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You've had a dynamic where money has become freer than free.

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You talk about a Fed just gone nuts.

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All the central banks going nuts.

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So it's all acting like safe haven.

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I believe that in a world where central bankers are tripping over themselves to devalue their currency,

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Bitcoin wins.

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In the world of fiat currencies, Bitcoin is the victor.

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I mean, that's part of the bull case for Bitcoin.

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If you're not paying attention, you probably should be.

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Robert, welcome back to the show, sir.

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Good to be back.

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Good to have you back.

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I've been binging your YouTube channel the last two weeks.

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Before that, I was checking in once a week,

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but I think with all the madness going on in markets right now,

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you've been covering everything going on with great detail.

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It's astonishing the amount of detail that you can go into

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and the amount of data that you're able to surface.

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I reached out last week.

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I said, hey, we'd love to catch up on the show.

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Last time you were on, we talked about silent depression

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and sort of the more secular headwinds, if you will, societally,

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in terms of the effect that the economy is having on individuals

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and society at large in aggregate.

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And I think you can definitely touch on that later

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because I think things are certainly accelerating

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as AI becomes more prominent and people begin to worry about

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what the job market is going to look like moving forward.

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But I think just to stay timely and topical,

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You've been covering a Fed report that was dropped, I believe, over the weekend that highlights the dynamics of the Treasury market are not what they were being reported.

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And it all stems from activity going on in the Cayman Islands, particularly around the basis trade.

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So what did the Fed just let the markets know?

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Yeah, so apparently we had suspected, according to the TIC data, which is released by the Treasury Department, it's basically the official data on who holds a U.S. government debt in general cross-border capital flows.

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That tick data had reported that the holders of our debt were Japan at about $1.1 trillion, UK at about $900 billion, China at about $700 billion, and that has been coming down pretty notably.

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And then the Cayman Islands as our fourth largest holder at about $400 billion.

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but because of this popular hedge fund trade known as the basis trade, the Cayman Islands,

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obviously a hotspot for hedge funds domiciled in the Cayman Islands. This has nothing to do with

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like the Cayman government. When we're talking about the Cayman Islands, we're talking really

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about the fact that there's so many hedge funds based there, domiciled there. The Cayman Islands

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actually hold $1.8 trillion of our debt.

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And so that makes them by far the largest holder of U.S. government debt.

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And before it was being reported that they held what, around $400 billion?

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Yeah, $400.

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So undercount by $1.4 trillion.

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So what I'm trying to understand is why wasn't this reported correctly

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before the Fed released this report? And why did the Fed decide to let everybody know?

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Well, actually, here's what's going on. Yeah, that second question is one kind of the first

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one that popped into my head after I realized the implication of this. My first question is,

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well, why now? So it has to do with like how they calculate the repo, because this basis trade is

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financed in the repo market, which makes SOFR and what's going on there, I think, pretty important.

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But it has to do with just the way the methodology with which they use to measure

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various cross-border capital flows. Yeah. And so for anybody who's listening,

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you may need a refresher on the basis trade here. What are hedge funds doing when they

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engage in this? Yeah. So the basis trade is treasury futures. Let's just use a 10-year

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treasury. There's the cash 10-year treasury, which most people are familiar with, but then there is a

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futures contract that represents a 10-year treasury. That 10-year treasury futures contract

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is obviously a contract for future delivery. But there is this optionality that the seller has

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when you sell a 10-year treasury futures contract,

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there's optionality there

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where you get to actually deliver.

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You don't have to deliver a 10-year treasury at the end.

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You can deliver six and a half year maturity,

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seven year, there's a range.

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And so the seller gets to choose

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the cheapest option for them.

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Maybe at the time, it's a 10 basis point difference

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between the seven and the 10.

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So they deliver the seven,

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even though it's a 10-year treasury contract.

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And that kind of optionality or uncertainty premium

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is baked into the futures contract.

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So it's very small.

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It's only about 10 basis points or 0.1%.

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So that trades at a premium, the future.

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And so what they do is they short the futures contract

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and then they buy, they long the underlying US cash treasury.

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and the difference as expiration nears treasury futures, you know, kind of roll expire every

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three months as you near to expiration, that difference as the arbitrage kind of gets worked

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out goes to zero. And so you're basically just pocketing the spread between the futures contract

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and the actual 10-year treasury.

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And so it's delta neutral

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because if bond yields go up,

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well, you're covered because you're short

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the 10-year futures contract.

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Bond yields go down, you're okay

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because you're long the cash 10-year treasury.

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So it's delta neutral meaning,

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and also it's using probably,

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I mean, at least what the market considers

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to be pristine collateral.

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Um, we, you know, have different opinion on that, but, um, but yeah, that, so, so the fact that it is using U S treasuries as the collateral for financing and the repo market makes it, um, less risky.

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and of course you're delta neutral.

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So it doesn't matter if bond yields go up or go down.

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You're just trying to pocket the tiny little difference

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between that futures contract

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and the actual 10-year treasury

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as it approaches expiration.

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And you lever it up.

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So if it's only 0.1%, that's not worth anything.

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That's not worth anyone's time.

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So what they do is they lever it up 50 to one

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to as high as 100 to one.

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And that might sound crazy, but this is well documented on Google.

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This has been an issue for years.

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This has been a risk that the Fed has known about.

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This has been a risk the SEC has been aware of, the CFTC, various organizations.

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You can find all sorts of academic papers talking about the risk that this basis trade has.

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It's blown up.

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2020, it blew up.

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It also sort of started to blow up in April during the Liberation Day.

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So it's a known risk, and the leverage is well-documented to be pretty insane.

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Yeah, and you cited it in one of your videos from the last couple of days,

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but the Brookings Institute came out in June and wrote a paper, I believe,

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in reaction to the April blowout of this basis trade.

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I think a lot of people have been focused on the yen carry trade as well,

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And it just seems like wherever you look, there's a ton of hidden leverage in the system.

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And again, going back to the original question, why did the Fed feel compelled to release this data, particularly after we had the SOFR spasm last week?

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SOFR spread to Fed fund rate spiked to 0.19%, which is pretty high, highest point since 2020, I believe.

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um yeah it does make you wonder um the timing of it and of course uh jerome powell came out

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and um you know mentioned basically the end of qt uh funding stresses in in the repo market this

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was i think wednesday um and then yeah we got um data on so far for wednesday and thursday which

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was quite elevated for wednesday and thursday so far the secured overnight funding rate was

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actually above the discount window rate, which is the Fed's attempt at setting a ceiling in the

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price of money. They actually have a range. They don't set one interest rate. They have this

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corridor or this range that they use to set interest rates. And the lower bound being the

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reverse repo award rate. That is the Fed's attempt at basically saying no matter how overabundant

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dollars get, we will always buy them from you at 4%. And then the discount window rate is the

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upper bound. And that is the Fed trying to say, no matter how scarce dollars get, we will always

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sell them to you at 4.25. So by doing that, hopefully thinking of it that way makes it a

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little bit easier for people to understand. But by maintaining those two different interest rates,

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they're able to try to keep SOFR, which is the actual funding rate determined by supply and

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demand of dollars within the repo market. They try to keep SOFR within that range by

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having those two tools. Yeah. Typically, when you see spasms in these markets,

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it means that a liquidity crunch is on the horizon, like you said, Jerome Powell

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implicitly seems to believe that may be the case with his comments around the end of quantitative

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tightening uh there was regional banks last week had a pretty tough middle of the week with many

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um down more than 10 and you saw uh the sort of re-emergence of a theme that that reared its head

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a couple months ago with the tricolor auto loan subprime auto loan uh collapse it seems like there's

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there's other similar lenders that are out there uh under a lot of stress and you have banks as big

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as jp morgan with exposure to them i think jp morgan had to write down 200 million dollars in

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credit loss on one of these deals last week and um that's the quite like is there liquidity crunch

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well yeah i mean what what so for so the first video i did on liquidity and repo market and so

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And I think it was back in like July, because I think that was about the time when they announced they were going to rebuild the Treasury General Account or the TGA.

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This is the government's checking account, just like you would like a buffer in your checking account.

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The government does, too.

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It was down to, I think, only 300 billion or so.

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So they want to build that back up.

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And basically, when that was announced, I started to kind of warn that there would be increase that that in and of itself would cause, you know, a shortage of liquidity, at least compared to what it was before.

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the reverse repo was dwindling down. And so, you know, normally the reverse repo,

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it's not a primary method of managing liquidity. It's more one of the, I think of it as a shock

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absorber or a buffer. And so as that buffer was drawing down, meaning the amount of buffer

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for dollar liquidity was getting smaller, kind of all of it was lining up and you were starting to

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see some elevation in SOFR spreads, SOFR minus reverse repo or Fed funds, you're starting to see

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that kind of back in June, even at the end of June. And it's normal to see at the end of the

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month or end of the quarter or tax deadline, which we saw a couple weeks ago, I guess about

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about a month ago, it's normal to see SOFR start to kind of blow out. But what has been happening

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recently, like over the past couple of days is we've seen SOFR notably above, like I mentioned

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before, discount window rate, IORB, Fed funds, reverse repo award rate. And then you couple that

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with the credit issues and the fact that credit spreads have started to widen. They're still

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near kind of all time tights, almost historically tight credit spreads. But so we're starting from

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a pretty stable or decent position. But the fact that credit spreads have started to widen,

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you couple that with what's going on with SOFR, then you start to kind of factor in

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this basis trade and an unwind of the basis trade threat, I guess you could call it.

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And it's all, you know, it's like, we found that we know that SOFR, we know funding stress

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in the repo market from SOFR.

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We know the reverse repo is empty.

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The TGA rebuild is basically done.

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So that shouldn't have any further negative impact

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on liquidity, but it certainly did.

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They removed half a trillion dollars

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from the financial system.

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That's not nothing, but that is done.

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But you have the reverse repo empty,

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the TGA rebuild removed 500 billion.

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Bank reserves are declining.

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They're right around 3 trillion.

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last I checked. And so, yeah, you kind of couple it all together and it's like, okay, so the largest

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marginal buyer of our debt, foreign at least, is a bunch of hundred to one levered hedge funds in

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this basis trade. It's extreme. That basis trade must be financed every night in the repo market.

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So you start to get, you know, widening of SOFR spreads that could put funding stress on the basis

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trade causing an unwind of the basis trade, which could cause and what an unwind of the

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basis trade looks like.

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Remember, you're you're long the cash treasury and you're short the future.

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So if you are forced to unwind that position, it puts upward pressure on the future and

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downward pressure on the bond.

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You're forced to do the exact opposite of how you got into the trade.

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So it involves selling of the bond which means yield sharply up and then buying buying of the future to close your short And so we seen this before in 2020 You can look at TLT relative to ZB which is the long bond futures contract You can see this

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happen, for example, in March of 2020. It also started to happen again in April with Liberation

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Day. You get yields sharply higher. Not good for liquidity either. No. And on top of this,

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last week we had the um standing repo facility tapped for the first first time since covid i

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believe and it was not that yeah not the first time but what happened was if you think of the

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reverse repo which is that uh storage tank for kind of excess liquidity you can think of you take

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the reverse repo and you subtract out how much standing repo has been is being used that spread

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kind of gives you an idea are we in an abundant liquidity regime or a scarce liquidity regime

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it's kind of how i think about it so um you know previously we've been in an abundant uh liquidity

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regime where the reverse repo has been as high as two and a half trillion dollars uh and that

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storage tank of that shock absorber has been full of cash of dollars um and what we had recently was

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standing repo has been hit i think it was hit back in um i want to say august might have been june

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there have been a couple brief moments in the past year or so where it's been hit but what we had

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recently was uh that standing repo which again is the opposite of the reverse repo the standing

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repo or srf that is for when there is a shortage of liquidity and hedge funds need emergency dollars

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That staining repo got tapped.

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And you take that spread, the difference between the reverse repo and the staining repo, that went negative for the first time going all the way back to March of 2020.

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Now, as you're explaining all this, too,

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and you have the government shutdown in the backdrop of all this, too,

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it was the Fed release of this Cayman data, sort of like a signal,

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like, hey, politicians, we've got a pretty massive exposure

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to this carry trade by predominantly American hedge funds domiciled

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in the Cayman Islands.

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It may be time to turn the government back on so that we can solve this crisis if it doesn't merge.

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It could be a lot worse if it was a debt ceiling debacle like we had earlier.

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That, I think, would be significantly worse.

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That's probably coming.

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We go through those debt ceiling debacles all the time, it seems.

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It's like a constant thing in American politics.

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So whether it's a government shutdown or debt ceiling debate, there's always that kind of embedded stress that it seems like it happens every year or so.

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yeah well and then i was talking i just recorded with luke roman another variable in the backdrop

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here is this i want to call i don't know if it's an attack or it seems like china the brics countries

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many others are noticing what's going on with the u.s treasury market and not only the treasury

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market itself but the u.s government which is backing this market and they're saying i don't

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know if you're a good counterparty, if we're going to be buying your debt. And so we've seen

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massive transition towards this gold settlement network, which is many people are surmising what's

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happened with China registering its gold on warrant at the Shanghai Gold Exchange. That

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chart became popular about a month or two ago, but I saw Jim Bianco updated it and seems like

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that's only increasing at a rapid pace. It's almost doubled in the last month, the amount of

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gold on the war at the Shanghai Gold Exchange.

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Yeah, it's vertical.

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Yeah, right before we hopped on, I saw that Ethiopia made a deal with China to settle their

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trades in Yuan.

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What did I say exactly?

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Ethiopia and talks with China on converting dollar loans to Yuan loans.

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And so it seems like the U.S. Treasury, the Fed are in a very precarious situation where

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They're walking a tightrope 200 yards above the earth, trying to make sure that they can manage any liquidity crisis that may be emerging.

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And on top of that, they're getting attacked from another angle, which is one of the large superpowers in the world, China, basically opening up a competing settlement network backed by gold and trying to use that as a reserve sort of asset.

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And I think Luke said something that I've been thinking about since we recorded last Monday.

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It's been a week now.

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Posted the episode on Saturday, though.

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And it's like foreign governments now officially hold more gold in reserves than U.S. Treasuries.

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Is that a signal that the U.S. dollar reserve system has been supplanted?

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Yeah, I mean, going back to February, China held about $784 billion.

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now, just in the past, what, seven months or so, or I guess it's five months, I'm looking at July

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data. So just in five months from February to now, that's down to 730 billion. So a reduction of,

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what was that, 50, 54 billion? That's significant. And then you couple it with what you mentioned

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about Shanghai and what China is doing with gold. I think it's interesting because it kind of is

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what the U.S. needs. To go back to the discussion we had the first time on the silent depression

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and some of the structural issues, it's actually, in my opinion, going to help that situation as

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countries move away from the U.S. Treasury and into something like gold, something neutral like

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gold. I think that it'll actually improve a lot of the issues that we have talked about with

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a 4% of GDP current account deficit. And of course, the resulting capital inflows that

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disproportionately benefit those that have capital, those that have financial assets that are buoyed by

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about a trillion dollars of forced mandatory structural capital inflows into financial markets

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in the US. I added up from the BEA, the current account data, I added up from I think it was 2011

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or 2012 up through 2024, if you look at foreign purchases of real estate, those get recorded under

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FDI, foreign direct investment. And then you add in the estimated portfolio investment into REITs

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and MBS, mortgage-backed securities. You add that all together. And going back to 2011, 2012,

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I can't remember exactly which year it was, foreigners have purchased about 700,000 single

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family homes worth of real estate. That's significant. And that's that, you know, these

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are price insensitive buyers, they are buying to balance that current account deficit. So

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the same thing is true, of course, with equities, we know foreigners, that's one of their favorite

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places to recycle dollars into. And of course, treasuries that kept yields very low artificially

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low. And so, yeah, it a move away from that recycling of the trillion dollars that we

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send out to the rest of the world in the form of our current account deficit, that trillion dollars

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is being recycled into dollar denominated assets, less and less. And it's not happening. You know,

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it's not we're not talking about overnight changes of like 50%. This is around the margin.

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and it would take years, if not decades for this to fully play out. But if those foreign countries

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start to, you know, instead of buying equities or treasuries or US real estate with those dollars,

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that trillion dollars we are running in our current account deficit every year,

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if instead of dollar denominated assets like those, they start to buy gold, that'll bid up

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the price of gold in dollar terms. And so gold can, and this is something Lou Groman's been

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super out front on, you know, going back like two years, maybe even more, that gold as there's a

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shift away from the US Treasury or other dollar denominated assets into some neutral reserve

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asset that freely floats in all currencies like gold, what you could get is a revaluation of some

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of these currency crosses. Because again, China's not running a trillion dollar current account

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deficit with anyone. They run a massive current account surplus. I think it's like 5% of GDP.

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So there is no country right on the other side from China going, well, yeah, you know,

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we used to recycle these into, I don't know, Yuan denominated bonds, government bonds,

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but now we're going to buy gold. So you don't have that, the gold price in Yuan terms,

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at least from foreigners being bid up in yuan terms. There's no offsetting kind of bid in yuan

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terms. Now, domestically, of course, we know they buy gold, but just kind of generally speaking,

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this is one of those kind of subtle forces that over a decade or two would eventually lead to a

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higher gold price in dollar terms and a lower gold. Gold will still get bid up in yuan for sure,

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but to a lesser degree.

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And so then what you have,

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you cancel out the two denominators

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because they're constant gold to gold,

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cancel out the denominator.

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You basically just set a new exchange rate.

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And this is something Luke has been talking about

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for a long time now,

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the need for a revaluation specifically

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of the dollar-yuan cross rate.

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There's of course other currency issues.

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The dollar structurally overvalued.

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In fact, on a purchasing power parity basis in 2024, the dollar with the Dixie at like 105 was more overvalued than it was 1984, 1985, when the Dixie was 163.

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And of course, the Plaza Accord was just about, you know, a couple months later, we were even more overvalued on a purchasing power parity basis in 2024 than we were back then when the Dixie was 162 or three.

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And of course, the Plaza Accord happened right after and we know what happened to the dollar.

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So I still think that whether it's kind of a gradual revaluation, like you mentioned,

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you know, kind of the adoption of gold, it's happening more rapidly than I think

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some of us thought it would. I expected it to happen around the margin, but kind of more

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gradually, the degree, the rapidity, the velocity with which it's happening is kind of surprising to

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me. But whether it happens gradually in the mechanism I just described, where you get a

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weaker, you know, a devaluation of the dollar versus gold to a greater degree than devaluation

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of yuan gold, then that could take 10, 20 years. But eventually you get a new exchange rate where

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the dollar is weaker versus the yuan. And of course, you know, China has made it pretty clear

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in various statements they've been making for five, six, seven years, top CCP officials,

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that they are trying to number one, internationalize the yuan, and number two,

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reorient their economy much more in a US model toward domestic consumption rather than this

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subsidized overcapacity export dumping sort of approach that they've taken where it's just

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gain market share at any cost. There's a recognition in China, just like there's a

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recognition here in the US, with the current administration, at least, that our structure

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of debt-fueled overconsumption and insane twin deficits, that that has kind of run its course

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and the pendulum has gone too far in that direction.

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Just on the other end, China has recognized that their model has gone too far.

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And you don't get public statements by top CCP officials like that unless it has the

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blessing of, over there, you disappear if you say something.

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Over here, we get to have leaks and all this kind of public comments about stuff.

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Over there, not so much. So the fact that they have been pretty vocal about that, I think there's a recognition that both of our economic models kind of went to their logical conclusion.

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And we've seen peak globalization, in my opinion. I think that's pretty clear. I don't think it's controversial anymore.

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and that there's likely to be a meeting in the middle,

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whether that happens by Mar-a-Lago Accord or the mechanism you mentioned

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where it's kind of a gradual gold adoption in place of the U.S. Treasury.

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I think either of them have the same end effect,

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which is a weaker dollar, stronger yuan.

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Yeah and it very interesting to try to think through which happens I mean I looking at the price of gold right now It approaching So it cooling off a little bit after the run that went on last week and the week before

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but that could certainly accelerate again. I think that's one question on many people's minds,

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like, is this a blow off top? Is gold about to correct? But I do think we are

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in uncharted territory in the sense that I think this bid seems very different than

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anything I've seen in my life. Not that there's been many material bids under gold outside of like,

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what was it, 2011 and 2012. Obviously, the last two years, last year has been very good. But it

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seems like somebody's buying hand over fist or multiple people are buying hand over fist,

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sort of seeing the writing on the wall. And then you pair this with the sort of geopolitical

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saber rattling between the US and China over the last two weeks, specifically with rare

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earth metals? And are we just getting a sort of show between Trump and G where they both recognize

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like, hey, we need to get to the table, but there's some showmanship or is the showmanship actually

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public sort of exertion of, hey, who has the leverage at the end of the day? And after my

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conversation with Luke, he would say that China has all the leverage, particularly if you believe

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that we need to go into this hyper-industrialized reshoring era of the United States?

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I don't understand how anyone could argue that China's not the one with the leverage. I mean,

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we lost effectively a proxy war to a country with one twelfth of our GDP because we have so

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completely hollowed out our industrial base that we can't even make the shells and artillery and

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and Patriot missiles needed for our own military to defend our own people.

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We rely on China for 65% of active pharmaceutical ingredients.

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So the actual drug that goes into the medication, those APIs, about 65% come from China.

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You kind of go down the list, right?

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China has everything that is actually needed.

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What do we have?

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We have a bunch of derivatives traders.

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we got a bunch of meme coin traders we got um you know high frequency trading firms that build the

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best high frequency trading algorithms we got the most deep and liquid treasury debt market in the

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world sovereign debt market in the world but like you compare those two china's got commodities

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they've got the chips they have the active pharmaceutical ingredients they got the rare

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earth. You go down the list of what they have versus what we have. And I don't know, the deepest,

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most liquid capital market in the world doesn't seem very important when you're talking about,

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you know, what, when you get down to it, look, maybe in 1990 peace dividend sort of world,

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that matters and that has value. But, you know, in a world that is, like you mentioned,

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more polarized with higher tensions geopolitically, more multipolarity. I think that it matters much

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less how deep your sovereign debt market is, how liquid your sovereign debt market is,

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and matters much more who has the commodities. Now, we necessarily have energy, which that I

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think is one of the areas of leverage that we do have over China. They are so utterly reliant on

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imports, energy imports, much more so than we are. We have abundant oil, natural gas, and energy

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resources here in America. And I think that this administration accurately identified that as being

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one of the strong suits, one of our pros, one of our benefits here. But at the end of the day,

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I don't think that the most liquid capital market in the world is really that important,

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especially when you're talking about a world that looks a lot different than the world we might be

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used to uh in the kind of peace dividend era um but maybe i'm crazy i don't know no i mean i i've

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been i've had luke on belagi had uh somebody who's been over in china advising western companies how

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to do business in china for 30 years on the show and that's one of the main piece of feedback is

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like uh these guys are just like pro china like uh i'm not just to make it super clear i am

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extremely patriotic i love america more than anything i i i could not be i do not want to

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live in china i would i would rather i don't know i'd probably rather die than live in china

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is not out of a pro china there's such this like knee-jerk reaction nowadays to when it came to

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the war in Eastern Europe is the same thing. And with China, I see that sometimes too.

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There's such this like effort to pigeonhole just because you make a criticism about your country.

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I think it was Mark Twain that said that there's no deeper patriotic duty than criticizing your

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own country. That's kind of how I look at it. It's not that I'm saying these things because

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I hate America or that I love China. Couldn't be further from the truth. It's more that I want to

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see America return to the strength that we all know it has potential for.

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Yeah. And the reason I bring it up is because I agree with you. I think there's people that are

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just denying objective reality when you look at it, like you go through the yes, we do have

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liquid capital markets and get high frequency traders and a great services economy at the end

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of the day. But if you do believe that we're moving into a more multipolar world, globalization

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has seen its peak and we're going towards a more de-globalized world and you're

408
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trying to look at the objective facts it's like yeah the the leverage is going to be

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yeah how many how many lawyers do we need we need less we need probably like 10 percent of the amount

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of lawyers that exist because i mean that gets to a whole another can of worms is like the problems

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they create by writing more laws and regulations and permitting requirements whatever it may be but

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But I digress.

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When it comes to China, people saying you're on patriot,

414
00:37:19,075 --> 00:37:20,995
never bet against the United States.

415
00:37:21,055 --> 00:37:22,095
I completely agree with that.

416
00:37:22,155 --> 00:37:26,375
But I think before we even place chips on the table to make a bet,

417
00:37:26,455 --> 00:37:28,775
it's like, all right, let's acknowledge objective reality

418
00:37:28,775 --> 00:37:33,555
and try to figure out the best solution based off of that objective reality.

419
00:37:33,555 --> 00:37:35,135
You can't put your head in the sand and just say,

420
00:37:35,215 --> 00:37:36,075
oh, don't worry about China.

421
00:37:36,655 --> 00:37:37,415
Nothing's going to happen.

422
00:37:37,535 --> 00:37:40,395
I think the last two weeks have proven that they do have leverage

423
00:37:40,395 --> 00:37:43,175
as it pertains to rare earths specifically.

424
00:37:43,395 --> 00:37:45,035
And that's one thing through these conversations

425
00:37:45,035 --> 00:37:48,755
that I've been trying to sort of tease out

426
00:37:48,755 --> 00:37:52,035
is like what is like ideally in my mind,

427
00:37:52,035 --> 00:37:54,335
it's like China and the United States, Trump, Xi,

428
00:37:54,675 --> 00:37:57,295
however you want to frame it, get to the table and get a deal done.

429
00:37:57,495 --> 00:37:59,575
And I think China just wants to be recognized

430
00:37:59,575 --> 00:38:04,835
as a legitimate economic power and political power on the planet.

431
00:38:04,995 --> 00:38:08,135
They don't want the U.S. meddling in things in Southeast Asia

432
00:38:08,135 --> 00:38:14,335
and observing objective reality and with that in mind saying,

433
00:38:14,475 --> 00:38:18,555
hey, we may need to make some concessions in terms of swallowing some pride

434
00:38:18,555 --> 00:38:19,935
and saying, hey, China, yeah, we agree.

435
00:38:20,095 --> 00:38:23,135
You guys are doing some pretty miraculous stuff,

436
00:38:23,135 --> 00:38:28,355
and let's try to work together and not get into some kinetic war

437
00:38:28,355 --> 00:38:33,775
because in 2025, kinetic war or even economic war is not good.

438
00:38:34,055 --> 00:38:35,955
The leverage in the system is too high,

439
00:38:35,955 --> 00:38:40,595
And it's a tinderbox for a calamity.

440
00:38:40,815 --> 00:38:48,015
I want to see the routes where we figure out how to work together and just increase the quality of life for all humans.

441
00:38:48,535 --> 00:38:50,575
Yeah, same goes with Russia, in my opinion.

442
00:38:51,855 --> 00:39:03,095
You know, my ideal world is global cooperation, not globalization, not this neoliberal approach that both parties had taken for decades, right?

443
00:39:03,095 --> 00:39:05,515
Not that, but peace.

444
00:39:05,955 --> 00:39:10,915
I think, well, hopefully most people at least our age are of that mindset.

445
00:39:11,195 --> 00:39:16,655
There is certainly a camp that does not wish for peace.

446
00:39:16,655 --> 00:39:22,655
You know, it's always yearning for conflict with, you know, some new country every week.

447
00:39:23,375 --> 00:39:23,995
It's a new country.

448
00:39:24,155 --> 00:39:29,355
But I would like to see tensions with Russia and China decreased.

449
00:39:29,355 --> 00:39:55,075
But, you know, I think that we have to be honest about the shortcomings that the U.S. economy, that U.S. society, all again, it kind of goes back to our prior conversation, like all of those criticisms, when I bring up deaths of despair and the suicide rate and all those various statistics, it's because I think the first step is admitting what the problem is.

450
00:39:55,075 --> 00:40:00,315
most people don't even talk about that stuff. Although I will say that in the past, I don't know,

451
00:40:00,355 --> 00:40:08,495
six months, nine months, there's been a growing discourse, a growing conversation when it comes

452
00:40:08,495 --> 00:40:12,275
to the kind of silent depression stuff. Someone told me the other day, they're like, what do you

453
00:40:12,275 --> 00:40:16,195
call it? That's not so, it's not very silent anymore. And I said, well, when I started talking

454
00:40:16,195 --> 00:40:22,495
about it was, you know, but I think that that's a first step is recognizing the areas. Look, I think

455
00:40:22,495 --> 00:40:28,355
that like, you know, uh, the average American would, if they were polled, um, be able to tell

456
00:40:28,355 --> 00:40:33,715
you, especially average young American would be able to tell you, yeah, like, I don't know what

457
00:40:33,715 --> 00:40:40,515
world you live in. Right. If you, if you have $5 million in your 401k, you got two or three homes

458
00:40:40,515 --> 00:40:46,455
that are up, you know, 800% and all the equity, you know, all the wealth created there. Yeah.

459
00:40:46,755 --> 00:40:50,875
Like the boomers are doing great. Of course, they're not going to see any of these issues.

460
00:40:50,875 --> 00:40:56,995
Um, so there's a, there's a large amount of, uh, generational gap there as well.

461
00:40:56,995 --> 00:41:01,755
But I think that the first step is to, and I think to some degree, it's going to take

462
00:41:01,755 --> 00:41:06,475
some of the younger people starting to come into power politically.

463
00:41:06,955 --> 00:41:13,375
Um, and you already kind of see that, um, already on both sides, I would argue to some

464
00:41:13,375 --> 00:41:18,175
degree, you're already seeing a bit more representation from the, the younger crowd,

465
00:41:18,175 --> 00:41:23,875
the millennials and, uh, and to some degree the zoomers. And I think that that that's important

466
00:41:23,875 --> 00:41:29,855
because there's a huge generational component to it too. Boomers seem to live like every time,

467
00:41:29,855 --> 00:41:35,915
you know, I, I, I see one of these kind of head in the sand type type speeches or comments or,

468
00:41:35,915 --> 00:41:42,115
or whatever. It's, it's always a boomer that is living in like 1960s America in their head,

469
00:41:42,395 --> 00:41:48,155
1970s America. And it's not that way. Uh, I think that the picture would be a lot different if you,

470
00:41:48,175 --> 00:41:50,695
spoke to especially younger people.

471
00:41:50,915 --> 00:41:51,555
What's up, Freaks?

472
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516
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Now, with that in mind, obviously Trump has surrounded himself with something like J.D. Vance, most importantly, as his vice president millennial.

517
00:43:29,855 --> 00:43:32,955
He seems to get what's going on, at least domestically.

518
00:43:33,635 --> 00:43:39,975
I think he stood up against H-1B visas and really standing up for the American worker.

519
00:43:39,975 --> 00:43:42,015
specifically with that in mind,

520
00:43:42,095 --> 00:43:45,855
like in terms of domestic policy to fix these problems,

521
00:43:45,855 --> 00:43:48,675
how would you grade Trump's performance so far?

522
00:43:52,455 --> 00:43:54,395
Not as good as I was hoping.

523
00:43:54,915 --> 00:43:56,015
A little disappointed.

524
00:43:57,535 --> 00:44:00,155
Could have been a lot worse, you know, I'll say that.

525
00:44:01,195 --> 00:44:07,755
But yeah, there's a lot of talk on a number of things

526
00:44:07,755 --> 00:44:12,655
that we haven't exactly seen follow through on it's still early like the one thing i'll say

527
00:44:12,655 --> 00:44:19,315
you know i is it's still he's still got some time i'm not gonna you know totally condemn

528
00:44:19,315 --> 00:44:26,095
uh the performance because we still have time like you mentioned jd vance uh has been pretty

529
00:44:26,095 --> 00:44:34,535
vocal on some pretty important issues uh like the h1b um so you know i'm cautiously optimistic

530
00:44:34,535 --> 00:44:40,975
but unfortunately i think that due to the fiscal dynamic and due to what's going on

531
00:44:40,975 --> 00:44:46,455
kind of economically i think that we're gonna get into a situation where for example that k-shaped

532
00:44:46,455 --> 00:44:52,335
economy probably actually gets worse um we know trump wants negative real rates we spoke about

533
00:44:52,335 --> 00:44:59,215
that in the prior conversation uh that's not gonna be good to fixing the k-shaped economy ironically

534
00:44:59,215 --> 00:45:04,915
the back, you know, kind of go back to early April and Liberation Day chaos,

535
00:45:05,215 --> 00:45:12,155
stock market is plummeting. Who was on CNN and kind of CNBC and these various kind of,

536
00:45:12,155 --> 00:45:18,075
you know, normie mainstream media outlets. It was a bunch of rich boomers that were upset,

537
00:45:18,075 --> 00:45:24,075
that were crying the hardest. That stock market decline. Now we know Trump capitulated,

538
00:45:24,415 --> 00:45:28,655
mainly due to what was going on in the treasury market, not necessarily the stock market, but

539
00:45:28,655 --> 00:45:35,375
We know we ended up capitulating, but, you know, something like that, I was starting to get pretty optimistic.

540
00:45:35,635 --> 00:45:40,055
Okay, Besson, all of the talk about Main Street, you know, it's their time to win.

541
00:45:41,555 --> 00:45:48,855
I was starting to get a little optimistic there in that first week of April because, you know, you talk to the average 25-year-old about their stock portfolio.

542
00:45:48,855 --> 00:45:50,555
They got like, you know, $200.

543
00:45:50,955 --> 00:45:52,295
They're living paycheck to paycheck.

544
00:45:52,415 --> 00:45:53,695
They're working three jobs.

545
00:45:53,695 --> 00:45:57,655
It's not exactly like they have millions of dollars in some stock portfolio.

546
00:45:57,655 --> 00:46:07,335
And if you look, the top 10% of income earners own 92% of US equities.

547
00:46:07,335 --> 00:46:25,043
So the bottom 80 90 they weren really affected The average holding in a 401k is like which is maybe a year worth of expenses It nothing It basically a rounding error

548
00:46:26,363 --> 00:46:33,302
So yeah, I think that the bottom 90%, it was starting to look like, okay, they're willing

549
00:46:33,302 --> 00:46:38,242
to break things. They're willing to, because really what that would have been was a wealth

550
00:46:38,242 --> 00:46:44,782
redistribution, which is funny, given the kind of like political implications of that.

551
00:46:45,782 --> 00:46:50,623
That's really what it was. You want to fix the K shaped economy, okay, you have to be able to

552
00:46:50,623 --> 00:46:56,482
tolerate a significant equity market decline. The problem is that, as again, Luke has been out front

553
00:46:56,482 --> 00:47:02,442
on this, I've done my own, I've done my own fact checking of it, and found it to be correct, which

554
00:47:02,442 --> 00:47:08,663
is the government can't afford the stock market to decline in a meaningful, you know, prolonged

555
00:47:08,663 --> 00:47:12,363
sort of way, or it so utterly hurts the wealth.

556
00:47:12,462 --> 00:47:18,302
The wealth effect starts going into reverse, and you start to negatively impact, you start

557
00:47:18,302 --> 00:47:22,082
to impair the capital gains tax revenue, blow out the deficit.

558
00:47:22,883 --> 00:47:28,183
As Luke says, the equity market de facto backs the U.S.

559
00:47:28,242 --> 00:47:28,762
Treasury market.

560
00:47:28,762 --> 00:47:34,802
So, you know, they were never probably going to tolerate a significant equity market decline.

561
00:47:34,942 --> 00:47:39,023
But that was one of those areas where I was like, okay, maybe they are willing to break things.

562
00:47:39,143 --> 00:47:45,502
But then as soon as treasury yields started to go vertical, two days later, it was capitulation.

563
00:47:45,762 --> 00:47:51,163
So I think that that's really the governing factor there is the treasury market, not necessarily the equity market.

564
00:47:51,702 --> 00:47:52,143
Yeah.

565
00:47:52,143 --> 00:48:05,663
And this is something I've been saying the last couple of months, too, is I think based off of the scenario or the reality that you just described that the government cannot afford this.

566
00:48:05,903 --> 00:48:14,242
So it looks like we're going the route of melt up, probably melt up equity markets, incredible debasement.

567
00:48:14,242 --> 00:48:20,863
Like individuals need to really take it upon themselves to protect themselves with assets like Bitcoin.

568
00:48:20,863 --> 00:48:27,262
And I've been pointing at Square's release of the Bitcoin functionality in their point of sale terminals.

569
00:48:27,423 --> 00:48:30,602
It's like, all right, this is you're not going to go fix this at the polling booth.

570
00:48:30,702 --> 00:48:41,663
You need to take advantage of this tool that Square has afforded you as a as a small business owner and begin saving some of your revenue, your cash flows in Bitcoin over time.

571
00:48:41,663 --> 00:48:45,823
Because it seems clear to me that melt up is is the way forward.

572
00:48:45,823 --> 00:48:50,823
And I think the gold price is screaming that as a leading indicator right now.

573
00:48:50,863 --> 00:48:58,742
Yeah. And just to like make it really clear, even a bunch of TradFi people don't really get this.

574
00:48:58,962 --> 00:49:05,543
They look at gold as just a thing. Like they don't, they don't really actually understand what,

575
00:49:05,923 --> 00:49:11,242
what you're actually looking at, which you have to think of gold as an FX pair, right? So dollar

576
00:49:11,242 --> 00:49:19,323
yen, dollar euro, it's the same thing. It's dollar gold or gold dollar is how people normally look at

577
00:49:19,323 --> 00:49:25,742
which is how many dollars does it take to get one ounce of gold, the gold price denominated in

578
00:49:25,742 --> 00:49:31,123
dollars. But you take the inverse of that gold chart, which is just going vertical, I take the

579
00:49:31,123 --> 00:49:37,383
inverse of that. And that is the dollar denominated in gold terms. Gold has been money for thousands

580
00:49:37,383 --> 00:49:43,123
of years that has its flaws for sure. All the properties I think Bitcoin objectively does better

581
00:49:43,123 --> 00:49:49,663
each of them. But that being said, gold has been money for hundreds of thousands of years.

582
00:49:49,962 --> 00:49:55,183
JP Morgan said, gold is money, everything else is just credit. I think there's some truth to that,

583
00:49:55,323 --> 00:50:00,363
even in today's day and age. So what is that really telling you? Well, what it's telling you,

584
00:50:00,363 --> 00:50:06,143
the way that the gold price gets bid up in dollars is that more people are willing to sell

585
00:50:06,143 --> 00:50:14,502
dollars to buy gold, then are doing the opposite, which is selling gold to buy dollars. That's

586
00:50:14,502 --> 00:50:18,643
really what it's telling you. So what that reflects now that you have, you know, now that

587
00:50:18,643 --> 00:50:25,482
once you understand that way of looking at it, that lens to view it through, it's a pretty damning

588
00:50:25,482 --> 00:50:32,143
indictment of not only the dollar, but the but of course, kind of the institutions that back the

589
00:50:32,143 --> 00:50:36,502
dollar. And it's not just the dollar. I mean, that's gold is getting bit up in every currency,

590
00:50:36,502 --> 00:50:42,703
but, um, you know, historically the dollar served as some sort of kind of safe Haven,

591
00:50:42,703 --> 00:50:49,363
uh, uh, asset. And we're not really seeing that too much. I do think that short to medium term,

592
00:50:49,363 --> 00:50:53,482
the dollar could show some strength here, uh, just kind of generally speaking, but

593
00:50:53,482 --> 00:51:03,023
we've been seeing the yen, the euro and the Swiss franc replacing the dollar in terms of when it

594
00:51:03,023 --> 00:51:07,563
comes to those risk off sort of moments, what is getting bid. And this is true going all the way

595
00:51:07,563 --> 00:51:12,523
back. I noticed in January, February, I'd wake up, I wake up early here on the West Coast, I'd wake

596
00:51:12,523 --> 00:51:17,762
up and see equities would be down, yields would be up a little bit, and the dollar would be down.

597
00:51:17,762 --> 00:51:20,262
So bonds down, stocks down, dollar down.

598
00:51:20,722 --> 00:51:23,843
And I started looking at, okay, well, what's up?

599
00:51:24,203 --> 00:51:28,123
And it was gold, euro, yen, and Swiss franc.

600
00:51:29,363 --> 00:51:35,982
And that theme is holding true, which, look, I don't think that you have to replace the

601
00:51:35,982 --> 00:51:39,762
dollar with the yen or the euro.

602
00:51:40,183 --> 00:51:44,802
I think that we're moving into a world that is much more, you mentioned multipolarity earlier.

603
00:51:45,302 --> 00:51:46,262
I think that's accurate.

604
00:51:46,262 --> 00:52:02,262
And I think that we should look at kind of global FX reserves and current, you know, not one global reserve currency, but multiple diversification of the sovereign holdings away from, you know, 65%.

605
00:52:02,802 --> 00:52:07,262
I think it was at the peak in terms of dollar denominated assets, mainly U.S. treasuries.

606
00:52:07,922 --> 00:52:14,143
And much more to, you know, maybe we hold 10, 15% in U.S. treasuries and 10% in yen.

607
00:52:14,143 --> 00:52:37,023
And right, I think that sort of world with gold, and eventually, I think Bitcoin, given enough time, that sort of world, right, because people always push back so hard on like nothing can replace the dollar. And it's like, well, gold kind of is number one. Number two, nothing has to be the global reserve currency. There can be multiple reserve currencies.

608
00:52:37,023 --> 00:52:46,282
You could imagine a world where dollar, euro, yen, and the yuan are all 25% or call it 15%

609
00:52:46,282 --> 00:52:50,922
and then maybe the rest gold, something like that, which would take some time to get to.

610
00:52:51,002 --> 00:52:54,722
It's not going to happen overnight, but I think that that's much more where it's going.

611
00:52:54,883 --> 00:53:01,563
But I think once people need to really kind of abstract out what the gold, how to think

612
00:53:01,563 --> 00:53:06,023
of what the move in gold is actually signifying, because once you get it, it's...

613
00:53:07,023 --> 00:53:09,623
red alert, you know, what's going on in the gold market.

614
00:53:09,623 --> 00:53:14,002
And also it should be noted that the breakout, like this is gold has been breaking out.

615
00:53:14,183 --> 00:53:18,523
It's not just in this current administration that started before.

616
00:53:18,982 --> 00:53:19,102
So.

617
00:53:20,383 --> 00:53:20,863
Yeah.

618
00:53:20,883 --> 00:53:30,203
And that begs the question, like how, how underexposed are not only governments, but

619
00:53:30,203 --> 00:53:31,002
institutions?

620
00:53:31,002 --> 00:53:36,802
I don't mean how many of these hedge funds in the Caymans just trying to leech off this,

621
00:53:36,802 --> 00:53:41,762
of this basis trade underexposed gold? I think there was a Bank of America report that came out

622
00:53:41,762 --> 00:53:48,942
a few weeks ago that something like 4% of hedge funds have any material exposure to gold. And

623
00:53:48,942 --> 00:53:53,563
is there like a whole class of institutional capital that's just completely missing this wave

624
00:53:53,563 --> 00:53:58,502
when their fiduciary responsibility is supposed to see it before it comes and benefit from it when

625
00:53:58,502 --> 00:54:05,903
it actually does manifest? Yeah, I mean, I think institutions are, at least in the West, probably

626
00:54:05,903 --> 00:54:11,602
I've seen similar similar reports I think institutions in the west firms in the west are

627
00:54:11,602 --> 00:54:18,802
under underexposed but you know also individuals like you had made the comment before about the

628
00:54:18,802 --> 00:54:23,843
debasement and kind of the the run it hot sort of approach and like how badly that's going to

629
00:54:23,843 --> 00:54:29,782
crush we're talking about the k-shaped economy getting worse what I really worry about is the

630
00:54:29,782 --> 00:54:37,422
average American getting crushed by a run at hot sort of regime by negative real rates. We know

631
00:54:37,422 --> 00:54:42,883
Trump thinks that since our discussion, we had mentioned negative real rates, how Trump thought

632
00:54:42,883 --> 00:54:48,383
that the Fed funds should be, I think back then it was like 1% or something, which would represent

633
00:54:48,383 --> 00:54:55,203
at the time a negative 200 basis point real rate. Well, now you have Stephen Myron, who Trump picked

634
00:54:55,203 --> 00:54:57,623
to be the chairman of the Council of Economic Advisors.

635
00:54:57,823 --> 00:55:01,462
And now on the Federal Reserve, he came out,

636
00:55:01,742 --> 00:55:03,643
this was like a month and a half, two months ago.

637
00:55:03,643 --> 00:55:07,282
And he said, I believe the neutral interest rate is 2%,

638
00:55:07,282 --> 00:55:09,722
which is notably below where we are now.

639
00:55:09,962 --> 00:55:12,102
And I thought, oh, well, that's interesting.

640
00:55:12,523 --> 00:55:13,883
But then like a week or two later,

641
00:55:13,883 --> 00:55:17,703
he comes out and says, no, the neutral interest rate is 0.5%,

642
00:55:17,703 --> 00:55:23,002
which is just insane to me when you have inflation at 3%,

643
00:55:23,002 --> 00:55:24,883
like solidly at 3%.

644
00:55:24,883 --> 00:55:32,242
and assets at all time highs, you know, it, I think that they're trying to tell you where,

645
00:55:32,623 --> 00:55:36,922
which direction they want to go and look like it's not necessarily that they have a ton of

646
00:55:36,922 --> 00:55:42,582
optionality or choice in the matter. You know, this has kind of been starting to get

647
00:55:42,582 --> 00:55:50,123
baked in the cake as Luke says years ago. So it's not that they're choosing to do this. Right.

648
00:55:50,123 --> 00:55:57,762
and and i i wouldn't it it's unfortunately just where we are and just kind of what you have to do

649
00:55:57,762 --> 00:56:03,442
uh absent a productivity miracle we're not going to cut spending because you cut spending

650
00:56:03,442 --> 00:56:09,023
i've done the math and if you cut spending if you balance the budget it would result in a gdp

651
00:56:09,023 --> 00:56:15,962
contraction worse than 2008 and the gfc um so you can't can't just bounce the budget especially

652
00:56:15,962 --> 00:56:21,602
given what's going on kind of with the dollars reserve status and what that might do to other

653
00:56:21,602 --> 00:56:29,742
assets. Of course, in mid-90s to late 90s, we ran a surplus and that caused all sorts of problems

654
00:56:29,742 --> 00:56:34,962
in say the equity market. And then that got kicked to the housing bubble, which by the way,

655
00:56:35,023 --> 00:56:42,323
even the economist on the Wikipedia article for 2008 and the causes of 2008, even the economist,

656
00:56:42,323 --> 00:56:51,203
which is a fairly pro-globalism sort of outlet, even they admitted that the 5% or 6% trade deficit

657
00:56:51,203 --> 00:56:57,383
as a share of GDP in the early 2000s led to the 2008 GFC, the bubble, to the housing bubble.

658
00:56:57,982 --> 00:57:02,802
So even they're admitting that. So you have all these other issues with balancing the fiscal

659
00:57:02,802 --> 00:57:09,123
budget. But yeah, you would plunge the US into a recession that would be catastrophic. It would be

660
00:57:09,123 --> 00:57:14,482
a margin call on the debt. So you can't do that. Like what other option outside of a productivity

661
00:57:14,482 --> 00:57:21,643
miracle, which could also bring about mass unemployment, right? And all these other issues,

662
00:57:22,242 --> 00:57:28,523
like they don't really have a good option here. Unfortunately, run it hot, devalue the debt in

663
00:57:28,523 --> 00:57:34,523
real terms against scarce assets like gold and Bitcoin. And that's kind of the only option that

664
00:57:34,523 --> 00:57:39,203
they that they really have negative real rates to try to get the interest expense, which is

665
00:57:39,203 --> 00:57:44,722
one of the largest outlays, try to get that under control of negative real real rates,

666
00:57:44,722 --> 00:57:49,323
but that's going to be stimulatory, it's going to be inflationary, that'll make the

667
00:57:49,323 --> 00:57:54,663
K shaped economy worse, they'll fuel the asset bubble even more. So yeah, it's unfortunate,

668
00:57:54,663 --> 00:58:00,203
because I don't really think that they have much of a good option outside of a run at hot. And they

669
00:58:00,203 --> 00:58:05,422
started telling us back in what, May or June, that they were, I mean, it was Scott Besant,

670
00:58:05,883 --> 00:58:11,123
David Sachs, and Elon Musk, all within a week of each other, all came out back in, I think it was

671
00:58:11,123 --> 00:58:17,403
May, and said, yep, like, can't cut, can't cut. That's not how we're going to get out of this. We

672
00:58:17,403 --> 00:58:22,183
got to grow our way out of the debt. They all mentioned that nominal growth has to be above

673
00:58:22,183 --> 00:58:27,163
the cost of the debt. And unfortunately, that's just kind of where we are. That's what we did

674
00:58:27,163 --> 00:58:28,123
after World War II.

675
00:58:29,442 --> 00:58:34,323
And inflation was 18%, 19% at the peak coming out of that.

676
00:58:35,722 --> 00:58:37,683
Yeah, I know we touched on this last time we were on,

677
00:58:37,742 --> 00:58:39,722
but the productivity miracle, it's right around the corner.

678
00:58:40,323 --> 00:58:42,302
Have you seen everything going on with AI?

679
00:58:42,422 --> 00:58:44,002
All these data centers being built up,

680
00:58:44,002 --> 00:58:46,482
there's not enough supply of GPUs

681
00:58:46,482 --> 00:58:53,343
to feed the insatiable hunger for tokens in the world.

682
00:58:53,343 --> 00:58:59,462
Do you believe that there is any hope of an AI productivity miracle actually materializing?

683
00:59:00,183 --> 00:59:05,663
I mean, I can say for myself that it has notably improved my productivity.

684
00:59:06,602 --> 00:59:10,063
I use it in a very particular kind of way.

685
00:59:10,782 --> 00:59:14,482
And it has significant limitations, right?

686
00:59:14,563 --> 00:59:18,742
But it's kind of constantly improving and tends to be getting better.

687
00:59:18,742 --> 00:59:22,582
For example, you can tell it to write a PineScript code for TradingView.

688
00:59:22,582 --> 00:59:25,922
and it just spits out like I could never do that.

689
00:59:25,982 --> 00:59:26,643
I'm not coder.

690
00:59:26,762 --> 00:59:27,543
I have no idea.

691
00:59:27,543 --> 00:59:35,082
So things like that, you know, and it's very quick to certainly boost my productivity when

692
00:59:35,082 --> 00:59:41,363
it comes to say the YouTube video research or, you know, preparing charts.

693
00:59:41,462 --> 00:59:47,582
It certainly helped me how much and how quickly the real productivity gains actually appear

694
00:59:47,582 --> 00:59:49,163
is totally different story.

695
00:59:49,163 --> 00:59:58,482
So like I've looked for good high quality data on that very issue and not really been able to find a ton of data, which is kind of surprising.

696
00:59:59,383 --> 01:00:05,442
I did put out that post job openings to the S&P kind of as a joke.

697
01:00:05,823 --> 01:00:08,043
It ended up going like giga viral.

698
01:00:08,802 --> 01:00:18,922
It was kind of a joke, but, you know, there's probably some amount of I was hoping to spark some amount of conversation because I do think that there is some amount.

699
01:00:18,922 --> 01:00:24,582
just from what it's doing personally for my productivity, I believe that there's got to be

700
01:00:24,582 --> 01:00:31,843
some amount of productivity gains coming from AI. Productivity for Q2 did come in significantly

701
01:00:31,843 --> 01:00:39,462
higher than expected by a lot. I think it came in at 3.3 and the expectation was like 2.6.

702
01:00:39,942 --> 01:00:48,643
So it did come in notably hot. Q3, I haven't seen yet, government shutdown. So yeah, I would imagine

703
01:00:48,643 --> 01:00:50,782
that there's some amount of productivity coming,

704
01:00:50,982 --> 01:00:53,383
but then you start creating other problems, right?

705
01:00:53,442 --> 01:00:58,183
Which is, okay, say it is gonna be as transformative

706
01:00:58,183 --> 01:01:01,582
as some people say, okay, well, now you might be talking

707
01:01:01,582 --> 01:01:02,982
about an unemployment rate of 20%.

708
01:01:03,543 --> 01:01:07,143
Well, how do you fund that?

709
01:01:08,262 --> 01:01:11,143
And so, yeah, I think that that's why,

710
01:01:11,422 --> 01:01:12,823
and I think Luke's correct on this,

711
01:01:12,823 --> 01:01:15,823
the productivity miracle option

712
01:01:15,823 --> 01:01:17,762
has to come at just the right pace

713
01:01:17,762 --> 01:01:24,462
and it has to come at just the right intensity. Otherwise, it actually makes the situation worse.

714
01:01:24,942 --> 01:01:29,663
Because we know government's so inefficient, like for example, Medicare outlays as a share of tax

715
01:01:29,663 --> 01:01:38,523
receipts. When back in the early 70s, it was like 2%. Now it's like 24, 25, 26%. So we know how

716
01:01:38,523 --> 01:01:42,742
inefficient, and it's the same with Social Security as well. The,

717
01:01:42,768 --> 01:01:51,668
These government programs are incredibly inefficient allocators of capital and the number of administrators and the bureaucracy and all of that.

718
01:01:52,008 --> 01:01:54,568
So it's not like a one-to-one, right?

719
01:01:55,408 --> 01:02:05,388
There's probably for every dollar in unemployment benefits that someone actually makes, there's probably another 50 cents that's getting paid to government bureaucrats along the way.

720
01:02:05,388 --> 01:02:17,108
You know, so, yeah, I think that the problem is if it comes, if it does come, if the productivity miracle does come and it is transformative, it'll cause significant dislocations in the labor market.

721
01:02:17,228 --> 01:02:23,568
Those people have mortgages and car loans and they go to the local Starbucks to buy coffee and whatever.

722
01:02:24,248 --> 01:02:31,648
And so AI being extremely deflationary, I've kind of understood this concept.

723
01:02:31,808 --> 01:02:34,208
I've been talking about it for a year and a half.

724
01:02:34,208 --> 01:02:48,008
I don't really know how it ends up resolving, but immediately I thought, well, okay, if AI is as transformative and revolutionary as people say, okay, well, that's massively deflationary.

725
01:02:48,728 --> 01:02:52,208
And then I was like, okay, but the government debt to GDP is 125%.

726
01:02:52,748 --> 01:02:57,168
Now, private household debt, they have de-levered after 2008.

727
01:02:57,168 --> 01:03:04,188
but but on the sovereign side we are so highly levered seven percent pro cyclical deficit 22

728
01:03:04,188 --> 01:03:10,768
percent uh of tax revenue is going to interest you know kind of go down the list so okay if it's

729
01:03:10,768 --> 01:03:16,688
super deflationary we're in this highly levered debt-based monetary system like i kept telling

730
01:03:16,688 --> 01:03:22,788
people guys like this is the story is how those two end up resolving and the only conclusion that

731
01:03:22,788 --> 01:03:28,848
I've been able to come to. I keep pointing it out and never really knowing how it ends up resolving.

732
01:03:28,968 --> 01:03:35,808
The only thing I can kind of rely on, I guess, or bet on is that they will have to overcome

733
01:03:35,808 --> 01:03:44,168
the deflation from AI and robotics by printing even more money, right? So I think that's kind of

734
01:03:44,168 --> 01:03:49,548
where I've landed. I don't really see another option because it's incompatible with a highly

735
01:03:49,548 --> 01:03:54,908
levered debt-based system and my you know maybe someone can reach out and tell me another solution

736
01:03:54,908 --> 01:04:02,088
but the only one i can think of is they print even more money to offset the deflation yeah i mean

737
01:04:02,088 --> 01:04:07,828
that's what they've done already for the last five decades i'm sure you saw but the the new head of

738
01:04:07,828 --> 01:04:14,348
product at x nikita beer or whatever his name is was um tweeting basically making fun of bitcoiners

739
01:04:14,348 --> 01:04:20,288
and gold bugs saying, all the Bitcoiners and gold bugs are expecting hyperinflation when AI

740
01:04:20,288 --> 01:04:25,548
is going to be extremely deflationary. It's like, well, all tech is deflationary if applied the

741
01:04:25,548 --> 01:04:29,108
right way or most tech. People wouldn't end up picking because I quote tweeted with all tech.

742
01:04:29,288 --> 01:04:35,168
But we've seen incredible deflation driven by technology advancements over the last

743
01:04:35,168 --> 01:04:41,968
five decades and the cost of living has gone up consistently. Quality of life for the bottom 90%

744
01:04:41,968 --> 01:04:48,988
has gone down consistently despite incredible leaps and bounds and advancements in technology

745
01:04:48,988 --> 01:04:56,348
that have led to overall deflation in that sector. But it is not enough to combat the money printer

746
01:04:56,348 --> 01:05:02,968
they need to print to keep it up. So despite all this tech deflation, until we pair that tech

747
01:05:02,968 --> 01:05:09,588
deflation with a reserve currency that is a sound money, Bitcoin is what I think it ultimately will

748
01:05:09,588 --> 01:05:13,688
be, you're not going to reap the benefits societally of that tech deflation.

749
01:05:14,488 --> 01:05:17,708
Yeah, or until you've de-levered the sovereign balance sheet.

750
01:05:17,908 --> 01:05:25,268
If we could get debt to GDP back down to 50%, 60%, maybe even 70%, then it's a bit of a

751
01:05:25,268 --> 01:05:25,948
different story.

752
01:05:26,068 --> 01:05:32,548
The problem is the leverage is so high that a recession or a bout of deflation, sustained

753
01:05:32,548 --> 01:05:36,328
deflation, basically acts as a margin call on the debt.

754
01:05:36,328 --> 01:05:42,868
uh the in in in the past three recessions if you take an average tax revenue in a recession falls

755
01:05:42,868 --> 01:05:48,828
by about 25 percent spending goes up by about 15 percent oh and gdp the denominator and the deficit

756
01:05:48,828 --> 01:05:55,168
as a share gdp is falling so you end up talking about like a five trillion dollar deficit in just

757
01:05:55,168 --> 01:06:04,108
a normal recession um and so yeah it's uh it's a tough situation they're trying to thread a needle

758
01:06:04,108 --> 01:06:11,008
here and i don't know if it's gonna work um maybe there's some secret technology they have that

759
01:06:11,008 --> 01:06:17,488
they've known about uh that could help but i mean absent something like that i think that

760
01:06:17,488 --> 01:06:25,368
it's just gonna be even more inflation to offset the deflationary forces um unfortunately

761
01:06:25,368 --> 01:06:32,108
yeah well i guess to tie bitcoin into this obviously gold's been running i think bitcoin

762
01:06:32,108 --> 01:06:36,208
as a solution for individuals, institutions, governments alike

763
01:06:36,208 --> 01:06:40,168
to a certain extent to protect yourself

764
01:06:40,168 --> 01:06:44,308
as it seems obvious that we're going to have these extreme bouts

765
01:06:44,308 --> 01:06:48,168
of inflation moving forward as the government needs to inject liquidity

766
01:06:48,168 --> 01:06:51,948
into the system to make sure that doesn't completely implode.

767
01:06:51,948 --> 01:06:55,768
But I think that's one question that's been on many people's minds,

768
01:06:55,868 --> 01:06:59,368
particularly Bitcoiners over the last month, is why do something?

769
01:06:59,368 --> 01:07:06,528
Why aren't you doing it? Gold's running tall time highs. It's sucking the air out of the room and Bitcoin where it is.

770
01:07:07,668 --> 01:07:13,108
In the halving cycle, if you believe in halving cycles, signals that the price should be running a lot hotter.

771
01:07:13,668 --> 01:07:17,848
People are very disappointed. How does Bitcoin play out into all this?

772
01:07:17,928 --> 01:07:24,908
What is your short, medium, long term view on Bitcoin and where it fits into this bigger picture that we've been describing?

773
01:07:24,908 --> 01:07:32,968
yeah short term is hard um that short term is really hard medium to long term though i'm very

774
01:07:32,968 --> 01:07:43,728
bullish uh i look at it i my conviction in bitcoin is so significant um that i like it i like

775
01:07:43,728 --> 01:07:49,988
uh pullbacks i i like when it is not ripping higher because when it's ripping higher again

776
01:07:49,988 --> 01:07:55,748
going to the prior conversation about gold, like my wages or my earnings are getting devalued when

777
01:07:55,748 --> 01:08:03,228
gold and Bitcoin are ripping higher. So I actually like when it's not ripping higher, I would like to

778
01:08:03,228 --> 01:08:12,508
accumulate more. Because yeah, inevitably, I know how this all ends up resolving. And look, it could

779
01:08:12,508 --> 01:08:18,068
take longer than we think, you know, it could, it keeps feeling like, okay, well, we're nearing this

780
01:08:18,068 --> 01:08:37,383
event horizon or maybe even past it why doesn it feel like we are Gold I would say indicates that we probably are The way gold is the price action on gold I mean it was up like 3 on Friday um or Thursday I think it was had this like 3

781
01:08:37,383 --> 01:08:38,143
monster date.

782
01:08:38,143 --> 01:08:42,643
Like you don't see that in gold, especially routinely day after day after day.

783
01:08:42,783 --> 01:08:45,863
It's, uh, every single day it's like up a percent or more.

784
01:08:46,163 --> 01:08:52,323
So I think gold is kind of signaling that we're nearing an, uh, an event horizon.

785
01:08:52,323 --> 01:09:02,263
I think that Bitcoin has too much of a NASDAQ, high beta, you know, aspect to it, unfortunately.

786
01:09:02,643 --> 01:09:10,063
So, you know, there's been a bit of kind of volatility recently, short term at least, in spying QQQ.

787
01:09:10,203 --> 01:09:17,683
So I think that that's probably not helping with Bitcoin, although today both were up when we started to record.

788
01:09:17,683 --> 01:09:24,303
And then you had the cascading crypto liquidation thing that happened a week or two ago.

789
01:09:24,463 --> 01:09:32,343
And there's probably some amount of residual, you know, deleveraging or, you know, going on there.

790
01:09:32,643 --> 01:09:36,383
But medium to long term, like I'm grateful for this pullback.

791
01:09:36,523 --> 01:09:37,583
I wish it would pull back more.

792
01:09:37,703 --> 01:09:40,263
I want it back in 70k, 80k.

793
01:09:41,303 --> 01:09:47,283
Because yeah, it's like, if you have enough conviction, you should be wanting, you should be enjoying pullbacks.

794
01:09:47,283 --> 01:09:51,263
You should be wanting it to pull back because you're looking out into the future.

795
01:09:52,003 --> 01:09:55,623
And again, you have high conviction of that medium to long-term view.

796
01:09:55,803 --> 01:09:58,023
So that's kind of how I look at it.

797
01:09:58,203 --> 01:10:02,623
The longer that it is not going parabolic, the more time I have to accumulate.

798
01:10:03,363 --> 01:10:11,643
Because inevitably, you know, whether it takes a month or a year or 10 years, like it's going much higher, in my opinion.

799
01:10:11,643 --> 01:10:11,823
Yeah.

800
01:10:13,183 --> 01:10:17,683
And it is hilarious to people pointing at gold's performance this year,

801
01:10:17,743 --> 01:10:19,703
particularly and saying, oh, Bitcoin's not catching up.

802
01:10:19,743 --> 01:10:21,583
It's like if you zoom out at the five-year chart,

803
01:10:21,743 --> 01:10:25,803
Bitcoin's up like 900%, gold's up like 130%.

804
01:10:25,803 --> 01:10:30,983
Yeah, since the ETF, it's up like, what, 250% since the ETF was announced?

805
01:10:31,343 --> 01:10:32,123
So, yeah.

806
01:10:32,823 --> 01:10:34,383
That was just two years ago or so.

807
01:10:35,003 --> 01:10:40,223
Yeah, I think it is a signal of the high-velocity trash economy.

808
01:10:40,223 --> 01:10:44,923
people that are in Bitcoin and they, I think they have visions of things they want to buy and things

809
01:10:44,923 --> 01:10:50,383
they want to do. Um, and sometimes let those visions. And I think, I think that illustrates

810
01:10:50,383 --> 01:10:56,043
the problem, right? Which is like, if, if you look at Bitcoin as just a number go up sort of

811
01:10:56,043 --> 01:11:02,783
phenomenon or asset, uh, if you're just purely looking at it from that lens and you have a low

812
01:11:02,783 --> 01:11:09,503
time, low time preference, you have that kind of like fiat mindset of, I want Bitcoin price to go

813
01:11:09,503 --> 01:11:16,303
up so I can sell my Bitcoin for dollars. I think that that is a different camp than a lot of

814
01:11:16,303 --> 01:11:23,463
Bitcoiners who don't view it that way and view it as the denominator of choice.

815
01:11:24,103 --> 01:11:29,703
I use gold and Bitcoin as denominators for a lot of things. And again, plot average hourly wage,

816
01:11:29,763 --> 01:11:35,443
anyone with a trading view, plot average hourly wage divided by Bitcoin. Your wages are getting

817
01:11:35,443 --> 01:11:41,623
devalued when Bitcoin goes up. Like once you start to realize that, I think that you start to kind of

818
01:11:41,623 --> 01:11:49,683
see things in a different, uh, in a different lens, I guess. Yeah. The, um, what was I going to say?

819
01:11:49,683 --> 01:11:57,863
The, uh, not only the devaluing, but the, um, uh, I lost my thought there when, uh,

820
01:11:58,463 --> 01:12:03,203
talking about the speed at which this happened. Oh, that's what I was going to ask. Like,

821
01:12:03,203 --> 01:12:11,543
And then it's one thing we talk about a lot at 1031 is like there's an order of operations to Bitcoin's ultimate success.

822
01:12:11,543 --> 01:12:22,663
And I think, again, going back to the square point of sale system, a lot of people are are excited that you'll be able to pay in Bitcoin and merchants will be able to accept Bitcoin, which is interesting.

823
01:12:22,663 --> 01:12:27,443
But the merchant adoption meme has been around since 2013.

824
01:12:27,783 --> 01:12:31,583
Roger Ver was out basically trying to convince everybody to accept Bitcoin.

825
01:12:31,583 --> 01:12:41,743
And if I'm being honest with myself, I feel like that part of the stack that they just released at Square will probably most likely be the least used out of all of it.

826
01:12:41,783 --> 01:12:56,083
But the tool to be able to sweep cash flows immediately into Bitcoin and hold that on the balance sheet is probably going to be the most used feature and the most valuable feature, not only for those individuals, but for Bitcoin more broadly.

827
01:12:56,083 --> 01:13:03,143
And I do think there has been a degree of complacency in the broader Bitcoin sphere.

828
01:13:03,263 --> 01:13:05,123
People just focus on number, go up, number, go up.

829
01:13:05,163 --> 01:13:14,283
It's like, well, we need to increase the utility of the tools around the Bitcoin stack to make it easier for people to adopt.

830
01:13:14,283 --> 01:13:25,903
And so I think people should be focused on that, like where can we begin to fit Bitcoin into these different nooks and crannies and get people exposure to it more easily.

831
01:13:26,083 --> 01:13:43,703
I would say even outside, I would agree, but then I don't also, even on the like number go up part, I had someone who sits on a board of a publicly traded company, ask me about, this person knows I'm, I've been following Bitcoin for a while and I'm into it.

832
01:13:43,703 --> 01:13:46,443
asked me about it a couple days ago.

833
01:13:46,443 --> 01:13:48,563
And I said, well, you know, what makes you bring it up now?

834
01:13:48,643 --> 01:13:55,523
They're a boomer and older and kind of was always very avoidant or, you know, dismissive

835
01:13:55,523 --> 01:13:56,183
of Bitcoin.

836
01:13:56,183 --> 01:13:59,363
You know, what made you, why are you asking?

837
01:13:59,523 --> 01:14:04,623
And she said, well, our accountant asked us if we had any Bitcoin holdings.

838
01:14:05,103 --> 01:14:06,563
This is a publicly traded company.

839
01:14:07,723 --> 01:14:13,183
So, you know, I think that there's an element for, of course, we know it individually.

840
01:14:13,703 --> 01:14:17,143
as a pretty amazing savings technology individually.

841
01:14:17,803 --> 01:14:20,603
But even as you gain adoption of it,

842
01:14:20,883 --> 01:14:22,083
just psychologically,

843
01:14:22,703 --> 01:14:25,843
once it becomes more of a valid,

844
01:14:26,403 --> 01:14:28,163
once people start looking at it

845
01:14:28,163 --> 01:14:31,803
more as a valid form of savings technology,

846
01:14:31,803 --> 01:14:34,003
which is the primary method I look at it as,

847
01:14:34,523 --> 01:14:38,183
I think even that is a step in the right direction for Bitcoin

848
01:14:38,183 --> 01:14:40,003
because then those people adopt it.

849
01:14:40,483 --> 01:14:42,023
And then maybe they can start to play

850
01:14:42,023 --> 01:14:49,663
with a lightning wallet or whatever, right? So I think the primary funnel for most people,

851
01:14:49,763 --> 01:14:54,823
whether it be corporations, whether it be sovereigns even, or whether it be individuals,

852
01:14:55,463 --> 01:15:01,263
is the savings technology. It preserves your purchasing power because in dollar terms,

853
01:15:01,323 --> 01:15:06,743
it goes up in price. But then that, once you're exposed to it, once you've used it,

854
01:15:06,743 --> 01:15:11,823
once you've bought some Bitcoin, once you've sent it to a wallet, maybe you have a cold

855
01:15:11,823 --> 01:15:23,658
you know a cold card or old and self custody And once you understand the concept of like you know holding your own keys once you start to like kind of play with it and go down the rabbit hole

856
01:15:24,138 --> 01:15:30,378
I think that it leads to all of the other benefits, all of the kind of more peripheral

857
01:15:30,378 --> 01:15:35,138
sort of benefits that, you know, whether it be like, as a means of transaction,

858
01:15:35,698 --> 01:15:40,218
and that sort of thing. So I think it, I think the primary funnel will continue to be

859
01:15:40,218 --> 01:15:42,278
the number go up component.

860
01:15:43,278 --> 01:15:47,098
But that's only because the denominator is melting, unfortunately.

861
01:15:47,878 --> 01:15:47,978
Yeah.

862
01:15:48,398 --> 01:15:53,058
And then in terms of not the converse,

863
01:15:53,178 --> 01:15:54,258
but the other side of the coin,

864
01:15:54,298 --> 01:15:57,178
the number go up is distributed peer-to-peer cash

865
01:15:57,178 --> 01:15:59,138
that nobody can control.

866
01:15:59,358 --> 01:16:02,598
I think governments are doing their best to fund people

867
01:16:02,598 --> 01:16:05,098
towards the point of recognition like,

868
01:16:05,178 --> 01:16:07,198
oh, maybe this makes sense for this reason,

869
01:16:07,198 --> 01:16:09,058
particularly in the UK,

870
01:16:09,058 --> 01:16:12,098
where they're launching digital IDs and speech laws.

871
01:16:12,298 --> 01:16:14,758
And I think come from number, go up,

872
01:16:14,818 --> 01:16:18,298
and then Trojan horse, peer-to-peer digital cash

873
01:16:18,298 --> 01:16:20,458
that can't be censored by despotic governments.

874
01:16:21,118 --> 01:16:22,258
They're doing the job.

875
01:16:22,778 --> 01:16:24,378
The governments are doing the job behind the scenes

876
01:16:24,378 --> 01:16:27,698
to make sure people understand that they need that as well

877
01:16:27,698 --> 01:16:28,498
when the time's right.

878
01:16:29,118 --> 01:16:34,218
It's not a pretty-looking landscape out there politically,

879
01:16:34,438 --> 01:16:35,618
not just in the UK.

880
01:16:35,618 --> 01:16:41,378
and you know i i worry sometimes about three years from now what will the u.s look like

881
01:16:41,378 --> 01:16:49,138
um you know we might have bought a little bit of time i mean some some people um would argue that

882
01:16:49,138 --> 01:16:54,978
you know some of what we're seeing even now is leaning in the kind of technocratic or you know

883
01:16:54,978 --> 01:17:01,558
techno dystopia right with certain companies and stuff so you know you can make the arguments even

884
01:17:01,558 --> 01:17:06,738
happening now here in the US. But at the very least, you know, if you reject that argument,

885
01:17:06,738 --> 01:17:13,838
at the very least, it could happen here in, say, three years. So right now, it's the UK. But I think

886
01:17:13,838 --> 01:17:18,298
that that could make its way over here, unfortunately, with the rise of populism. And

887
01:17:18,298 --> 01:17:25,238
look, if like, if the average American, the average blue collar American that's been on the lower leg

888
01:17:25,238 --> 01:17:31,358
of the K that has watched, you know, the capital class just get obscenely rich and so on and so

889
01:17:31,358 --> 01:17:37,558
forth. If that lower leg of the K that elected president Trump, if they don't feel like he has

890
01:17:37,558 --> 01:17:44,178
adequately fought for main street, as Besson always says, it could get pretty crazy. I think

891
01:17:44,178 --> 01:17:52,918
people dismiss a AOC presidency, but I think that they'd be wise to, to rethink that. Um,

892
01:17:52,918 --> 01:17:56,878
because I think that populism is not just going to be on the right.

893
01:17:56,978 --> 01:17:58,538
We're seeing a rise in populism.

894
01:17:58,638 --> 01:18:03,978
I think if you look at like New York, I think New York's going to be.

895
01:18:06,318 --> 01:18:12,238
Luckily, it looks like we're going to have a case study in left-leaning populism in New York.

896
01:18:12,818 --> 01:18:15,278
Hopefully they can blow that.

897
01:18:17,578 --> 01:18:18,818
What's the word I'm looking for?

898
01:18:20,258 --> 01:18:22,578
They can mess that city up, too.

899
01:18:22,918 --> 01:18:26,778
a certain extent in a quick enough amount of time that people are able to point out and say,

900
01:18:26,858 --> 01:18:30,358
look, this is what ASC wants to do to the country. Let's not go down this route.

901
01:18:30,658 --> 01:18:35,818
But I mean, look, going back to 2016, this is not like a new phenomenon. I remember

902
01:18:35,818 --> 01:18:44,218
back in 2016 in the Rust Belt, they would go, you know, CNN, MSNBC, they would go and interview

903
01:18:44,218 --> 01:18:49,698
just average people, just average blue collar, middle of the road, you know, just average people.

904
01:18:49,698 --> 01:18:53,718
and they say, who are you voting for? Who is it between? And they would say, well, kind of,

905
01:18:53,798 --> 01:18:58,998
I like this Trump guy, but I also like Bernie. And it like just completely broke their head.

906
01:18:59,578 --> 01:19:06,318
These, these kind of, you know, partisan type, uh, uh, that live in Manhattan or live in Washington,

907
01:19:06,478 --> 01:19:11,498
DC, like it just completely broke their head that you could be between Trump and Bernie.

908
01:19:11,998 --> 01:19:18,338
Um, but I think that going back to that, that was a signpost and that was back in 2016. So

909
01:19:18,338 --> 01:19:23,298
I think it's only going to kind of accelerate from here, unfortunately. Because populism,

910
01:19:23,598 --> 01:19:28,158
look, going back to what we were talking about debasement and that whole conversation,

911
01:19:28,778 --> 01:19:36,138
populism, the last time the US had populism really was 1965 through 1982. In dollar terms,

912
01:19:36,278 --> 01:19:43,658
denominated in dollars, S&P 500 basically went sideways. In gold terms, the S&P 500 lost 90%

913
01:19:43,658 --> 01:19:51,378
of its value. We didn't have Bitcoin back then, but in gold terms, S&P 500 lost 90% of its value.

914
01:19:51,918 --> 01:19:57,178
Populism is not good for financial assets. It's not good if you care about inflation.

915
01:19:58,618 --> 01:20:04,218
And so, you know, that'll eventually that'll come into conflict, of course, with the bond market,

916
01:20:04,738 --> 01:20:11,878
which we kind of have an idea how they're going to resolve that conflict with QE or yield curve

917
01:20:11,878 --> 01:20:19,238
control or something. But populism is a period in time where you want to own scarce bearer assets.

918
01:20:20,398 --> 01:20:26,698
And I think that, you know, Bitcoin is the best because gold can always be confiscated. They could

919
01:20:26,698 --> 01:20:31,138
kick down your door and, you know, you have to physically hold it or it's held in a brokerage

920
01:20:31,138 --> 01:20:34,898
account. So it's not really your goal. Number one, it's not real gold. Number two, it's not actually

921
01:20:34,898 --> 01:20:42,518
yours. So yeah, I think, you know, memorize 12 or 24 words, you know, makes it makes it the best

922
01:20:42,518 --> 01:20:47,678
asset to own in a period of time of increasing geopolitical tension, a period of time of

923
01:20:47,678 --> 01:20:55,678
increasing political polarization, ideological polarization, even racial division here in America.

924
01:20:56,678 --> 01:21:03,058
And of course, you know, the economic side of it as well. I think that it's pretty much the only

925
01:21:03,058 --> 01:21:08,338
thing when people ask me, they're like, you watch this stuff all the time. This is all you do all

926
01:21:08,338 --> 01:21:15,538
day. Like, what should I do? You know, I got 10,000 or 20,000 or whatever. And like, I've thought

927
01:21:15,538 --> 01:21:21,218
about it a lot. And at least for myself, the only option I keep coming back to is like the only

928
01:21:21,218 --> 01:21:27,478
thing that I'm really that I have high conviction in is Bitcoin and to some degree gold. Although

929
01:21:27,478 --> 01:21:35,598
the parabolic run in gold makes me wary of recommending that. I was buying some in 22 and 23.

930
01:21:36,358 --> 01:21:40,758
But, you know, after the run that gold's had, it's like, it's kind of hard to recommend gold.

931
01:21:41,678 --> 01:21:45,798
And then so the only thing that you're left with is Bitcoin, because we know cash,

932
01:21:46,358 --> 01:21:50,138
cash had been good, right? Money market fund, you get four and a half percent. That's cool.

933
01:21:50,958 --> 01:21:57,298
But like that is a melting ice cube more and more with what they're doing with the federal funds

934
01:21:57,298 --> 01:22:11,773
rate So like that was kind of the last straightforward thing outside of Bitcoin So now it kind of like it getting to a point where for me at least the only thing that makes sense is Bitcoin I not going to buy the S 500 at a

935
01:22:11,773 --> 01:22:20,533
price to earnings of 3,000, whatever it is, price to sales at 3.3 times. I will say that's not to

936
01:22:20,533 --> 01:22:27,793
say the S&P or the NASDAQ stocks, equities can't go up. I looked at the price to sales of the

937
01:22:27,793 --> 01:22:33,053
Lebanese stock market during their currency collapse, people were making such a big deal

938
01:22:33,053 --> 01:22:38,973
about the price to sales ratio of S&P at 3.3 times. That is so historically overvalued.

939
01:22:39,593 --> 01:22:45,033
And so I looked in Lebanon and it reached 62 price to sales. So, you know, like it's not to

940
01:22:45,033 --> 01:22:50,173
say that the equities can't go up in dollar terms, but what you really need to, what people

941
01:22:50,173 --> 01:22:55,193
really need to start doing, and I've been trying to bang this drum, is start changing the denominator.

942
01:22:55,193 --> 01:23:00,253
whether you like gold whether you like bitcoin gold is good because it's been around a long time

943
01:23:00,253 --> 01:23:05,413
so if you're a macro nerd like me trying to evaluate data you have more price history uh but

944
01:23:05,413 --> 01:23:10,453
you know use bitcoin as a denominator denominate stocks in bitcoin whatever you're thinking about

945
01:23:10,453 --> 01:23:17,193
investing in housing right denominate the average sales price in bitcoin it's it looks a lot different

946
01:23:17,193 --> 01:23:23,553
than in u.s dollars yeah i mean just two points there like to your point on populism not being

947
01:23:23,553 --> 01:23:30,673
good going back to 65 to 82 to your point if you if you price everything in bitcoin going back to

948
01:23:30,673 --> 01:23:37,973
2016 when populism really became um as big of a thing as it is here in the united states today

949
01:23:37,973 --> 01:23:46,393
like s&p is probably down 95 99 um going back there in bitcoin terms and gold obviously uh luke

950
01:23:46,393 --> 01:23:52,393
and many others were sharing that chart a few weeks ago if you price ndx s&p um real estate

951
01:23:52,393 --> 01:23:54,393
prices in gold and Bitcoin, they're down

952
01:23:54,393 --> 01:23:56,313
significantly. So this could be

953
01:23:56,313 --> 01:23:57,693
a conversation we're having where

954
01:23:57,693 --> 01:24:00,373
we're in the middle of the

955
01:24:00,373 --> 01:24:02,133
debasement of the populism, whatever it may be.

956
01:24:03,393 --> 01:24:03,833
People

957
01:24:03,833 --> 01:24:06,393
look back retrospectively 50 years from

958
01:24:06,393 --> 01:24:08,333
now and be like, oh yeah, they were in the middle

959
01:24:08,333 --> 01:24:10,253
of it as it was happening.

960
01:24:10,413 --> 01:24:11,653
And then to your point on gold too,

961
01:24:11,813 --> 01:24:14,213
China just discovered a

962
01:24:14,213 --> 01:24:16,313
mine with 83 and a half

963
01:24:16,313 --> 01:24:18,493
billion. Yeah, the world's largest

964
01:24:18,493 --> 01:24:20,473
gold mine.

965
01:24:20,953 --> 01:24:21,573
Yeah, and

966
01:24:21,573 --> 01:24:28,833
supply of gold is not nearly as inelastic as bitcoin bitcoin is perfectly inelastic no matter

967
01:24:28,833 --> 01:24:33,533
how much demand for bitcoin there there ever is at any given point in time you're not gonna be able

968
01:24:33,533 --> 01:24:38,973
to create more of it and um china just found the largest gold reserve in history that that's a

969
01:24:38,973 --> 01:24:44,573
consequence of a higher gold price yeah right is you find more gold it'll unlock supply whether it

970
01:24:44,573 --> 01:24:49,613
be through people willing to sell their gold to buy fiat currency or whether it be through new

971
01:24:49,613 --> 01:24:53,373
supply. So that's a consequence to the higher gold price. Like you mentioned with Bitcoin,

972
01:24:53,993 --> 01:25:00,313
Bitcoin could go to $10 million per Bitcoin tomorrow. And there's no, now sellers could

973
01:25:00,313 --> 01:25:06,013
be encouraged, right? Long-term holders that go, okay, well that I'll sell 10 million, but

974
01:25:06,013 --> 01:25:11,813
there is no new Bitcoin supply wise that can come in. So that's one of the reasons that's

975
01:25:11,813 --> 01:25:15,013
so much better. I think one of the many reasons, but

976
01:25:15,013 --> 01:25:21,853
fascinating times thank you for uh taking some time out of your monday morning early monday

977
01:25:21,853 --> 01:25:29,553
morning to rip it um this is great and uh i really value uh your consistency it was worth

978
01:25:29,553 --> 01:25:34,773
talking before we hit record uh it's admirable how consistent you are with the analysis and

979
01:25:34,773 --> 01:25:40,953
uh it's been a great infronomics has been a great channel for me to check in once a day and just

980
01:25:40,953 --> 01:25:44,933
see what you're thinking what you're looking at and trying to get a better well-rounded

981
01:25:44,933 --> 01:25:51,413
view of what's going on in the world of finance. I appreciate that. Yeah, I just, again, I, you know,

982
01:25:51,413 --> 01:25:57,393
my prime goal is to help kind of the average person that I know everyone, not very many people

983
01:25:57,393 --> 01:26:02,333
can watch all of my videos, because I do release one every day. But hopefully, you know, those that

984
01:26:02,333 --> 01:26:08,453
you might find interesting, take a look. Because yeah, my only hope is to explain some of these

985
01:26:08,453 --> 01:26:16,733
very complicated macroeconomic concepts and phenomena to people, normal people that don't

986
01:26:16,733 --> 01:26:21,613
have the time to nerd out to the degree that I have. Because you shouldn't have to, you shouldn't

987
01:26:21,613 --> 01:26:29,113
have to be so obsessively devoted to, you know, I'm crazy. So shouldn't have to be crazy to

988
01:26:29,113 --> 01:26:33,573
understand how your money works, how your economic system works, how the global trading system and

989
01:26:33,573 --> 01:26:39,413
global capital flow shouldn't have to shouldn't require that much energy. So that's kind of the

990
01:26:39,413 --> 01:26:46,953
first, I think the first step is for the average American to understand the problem. Because once

991
01:26:46,953 --> 01:26:51,433
you understand the problem, then it makes a solution, I think, pretty straightforward.

992
01:26:52,313 --> 01:26:58,393
So yeah, that that that's the prime goal. If that sounds interesting, you could go check it out.

993
01:26:59,593 --> 01:27:03,553
Passion, it's the word I don't think it's crazy. I think you're extremely passionate about this.

994
01:27:03,573 --> 01:27:10,113
yeah yeah i always like puzzles from when i was a kid i was a nerd i didn't play with the kids i

995
01:27:10,113 --> 01:27:14,953
played i did puzzles puzzle books and stuff and like when i when i kind of came to markets it was

996
01:27:14,953 --> 01:27:20,773
like well this is basically the world's biggest puzzle with the most high stakes so it's kind of

997
01:27:20,773 --> 01:27:28,473
i look at it fun puzzle to solve yeah um for me it is at least yeah yeah well hopefully we do this

998
01:27:28,473 --> 01:27:34,173
again let's catch up uh beginning of next year maybe let's see uh see how everything's playing

999
01:27:34,173 --> 01:27:41,833
out in the world of bitcoin gold debasement polarization de-globalization all the buzzwords

1000
01:27:41,833 --> 01:27:47,753
it's uh interesting time to be alive and appreciate you joining us today yeah thanks for having me on

1001
01:27:47,753 --> 01:27:54,633
all right peace love freaks thank you for listening to this episode of tftc if you've made it this far

1002
01:27:54,633 --> 01:27:56,953
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1003
01:27:57,713 --> 01:28:01,333
If so, please share it far and wide with your friends and family.

1004
01:28:01,493 --> 01:28:02,773
We're looking to get the word out there.

1005
01:28:03,533 --> 01:28:09,513
Also, wherever you're listening, whether that's YouTube, Apple, Spotify, make sure you like

1006
01:28:09,513 --> 01:28:10,873
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1007
01:28:11,213 --> 01:28:15,613
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1008
01:28:16,033 --> 01:28:21,313
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1009
01:28:21,313 --> 01:28:23,693
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1010
01:28:23,693 --> 01:28:26,453
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1011
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1014
01:28:38,833 --> 01:28:41,133
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1015
01:28:41,753 --> 01:28:41,953
Okay.