00:44:03,452
Your first thing you're going to stop paying is credit cards.

510
00:44:03,672 --> 00:44:06,772
But the interesting thing is the credit card spending is continuing.

511
00:44:07,192 --> 00:44:10,172
You know, like there's a lot of credit card debt out there.

512
00:44:10,992 --> 00:44:26,403
And then another thing is margin debt You seeing a ton of margin debt in securities So whether or not people are pulling money out of their accounts and using margin to avoid having to sell the securities

513
00:44:26,403 --> 00:44:29,623
and just leaning on them.

514
00:44:30,043 --> 00:44:33,043
But again, so it's either you're using credit,

515
00:44:33,163 --> 00:44:34,023
you're using debt,

516
00:44:34,163 --> 00:44:37,083
or you've got assets that you're drawing from

517
00:44:37,083 --> 00:44:41,943
that you're able to keep spending.

518
00:44:41,943 --> 00:44:44,683
And that's kind of what the Fed has been seeing.

519
00:44:44,843 --> 00:44:47,123
And they've pretty much acknowledged that.

520
00:44:47,683 --> 00:44:50,123
So that's why they're watching unemployment closely.

521
00:44:50,603 --> 00:44:54,703
Because once unemployment starts ticking up, along with those credit card delinquencies,

522
00:44:55,443 --> 00:44:56,943
that's a toxic mix.

523
00:44:57,723 --> 00:45:00,083
And so that's an easy way to slip right into a recession.

524
00:45:00,443 --> 00:45:03,943
How can that snowball, the credit card delinquencies, student load delinquencies?

525
00:45:04,143 --> 00:45:04,883
Like what happens?

526
00:45:05,143 --> 00:45:07,243
What is the sort of next thing to fall after those?

527
00:45:08,123 --> 00:45:09,303
You have a market crash.

528
00:45:09,303 --> 00:45:16,823
we have a stock market crash and then spending just seizes up because you know you feel great

529
00:45:16,823 --> 00:45:23,623
yeah my google stock's all-time high you know i bought the mag 7 and i'm doing okay or man i got

530
00:45:23,623 --> 00:45:29,023
into this ai trade i'm crushing it you know and then all of a sudden the market crashes and you're

531
00:45:29,023 --> 00:45:34,143
like oh wait hold on i'm not gonna i'm not gonna buy that car i'm not gonna you know buy that house

532
00:45:34,143 --> 00:45:36,883
I'm going to pull back my spending.

533
00:45:37,043 --> 00:45:40,543
I'm going to cancel this offer for this or whatever.

534
00:45:40,703 --> 00:45:46,343
And then that in and of itself, I mean, we've seen it happen a number of times in our careers.

535
00:45:48,583 --> 00:45:53,823
And the market crash, just that grinds the economy to a halt, especially in America.

536
00:45:54,043 --> 00:46:01,463
In the United States, we are so financialized as an economy that we cannot get away from the stock market.

537
00:46:01,523 --> 00:46:02,083
It's part of it.

538
00:46:02,083 --> 00:46:06,623
It's a, it's a, it's a central part of, of our, the health of our economy.

539
00:46:07,463 --> 00:46:11,563
And, and how, what likelihood would you put on that happening? Like what percentage likelihood

540
00:46:11,563 --> 00:46:13,563
in the next say couple of years?

541
00:46:14,903 --> 00:46:22,183
Well, I mean, so it's, it's interesting because you saw, um, SpaceX come out and the absurd

542
00:46:22,183 --> 00:46:30,683
valuation they've got on that thing. Um, a hundred years of revenue, you know, um, crazy,

543
00:46:31,403 --> 00:46:33,543
Then you've got OpenAI and Anthropic coming.

544
00:46:34,163 --> 00:46:36,443
It sounds like they've punted to next year.

545
00:46:38,003 --> 00:46:40,183
So why would they do that?

546
00:46:40,183 --> 00:46:54,963
Well, you know, remember, once they go public, all their borrowing and their debt and their contracts and the lending and all the offshore, sorry, off balance sheet stuff.

547
00:46:54,963 --> 00:46:59,903
and they're lending to the chip makers.

548
00:47:00,543 --> 00:47:06,003
It just becomes this kind of a circle.

549
00:47:06,683 --> 00:47:09,803
And so I'm not sure they want to show their hands

550
00:47:09,803 --> 00:47:11,103
on all of that quite yet.

551
00:47:11,823 --> 00:47:15,783
But the issue here is that, yeah, the chip makers,

552
00:47:16,003 --> 00:47:16,923
they're crushing it.

553
00:47:16,923 --> 00:47:18,643
You saw Micron's earnings last week.

554
00:47:20,683 --> 00:47:23,003
I mean, I don't know how much that spending

555
00:47:23,003 --> 00:47:26,223
comes from lending from within that same ecosystem.

556
00:47:26,823 --> 00:47:27,063
Yeah.

557
00:47:27,323 --> 00:47:28,283
It's hard to tell.

558
00:47:28,923 --> 00:47:29,963
And that's number one.

559
00:47:29,963 --> 00:47:35,963
And number two, you know, once they come out

560
00:47:35,963 --> 00:47:37,963
and they just, they show all their books

561
00:47:37,963 --> 00:47:40,463
and everybody sees what's going on,

562
00:47:40,523 --> 00:47:45,043
the issue here is you saw everybody running into SpaceX

563
00:47:45,043 --> 00:47:47,343
at an insane valuations

564
00:47:47,343 --> 00:47:49,383
because they just want to get into this trade somehow.

565
00:47:50,103 --> 00:47:51,643
I mean, I had people calling me, Danny,

566
00:47:51,643 --> 00:47:56,323
like friends and family calling me like how can i get spacex i need to be in this before the ipo i'm

567
00:47:56,323 --> 00:48:01,883
like call your broker man it's gonna be it's insane i'm not sure i would buy it on the opening

568
00:48:01,883 --> 00:48:07,263
if you you know if you get some of the ipo and just want to put it away for 10 years sure but

569
00:48:07,263 --> 00:48:13,283
i don't understand that like apart from the vibes being really high and elon clearly being

570
00:48:13,283 --> 00:48:18,223
an insane person of agency who's done really cool things like what is it that people want

571
00:48:18,223 --> 00:48:23,663
spacex for why do they want it so bad and the space energy you know these gonna have the the

572
00:48:23,663 --> 00:48:29,223
hyperscalers out in space where they can run more efficiently and they're gonna they're gonna zap

573
00:48:29,223 --> 00:48:34,343
teleport that energy back to earth you know so come on we don't like do we even know that's gonna

574
00:48:34,343 --> 00:48:42,283
work like we don't know that's gonna work i i don't i don't know um if it does it it's it's

575
00:48:42,283 --> 00:48:50,603
world-changing um literally world-changing that's like tesla uh you know the original tesla power

576
00:48:50,603 --> 00:48:57,943
plants it's like completely world-changing so uh will it work that's what you're betting on

577
00:48:57,943 --> 00:49:03,523
basically that that and ai is going to be a big driver of their of their earnings but

578
00:49:03,523 --> 00:49:10,863
they why were people doing that because they can't get into the actual ai they want to be an ai

579
00:49:10,863 --> 00:49:15,163
Somehow, the first obvious thing to do was, well, AI needs power.

580
00:49:15,323 --> 00:49:27,183
So go buy all the power companies, you know, the irons and the, you know, the ciphers and whoever's got contracts with AI, Google and whoever can get them energy.

581
00:49:27,603 --> 00:49:29,443
You know, Google's got contracts.

582
00:49:29,883 --> 00:49:31,123
Anthropics got contracts.

583
00:49:31,563 --> 00:49:36,443
You know, we've got Cormant who's got contracts with these guys.

584
00:49:37,103 --> 00:49:37,903
Yeah, that's real.

585
00:49:37,903 --> 00:49:43,583
um so that's the first step and then what do you have you have the chips you got the chip makers

586
00:49:43,583 --> 00:49:48,603
you got so people going after anything ai associated because they can't get the actual

587
00:49:48,603 --> 00:49:52,023
thing they're buying the picks and shovels and they're like where can i get in where can i get

588
00:49:52,023 --> 00:49:59,103
in where can i get in so if these things get way out of hand because people just want to be there

589
00:49:59,103 --> 00:50:08,343
and it becomes bubblish because you start seeing that circular, you know, circular reference within

590
00:50:08,343 --> 00:50:14,623
that AI economy. Yeah, sure. Then that could, that could pop and you can have valuations come

591
00:50:14,623 --> 00:50:21,963
back to earth or a different earth than, than they thought. And so that's the one thing that

592
00:50:21,963 --> 00:50:28,023
worries me about this market, Danny, is it's hard to tell just how much further it can go and, and

593
00:50:28,023 --> 00:50:30,803
what exactly is going on with their earnings and all this.

594
00:50:30,803 --> 00:50:35,863
So when we get, I hope that that doesn't happen

595
00:50:35,863 --> 00:50:37,023
and we can just continue.

596
00:50:37,074 --> 00:50:43,654
on and things kind of settle to the right spot and you have the AI companies come public and

597
00:50:43,654 --> 00:50:47,694
it all works properly, that would be ideal. We'll see.

598
00:50:49,134 --> 00:50:55,574
It's going to be interesting. So Bitcoin's at 64k. There's obviously a lot of uncertainty still out

599
00:50:55,574 --> 00:50:59,974
there in the market, but Bitcoin over the last week or so seems to have found another bottom.

600
00:51:00,114 --> 00:51:05,594
Who knows whether it's the bottom or just another bottom for now. What do you think Bitcoin's going

601
00:51:05,594 --> 00:51:11,554
look like over the next 12 months? Well, I actually am confident that it's going to recover

602
00:51:11,554 --> 00:51:14,894
the next 12 months. I think we're going to be bumping up against the all-time highs or above

603
00:51:14,894 --> 00:51:22,414
them again. Look, we didn't have a blow off top like we did in the prior cycles. Part of the

604
00:51:22,414 --> 00:51:28,574
reason for that is it's kind of a multifold. One reason is I think that $100,000 level was a massive

605
00:51:28,574 --> 00:51:34,974
mental level for a lot of people. Totally. And not just new people, but OGs who have been sitting

606
00:51:34,974 --> 00:51:37,954
on this thing from a few dollars. You're like, if it ever gets to a hundred thousand dollars,

607
00:51:38,074 --> 00:51:42,894
I am selling half my stack or I'm selling three cores of my stack. And you saw millions and

608
00:51:42,894 --> 00:51:48,594
millions and millions of coins come out over the course of 2025 because of that. They were just

609
00:51:48,594 --> 00:51:54,614
like, it's over a hundred. I'm done. I'm out. Push it as far as I can. I don't know what that game

610
00:51:54,614 --> 00:52:01,134
was in the beginning of, of, uh, Bitcoin life, but there was a game that, uh, HODL was telling

611
00:52:01,134 --> 00:52:07,494
me about where it was like you put in a Bitcoin and then you see it, you see it grow and grow and

612
00:52:07,494 --> 00:52:11,794
grow and grow and grow and grow and grow. And then you have to say when you want to get out

613
00:52:11,794 --> 00:52:16,294
and you might get seven Bitcoin out of it and then you get out. But if you don't, it might go

614
00:52:16,294 --> 00:52:22,534
seven, 7.0. And it's like, you missed it. Darn it. You know? So you had, it's, it was kind of

615
00:52:22,534 --> 00:52:30,194
like that, the old mentality of it's up at 110, 115, 120, 125, 126, and then it started falling.

616
00:52:30,194 --> 00:52:32,014
And then they're like, okay, I'm out, I'm out, I'm out, I'm out.

617
00:52:32,134 --> 00:52:34,354
And so, and you just saw it happen.

618
00:52:34,474 --> 00:52:37,134
And then you had the deleveraging event in October.

619
00:52:37,374 --> 00:52:41,094
Who even knows what that was, Jane Street or whatever it was that was involved there.

620
00:52:41,294 --> 00:52:43,474
But that was one part of it.

621
00:52:43,774 --> 00:52:48,214
Second part is that hot ball of money was already moving out of Bitcoin.

622
00:52:48,814 --> 00:52:55,014
And it entered into gold and silver and the metals at the, you know, in the third quarter

623
00:52:55,014 --> 00:52:57,594
of last year and fourth quarter.

624
00:52:57,594 --> 00:53:02,254
And then it also was going into AI stuff, anything AI related.

625
00:53:03,074 --> 00:53:09,114
And then it poured out of everything, out of Bitcoin, out of gold, out of silver, platinum,

626
00:53:09,634 --> 00:53:10,254
copper, everything.

627
00:53:10,374 --> 00:53:13,714
Just get out, get out, get into the AI trade.

628
00:53:14,294 --> 00:53:18,214
And so, and then you had, of course, the energy trade on the backside of the war.

629
00:53:18,514 --> 00:53:23,674
So the hot ball of money has been moving around and it has, it left Bitcoin.

630
00:53:23,674 --> 00:53:31,914
the good news is because it didn't have such a blow off top that the downside that that drawdown

631
00:53:31,914 --> 00:53:36,414
was kind of muted for bitcoin it sounds brutal to people who just got into it and they're down

632
00:53:36,414 --> 00:53:45,454
over 50 but like this was actually not so bad yeah you know it wasn't it wasn't 85 so you know

633
00:53:45,454 --> 00:54:00,779
it funny though because like the actual the price hasn been so bad like 50 for a bear market is nothing but the sentiment been terrible It been brutal Like maybe the worst People attacking each other in the Bitcoin community It been brutal Like you know

634
00:54:01,019 --> 00:54:08,059
and calling each people, like people, you know, calling other people unethical. It's like,

635
00:54:08,139 --> 00:54:15,459
oh man, like seriously, what are you doing? So, but I do think that, you know, when you look at

636
00:54:15,459 --> 00:54:19,619
things like the power law, you've got people coming out and say, oh, the power law is broken.

637
00:54:19,619 --> 00:54:20,699
It's way off.

638
00:54:20,759 --> 00:54:21,419
It's not on the power law.

639
00:54:21,499 --> 00:54:24,359
And it's like, it's broken the power law's support.

640
00:54:24,499 --> 00:54:25,499
And it's like, hold on.

641
00:54:25,559 --> 00:54:27,019
The power law does not have support.

642
00:54:27,319 --> 00:54:28,459
It's never been support.

643
00:54:29,359 --> 00:54:29,939
You know?

644
00:54:30,939 --> 00:54:36,239
So it's just, it's that regression.

645
00:54:36,699 --> 00:54:39,079
And it is log, log.

646
00:54:40,079 --> 00:54:46,179
And it's from past price is determining what it looks like as it grows.

647
00:54:47,859 --> 00:54:49,519
And will it get back there?

648
00:54:49,619 --> 00:54:52,139
Yeah, I do think it'll get back to that mean.

649
00:54:54,279 --> 00:54:56,799
Can it be one or two standard deviations off?

650
00:54:56,799 --> 00:54:59,899
Well, one and change.

651
00:55:00,499 --> 00:55:08,519
But it's been nowhere near a collapse of the power law pricing.

652
00:55:09,639 --> 00:55:15,299
And that's a pretty good North Star at this point to see where you think it should be.

653
00:55:15,299 --> 00:55:31,999
And so if you look at that, the various models say it should be somewhere around, you know, $180,000, $200,000 next year, right? So at the end of 27, if you look at the mean. And so, yeah, I like Porcopolis. Yeah.

654
00:55:31,999 --> 00:55:44,459
So, you know, do I think, has it been disconcerting or has it been disappointing?

655
00:55:44,739 --> 00:55:45,899
Yeah, it has been.

656
00:55:46,519 --> 00:55:49,419
Disconcerting, no, it's just what it is.

657
00:55:50,639 --> 00:55:57,479
And so to answer your question fully, I think if we don't have a drawdown in the market,

658
00:55:57,479 --> 00:56:02,759
If we don't have a correlation to one event, I think we have seen bottom.

659
00:56:03,639 --> 00:56:05,839
That said, this is Bitcoin.

660
00:56:06,119 --> 00:56:13,899
And if it drew back to 52,000 or 47,000 without a correlation to one event, it wouldn't shock me.

661
00:56:14,839 --> 00:56:19,499
But I would say it's a better than 50% chance that it won't at this point.

662
00:56:19,659 --> 00:56:20,979
But, you know, it's Bitcoin.

663
00:56:21,699 --> 00:56:23,599
You just got to stomach it.

664
00:56:24,419 --> 00:56:25,239
You just never know.

665
00:56:25,239 --> 00:56:29,719
is the interesting thing to me is like i obviously totally agree with you when you say the hot ball

666
00:56:29,719 --> 00:56:34,599
of money's left bitcoin and i don't i don't think it was really that interesting bitcoin for the

667
00:56:34,599 --> 00:56:40,299
entire 2025 cycle like it was never it wasn't like previous cycles we've had um the interesting

668
00:56:40,299 --> 00:56:44,939
thing to me will be if the ai trade does roll over and at some point it's going to who knows

669
00:56:44,939 --> 00:56:49,279
if that's a decade away or a year away but at some point that trade will roll over like where

670
00:56:49,279 --> 00:56:56,479
the money goes then because like you look at other equities and i don't i don't really see the

671
00:56:56,479 --> 00:57:01,359
narrative for them but then if you look outside of that things like gold bitcoin like the sound

672
00:57:01,359 --> 00:57:05,739
money trade seems like the debasement trade seems like the obvious place for money to start moving

673
00:57:05,739 --> 00:57:18,924
do you think that that the likely outcome of something like that happening it the obvious place for money to start moving when you see that Fed asset when you see the Fed assets the balance sheet expanding in

674
00:57:19,224 --> 00:57:20,564
That is the obvious place.

675
00:57:20,564 --> 00:57:24,724
Or if you see structural problems

676
00:57:24,724 --> 00:57:28,664
in debt or fixed income,

677
00:57:29,404 --> 00:57:32,444
I would expect for there to be a reaction

678
00:57:32,444 --> 00:57:35,544
and it would be a visceral reaction

679
00:57:35,544 --> 00:57:38,184
from the Treasury and the Fed.

680
00:57:38,404 --> 00:57:44,464
I think that they will do what they need to do to stabilize those markets.

681
00:57:44,744 --> 00:57:46,784
And so that's really the thing.

682
00:57:46,904 --> 00:57:53,764
So if you see the stock market crash, they may let it simmer out a little bit.

683
00:57:53,804 --> 00:57:59,044
But if you see it take down the bond market with it, no, that's going to be, there's going

684
00:57:59,044 --> 00:58:00,664
to be printing immediately behind it.

685
00:58:00,664 --> 00:58:04,944
But you're looking for signals in the background.

686
00:58:04,944 --> 00:58:17,384
So one thing they could do is the Fed could take out the supplementary leverage ratio rules and remove treasuries from there.

687
00:58:17,524 --> 00:58:22,724
And then suddenly banks are buying more treasuries and holding more treasuries on their books.

688
00:58:22,784 --> 00:58:23,244
And what is that?

689
00:58:23,304 --> 00:58:24,124
That's inflationary.

690
00:58:24,784 --> 00:58:33,704
You know, you could see some sort of acronym come out on a regular treasury enhancement system, you know.

691
00:58:33,704 --> 00:58:43,624
And so next thing you know, they're buying treasuries and they say, well, we're going to be buying seven years and, you know, seven to 15 year treasuries.

692
00:58:43,744 --> 00:58:45,144
You're going to be buying those for a little bit.

693
00:58:45,244 --> 00:58:46,924
And it's because of this, this and this.

694
00:58:46,984 --> 00:58:49,884
And it's a regular operation.

695
00:58:50,064 --> 00:58:51,144
There's nothing to see here.

696
00:58:52,264 --> 00:58:54,924
If the balance sheet is expanding, it's not regular.

697
00:58:55,744 --> 00:59:01,084
That's inflationary, meaning it's debasing the currency.

698
00:59:01,084 --> 00:59:02,564
And so those are obvious.

699
00:59:03,704 --> 00:59:09,244
kind of flags for you to get back into those trades. Not that I've gotten out of them.

700
00:59:10,004 --> 00:59:16,744
Yeah, me neither. I'm too bad at trading. I just buy and hold Bitcoin. But when QE comes back in

701
00:59:16,744 --> 00:59:21,864
whatever form it is, might not be called QE. Do you think we could see yield curve control and go

702
00:59:21,864 --> 00:59:28,644
the full sort of Japan playbook route? I do, but I don't think it would be,

703
00:59:28,644 --> 00:59:34,104
I don't I think it would be much less obvious than what Japan has been doing I just think that

704
00:59:34,104 --> 00:59:42,004
we'll obfuscate it um in some way shape or form with acronyms and programs and I just don't I

705
00:59:42,004 --> 00:59:48,264
don't think it would be so obvious um but functionally and structurally it'd basically

706
00:59:48,264 --> 00:59:55,884
be the same thing the question is how much would we be buying how and for how long um and you know

707
00:59:55,884 --> 01:00:04,144
And whether it's like Larry says, it's whether it's a collapse of the markets or economy or confidence in the treasury.

708
01:00:04,324 --> 01:00:06,124
And next thing you know, you've got the big print.

709
01:00:08,244 --> 01:00:12,284
That would take a black swan event that we can't imagine.

710
01:00:13,424 --> 01:00:22,224
But, you know, I couldn't imagine six years ago that they would insist that we be locked in our own houses for months at a time.

711
01:00:22,344 --> 01:00:23,624
So who knows?

712
01:00:23,664 --> 01:00:24,864
Who knows what they come up with?

713
01:00:24,864 --> 01:00:36,429
But you know I just think it more along the lines of a slow continuous quiet print

714
01:00:37,189 --> 01:00:41,369
And they move these programs around to keep it going.

715
01:00:41,489 --> 01:00:42,469
And they're active.

716
01:00:42,609 --> 01:00:43,669
They dance around it.

717
01:00:44,089 --> 01:00:48,429
I don't think it's going to be in your face, big, obvious debasement.

718
01:00:48,509 --> 01:00:51,969
I think it's going to be a quiet, steady debasement like we're seeing now.

719
01:00:51,969 --> 01:00:55,169
Right now, it's just, we've got QE Lite going on.

720
01:00:56,569 --> 01:01:00,189
And I think it'll be QE light to medium for a long time.

721
01:01:00,409 --> 01:01:05,089
And they will allow the inflation to run hotter

722
01:01:05,089 --> 01:01:06,269
than they'll admit to,

723
01:01:06,389 --> 01:01:07,869
which is the whole point of the conversation

724
01:01:07,869 --> 01:01:08,689
we started with,

725
01:01:08,869 --> 01:01:11,089
which is what really is the inflation rate?

726
01:01:12,009 --> 01:01:13,409
Go look at your own bills.

727
01:01:14,209 --> 01:01:16,129
Go look at what you were paying for last year

728
01:01:16,129 --> 01:01:17,449
and compare it to what you're paying this year.

729
01:01:17,609 --> 01:01:18,649
Look at the same things.

730
01:01:19,189 --> 01:01:21,289
And look at your grocery bill, your gas bills,

731
01:01:21,289 --> 01:01:24,589
your air conditioning, energy,

732
01:01:24,589 --> 01:01:27,349
And don't forget insurance.

733
01:01:27,809 --> 01:01:30,129
That's likely the biggest slug of it.

734
01:01:30,609 --> 01:01:35,669
Health, home, car, like that stuff is just skyrocketed.

735
01:01:36,349 --> 01:01:37,229
Child care.

736
01:01:38,129 --> 01:01:42,769
I mean, you can't tell me it's 3.5%.

737
01:01:42,769 --> 01:01:43,509
Please.

738
01:01:44,029 --> 01:01:44,549
Zero chance.

739
01:01:44,549 --> 01:01:44,749
It's absurd.

740
01:01:45,509 --> 01:01:46,129
Zero chance.

741
01:01:46,729 --> 01:01:52,889
So the best thing they could do for them is quietly allow inflation to run hot.

742
01:01:52,889 --> 01:01:58,549
you know quietly let it run five seven nine percent without people really understanding it

743
01:01:58,549 --> 01:02:03,569
somehow to inflate away that's what happened yeah what's that to inflate away their debt

744
01:02:03,569 --> 01:02:07,429
to inflate away the debt yeah inflate away the obligations

745
01:02:07,429 --> 01:02:14,729
not a nice outcome it's a it's a mess man i can't wait to do a show where we talk about the economy

746
01:02:14,729 --> 01:02:20,309
like damn things are looking pretty good great yeah is that ever going to happen things are

747
01:02:20,309 --> 01:02:26,089
looking like england football i mean i i'm hopeful i get hopeful every world cup but this year i

748
01:02:26,089 --> 01:02:32,829
actually think it's our year i think we got it james it's been awesome man um we'll have to i

749
01:02:32,829 --> 01:02:36,289
wonder why i don't know when i'll next be in vegas but i i've not seen you in a while we'll have to

750
01:02:36,289 --> 01:02:41,069
do one in person at some point soon definitely uh let me know when you're here again please

751
01:02:41,069 --> 01:02:48,289
i'm i'm gonna be here for a long time let's go uh well you've got the usa world cup match to

752
01:02:48,289 --> 01:02:52,529
watch belgium i think you're gonna win it belgium uh not the team they were a few years ago i think

753
01:02:52,529 --> 01:02:57,429
you got this one in the bag yeah they're still tough but uh yeah got family coming over we're

754
01:02:57,429 --> 01:03:01,889
gonna go watch it and uh the pavilion it's gonna be good so awesome and trump's done you a favor

755
01:03:01,889 --> 01:03:07,229
he's got your striker back that's insane

756
01:03:07,229 --> 01:03:15,029
i don't know it's all subjective we'll see we'll see we'll see what kind of red cards come out

757
01:03:15,029 --> 01:03:20,729
tonight yeah as long as as long as he scores the winner then i mean i don't know people in europe

758
01:03:20,729 --> 01:03:25,269
will be having a meltdown it's hilarious um thank you so much man we'll we'll definitely do this

759
01:03:25,269 --> 01:03:29,609
again at some point i appreciate the time yeah thank you danny i appreciate it and look forward

760
01:03:29,609 --> 01:03:31,189
to the next time awesome

761
01:03:45,029 --> 01:04:15,009
Thank you.