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The violence, all this stuff, it only gets worse.

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The value of energy, of money, has been so perverted and debased by politicians and governments.

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Part of that's the fault of the people themselves.

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Like, the question with this kind of thing is always, like, where are they going to get

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the money from?

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Do you think this is just countries around the world are going to have to print money

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to do this?

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Yes, because I don't think people want to pay more taxes.

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It's one thing to say, here's a problem, let's tax you more for it.

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And they're like, well, what the fuck?

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I've been paying billions and trillions of dollars of taxes over the last decades.

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And now you're saying I got to pay more taxes because you made all these investment decisions

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that didn't do anything for our national security or for our security of food and fertilizer

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and commodities.

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Fuck that.

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You're out of power.

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Give me the next guy who says I'm not going to pay any taxes.

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Trust the process.

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The money will be printed.

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The things might get up or down.

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But at the end of the day, until you see politicians campaigning on austerity, don't worry about

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money not being printed.

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Arthur Hayes, it is good to have you back on the show, man.

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The last time we recorded was in Miami while Pete was still at the wheel.

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But it's been a while. How have you been?

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Excellent. You know, well, markets go up, markets go down.

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I'm still here, surviving.

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Markets go up, markets go down.

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But I read your piece recently, and you said that the bull market started when the U.S. bombed Iran.

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So do you think the bottom is in now and we're back in a bull market for Bitcoin?

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Yes, I do. And I think that there is an AI fear for deflation. And I still think that that particular scenario is playing out. Workers are getting fired. You know, people are adjusting to what it means when you have the highest earning workers on average, at least in an advanced economy like the United States.

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you know the bottom 10 20 percent of them are going to lose their jobs and a lot of these tech

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companies and um sort of businesses that are optimizing for a cost structure that doesn't need

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these type of knowledge workers i think that's continuing to happen and that's going to be a

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drag on the credit situation but the war has catalyzed governments around the world especially

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you know united states and china that they need to spend more on defense which now includes ai

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because AI has been roped into national security in both countries.

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And countries need to rebuild redundancies in their supply chains

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for commodities and electricity and all these sorts of things.

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And that's starting in the United States.

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China has been doing this self-sufficiency drive in earnest since 2018

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when Trump started the first trade war with China.

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And the rest of the world is waking up to the fact that

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they need to invest in their own defense, in their own supply chains

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because you can't have, you know,

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you can't have your fertilizer, your oil,

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all these things coming through this one particular choke point

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in the Persian Gulf.

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It's not like the Persian Gulf has changed in any way, shape, or form

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since we have been civilized humans

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for however many hundreds of thousands of years.

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There's always been a Persian Gulf choke point.

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It's just people have ignored it

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because it was convenient to do so and it was cheaper.

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But now there's no other option.

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Regardless of what you believe

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in terms of the right or wrongness of this particular war,

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Or if you're still in the Philippines and you no longer have energy because you didn't feel like diversifying your supply chain, well, you might be losing your seat at the table in terms of a politician because you didn't make these choices.

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And so, Cartier's going to start investing in this stuff, and that's highly inflationary.

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Why do you think that the world has overlooked that single choke point?

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Because is this really to do with the American hegemony?

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So like if you're Europe and I mean, Europe don't rely on gas or oil through that straight, but like Asia do. Is it because they know that like the U.S. are going to be keeping things in line and keeping things going? And now that trust has broken down. That's why we're seeing the problems with that choke point.

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yeah I mean if you put yourself in the politician's shoes you could say okay well I can believe in the

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system that's been in place since the end of World War II where essentially the United States

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guarantees free navigation for those for most countries around the world and you can move your

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stuff and it doesn't cost you anything extra and that's you know doesn't really cost you anything

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extra in terms of budget outweighs or you can invest in building your own refineries or invest

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in maybe building the capacity to accept crude oil

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or different commodities from other parts of the world

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or have trading ties with random countries in South America

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so that you can get your commodities from somewhere else

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that doesn't flow through the choke point,

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and that costs you extra money.

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And now you've got to find this money.

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Either you tax your people more, you inflate,

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or whatever you have to do to get that money

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and make those choices.

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Those are hard political choices to make,

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saying, hey, we need to spend more money,

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given that there's this cheaper option right here

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and we can just use, you know, suppliers in the Gulf.

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And we assume that everything is going to work out okay.

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And I think that's the shattering of that assumption.

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Regardless of whether or not in two weeks' time

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Trump and the IRGC come to some sort of deal

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and the strait is reopened or not, it doesn't matter.

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If you are a politician and you have experienced

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this last eight or nine weeks of disruption,

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you can't go back to that same illusion.

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And that's the point where people have to rethink

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Think about how their supply chains work for all these different commodities.

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So in some ways, is it a little bit like when the U.S. froze Russian treasuries in like,

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even if they unfroze them, they still like that has now set a precedent.

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And we know that that can happen again.

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So instead of having to rely on this, we're going to see countries build out,

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you know, nuclear energy or refineries or whatever it is and start spending in their

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own country rather than just relying on these things that have existed since World War II.

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Exactly.

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The assumption has been shattered.

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And again, we can go back to similar sort of volumes to the straight, but you can't, you know, now you have the ability, the political capital say, hey, look, look what happened in the last nine months.

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You know, we had to go work from home.

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We had to, you know, curtail flights.

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And wouldn't it be better if we had our own sort of more redundant supply chain?

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We should have multiple suppliers of these things, or we should build out our domestic refining capabilities so that our citizens aren't stranded on this island in the middle of nowhere.

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like Australia had to do with going to Singapore to beg for jet fuel and other refined products

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because China said, you know, we were going to keep all this stuff for ourselves. So I think

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that political discussion can happen. And there's a willingness to suffer the inflation, at least

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from a political standpoint, to rebuild your supply chain so that you aren't held hostage by

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a decision between, you know, Trump and the IRGC. But like the question with this kind of thing is

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always like, where are they going to get the money from? Do you think this is just countries around

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the world are going to have to print money to do this. Yes, because I don't think people want to

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pay more taxes at the end of the day, right? It's one thing to say, here's a problem. Let's tax you

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more for it. People are, well, I've been paying all these taxes, regardless of what the tax rate

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is around the world. And where'd it go? I don't know, maybe the politicians stole it. Maybe they

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did Green New Deal or some other nonsense. And they're like, well, what the fuck? I've been

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paying billions and trillions of dollars of taxes over the last decades. And now you're saying I

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to pay more taxes because you made all these investment decisions that, you know, didn't do

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anything for our national security or for our security of food and fertilizer and commodities.

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Fuck that. You're out of power. Give me the next guy who says I'm not going to pay taxes. And so I

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think that people are not for that type of tax, the overt tax, then they'll just do the covert

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tax, the inflationary tax, the printing the money, the, you know, the banking system printing the

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money or the central banks printing the money. It's funny, like even as a Bitcoiner, I understand

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the sort of insidious nature of inflation.

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But in Australia recently,

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they've brought in

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or they're bringing in a new capital gains tax.

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And I'm like,

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I would much rather just deal with the inflation

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rather than pay a huge capital gains tax

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whenever I sell an asset.

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Like in some ways,

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it's the least painful option,

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even though I know it's still bad.

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Does that make sense?

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Yeah, I mean, I guess that's because you own an asset

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which you believe is going to perform well

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in this scenario.

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I think most people,

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you know, they're not crypto investors.

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They barely own any stocks.

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They probably don't even own their own residence.

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And, you know, yeah, an extra tax is like, fuck, I can't afford, you know, a pound of beef at the supermarket.

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Right. It's it's kind of that way.

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So, well, OK, fine, I'll just deal with the inflation thing that's going to happen in the back end.

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Or it gets so apathetic they don't even notice.

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Is there any like which of the countries that will come out of this?

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Well, is it basically just the energy rich countries that are going to be strong on the other side of this?

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Yeah, I mean, countries that are self-sufficient in terms of capital and resources.

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will do well. And that's a very short list. Not even the United States is going to do well. Yes,

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Americans are not going to starve because of whatever happens in the street of Hormuz,

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but that doesn't mean that inflation is going to continue decimating the social fabric of America

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and inequality that this is going to sponsor is going to continue to decimate the social fabric

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of America. There's going to be lots of American losers, if you will, but again,

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and they're not going to be starving like Bangladeshis.

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So you think that that sort of K-shaped economy is only going to get worse?

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Yeah, I think that is a feature of this particular, you know, if you want to call it late-stage capitalism or whatever you want to call it, that's not going anywhere.

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You're not seeing it, you know.

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I think that's going to be a catalyzing feature for opposition to Donald Trump and the Team Red Republicans.

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Whether or not the Team Blue Democrats are going to succeed in that message, we're going to see.

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But, you know, if you take a look at Trump's polling numbers and what is he getting killed on, it's affordability.

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It's inflation.

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Same thing that Biden got killed on.

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This is what ends the run of the Republicans.

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So Trump's going to have to come up with an answer for this.

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Otherwise, you know, his team is going to get absolutely decimated in the upcoming midterm elections.

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It's one of those funny things as a Bitcoiner, like, you can see, like, I can believe what

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00:12:18,540 --> 00:12:23,060
you're saying like i can see this coming um and on the other side of it i'm like well it's going

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to be a ton of liquidity it's probably going to be good for bitcoin but it's like it's also terrible

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for the world and i don't want to see it happen even though i know that i'm probably on the right

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side of the trade when it does um do you think that like this next bull run for bitcoin is going

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to be all about liquidity because if like there's always a narrative right and like in in the 2020

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2021 sort of bull market it was all about stimulus after covid and then we had like the institutional

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wave and we had ETFs in 24, 25. Like, do you think this is all about liquidity or is it always all

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about liquidity? I mean, if you listen to anything I write or on stage, I'm always saying it's always

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about liquidity. We put a different wrap on it. We have to put a narrative on it. You know,

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me and every other commentator out there, because people don't really understand how banks and

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factory reserve systems work. But at the end of the day, it's all about liquidity. And the

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politicians have to tell it something different every time too, because, you know, they don't

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want people understanding that when they talk about all these esoteric programs or these acronyms,

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and they're really saying, we're going to print some more money and spend it on something. And

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there's going to be more losers and winners in this scenario. But please don't understand that

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that means inflation It means something other than that So and I know that you do talk about liquidity all the time Do you think Bitcoin does need liquidity to go up Because in the 2025 bull run like the Fed was

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drawing down its balance sheet almost the entire time, but Bitcoin still performed pretty well.

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It obviously didn't do as well as sort of tech stocks and gold, but it still did well.

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Well, I think that's a hangover from the two and a half trillion that was injected in the economy

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from the decline of the reverse repo program in the US. So yeah, so Powell had rates at five and

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a half short end or whatever from 2022 to certainly 2024 when they started cutting rates.

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But at the same time, due to the way that the U.S. Treasury was issuing short term debt,

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more so than long term debt, that actually drew two and a half trillion dollars of liquidity

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into the financial markets.

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And that's why you had a rally in stocks, Bitcoin, real estate.

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Everything was going up, even though you had short end rates, the highest they've been

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since the 1980s.

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Okay.

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Can you explain that to me?

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Because I don't know if I fully understand.

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Is that because the short-term debt is more money-like in the economy than long-duration debt?

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So basically, due to the COVID stimulus program, you had however many trillions of dollars were printed.

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And a lot of people basically shoved that into the banking system and money market funds.

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They said, OK, I've got all this money.

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I don't need it to spend anything.

242
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Let me just earn the 5.5%.

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in a money market fund,

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which is higher than what I get at a commercial bank,

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at least in the United States.

246
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And so the money market funds had all this money.

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And what they can do is they can park that money

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at the Federal Reserve and they can earn a rate,

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which is pretty much commiserate

250
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with the Fed Fund's effective rate.

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There's a bit of nuance around that,

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but essentially the Fed guarantees,

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if you give us money into this facility,

254
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we give you a rate.

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And they have to do this to be able to pin

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or manipulate short-term rates

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at the level that they want them to be at.

258
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So the money market funds have $2.5 trillion

259
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and invested with the Fed.

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And this is very good for money market funds.

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They get a rate, everyone's happy, right?

262
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So at the same time in 2022, end of 2022,

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the Fed's raising rates.

264
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And again, there's another affordability issue,

265
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but the U.S. economy needs assets to go up.

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Rich people need capital gains taxes to pay taxes.

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You know, rich people pay most of the taxes in the United States.

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And, you know, they fund all the politicians.

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And so Biden and Yellen at the time came up with a scheme where, okay, we need to juice

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the markets.

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We can't reduce rates.

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We can't do quantitative easing because everybody's hip to that.

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That's inflationary.

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Well, you've got this inert money, $2.5 trillion sitting on the Fed balance sheet.

275
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How do we get that off the Fed balance sheet and into the global U.S. dollar money markets?

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Okay, well, I know that these money market funds will keep the money at the Fed because

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the rate that the Fed pays them is higher than the rate that the U.S. Treasury is offering

278
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on a short-term treasury bill.

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So a bill is anything less than one year in maturity.

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So if I increase the supply of something, the price goes down, yield goes up.

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So Yellen said, okay, instead of issuing more long-term debt, 10-year bonds, something like

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that, I'm going to issue a fuck ton of short-term treasury bills.

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and if the bills rate goes above this reverse repo program rate,

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then a money market fund who is profit maximizing

285
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will say, okay, I'm going to take my money off the Fed

286
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and I'm going to put it in the U.S. Treasury.

287
00:17:00,308 --> 00:17:02,728
Now your credit profile of default doesn't change.

288
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You're still, the U.S. government's still paying you money.

289
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It's a different arm of the U.S. government,

290
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but the U.S. government's still paying you money.

291
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But when I put money into a Treasury bill,

292
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now that gets rehypothecated through the financial system

293
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and that's added liquidity to the overall system.

294
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And so you had essentially, as the U.S. Treasury issued more and more treasury bills starting in late 2022, you had the money market funds pulling money out of the Federal Reserve reverse repo program.

295
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You can chart this on Bloomberg or any other, you know, you can go on the FRED system.

296
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It's an open source data system.

297
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You can see this phenomenon.

298
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And you're going to see this program go from about two and a half trillion dollars till the start of, you know, 2025 down to zero.

299
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and you can chart bitcoin gold stocks real estate everything goes up because you injected two and a

300
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half trillion dollars of stimulus into the global markets even with rates at the levels that they

301
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were at and so that was the way in which you know the 2022 bottom to 2025 high was powered

302
00:18:02,928 --> 00:18:08,947
was this particular phenomenon and i remember i know that percent was making a big deal about

303
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how yellen had been issuing everything at the short end and then he came in and kind of just

304
00:18:13,168 --> 00:18:19,088
did the same thing. Is that just because there's no sort of demand for long-term debt?

305
00:18:20,768 --> 00:18:26,668
Yes. Nobody wants to own 10-year treasury bonds. Obviously, Besant was correct in what he was

306
00:18:26,668 --> 00:18:32,027
saying. Hey, short-term rates are low by historical standards. Yellen, you're an idiot.

307
00:18:32,148 --> 00:18:39,568
Why didn't you issue a bunch of 10-year, 20-year, 30-year bonds? But the problem is the liquidity

308
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at that long end is there is no liquidity.

309
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So all the while the Fed is supposedly

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doing quantitative tightening,

311
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which they were, the balance sheet was falling,

312
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the Fed never sold anything longer than a 10-year bond.

313
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In fact, they actually bought this debt.

314
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So at the same time the Fed balance sheet

315
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overall is decreasing,

316
00:18:57,428 --> 00:18:59,588
the Fed knows at the long end of the U.S. trading market

317
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is so fucked that they need to do quantitative easing

318
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on the back end of the curve.

319
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And obviously, you know,

320
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Yellen and Hunter Staffers are not idiots.

321
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They knew this too.

322
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They knew I can't increase the issuance at the long end.

323
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I'm going to lose control of that.

324
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So the only answer is short term bills.

325
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That's what everybody wants.

326
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Everybody wants a cash like instrument guaranteed by the government.

327
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And so I'm going to issue debt there.

328
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And I know I have a lot of takers for that particular tenor of debt.

329
00:19:26,388 --> 00:19:27,287
And so that's what she did.

330
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And when Besson gets in the seat and he's got the same directive from above, hey, I need

331
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lower cost of debt because I have my set of programs that I want to fund.

332
00:19:37,648 --> 00:19:40,648
doesn't necessarily mean the same ones that the Democrats want to find.

333
00:19:40,727 --> 00:19:43,588
But again, the Republicans print money just as much as the Democrats do.

334
00:19:44,027 --> 00:19:45,807
Trump has the same message to the Treasury Secretary,

335
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make my shit as affordable as possible.

336
00:19:48,828 --> 00:19:51,487
So we have to do the same policies as Yellen.

337
00:19:51,987 --> 00:19:55,768
And this goes into my, you know, discussion about Kevin Warsh.

338
00:19:56,008 --> 00:19:56,987
Everyone's like, oh, he's a hawk.

339
00:19:57,348 --> 00:19:59,268
Yeah, he's a hawk when he doesn't have to be a hawk,

340
00:19:59,268 --> 00:20:01,108
when he's just spouting off his mouth.

341
00:20:01,688 --> 00:20:02,268
Put him in the seat.

342
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Put him in policy with all the constraints that that comes from

343
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and the director from above,

344
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which is make sure the treasury market's functioning,

345
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make sure that I can fund these wars

346
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and this industrialization effort.

347
00:20:13,787 --> 00:20:15,627
Okay, what are you going to do, Warsh?

348
00:20:15,848 --> 00:20:17,047
He's going to do the same thing, Paul,

349
00:20:17,108 --> 00:20:19,168
whether it's just hold rates, print money.

350
00:20:19,268 --> 00:20:22,727
He is not going to sell bonds

351
00:20:22,727 --> 00:20:26,068
and materially reduce the side of the Fed's balance sheet

352
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because he can't.

353
00:20:27,068 --> 00:20:29,707
He's got all the institutional constraints upon him

354
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as he sits in this chair.

355
00:20:30,947 --> 00:20:33,368
And so it doesn't matter the political party,

356
00:20:33,648 --> 00:20:34,928
what they said before,

357
00:20:35,047 --> 00:20:35,807
when they get in the seat

358
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and they see the state of the finances

359
00:20:37,027 --> 00:20:38,787
and the directive from above hasn't changed.

360
00:20:39,287 --> 00:20:40,428
It's I've got to fund this stuff.

361
00:20:41,127 --> 00:20:42,168
The actions are the same.

362
00:20:43,348 --> 00:20:45,648
But I mean, he is in such a tricky spot now coming in

363
00:20:45,648 --> 00:20:47,868
because like he's obviously got a ton of pressure

364
00:20:47,868 --> 00:20:50,148
from Trump and the administration to cut rates.

365
00:20:50,268 --> 00:20:51,627
But with this war going on,

366
00:20:51,668 --> 00:20:53,388
like I don't see how he can.

367
00:20:53,487 --> 00:20:54,388
Do you think he will?

368
00:20:55,108 --> 00:20:56,868
Maybe I think what they're going to try to do

369
00:20:56,868 --> 00:20:58,207
is hold rates as long as they can.

370
00:20:58,328 --> 00:20:59,068
They're not going to increase them.

371
00:20:59,108 --> 00:21:00,027
They're not going to decrease them.

372
00:21:00,588 --> 00:21:03,348
And you see if by luck of the draw,

373
00:21:03,428 --> 00:21:05,207
they can get through this without the 10 years spiking

374
00:21:05,207 --> 00:21:06,967
to like, you know, five and a half, 6%.

375
00:21:06,967 --> 00:21:07,807
We'll see.

376
00:21:08,627 --> 00:21:11,527
I think the thing to watch is the volatility index,

377
00:21:12,248 --> 00:21:15,928
the move index, as my friends in the bond market say,

378
00:21:16,068 --> 00:21:18,368
the nominal level of rates is not the point.

379
00:21:18,467 --> 00:21:20,207
It's how fast you move up or down.

380
00:21:20,668 --> 00:21:22,168
So it's a volatility increases

381
00:21:22,168 --> 00:21:25,148
that is super bad for the treasury market.

382
00:21:25,268 --> 00:21:28,068
And that's what's going to elicit a policy response.

383
00:21:29,227 --> 00:21:30,688
So is the 10 year the one

384
00:21:30,688 --> 00:21:31,748
that we need to be paying attention to?

385
00:21:31,828 --> 00:21:34,608
Because I know the 30 year now is like well above 5%.

386
00:21:34,608 --> 00:21:36,287
In the UK, it's like nearly 6%, I think.

387
00:21:36,368 --> 00:21:37,888
In the US, it's over 5%.

388
00:21:37,888 --> 00:21:39,547
And they're like the highest levels.

389
00:21:39,987 --> 00:21:41,908
I think in the UK, it's the highest level since the late 90s.

390
00:21:41,928 --> 00:21:43,848
In the US, since just before the financial crisis.

391
00:21:44,068 --> 00:21:48,307
Like that signaling that is that, well, is that signaling that there's something wrong here?

392
00:21:48,868 --> 00:21:50,668
I mean, I think the reason why we look at the 10 years,

393
00:21:50,748 --> 00:21:54,348
because so many other financial products are priced off of that.

394
00:21:54,428 --> 00:21:55,967
Your mortgages, at least in the United States,

395
00:21:56,987 --> 00:21:58,928
your mortgage is priced off a 10-year bond,

396
00:21:59,648 --> 00:22:03,068
car loans, asset-backed securities, corporate loans.

397
00:22:03,068 --> 00:22:04,807
it's the most liquid part of the curve.

398
00:22:04,928 --> 00:22:08,888
And so therefore, all type of corporate and consumer debt is priced off of that level.

399
00:22:09,227 --> 00:22:14,428
So as that level increases, then that transmits down to the everyday person and the type of

400
00:22:14,428 --> 00:22:16,148
things that they care about in terms of credit.

401
00:22:16,768 --> 00:22:20,987
And so that's why it's super important in terms of to maintain control of that particular

402
00:22:20,987 --> 00:22:22,408
part of the curve.

403
00:22:22,408 --> 00:22:27,568
I don't think particularly Besant cares if the 30-year trade is at 10%, if the 10-year

404
00:22:27,568 --> 00:22:30,367
stays behaved at four and a half or whatever it is right now.

405
00:22:30,367 --> 00:22:35,828
do you think there's in the near future like say in the next four or five years do you think we'll

406
00:22:35,828 --> 00:22:40,107
see yield curve control in like a big western nation i think we'll see yield curve control

407
00:22:40,107 --> 00:22:45,348
i don't think it'll be called yield curve control there'll be something more opaque

408
00:22:45,348 --> 00:22:50,928
um and we'll see what it what they call it but in effect it will be yield curve control

409
00:22:50,928 --> 00:22:55,627
but it's like the the kind of question is it all roads lead back to the money printer really

410
00:22:55,627 --> 00:22:56,867
is where we're going with this.

411
00:22:57,487 --> 00:23:00,388
Yes, until the population and economy says,

412
00:23:00,487 --> 00:23:01,828
okay, I'm going to accept the leader

413
00:23:01,828 --> 00:23:03,188
who's going to come in and tell me that

414
00:23:03,188 --> 00:23:06,248
I have to make sacrifices in my standard of living,

415
00:23:06,348 --> 00:23:08,947
whether that's higher taxes or less government services,

416
00:23:08,947 --> 00:23:12,688
for things that happened even probably before I was born.

417
00:23:13,447 --> 00:23:15,568
And I have no personal,

418
00:23:15,928 --> 00:23:18,528
I didn't make any decision to spend on these things,

419
00:23:18,688 --> 00:23:21,707
but somebody before me spent all this money on stuff,

420
00:23:22,168 --> 00:23:23,268
doesn't matter what it was,

421
00:23:24,107 --> 00:23:25,127
and now I have to suffer.

422
00:23:25,627 --> 00:23:30,008
and I have to pay for it. We're humans. That just isn't going to happen. That is not a winning

423
00:23:30,008 --> 00:23:36,207
political strategy. Yes, Argentina and Miele are kind of doing this, but Argentina has been fucked

424
00:23:36,207 --> 00:23:39,288
for the last 100 years, and the population finally said, okay, we're going to try something different.

425
00:23:39,867 --> 00:23:44,107
That's not the case in the United States and a lot of advanced Western European economies.

426
00:23:44,748 --> 00:23:47,748
Yeah, getting the majority of the population to vote in a party that are saying,

427
00:23:47,748 --> 00:23:52,688
we're going to do real austerity, it's just not going to happen. Which is kind of like,

428
00:23:52,688 --> 00:23:58,908
what does happen then do we just have continued societal decline is that like i want to go from

429
00:23:58,908 --> 00:24:05,528
this right now the this angst this you know the violence all this stuff it only gets worse

430
00:24:05,528 --> 00:24:12,987
because people the other we all know the underlying cause but nobody wants to admit what it is and fix

431
00:24:12,987 --> 00:24:18,487
it they're just going to say oh it's whatever other issue they want to blame why you're upset

432
00:24:18,487 --> 00:24:24,328
about, but it's really because the value of energy of money has been so perverted and debased

433
00:24:24,328 --> 00:24:30,928
by politicians and governments. Part of that's the fault of the people themselves, that this is why

434
00:24:30,928 --> 00:24:36,848
you feel like you're going nowhere in your life. And you choose religion, or I hate the immigrants,

435
00:24:37,227 --> 00:24:43,168
or I hate people with a different accent than me, or I hate the AI, or I hate all these other things,

436
00:24:43,288 --> 00:24:46,867
but the real thing, which is why you're angry. And that's what all these different political

437
00:24:46,867 --> 00:24:51,727
parties are getting you to focus on something else other than it's really about inflation and

438
00:24:51,727 --> 00:24:56,528
your value as a human and what you produce as evidenced by what the price of money is.

439
00:24:56,908 --> 00:25:00,107
Yeah, it's always like just easier to blame a scapegoat than gets the root cause of the problem

440
00:25:00,107 --> 00:25:04,508
because the root cause of the problem isn't always easy to understand. Like when I got into Bitcoin,

441
00:25:04,588 --> 00:25:08,408
that's the first time I really understood the problem with money. And like that was by chance,

442
00:25:08,508 --> 00:25:12,688
you know, like 10 years ago, I looked at this weird internet money and then ended up here. It's

443
00:25:12,688 --> 00:25:17,168
like not everyone's necessarily going to go down that rabbit hole. Yeah, that's unfortunate. But

444
00:25:17,168 --> 00:25:21,768
again, that's I guess that's just the state of society. Yeah. Do you think we sometimes overstate

445
00:25:21,768 --> 00:25:26,888
the importance of like, or the resilience of the market? Like, you know, when oil traded like above

446
00:25:26,888 --> 00:25:32,688
100, got to 125, $130, whatever it got to, people were sort of calling for this being like

447
00:25:32,688 --> 00:25:36,068
catastrophic, the economy, things are going to start breaking and things were kind of okay.

448
00:25:36,348 --> 00:25:39,568
Like, do you think we the market is more resilient than we give it credit for?

449
00:25:39,568 --> 00:26:02,768
Yes, in many places, in most places, right? If you think about, you know, oil at $200, right? The United States is going to be fine. Things will be a little bit more expensive. Europeans, for the most part, are going to be fine, right? They could backtrack and go back and buy oil from Russia. They could, people, the euros are the second largest used currency in the world. They can print a bunch of money and buy stuff, right?

450
00:26:02,768 --> 00:26:06,607
I'm saying most of the people listening to this podcast, you are going to be fine.

451
00:26:07,168 --> 00:26:08,127
Things might be more expensive.

452
00:26:08,268 --> 00:26:09,328
You might be upset about that.

453
00:26:09,727 --> 00:26:13,188
But, you know, it's not going to be like in the Philippines and Bangladesh and parts of

454
00:26:13,188 --> 00:26:16,947
Africa where people are literally going to starve to death because there's just not enough

455
00:26:16,947 --> 00:26:18,127
to go around at that price.

456
00:26:18,328 --> 00:26:19,547
And their countries cannot print money.

457
00:26:20,268 --> 00:26:22,768
They have no sovereign savings, right?

458
00:26:22,807 --> 00:26:26,047
Nobody trusts them that they're going to buy their bond because they're going to pay them

459
00:26:26,047 --> 00:26:27,028
back later with tax revenue.

460
00:26:27,447 --> 00:26:28,428
Those people are going to starve.

461
00:26:28,428 --> 00:26:52,888
This isn't, you know, this is an academic discussion for us about inflation and scarcity and hardship. But for a lot of people around the world, they're going to starve to death. But nobody, BBC doesn't cover the starving people in Burkini Faso more so than maybe a blip on, you know, the morning news. Nobody cares, right? It's just not, there's only so much suffering the population can take before you go back to your TikTok and start scrolling your favorite cat video.

462
00:26:52,888 --> 00:26:56,307
So it's that issue that's going to happen.

463
00:26:56,467 --> 00:26:58,428
And that's unfortunate, but that's just human nature.

464
00:26:58,967 --> 00:27:01,088
How long do you think we have until it gets that dire?

465
00:27:01,607 --> 00:27:21,255
I mean if you listening to some of the commodity exports you know we at the tipping point of that in certain countries right If you live in mostly Southeast Asia and you hearing you know work from home in places like the Philippines and Thailand If you look at India right the rupee the Indian rupee is about to take out 100 like all time low for the Indian currency

466
00:27:21,815 --> 00:27:25,555
So in a sense, you have a perfect storm of things hitting a lot of these economies, right?

467
00:27:25,595 --> 00:27:33,095
A lot of these economies are back office processing centers for advanced economies.

468
00:27:33,095 --> 00:27:52,695
It's the call center people. It's this, you know, intermittent labor that's doing, you know, tasks that are cheaper to have a human do than automate. And if you have an AI that can do that better and you say, OK, well, no, you no longer have access to cheap commodities because you are just on the receiving end of whatever is able to get out of the strait.

469
00:27:52,695 --> 00:27:56,415
but, you know, Europeans, Americans, Japanese, Koreans,

470
00:27:56,515 --> 00:27:57,715
they've just bought everything that they can

471
00:27:57,715 --> 00:27:58,635
on the spot market to make sure

472
00:27:58,635 --> 00:27:59,815
their population is insulated,

473
00:28:00,075 --> 00:28:01,615
then you no longer have a job

474
00:28:01,615 --> 00:28:04,235
and you no longer have commodities.

475
00:28:04,975 --> 00:28:08,275
And so that's just a recipe for maximum social unrest

476
00:28:08,275 --> 00:28:09,675
in those type of places.

477
00:28:09,895 --> 00:28:11,975
And so if this persists much longer

478
00:28:11,975 --> 00:28:14,315
and the deficit of production,

479
00:28:14,875 --> 00:28:16,675
you know, we go over that cliff, whatever that is,

480
00:28:16,835 --> 00:28:18,755
you know, pick your favorite commodity analyst.

481
00:28:18,755 --> 00:28:21,495
Some people say it's in June, July, August,

482
00:28:21,615 --> 00:28:22,235
somewhere around there.

483
00:28:22,235 --> 00:28:26,255
you know you're going to have heads in a spike politicians are going to die in a lot of these

484
00:28:26,255 --> 00:28:32,055
places there's going to be mass social protests um in places like that because they have no job

485
00:28:32,055 --> 00:28:39,535
and they have no food damn i mean that's so bleak and and like you started this at the very start

486
00:28:39,535 --> 00:28:43,495
this interview talking about like ai job losses and and whenever i have talked about that i'm

487
00:28:43,495 --> 00:28:46,755
always thinking about like the places i live like i spend a lot of time in america i live in

488
00:28:46,755 --> 00:28:50,915
australia i'm from the uk like i i'm not necessarily thinking of like the global south that much when

489
00:28:50,915 --> 00:28:54,595
and talk about that, but you're right. Like they're going to be displaced because like the,

490
00:28:54,595 --> 00:28:58,435
the only person I've ever hired from, he was from the Philippines was I had an assistant for a while.

491
00:28:58,555 --> 00:29:02,655
And like, I got rid of that system because AI is now doing that job essentially. And there's going

492
00:29:02,655 --> 00:29:07,735
to be so many people in that bracket. Um, if you take it back to like the U S or like any Western

493
00:29:07,735 --> 00:29:11,575
nation, like how disruptive do you think AI will be in the short term? Say like the next five years,

494
00:29:11,595 --> 00:29:17,375
do you think we're going to see huge job losses? I mean, I call like 20, 20, 30%, but again,

495
00:29:17,375 --> 00:29:23,015
I think it's going to be concentrated on the knowledge workers, the white-collar professionals.

496
00:29:24,015 --> 00:29:28,175
And so while, if you think about it, at least in the United States, for example, and probably

497
00:29:28,175 --> 00:29:36,355
parts of our view, you had massive dislocation of blue-collar workers starting in the 1990s

498
00:29:36,355 --> 00:29:43,895
until the present day. And only probably until recently did they have a voice in Donald Trump,

499
00:29:43,895 --> 00:29:49,775
maybe a little bit Biden, you know, pick your right of center politician in Europe and Australia,

500
00:29:50,275 --> 00:29:55,355
talking about the concerns of these blue collar workers who, you know, lost their jobs due to

501
00:29:55,355 --> 00:30:03,175
the chinification of global markets and labor force. But the white collar workers have the

502
00:30:03,175 --> 00:30:08,795
organs of power. They own, they have the media. Nobody cares about blue collar workers in the

503
00:30:08,795 --> 00:30:14,075
advanced economy. It's all about what are rich white-collar workers doing, whether from culture,

504
00:30:14,355 --> 00:30:19,335
whether from spending habits. And this is what the news cycle is really about. And so this issue

505
00:30:19,335 --> 00:30:24,875
is going to be amplified to levels that we were under custom to when you think about what happened

506
00:30:24,875 --> 00:30:30,435
from in the last past four years as China entered the global economy and sort of depressed wages

507
00:30:30,435 --> 00:30:35,375
for a lot of this work. So I think it's going to seem like it's a lot larger than it is,

508
00:30:35,375 --> 00:30:37,635
just because these are the folks

509
00:30:37,635 --> 00:30:40,035
who the New York Times writes about and cares about.

510
00:30:40,955 --> 00:30:42,575
But at the end of the day, I think it's, you know,

511
00:30:42,595 --> 00:30:45,175
we're talking probably 10 to 20%, I think,

512
00:30:45,295 --> 00:30:46,955
is the amount of knowledge workers,

513
00:30:47,095 --> 00:30:48,235
at least in this particular wave,

514
00:30:48,295 --> 00:30:50,375
that are going to lose their jobs due to AI.

515
00:30:50,555 --> 00:30:52,675
I think that's the easiest, lowest hanging fruit

516
00:30:52,675 --> 00:30:53,295
for a lot of companies.

517
00:30:53,375 --> 00:30:54,415
If you take a look at the job loss,

518
00:30:54,515 --> 00:30:57,435
and usually in the 10 to 30% range of workforce,

519
00:30:57,515 --> 00:30:58,995
when you talk about a tech company announcing

520
00:30:58,995 --> 00:31:00,855
AI rationalization, they say,

521
00:31:00,855 --> 00:31:02,655
okay, we're going to let go of a certain amount of workers.

522
00:31:03,615 --> 00:31:05,155
But I mean, even on, like,

523
00:31:05,155 --> 00:31:09,295
if you compare it to that blue collar layoff because of China, like that was bleak. Like that

524
00:31:09,295 --> 00:31:13,535
was essentially like, I think Luke Grohman calls it the economy of despair because all these people

525
00:31:13,535 --> 00:31:17,715
who lost their jobs in the Rust Belt in the US, like then comes like the opioid epidemic, which

526
00:31:17,715 --> 00:31:21,795
I think those two things are certainly related to a degree. And it's like tons of people die.

527
00:31:22,115 --> 00:31:26,575
And if that goes to the coasts, like it's, it's kind of scary.

528
00:31:27,295 --> 00:31:30,815
But I think that the coasts, at least the political system is very responsive to the

529
00:31:30,815 --> 00:31:36,175
folks on the coast. They are the technocrats that are in the government agencies, that are in the

530
00:31:36,175 --> 00:31:42,875
NGOs, that are in the policy think tanks that give the architecture for policy and the excuse for what

531
00:31:42,875 --> 00:31:48,095
you're going to do as a politician. You know, I didn't come up with this idea. The XYZ NGOs staffed

532
00:31:48,095 --> 00:31:52,635
by all the Ivy League people, they came up with this idea and I just implemented it, right? And so

533
00:31:52,635 --> 00:31:58,255
I think these people have a voice in the government. They always have. And we're going to see something

534
00:31:58,255 --> 00:32:04,115
like UBI or government handouts or progressive taxation on AI companies, like whatever the

535
00:32:04,115 --> 00:32:09,075
solution is, I think because these are the folks using their jobs and they're the ones

536
00:32:09,075 --> 00:32:12,675
that the politicians have cared about in the past, they're going to get something out of

537
00:32:12,675 --> 00:32:16,815
the system that your factory worker did not when they lost their job due to China.

538
00:32:17,915 --> 00:32:21,575
Yeah, this is something I've been thinking a lot about, because if you say roughly like,

539
00:32:21,575 --> 00:32:26,055
you know, 10, 20 percent, whatever it is, it can sound, you know, in the grand scheme

540
00:32:26,055 --> 00:32:30,095
of things, it can sound like a relatively small number, but these people don't own their homes

541
00:32:30,095 --> 00:32:34,015
outright. They don't own their cars outright. They have credit card debt. And that's a big

542
00:32:34,015 --> 00:32:38,075
enough percentage to kind of bring the system to its knees. And what does a government do in

543
00:32:38,075 --> 00:32:41,875
response to that? And I don't think UBI is a good idea, but I think

544
00:32:41,875 --> 00:32:45,875
it's the only thing that can happen to sort of save the financial

545
00:32:45,875 --> 00:32:48,835
system if we do lose 10% of workers across the country.

546
00:32:50,175 --> 00:32:53,935
Yeah. And I think if you want to think about what this is going to look like, start to listen to some of

547
00:32:53,935 --> 00:33:00,895
the, I can't pronounce her name correctly, AOC. She's a woman, congressperson from New York.

548
00:33:01,495 --> 00:33:06,415
I think she's going to be the Democratic nominee for the president in 2028. Listen to some of her

549
00:33:06,415 --> 00:33:11,895
rhetoric, and I disagree with almost everything of it, but it sounds good. She talks about,

550
00:33:12,015 --> 00:33:16,015
you know, the billionaire class not earning what they made. I think she's going to get onto this

551
00:33:16,015 --> 00:33:19,775
AI affordability narrative. You know, there's bipartisan efforts in a lot of the United States

552
00:33:19,775 --> 00:33:21,275
to say we don't want any more data centers.

553
00:33:22,235 --> 00:33:22,295
Yeah.

554
00:33:22,755 --> 00:33:24,675
And so if you think about the types of folks

555
00:33:24,675 --> 00:33:26,355
that buy into her rhetoric,

556
00:33:26,635 --> 00:33:29,935
it's highly educated people on the coast.

557
00:33:30,355 --> 00:33:32,415
These are the folks most at risk of losing their jobs,

558
00:33:32,715 --> 00:33:34,115
at least in this wave, due to AI.

559
00:33:34,675 --> 00:33:37,355
And I think she's going to be the personification of that.

560
00:33:37,615 --> 00:33:38,735
And the Democratic Party,

561
00:33:39,375 --> 00:33:41,775
those who are successful in their bid to become

562
00:33:41,775 --> 00:33:43,875
the leaders of that party going forward

563
00:33:43,875 --> 00:33:46,875
are going to lean into this affordability due to AI,

564
00:33:46,875 --> 00:33:54,995
this we want to return the economy to humans, to, you know, human labor, whatever that means in sort

565
00:33:54,995 --> 00:34:02,535
of a white color perspective. And people like her are going to get a lot of, you know, formerly

566
00:34:02,535 --> 00:34:08,455
wealthy urban workers are going to latch on to that message. That'd be very, very powerful. And

567
00:34:08,455 --> 00:34:16,255
again, they have the organs of the media of all these, this apparatus of NGOs and whatnot,

568
00:34:16,255 --> 00:34:22,875
and I think that's going to be a counter movement to sort of the Trump business person. We're going

569
00:34:22,875 --> 00:34:27,155
to optimize everything. Don't worry about it. There's going to be this utopia in the next five,

570
00:34:27,235 --> 00:34:31,415
10 years, and we're all going to have this abundance. Maybe, maybe not. Who knows? But

571
00:34:31,415 --> 00:34:36,315
that's going to be the counter message to that. And that message is going to get aped in other

572
00:34:36,315 --> 00:34:41,115
advanced Western economies around the world. Oh, okay. There's another way to counter the far

573
00:34:41,115 --> 00:34:46,795
right or the you know the tech bros and the ai bro is taking everyone's jobs let's lean into this

574
00:34:46,795 --> 00:34:52,675
type of message that aoc and folks like her are putting out there and so as with you know people

575
00:34:52,675 --> 00:34:57,835
are aping trump in a lot of um western economies i think people are going to ape aoc and the

576
00:34:57,835 --> 00:35:03,875
counter message to to that situation the thing that keeps me up at night is the idea of a critical

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632
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Yeah, and I can totally see like the pushback against data centers.

633
00:37:44,555 --> 00:37:47,355
If it does get to the point where 10, 20% of people losing their jobs,

634
00:37:47,435 --> 00:37:48,815
there's going to be huge social unrest.

635
00:37:48,935 --> 00:37:52,735
And I can see the world where people start like attacking data centers,

636
00:37:52,815 --> 00:37:53,735
trying to take these things down.

637
00:37:53,975 --> 00:37:58,795
It's one of those things that whenever you talk about the near future,

638
00:37:58,795 --> 00:38:04,515
this is very hard like i think ai will be hugely important for the world but like the social unrest

639
00:38:04,515 --> 00:38:12,935
is going to come alongside it is going to be real um it's kind of terrifying yeah i mean i think

640
00:38:12,935 --> 00:38:18,335
there's always something terrifying going on in our society so yeah maybe it's true yeah that's

641
00:38:18,335 --> 00:38:24,435
true but like if um i guess everything we've spoke about there on the macro side while it kind of

642
00:38:24,435 --> 00:38:27,615
seems flippant to say it's going to be good for bitcoin it's probably going to be good for bitcoin

643
00:38:27,615 --> 00:38:31,255
Like, do you think this next bull market is going to be like unlike others?

644
00:38:32,075 --> 00:38:32,575
No, it's the same.

645
00:38:32,655 --> 00:38:33,375
It's the same ingredients.

646
00:38:33,475 --> 00:38:34,335
There's money printing.

647
00:38:34,935 --> 00:38:37,655
Why we are printing money, you can debate the cause.

648
00:38:38,295 --> 00:38:44,775
But at the end of the day, globally, not just, you know, advanced Western economies, everyone's going to try to print money.

649
00:38:45,295 --> 00:38:51,115
One of my favorite derivative traders, and I'm an LP in his fund, David Dredge, calls it the hunger games.

650
00:38:51,795 --> 00:38:52,955
Everybody's got the same problem.

651
00:38:53,655 --> 00:38:59,035
I've got to print this money to placate some particular part of my population, but there's

652
00:38:59,035 --> 00:39:02,435
only so much capital, investable capital to go around.

653
00:39:03,195 --> 00:39:07,415
There's only one United States that can issue bonds and they're going to cram it in everyone's

654
00:39:07,415 --> 00:39:11,215
throat and you've got to kind of find your crack to issue your debt.

655
00:39:11,275 --> 00:39:13,435
So it's the Hunger Games of debt issuance.

656
00:39:13,815 --> 00:39:17,275
But at the end of the day, the aggregate amount of fiat will be higher than it is today.

657
00:39:17,475 --> 00:39:21,315
And that is what powers a fixed supply asset like Bitcoin.

658
00:39:21,315 --> 00:39:27,495
I had David on the podcast a few months ago. He's awesome. But the funny thing about the last

659
00:39:27,495 --> 00:39:33,335
sort of Bitcoin bull market was it wasn't the hottest trade in the world. And previous cycles,

660
00:39:33,415 --> 00:39:38,295
I think it has been. But this one was so dominated by initially like AI stocks and I guess throughout

661
00:39:38,295 --> 00:39:42,895
AI stocks, but then also gold. Do you think Bitcoin can reclaim that sort of hottest trade?

662
00:39:43,615 --> 00:39:50,095
I mean, I think AI stocks was some of the suppliers and maybe not NVIDIA and TSMC,

663
00:39:50,095 --> 00:39:52,395
because they're such a massive entities, right?

664
00:39:52,455 --> 00:39:53,975
NVIDIA is bigger than most countries in the world

665
00:39:53,975 --> 00:39:55,395
in terms of its market cap.

666
00:39:57,035 --> 00:39:58,175
But I do think, you know,

667
00:39:58,175 --> 00:39:59,175
there's going to be the Sandisk

668
00:39:59,175 --> 00:40:01,375
of the world that went up 50x in a year, right?

669
00:40:01,555 --> 00:40:03,795
There's going to be another critical choke point

670
00:40:03,795 --> 00:40:08,875
identified in this flow chain of, you know, AI economy.

671
00:40:09,195 --> 00:40:11,995
And these stocks are going to do really, really well.

672
00:40:13,015 --> 00:40:15,595
And so, yes, if you are a stock picker

673
00:40:15,595 --> 00:40:17,095
in sort of the AI supply chain,

674
00:40:17,515 --> 00:40:19,395
I think that you will vastly outperform

675
00:40:19,395 --> 00:40:21,395
from Bitcoin.

676
00:40:21,395 --> 00:40:24,135
But again, it's not very easy.

677
00:40:24,135 --> 00:40:26,435
I've dabbled at it in my stonk portfolio,

678
00:40:26,435 --> 00:40:29,555
which is a fraction of the size of my crypto portfolio.

679
00:40:29,555 --> 00:40:31,515
But at the end, if you're talking about

680
00:40:32,455 --> 00:40:34,575
a big asset with a very simple narrative,

681
00:40:34,575 --> 00:40:37,155
is there more fiat tomorrow than today,

682
00:40:37,155 --> 00:40:49,363
therefore I go up then I think that is Bitcoin That is the beta If anything you should be performing better than Bitcoin whether it an AI stock or real estate or whatever Your performance benchmark has to be Bitcoin

683
00:40:49,363 --> 00:40:51,762
because it's a liquidity addition

684
00:40:51,762 --> 00:40:55,222
that's driving the majority of your returns.

685
00:40:55,643 --> 00:40:56,742
And so if you can't beat Bitcoin,

686
00:40:57,043 --> 00:40:59,523
then you shouldn't be investing in that.

687
00:41:01,102 --> 00:41:03,102
Because even in Bitcoin last cycle,

688
00:41:03,302 --> 00:41:05,463
it was like the treasury companies got the hype.

689
00:41:05,602 --> 00:41:07,282
It wasn't necessarily buying spot Bitcoin

690
00:41:07,282 --> 00:41:08,582
and holding it in self-custody.

691
00:41:08,582 --> 00:41:09,363
True, but look at NACA.

692
00:41:09,482 --> 00:41:11,643
It's down 99.99%.

693
00:41:11,643 --> 00:41:13,143
Like most of these treasury companies

694
00:41:13,143 --> 00:41:14,123
are terrible investments.

695
00:41:14,843 --> 00:41:15,023
Yeah.

696
00:41:15,482 --> 00:41:17,663
I mean, NACA is brutal.

697
00:41:17,923 --> 00:41:19,463
That chart is not nice to look at.

698
00:41:20,463 --> 00:41:21,502
Poor David Bailey.

699
00:41:22,963 --> 00:41:23,802
He's not poor.

700
00:41:24,443 --> 00:41:25,762
He certainly is not poor.

701
00:41:27,703 --> 00:41:29,063
Unfortunate David Bailey then.

702
00:41:29,943 --> 00:41:31,383
But so like going forward,

703
00:41:31,443 --> 00:41:32,943
what do you think the next bull market

704
00:41:32,943 --> 00:41:33,823
will look like for Bitcoin?

705
00:41:34,002 --> 00:41:35,863
Because like 126K top,

706
00:41:35,863 --> 00:41:37,963
Like, will we reclaim that quickly, do you think?

707
00:41:38,063 --> 00:41:39,383
How high do you think it can go?

708
00:41:40,643 --> 00:41:45,742
So right now, I think it's almost at the policy panic.

709
00:41:46,242 --> 00:41:48,802
And this is like the event that we all have been waiting for.

710
00:41:48,943 --> 00:41:50,943
You know, what does a policy panic look like?

711
00:41:50,963 --> 00:41:58,302
A policy panic looks like the bank term funding program in 2023 when three banks failed in

712
00:41:58,302 --> 00:41:59,302
two weeks, right?

713
00:41:59,363 --> 00:42:04,543
And overnight, Yellen and Powell essentially nationalized the entire U.S. banking system,

714
00:42:04,843 --> 00:42:05,002
right?

715
00:42:05,002 --> 00:42:07,102
It's what you call a policy panic, whatever it was.

716
00:42:07,802 --> 00:42:07,962
Yeah.

717
00:42:08,262 --> 00:42:22,903
A policy panic looks like April 10th, 2025, when Trump and Besant sort of backed off the tariffs, the maximalist tariffs almost immediately declared the 90 day ceasefire with China and all that sort of stuff.

718
00:42:22,982 --> 00:42:24,643
And then stocks and things ripped.

719
00:42:25,203 --> 00:42:31,602
And so right now we have this Iran war situation, this back and forth between Trump and the IRGC.

720
00:42:31,602 --> 00:42:36,563
And, you know, I hope you don't trade tweets because you'd be up ways, down, sideways.

721
00:42:36,663 --> 00:42:37,563
You wouldn't know which way you're going.

722
00:42:37,982 --> 00:42:44,623
So if you're basing your trading activity off of, you know, what either side said on a minute-by-minute basis.

723
00:42:45,343 --> 00:42:50,582
But the thing to watch is right now, the 10-year is at, I don't know, 4.67, 4.68%.

724
00:42:50,582 --> 00:42:55,903
The move index has rallied from, like, you know, 60s to 90s, like 85, 86.

725
00:42:56,203 --> 00:42:57,843
I haven't looked at my Bloomberg charts this morning.

726
00:42:58,703 --> 00:43:01,123
But we're in that trajectory.

727
00:43:01,403 --> 00:43:02,482
Volatility is increasing.

728
00:43:02,923 --> 00:43:05,002
The nominal level of debt is increasing.

729
00:43:05,582 --> 00:43:09,082
This scare of a sovereign debt meltdown

730
00:43:09,082 --> 00:43:12,043
in the United States and Great Britain and Japan

731
00:43:12,043 --> 00:43:15,302
and a lot of places is ever present and growing.

732
00:43:16,262 --> 00:43:19,723
And so if we get the move in next 130

733
00:43:19,723 --> 00:43:22,343
over the next days or weeks,

734
00:43:23,002 --> 00:43:25,123
we're right for a policy panic.

735
00:43:25,123 --> 00:43:25,782
Now, before that,

736
00:43:25,843 --> 00:43:27,823
we're probably gonna get some dislocation in the market, right?

737
00:43:27,843 --> 00:43:29,863
we'll see in media results in it.

738
00:43:29,903 --> 00:43:31,383
If they're not good and the market doesn't like them,

739
00:43:31,623 --> 00:43:33,863
it could be like bad news bears for a lot of AI stocks

740
00:43:33,863 --> 00:43:36,982
for a while until liquidity printer really gets going again.

741
00:43:37,802 --> 00:43:38,962
But at the end of the day,

742
00:43:39,123 --> 00:43:41,582
this is the recipe for a policy panic.

743
00:43:42,102 --> 00:43:43,023
What does that mean?

744
00:43:43,663 --> 00:43:44,363
I don't know.

745
00:43:44,643 --> 00:43:46,423
You know, there's a lot of tools at the disposal of Trump.

746
00:43:46,563 --> 00:43:47,962
Trump could literally just pull those ships out

747
00:43:47,962 --> 00:43:48,943
and say, I'm done.

748
00:43:49,403 --> 00:43:50,703
Iran war, we won, goodbye.

749
00:43:51,363 --> 00:43:52,143
Sail it off, right?

750
00:43:52,143 --> 00:43:54,943
I'm going to focus on affordability and whatnot,

751
00:43:55,223 --> 00:43:56,703
you know, in the election.

752
00:43:56,703 --> 00:43:59,383
and Iran doesn't even register anymore, right?

753
00:43:59,563 --> 00:44:00,742
There's all sorts of things they can do.

754
00:44:01,223 --> 00:44:03,962
But if we want to have that explosive bull market

755
00:44:03,962 --> 00:44:05,343
in Bitcoin and other crypto assets,

756
00:44:05,443 --> 00:44:06,443
we need a policy panic.

757
00:44:07,002 --> 00:44:08,183
And I think we're almost there.

758
00:44:08,903 --> 00:44:10,923
But that doesn't mean that Bitcoin goes up.

759
00:44:11,523 --> 00:44:13,802
It could go from 75 to 70,000

760
00:44:13,802 --> 00:44:18,262
if the 10-year starts ripping towards 5%

761
00:44:18,262 --> 00:44:19,282
in a volatile fashion.

762
00:44:19,623 --> 00:44:20,782
But this is the recipe.

763
00:44:20,782 --> 00:44:22,043
We're almost at that point

764
00:44:22,043 --> 00:44:25,302
where you get this massive panic

765
00:44:25,302 --> 00:44:28,363
due to bond market fundamentals and volatility.

766
00:44:29,043 --> 00:44:31,302
And you get a massive policy response

767
00:44:31,302 --> 00:44:33,563
in the United States and other places around the world.

768
00:44:33,823 --> 00:44:36,082
And then that's it, they're done.

769
00:44:36,663 --> 00:44:38,082
They've got the excuse to do

770
00:44:38,082 --> 00:44:39,023
what they've always wanted to do.

771
00:44:39,543 --> 00:44:41,023
And now it's just, you know,

772
00:44:41,242 --> 00:44:43,602
a massive printing exercise for a year or two.

773
00:44:43,802 --> 00:44:46,462
And that's what carries Bitcoin through 126,000

774
00:44:46,462 --> 00:44:48,762
to whatever level it's going to get to on the upside

775
00:44:48,762 --> 00:44:51,502
before we come to our senses again and that goes down.

776
00:44:52,703 --> 00:44:54,222
How many more of these sort of panics

777
00:44:54,222 --> 00:44:55,302
do you think fiat can take?

778
00:44:55,442 --> 00:44:58,002
Like, because from 2007 to COVID,

779
00:44:58,163 --> 00:44:59,643
like the amount of money printing

780
00:44:59,643 --> 00:45:02,343
is like 2007 is not even on the chart.

781
00:45:02,403 --> 00:45:03,543
That was probably like a week of printing

782
00:45:03,543 --> 00:45:05,082
during COVID or something stupid like that.

783
00:45:05,383 --> 00:45:07,023
Like how many more of these can it take?

784
00:45:07,102 --> 00:45:09,082
Like when will we get to the last fiat cycle?

785
00:45:09,163 --> 00:45:09,942
Or do you think, again,

786
00:45:10,002 --> 00:45:11,123
this is more sustainable

787
00:45:11,123 --> 00:45:12,383
than people will give it credit for?

788
00:45:12,383 --> 00:45:14,802
I mean, I think fractional reserve banking

789
00:45:14,802 --> 00:45:15,883
has been around for hundreds of years.

790
00:45:16,363 --> 00:45:17,163
Like the Bank of England

791
00:45:17,163 --> 00:45:19,942
was the first episode of quantitative easing

792
00:45:19,942 --> 00:45:20,863
to save the,

793
00:45:20,863 --> 00:45:27,383
uh was it the i forgot which company it was one of the ones that was doing slavery and drug dealing

794
00:45:27,383 --> 00:45:31,302
in the in the nears wasn't like the east india company or something was it yes yeah exactly they

795
00:45:31,302 --> 00:45:35,543
were about to fail i think it was like something like 18 something whatever it was and the bank

796
00:45:35,543 --> 00:45:40,222
of england conducted the first episode of quantitative easing to save what was you know

797
00:45:40,222 --> 00:45:45,563
the biggest and hottest stock uh at the time everybody uh middle class uh english person

798
00:45:45,563 --> 00:45:50,242
owned the stock and you know there were some issues some impropriety and the stock crashed

799
00:45:50,242 --> 00:45:52,962
and the Bank of England had to come in and print money and prop it up, right?

800
00:45:53,163 --> 00:45:54,782
First instance of quantitative easing.

801
00:45:55,023 --> 00:45:56,242
We've been doing this for hundreds of years.

802
00:45:56,543 --> 00:45:57,242
We can do it for longer.

803
00:45:58,242 --> 00:46:00,082
The only thing that really stops this train is AI.

804
00:46:00,903 --> 00:46:03,582
Because if you have an energetic economy,

805
00:46:03,923 --> 00:46:06,002
which is completely different in terms of its structure

806
00:46:06,002 --> 00:46:07,703
of how knowledge is produced and consumed,

807
00:46:08,102 --> 00:46:12,203
then the whole edifice of fresh and reserved banking

808
00:46:12,203 --> 00:46:14,302
doesn't need to be there anymore.

809
00:46:14,683 --> 00:46:18,082
And I think that's what sort of brings in a change in the monetary system.

810
00:46:18,223 --> 00:46:19,582
What that change means, I don't know.

811
00:46:19,582 --> 00:46:23,843
but it's not going to be like it has been for the past two or three hundred years.

812
00:46:24,063 --> 00:46:28,863
I think that is the thing that stops fractional reserve banking and gets us to a different system.

813
00:46:29,502 --> 00:46:31,002
That saying it's better or worse is different.

814
00:46:32,163 --> 00:46:37,442
When we do get to that sort of agentic economy, do you think that the AI agents will choose Bitcoin as money?

815
00:46:37,663 --> 00:46:40,282
Or do you think, because I mean, they're not going to have a Chase Bank account.

816
00:46:40,383 --> 00:46:43,742
Like, do you think stable coins will win that race or Bitcoin or something else?

817
00:46:44,043 --> 00:46:49,043
So, I mean, I have a theory on this and I think the AI agents want, at the end of the day,

818
00:46:49,043 --> 00:46:57,102
what do ai agents eat they eat raw compute they don't eat tokens tokens is just a layer a layer

819
00:46:57,102 --> 00:47:02,623
above that and yes bitcoin bitcoin represents electricity at the end of the thing that's what

820
00:47:02,623 --> 00:47:08,602
the derivative of bitcoin is on a kilowatt hour and what work that can do and ai cares about you

821
00:47:08,602 --> 00:47:14,802
know floating port operations per second or per period of latency that is their currency so i think

822
00:47:14,802 --> 00:47:21,143
that yes, Bitcoin is probably the best approximation of that right now. There will be a AI commodity

823
00:47:21,143 --> 00:47:29,462
token that represents floating point operations per second closer than a token does. And that is

824
00:47:29,462 --> 00:47:35,323
what is going to be the currency of the AI economy. We don't have that yet. But I think that if I think

825
00:47:35,323 --> 00:47:40,703
about it in a theoretical perspective, I think that is what is coming for the AI economy. And then we'll

826
00:47:40,703 --> 00:47:45,123
price everything else off of that you know it is still might use bitcoin because you know maybe

827
00:47:45,123 --> 00:47:48,883
they need to interface with a human and the human wants bitcoin doesn't want this other currency but

828
00:47:48,883 --> 00:47:54,203
i think there is a space for that type of currency it will be cryptographic in nature it will be on a

829
00:47:54,203 --> 00:48:00,903
public blockchain it will not be a u.s dollar stable coin in my opinion yeah i mean on the

830
00:48:00,903 --> 00:48:05,623
crypto side because i like i'm i just pay attention to bitcoin but i know that you you sort of trade

831
00:48:05,623 --> 00:48:12,462
other stuff. The kind of narrative in Bitcoin circles is that the crypto trade kind of died

832
00:48:12,462 --> 00:48:16,163
in the last cycle in the sense that like, because AI took so much hype and don't get me wrong,

833
00:48:16,203 --> 00:48:19,683
it definitely took hype away from Bitcoin as well. But it looked like from the outside that

834
00:48:19,683 --> 00:48:23,223
sort of the crypto world got a little crushed with that. And they weren't, you know, again,

835
00:48:23,282 --> 00:48:26,262
like you weren't really getting the meme stock pumps, all that sort of stuff. Like,

836
00:48:26,262 --> 00:48:30,203
do you look at that, the crypto ecosystem as being slightly dead?

837
00:48:31,443 --> 00:48:35,423
No, because I think Hyperliquid was the best performing shitcoin of the last

838
00:48:35,623 --> 00:48:41,523
cycle of a particular size, right? And I think the Hyperliquid team did what they needed to do.

839
00:48:41,623 --> 00:48:44,923
And the most important thing they did was they built a successful product. A lot of people build

840
00:48:44,923 --> 00:48:50,582
successful products. The problem with most crypto projects, I say this to a lot of the companies

841
00:48:50,582 --> 00:48:55,302
that I advise, is you do not give any of the economic value created at the protocol level

842
00:48:55,302 --> 00:49:00,982
back to the token holders. In fact, you create a situation where you have a bunch of early

843
00:49:00,982 --> 00:49:05,523
investors who for no fault of their own in their own profit maximization and their own fiduciary

844
00:49:05,523 --> 00:49:10,802
duties, must dump their tokens into the market and depress the price. And so when you list your TGE,

845
00:49:10,942 --> 00:49:14,843
that's the maximum price your token's ever going to receive. Because not only do you not give any

846
00:49:14,843 --> 00:49:18,883
value back to the token holder, you have a bunch of investors you have to sell because they need

847
00:49:18,883 --> 00:49:24,843
DPI for their investors, their LPs. And so this is why tokens are down only. Hyperliquid said,

848
00:49:24,942 --> 00:49:30,223
okay, well, we're not going to have a massive VC overhang. Yes, we have a big team overhang,

849
00:49:30,383 --> 00:49:34,623
but Jeff and the team do need to get paid for the value they've created. But we're going to take

850
00:49:34,623 --> 00:49:39,183
97% of the revenues, I'm going to buy back our own token. And we're a very profitable protocol.

851
00:49:39,183 --> 00:49:43,102
As we know, trading fees from exchanges, it's the perfect killer app for crypto.

852
00:49:43,582 --> 00:49:50,203
So that's why it's done so well. But for various reasons, most teams choose not to copy that model,

853
00:49:50,523 --> 00:49:55,343
whether it's they need to get an investment from a large VC fund, and this is just not the way in

854
00:49:55,343 --> 00:50:00,163
which a large VC fund wants you to operate. I've gotten that pushback from a lot of projects. Well,

855
00:50:00,163 --> 00:50:04,602
you know, we have such and such brand name VC. And I, you know, and I said, yeah, we should just

856
00:50:04,602 --> 00:50:08,123
unlock all our tokens or whatever. And they said, no, no, no, we can't do that. Oh, I'm like, okay,

857
00:50:08,163 --> 00:50:13,143
well, good luck. Your coaching is going to zero. Oh no, we can't give the money back to the token

858
00:50:13,143 --> 00:50:18,443
holders because of, you know, whatever reason. Okay, great. I understand. Don't care. I'm not,

859
00:50:18,543 --> 00:50:22,782
if I'm not getting any money, I'm not going to own your token. Don only, right? And so, but

860
00:50:22,782 --> 00:50:28,243
Hyperliquid, completely different situation. And that's why it's performed so well. And so I think

861
00:50:28,243 --> 00:50:33,203
after this experiment we've been running with different ways of capital formation in the crypto

862
00:50:33,203 --> 00:50:41,643
capital market since really 2017 in the ICO bull, we as shitcoin investors have gotten a lot more

863
00:50:41,643 --> 00:50:46,123
mature and a lot more demanding. You can't just put a white paper on the internet and get our money.

864
00:50:47,163 --> 00:50:52,582
You can't just have a bunch of, I know you, yeah, you raised a hundred million dollar pre-seed round

865
00:50:52,582 --> 00:50:55,302
and you got all the coolest and baddest investors

866
00:50:55,302 --> 00:50:57,742
in the game on a cap table,

867
00:50:58,023 --> 00:50:59,623
that no longer is enough.

868
00:51:00,242 --> 00:51:02,462
I actually want to get some value as a token holder.

869
00:51:02,802 --> 00:51:04,242
And that's why Hyperliquid's done so well.

870
00:51:04,442 --> 00:51:06,183
And that's why the majority of these shit coins

871
00:51:06,183 --> 00:51:08,423
have not done well because they didn't do that.

872
00:51:08,543 --> 00:51:10,942
Their value and their, you know,

873
00:51:11,002 --> 00:51:14,982
Pomponomics is based on old ways of doing things.

874
00:51:15,343 --> 00:51:17,782
And we as crypto investors have matured.

875
00:51:17,982 --> 00:51:21,143
And finally, we care about cash flows coming to us

876
00:51:21,143 --> 00:51:23,423
as token holders, however that happens.

877
00:51:24,623 --> 00:51:25,903
Was BitMEX the first,

878
00:51:26,363 --> 00:51:28,242
like, did you create the perpetual future?

879
00:51:29,183 --> 00:51:29,423
Yes.

880
00:51:30,602 --> 00:51:31,923
So is it pretty cool to see

881
00:51:31,923 --> 00:51:32,883
like this stuff happening now?

882
00:51:32,923 --> 00:51:34,462
And even like strategy

883
00:51:34,462 --> 00:51:36,343
doing their perpetual preferreds

884
00:51:36,343 --> 00:51:38,462
and like, is it cool to see

885
00:51:38,462 --> 00:51:39,442
the thing that you created

886
00:51:39,442 --> 00:51:41,883
becoming like serious financial tools?

887
00:51:42,903 --> 00:51:43,403
I think it's great.

888
00:51:43,623 --> 00:51:44,442
You know, I'm super proud.

889
00:51:44,683 --> 00:51:45,982
I think everyone at BitMEX

890
00:51:45,982 --> 00:51:47,582
who worked on this thing back in 2016

891
00:51:47,582 --> 00:51:49,442
should be proud of the movement

892
00:51:49,442 --> 00:51:51,082
that we created, that we have

893
00:51:51,082 --> 00:51:57,023
you know centralized exchanges who are in bed with the regulators running scared because a team of 11

894
00:51:57,023 --> 00:52:02,663
people are able to out-compete them and build a better product i mean and that's also like the

895
00:52:02,663 --> 00:52:07,683
bullish side of ai is that we're going to see small teams completely disrupt huge industry and

896
00:52:07,683 --> 00:52:13,442
that is like that that's the cool side of ai like i i think it's an incredibly powerful tool i think

897
00:52:13,442 --> 00:52:16,203
it's going to there's going to be loads of social disruption that comes from it but like on the

898
00:52:16,203 --> 00:52:20,482
other side of it the the creativity and the new things we're going to have in the world is awesome

899
00:52:20,482 --> 00:52:24,002
Like I will see a billion dollar one person company at some point.

900
00:52:24,543 --> 00:52:28,723
Yeah, I think it's really cool that, you know, obviously it served a purpose.

901
00:52:29,063 --> 00:52:32,462
We have a lot of extremely intelligent people doing bullshit work.

902
00:52:32,623 --> 00:52:47,923
And I think bullshit work, at least in my context, is my accountants, my lawyers, all these types of service professionals that charge you a lot of money that do fuck all work and have this whole edifice of a system that is incomprehensible by design.

903
00:52:47,923 --> 00:52:50,163
so you have to pay them $2,000 an hour,

904
00:52:51,102 --> 00:52:53,823
we should liberate them from these shitty jobs

905
00:52:53,823 --> 00:52:55,523
and bring that intelligence back

906
00:52:55,523 --> 00:52:56,942
to doing something useful for humanity

907
00:52:56,942 --> 00:53:00,543
rather than parsing a tax code or some legal structure.

908
00:53:00,623 --> 00:53:02,563
We could have an AI do all these things

909
00:53:02,563 --> 00:53:05,183
and we have all this other human intelligence

910
00:53:05,183 --> 00:53:07,222
and creativity to do other things.

911
00:53:07,502 --> 00:53:11,343
And I think that is the techno-optimist side of things.

912
00:53:11,462 --> 00:53:13,683
And yes, unfortunately, when you lose your job,

913
00:53:13,722 --> 00:53:14,502
that's not what you think about

914
00:53:14,502 --> 00:53:15,962
when you were making a few million dollars

915
00:53:15,962 --> 00:53:17,402
as a parasitic lawyer

916
00:53:17,403 --> 00:53:19,343
and now that's no longer needed.

917
00:53:19,703 --> 00:53:21,643
But I think from a general stance

918
00:53:21,643 --> 00:53:24,762
of like the advancement of humanity as a species,

919
00:53:25,223 --> 00:53:27,082
we're liberating very smart people

920
00:53:27,082 --> 00:53:30,762
from, I think, net destructive employment.

921
00:53:31,703 --> 00:53:33,423
Yeah, it's kind of like an existential crisis

922
00:53:33,423 --> 00:53:35,602
for a decent chunk of the population who think,

923
00:53:35,663 --> 00:53:37,282
you know, you go to college, you get the degree,

924
00:53:37,363 --> 00:53:38,843
you become a lawyer, that's a job for life.

925
00:53:38,903 --> 00:53:40,442
Like even if you lose a job at one firm,

926
00:53:40,502 --> 00:53:41,602
there's always going to be other opportunities.

927
00:53:41,602 --> 00:53:43,482
And then it's like, maybe they're all gone.

928
00:53:44,543 --> 00:53:45,703
It's going to be so interesting

929
00:53:45,703 --> 00:53:46,903
to see how people like that react to it.

930
00:53:46,903 --> 00:53:56,262
Because again, like, are you going to get a 40-year-old accountant or a 40-year-old lawyer who's like in middle management of their firm retraining to do like AI tech work?

931
00:53:56,343 --> 00:53:57,482
I don't think so.

932
00:53:57,543 --> 00:53:58,863
Like, I don't know what those people do.

933
00:53:59,442 --> 00:54:01,302
They agitate politically and they get a handout.

934
00:54:01,602 --> 00:54:02,223
That's what they do.

935
00:54:02,563 --> 00:54:05,063
Again, I'm not saying that's the wrong thing to do, right?

936
00:54:05,063 --> 00:54:13,823
If we're creating all this abundance at a civilizational level, surely it shouldn't be that everyone who got displaced is now living as a pauper on the street, right?

937
00:54:14,282 --> 00:54:15,563
Essentially, it's all our data.

938
00:54:15,563 --> 00:54:17,782
our interactions as humans across

939
00:54:17,808 --> 00:54:20,008
us the world that created these AIs.

940
00:54:20,328 --> 00:54:21,648
Now, Google and Facebook might say,

941
00:54:21,708 --> 00:54:22,908
yo, but you signed that term of service

942
00:54:22,908 --> 00:54:24,408
saying that all that data is mine.

943
00:54:25,128 --> 00:54:26,568
But if we repudiate that and say,

944
00:54:26,648 --> 00:54:27,548
fuck that contract,

945
00:54:27,688 --> 00:54:30,088
like you guys have made, you know,

946
00:54:30,328 --> 00:54:34,708
so much money based on humanity as a construct.

947
00:54:35,008 --> 00:54:37,148
Therefore, we demand a chunk of that.

948
00:54:37,288 --> 00:54:39,068
And I think that's the message.

949
00:54:39,068 --> 00:54:41,568
If you want to run for political office

950
00:54:41,568 --> 00:54:43,068
in an advanced Western economy,

951
00:54:43,228 --> 00:54:46,348
that is the message that humans created Google.

952
00:54:46,348 --> 00:55:12,048
There is no LLM without human data inputs, whether that's public source data, whether that's theft of data, whether that's walled gardens. That's humans. That's humans with each other creating this data that has given these companies the ability to create these godlike intelligences. And therefore, we demand our recompense for that. I think that is a winning political message from now going forward.

953
00:55:12,048 --> 00:55:13,568
Yeah, I totally agree.

954
00:55:13,568 --> 00:55:20,488
And just from a personal perspective, there's no way that I think the 40-year-old lawyer who can't retrain losing his job has any reason to slow down on this.

955
00:55:20,588 --> 00:55:20,908
Fuck them.

956
00:55:21,328 --> 00:55:33,213
It going to be an adapt or die type situation I think Arthur this has been fucking awesome Is there anything especially on the macro side that we not talked about that you been thinking about a lot No I think it people

957
00:55:33,213 --> 00:55:34,793
just trust the process.

958
00:55:35,013 --> 00:55:36,073
The money will be printed.

959
00:55:36,893 --> 00:55:38,533
The things might get up or down,

960
00:55:38,633 --> 00:55:39,753
but at the end of the day,

961
00:55:40,633 --> 00:55:41,753
until you see politicians

962
00:55:41,753 --> 00:55:42,993
campaigning on austerity,

963
00:55:43,453 --> 00:55:45,073
don't worry about money

964
00:55:45,073 --> 00:55:45,733
not being printed.

965
00:55:46,433 --> 00:55:50,873
But use a safe amount of leverage

966
00:55:50,873 --> 00:55:51,633
if you use leverage,

967
00:55:51,633 --> 00:55:53,173
because it's going to get choppy.

968
00:55:53,373 --> 00:55:54,473
But at the end of the day,

969
00:55:54,593 --> 00:55:55,373
the trend is up.

970
00:55:56,173 --> 00:55:57,313
Yeah, we're not all Arthur Hayes.

971
00:55:57,373 --> 00:55:58,453
I think most people are best

972
00:55:58,453 --> 00:56:00,373
buying Bitcoin, holding it,

973
00:56:00,553 --> 00:56:01,413
DCAing.

974
00:56:02,213 --> 00:56:02,593
That's what I do.

975
00:56:02,593 --> 00:56:03,453
But Bitcoin is a trade.

976
00:56:03,653 --> 00:56:04,333
Like buy Bitcoin

977
00:56:04,333 --> 00:56:05,393
and avoid all this chaos.

978
00:56:05,493 --> 00:56:06,413
I guess that's the message.

979
00:56:07,573 --> 00:56:08,133
Yeah, exactly.

980
00:56:09,073 --> 00:56:09,573
Love it.

981
00:56:09,813 --> 00:56:10,853
Well, thank you so much, man.

982
00:56:10,893 --> 00:56:11,753
I appreciate you getting up early

983
00:56:11,753 --> 00:56:12,333
to do this.

984
00:56:13,133 --> 00:56:14,013
Hopefully we can do it again

985
00:56:14,013 --> 00:56:14,353
at some point.

986
00:56:14,393 --> 00:56:14,973
We'll have to try and do it

987
00:56:14,973 --> 00:56:15,953
in person again next time.

988
00:56:16,233 --> 00:56:16,493
Yes.

989
00:56:17,253 --> 00:56:17,673
Thank you.

990
00:56:17,753 --> 00:56:18,013
Awesome.

991
00:56:18,433 --> 00:56:18,933
Thank you, mate.

992
00:56:21,633 --> 00:56:23,693
you