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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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Like I was telling, I was binging your channel earlier this morning, playing some catch-up.

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You put out a lot of content, so it's hard to keep up if you don't have enough time in the day.

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But I think for this conversation, let's start in Japan.

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Obviously, that's been a big topic of discussion this week.

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Japanese yield curve screaming right now.

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And I think a couple of the videos they put out last week really dive into it, sort of the nuance of their yield curve, where a lot of the debt exists in different durations and what is actually happening.

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And I think this was incited, correct me if I'm wrong, from a tax policy.

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They were going to eliminate a sales tax or something, and that sent the yield curve screaming because people were worried they're not going to be able to service their debt.

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yeah food tax um sales tax on food i believe um and yeah that sent long end rates moving

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pretty sharply higher i mean we had 35 basis point move uh in the long end rate there in a

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single day so it is basically i mean on par with like the liz truss moment over in great britain

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where their bond market just completely imploded.

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It was kind of on par with that.

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It was kind of on par, arguably, with what happened in the U.S. in April

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with Liberation Day and all that chaos.

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So it was pretty historic what we saw over there.

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But, you know, for the nuance of I think what's important when it comes to Japan

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that a lot of the people I follow don't seem to talk about is,

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Number one, they run a very large current account surplus, four and a half percent of GDP.

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And they've ran that for a long time.

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That's part of how they've accumulated so many dollar denominated assets.

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So they've run a very large current account.

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When you look at where the debt is actually being issued, it's very similar to the U.S.

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where they issue the majority of their debt in notes and bills.

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So short duration, five year and under is definitely a majority.

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I think five year and under represents 65-ish percent of the debt.

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And the third year only represents two, three, four percent, like very low single digits when it comes to the amount of debt that is actually out there.

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Also, when you look at like the average duration on their debt, it's quite long at I think nine, ten years.

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So different than the US, not quite as long as Great Britain, where their average duration is close to 15 years.

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So quite a buffer when it comes to kind of flexibility, I guess you could say, or resistance to the fiscal dominant short term rate volatility that, like, for example, we're starting to kind of get a picture of here in the US.

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So large current account surplus, most of the debt is issued in the short end. And then they basically have a pretty decent buffer when it comes to the duration on their debt.

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So, yeah, they're there. You know, when it comes to the ownership of all of their debt, which is definitely high, you know, I I hear a lot of people talk about 240 percent debt to GDP, you know, the sky high amount of outstanding debt, which is totally 100 percent accurate.

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But when you look at who actually owns all that debt, the vast majority, well, majority is the Bank of Japan themselves.

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So they hold about 50 percent of the debt, meaning that all the interest payments just get recycled back to the Ministry of Finance.

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So after operational expense for the Bank of Japan, that interest expense just gets recycled back to the Ministry of Finance.

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They have very low external debt to GDP, only about 12 percent of the total debt that is outstanding is owned by foreigners.

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So low external debt, high, you know, large current account surplus, most of the debt being issued at the short end of the old curve.

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Yeah, I don't think that it's necessarily an imminent sign of, you know, Japan completely imploding most of the interest from higher rates.

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Again, they have that nine year average duration. So that's a buffer to kind of short term fluctuations, much less so than like what we see in the U.S. with so much issuance in the front end.

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So they have more of a buffer, large current account surplus.

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Most of the debt is issued in short term bills.

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The Bank of Japan themselves own 50 percent of the total outstanding debt, and they have a low external debt.

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Only about 12 percent of that debt is owned by external people outside of Japan.

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So, yeah, those are all points that you don't necessarily hear a lot of the like macro Fintwit type people on X talking about.

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But there are indications that maybe Japan is a little bit more resilient to withstanding.

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Now, look, like pension funds, banks, insurers over there in Japan, they're sitting much like it was in the U.S.

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where we had regional banks sitting on TLT, basically, long duration debt.

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And that debt fell 50 percent in value.

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Then there was a run on deposits and, you know, they didn't have enough liquidity to come up with it. So we had three of the four largest bank failures. Much like that happened here in the U.S., you know, a similar sort of situation could could could come out of Japan.

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But yeah, kind of like broadly speaking in general, doesn't seem to be, you know, the end of the world sort of catastrophe. I would argue it's even probably worse. What's going on over there is probably worse for the US, if anything.

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that's exactly what i was going to say way to because uh earlier this week with

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more economic forum going on obviously a lot of uh political rhetoric around greenland specifically

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markets uh markets took a bit of a dive and many people were um pointing at the greenland

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tension saying oh look trump's getting us in trouble and then scott percent came out

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and said it's not greenland it's the job japanese yield curves exploding um that's why markets are

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so he explicitly sort of highlighted the japanese yield curve as uh an input to the the bad uh the

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bad run that markets had earlier this week it was a six six standard deviation move like it was a six

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sigma event so yeah it was it was definitely uh major for sure yeah and so why why does this

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potentially have a more negative consequences for the us uh as opposed to japan itself

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So for a number of reasons. So that current account surplus that they've ran for decades, 30 years, 40 years, that means that they've accumulated.

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They've become they've been a creditor by by definition to the rest of the world.

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The U.S. being, you know, the primary beneficiary of that credit.

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Japan used to be before the Cayman Island repo nonsense basis trade stuff.

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Before that, Japan was the largest holder of U.S. Treasury debt. And so what could eventually happen is, you know, part of the reason that so much capital from Japan flowed into U.S. Treasuries was due to the fact that Japan was in the last decade.

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They had, you know, negative wage growth. They had negative GDP. Their economy was contracting. They had deflation. They were I mean, it was pretty bad and it didn't you know, it wasn't a short lived thing that we're talking, you know, 20 years of this sort of poor growth.

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And, you know, in response to that, the Bank of Japan, you know, the QE yield curve control, negative interest rate policy, 10-year JGB was only yielding, you know, zero, basically.

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I mean, there was no yield in Japan.

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You know, different points at different times had different rates, but you could basically think of the 10-year JGB as yielding zero.

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So in order to get yield, what what, you know, domestic institutions would do, you know, an insurer pension fund, something like that, is they would sell the yen by the dollar.

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This is part of why the yen has weakened so much.

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And then that once they had the dollars, they would buy U.S. Treasuries.

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And the difference, the interest rate differential, the difference between yield on a 10 year JGB and a 10 year U.S. Treasury at at the peak was four percent.

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meaning you got 4% more yield in U.S. Treasury, in a 10-year U.S. Treasury, than you did in a 10-year JGB.

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Not only that, but the dollar was strengthening versus the yen.

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So you're picking up extra carry there.

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And so that trade, this is kind of like what the yen carry trade generally was,

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borrowing yen at basically free, zero interest rates,

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sell the yen to buy the dollar to buy U.S. Treasuries to pick up yield.

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They would also go into U.S. stocks, MAG7, tech stocks were another beneficiary of this sort of yen carry trade.

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And so what could happen is with higher rates in Japan, some of that money could look at the higher rates in Japan and go, well, I got 0% five years ago, 10 years ago, but now there's yield finally.

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I'm going to bring some of that money back home.

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Well, the order of operations would be the exact opposite of what they putting on a young carry trade sort of thing would be, which is sell the U.S. Treasury downward pressure on the bond, upward pressure on the yield and then sell the dollar to buy the yen.

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So there is going to be an equilibrium point. Japan was kind of like a beach ball that was held underwater. The yen carry trade and low rates, QE, old curve control, NERP, all of that was a large marginal driver of liquidity.

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And so now that that's kind of that beach ball has been let above water, you know, it's going to drag rates higher all over the world in the US.

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I see is probably being, you know, the most affected in that sort of thing.

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Yeah, it's rather interesting, especially considering Trump's move a couple of weeks ago to prevent institutional investors from buying.

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single family real estate.

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And then on top of that, announcing a $200 billion mortgage bond buying spree

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in an attempt to bring down mortgage rates.

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And rather quickly, this Japanese Six Sigma event happens

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and sort of throws a wrench in that plan.

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And so the reason to bring that up, it just seems like things are chaotic.

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You mentioned beach ball underwater finally released.

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We'll find equilibrium somewhere.

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And that's the question I have in my mind is, does anybody who's, quote unquote, in control or behind behind the helm of economic policy, monetary policy, understand where that equilibrium is?

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I don't think so. I personally think the yen, you know, weakening here, obviously, on with populist prime minister.

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Look, it was one thing to have Abenomics where you have super dovish, you know, kind of easy money, easy fiscal policy, easy monetary policy.

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That's one thing when you're in the last decades. It's a whole other thing when inflation is 3%, wage growth is 3% or so. When your economy finally gets some heat in it, it's a totally different thing to have super dovish monetary and fiscal policy.

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So the long end of the old curve is indicating that, right, like that if you're going to continue this uber dovish monetary and fiscal policy with heat in the economy, finally, then we're going to demand a higher rate, especially out, you know, at the long at the long end.

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So, yeah, I think that, you know, eventually maybe Bank of Japan hikes right now.

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Very low odds that they hike here in a couple of days.

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I think the odds I think that's mispriced.

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I think there is a chance given what is going on with the yen kind of approaching that like 159 level on dollar yen.

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And what just happened at the long end of the yield curve.

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You know, this is Besant was pushing maybe a month ago, two months ago, was pushing the Bank of Japan.

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to hike rates. And the reason he was doing that was for exactly what we're talking about, which is,

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you know, he comes from a macro background with Soros and Druckenmiller and some of the greats.

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And he recognizes that, you know, the long end of the yield curve, if it gets too out of control

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over there, could cause major issues over here. And so he was pushing the Bank of Japan to hike

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interest rates. I think this is like a month or two ago where he was making kind of unusual comments

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for a treasury secretary to make about a foreign monetary decision, monetary policy decision. So

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I think that there's a chance that they hike rates here at this next meeting.

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Definitely this year, we're going to see Bank of Japan hikes. I think that'll help stabilize the

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yen. And I think that also it'll help stabilize long end rates, which are moving higher in response

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to kind of, you know, to lose monetary and fiscal policy.

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Well, if they, you know, start hiking rates,

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they'd be one of the only developed countries to be in a hiking cycle.

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You know, maybe that gets a bit into the yen.

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Hopefully, you would hope it would calm down the long end,

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which is worried about inflation and worried about kind of fiscal concerns.

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So I think that it would be a step in the right direction.

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But yeah, like dollar yen, the purchasing power parity,

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like fair fundamental value is 110 115 on dollar yen last i checked according to the imf so you

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know there's um there's there's room for it to appreciate for sure just on a fundamental basis

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um and yeah where that equilibrium point is no one really knows it certainly dragged rates higher

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not just in the u.s but all over the world i mean great britain france germany um you know their

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long-end rates look even worse than the US. We're kind of brushing up against that 490

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level on the third year, but yeah, Great Britain's even worse. So as Japanese rates move higher,

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eventually that's going to drag all rates higher and currencies, we could see significant volatility

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in the FX market, I think this year. And yeah, eventually there's an equilibrium point where it

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all calms down i haven't heard anyone that's able to uh give a level or you know say exactly where

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that's going to be but there but there is always an equilibrium point there's always a release valve

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um you know they kind of had the choice to like let the currency go or let the bond market go and

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it appears they've kind of let the bond market go um but you know they've also talked about

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currency intervention so uh yeah if we get if we get one of those or if we get a bank of japan hike

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I think you could see the yen start to appreciate quite rapidly, and it's not expected by the market, at least the bankage band hike at this next meeting.

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So just like we saw in summer 2024, all this kind of stuff can cause significant volatility for risk assets like we saw with the NASDAQ and S&P 500 last year or 2024.

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for. And how do you think the U.S. is positioned relatively in terms of, particularly in terms of

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the sort of tectonic economic policy changes we've made over the last year with tariffs,

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reshoring, the deficit falling significantly as the, in your mind, the economic policy decisions

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made over the last 12 months set the U.S. up to weather a yield storm, if you will, or are we

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exposed right now? Yeah. So I think one of the most under-discussed data points that's come in

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recently when it comes to that, when it comes to economic data, is the trade deficit. So the

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trade deficit shrank to the lowest level going all the way back to 2009. And the third lowest

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reading going back all the way to 2001, which was when China was admitted into the World Trade

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organization, the China shock. So the other way of saying that, you know, we've gone from, I think

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it was at its peak in April, $140 billion per month trade deficit. We've gone from $140 billion

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of worth of dollar exports to the rest of the world, exporting of the dollar to now 39 billion,

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I think it came in at. So yeah, the amount of dollars that the U S is now exporting to the rest

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of the world is dramatically reduced compared to what it was. The current account last I checked

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over the prior four quarters right now is running at about $1.3 trillion, but that's going to

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shrink as the trade deficit starts to get reflected in the current account data. So yeah,

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that is a pretty stunning reversal for what it implies when it comes to the dollar, when it comes

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to Triffin's dilemma, which Triffin's dilemma, you know, at the end of the day, you got to

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eventually you're going to have to pick between domestic needs and international obligation of

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being the reserve currency issuer. That's Triffin's dilemma. And it appears that they've

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picked domestic, you know, needs, reindustrialization and tariffs and, you know, MAGA.

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They've chosen that over international obligation of being the reserve currency issuer. And I think

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that all the trade tensions that we've seen that you mentioned with the EU and Greenland and all

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this kind of thing, I think it's, you know, indicating that the U.S. is, you know, stepping

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away from that sort of obligation that we had for decades to run ever larger trade deficits,

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to get the dollars out to the rest of the world. That's the mechanism by which you get dollars to

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other countries is by running a large trade deficit. I think that they've chosen, I think

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I think that there been a clear like regime shift when it comes to you know what role the U would like to play I think that we so thoroughly hollowed out our industrial base

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We've so thoroughly become reliant on our adversary, at worst our enemy, for critical components go into our, you know, our military, our defense systems, you know, our our weapon systems.

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We can't even we can't even make enough artillery and missiles and, you know, interceptors to to protect our own homeland.

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We rely on our enemy for about 85 percent of active pharmaceutical ingredients to keep our people alive.

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So, yeah, I think that, you know, things got a little bit too stretched.

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And I think that this administration, at least, is choosing the domestic needs over the international obligation of being the reserve currency issuer.

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And I think that, you know, the gold market is waking up to that. You see the gold price just going, you know, parabolic. But you don't really hear it being like discussed when it comes to the real implications, what that really means, not just for gold, not just for Bitcoin, but kind of broadly speaking.

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I mean, that is a once in a generation sort of reordering of the monetary order and global trading order.

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So, yeah, I think that's really significant to have President Trump say, you know, trade deficit is going to zero or trade balance.

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We're going to run balanced trade because what that means is we are not going to export you dollars anymore.

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And what's interesting is the dollar hasn't really rallied on that news.

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You would expect if dollar milkshake theory was correct, you would expect there to be the short squeeze in the dollar.

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But we didn't see that. You would also expect a bid into the dollar with the Greenland EU tariff geopolitical tension.

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You would expect a bid into U.S. treasuries and into the dollar. We saw the exact opposite.

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We saw selling of the dollar, selling of treasuries and selling of U.S. equities.

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So, yeah, that's that's a that's an important signpost. It didn't just pop up recently. This has been apparent going all the way back to like early 2020 or early last year.

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You could see indications of that where, you know, risk off sort of environments. You not see the dollar get bid or U.S. treasuries per se.

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You would see the Swiss franc, the euro and the yen were taking the place already before Liberation Day even came around and before CNBC woke up to this.

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It was already happening. So I think that there's a recognition that, you know, if you look at the FX holding FX reserves when it comes to gold versus U.S. treasuries, gold has already overtaken U.S. treasuries.

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So, you know, I think that there's some pretty important monumental shifts going on under the surface.

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It's not an overnight thing. You know, we're not going to wake up tomorrow and the dollar is just not used by anyone in global trade.

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And it's worthless toilet paper. It doesn't happen overnight. You know, these things take a long period of time to play out.

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But, yeah, I think that the U.S. is vulnerable, given the fact that we've let ourselves fall on the other side of Triffin's dilemma for so long.

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Right. Where we prioritized international needs, the needs of people outside of the U.S.

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We prioritize that. You know, we both parties chose globalism over nationalism and caring about domestic needs first and foremost.

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And the consequence of that is our net international investment position accumulated up to negative 95 percent of GDP, I think, at the peak.

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Right now, I think it's about negative 90% of GDP, which is still historic in the history of the world, that we haven't seen that negative of a net international investment position, which on a gross basis, foreigners own about $65 trillion of US dollar denominated assets.

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So we're incredibly vulnerable with that with that negative nip, 90 percent of GDP.

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We're very vulnerable to that, you know, shifting back to the U.S. and prioritizing, you know, domestic needs over international.

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You know, we're very vulnerable to upsetting the rest of the world who owns a huge amount of U.S. treasuries, U.S. equities, real estate.

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We could see another version of early April where you basically had the reserve currency in the very early stage of a balance of payments crisis for that first five days.

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If you saw a concerted dumping of dollar-denominated assets, it could put us in a very, very tough position, one that generally you only see in emerging markets.

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So, yeah, I would say, you know, it's going to be difficult to balance to to try to extricate ourselves from Triffin's dilemma without so thoroughly, you know, angering the rest of the world that we get ourselves into that sort of situation.

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Again, it's going to be really delicate to try to balance that looks like with Greenland.

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Maybe we dodged a bullet.

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Maybe there's a deal.

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Maybe everything's good.

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Who knows?

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Too early to tell.

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But, yeah, we're we're definitely vulnerable.

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I mean, arguably, you know, you look at Japan going back to Japan, their interest expense as a share of GDP is only like one point four, one point five percent.

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You look at U.S., it's like three point nine four percent.

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So, yeah, the fiscal situation going on in the U.S., yeah, we might be, you know, trade deficit might be coming in.

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But the fiscal it's improved for sure.

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You know, it's come from seven percent of GDP to six.

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So we have seen some improvement in the fiscal deficit, but interest expense right now is growing at about 15 to 16 percent year over year.

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And so they got to get that down. Otherwise, the deficit, there's going to be continued pressure there.

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Social Security, Medicare, Medicaid and defense still eats up a huge portion of the budget.

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So you can't really cut discretionary items and easily address the fiscal deficit.

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And the reason that's important is that we've relied on the rest of the world to buy our debt. And if you're balancing trade, right, and the trade deficit is shrinking to the degree that it is, but your fiscal deficit is shrinking, but much less quickly, then what that is essentially saying is that you're relying on other buyers of your debt, right?

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Instead of foreigners who were buying your debt, recycling trade deficits into your debt.

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Instead of that, now you're going to have to rely on your domestic institutions and individuals to absorb all that, you know, $1.7 trillion of new U.S. Treasury debt issued every year.

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Yeah, a lot to respond to there.

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But it's funny, as you mentioned, we got to balance this.

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It's like the art of politic and threading the needle.

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And I thought this week, it's funny because I think we both understand the sort of structural, the lack of structural integrity behind the system because of all the debt that's been built up over years.

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But you look at what happened in Davos this week and letting it come out first, like globalism has failed.

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We're expressing a lot of what you just described.

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We're beholden to supply chains outside of our borders when it comes to health care, defense.

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Like we need to fix that.

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Bessent comes out, shits on Gavin Newsom and basically says, yes, we're America first.

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Come work with us.

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Go, baby, go.

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Then Trump obviously gave his two hour speech, which really was just a flaming roast of globalism and its effects over the last five decades and signaling to that crowd.

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In Davos, America is going a different way.

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you can come with us or not. And as an American citizen, I think we've had this conversation a

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couple of times now on this show about the silent depression and because of the hollowing out

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of the manufacturing base and Triffin's dilemma's effect on United States citizens over five

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decades. And I looked at what happened this week and I was like, yes, we need to get this message

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out there, it is time to make this phase shift. But it's funny. It's like, depending on your

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perspective, do you want to continue the globalist agenda and keep going down that path? Or do you

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want to really pack it in and be America first and revitalize America's industrial base and

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domestic economy? It's like you're watching two different movies, the reactions to all these

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speeches at Davos this week were polar opposites, depending on what lens you were looking at this

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through. And I think that's the big question. Like how many countries are actually going to be

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inspired by the, um, the sort of posture that this administration is taking in the United States and

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say, Hey, this is actually a good idea. And I think that the narrative part of it and the sort

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of buy-in from a critical mass of foreign nations is going to be critical to land this plane.

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Yeah. I mean, Japan already has, they, uh, Takeichi was not at all expected to win. Uh,

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It was quite the shock.

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And so Japan's definitely going the kind of populist nationalist route.

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Keir Starmer, I think it was, out of the UK, made comments.

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This is, I don't know, a year ago, maybe, about globalization failing the median grit.

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And so you're starting to see a recognition that globalization really, look, it worked great for certain people.

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The problem was those certain people were the top 1%, right?

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It was a small share of the overall population.

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The vast majority of the people didn't really benefit.

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Look, you got to buy cheap Bluetooth speaker on Alibaba, right?

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But your good-paying middle-class job that didn't need a high school diploma is gone, you know?

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and your country and your your your state your city is completely hollowed out and called the

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belt because everything is a bucket of rust uh you know your your deaths of despair triple the

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rate that they were during the great depression you're you know addicted to fentanyl uh so yeah

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i i think that uh i think that it's pretty clear that the the maga right uh which is not conservative

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It's not old school Republican. It is not real. You could call it right wing, I guess, but it's definitely not like Republican. It's the opposite of the Republicans back in the 90s, early 2000s, who were the prime advocate of globalization because it was going to boost corporate profits and make them all rich and therefore boost corporate profits.

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You boost stock market valuations and who owns all the equities, the top 10% own 92% of equities.

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So, yeah, like it's kind of an inversion that we've seen.

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I kind of suspect that we might see here in the U.S. a return from our left back to what they used to be during the 90s and 2000s.

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Speaking out against globalization, we could even see kind of momentum start.

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or continue to build in kind of much more of the nationalist populist sort of direction.

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Because, I mean, it was, you know, the left back in the 90s that protested, you know,

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the World Trade Organization in Seattle, Battle of Seattle, the IMF, I believe it was in Miami,

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right? Like all those huge protests, they were all like global anti-globalization.

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And they were all coming from the left wing at the time and the Democrats at the time.

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I mean, there's like endless comments from Schumer, Pelosi.

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I remember Dennis Kucinich was like, you know, one of them that I remember, you know, all the Bernie, Bernie Sanders.

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They were all talking about globalization.

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It's going to suppress blue collar wages.

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It's going to widen wealth inequality.

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It's going to hollow out our industrial base, all things that happen.

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So, you know, like my question has always been like, why aren't they taking a victory lap?

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You know, like you, it's such a layout, a layout to, to, to take a victory lap on that because they were right.

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They were a hundred percent right in what ended up happening.

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And I would encourage people to go look up, you know, some of those comments, which are, you know, public.

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You would think that they might return to that.

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And if we get a return to that, then I think it's a durable trend.

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I think the damage so-called is already done. I think the trend is all, you know, I think the entropy has been built and the critical mass has been achieved. And I think the pendulum is going to swing. I've been saying, I think, you know, peak globalization, we've already reached it, you know, and I still I still stand by that.

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So I think that whether it's, you know, the right wing continuing with this kind of anti-globalist push or whether the left starts to kind of, you know, reinvigorate what they used to believe.

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I'm not sure if anything changed or they just, you know, you know, have to criticize the other party kind of thing.

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But yeah, I could see it even gaining momentum here in the US if we see in 2028 the pendulum swing to the other side.

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We might even see a more concerted effort to reverse some of the kind of ill effects of globalization.

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And I think that that's a pretty critical signpost when it comes to the impact that that's going to have on kind of the monetary order, how trade is settled, neutral reserve assets, right?

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How Bitcoin kind of fits into all of it.

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So, yeah, I think the critical mass has already been achieved, but I think we can even gain momentum if you see a resurgence of kind of what the left used to believe not too long ago.

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we'll get to bitcoin gold in the monetary order in a bit but i completely agree and i'm that would

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actually be i would welcome that with open arms if we can get some obscene sort of uh bringing back

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uh bringing both parties back from the polar uh ends of the spectrum towards the middle to really

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rally around american dominance and domestic economic policy um but i mean bringing back to

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the deficit and one thing i would worry about if even if the democrats were to get more moderate and

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begin becoming more nationalist to to an extent is the the spending the federal programs uh

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particularly medicaid medicare and i think that's a topic i want to cover with you is um obviously

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we have this problem we have all the spending we have this interest expense on the debt going up

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We have to manage that.

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But as we've come to know over the last year and more specifically over the last two months,

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the federal spending is wrought with fraud.

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Potentially 50% or more of federal spending is being laid bare that a lot of it is overt fraud.

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And so that's my question.

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Is it possible?

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And I talked about this with DarkSide earlier this week.

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Is it possible to have an actual doge come in and cut spending without collapsing the system?

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Like, is this fraud just sort of heroin that's being injected into the system because it needs it to sustain itself?

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Yeah, I mean, I agree that spending $5 billion on a Elmo program, Sesame Street program for Iraqi children,

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is kind of like not the best use of taxpayer dollars.

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Totally agree with that. I like, you know, cutting waste, fraud and abuse.

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But I always point out that, like, you know, just because just because one person might ascribe that descriptor, that adjective to it on an economic, you know, pure, purely removing politics and just purely looking at it from an economic standpoint, you know, one man's fraud is another man's income.

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So someone on the other end of that fraud is getting over much money if it's half of the deficit or half of spending.

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That's a lot of money. And those people have mortgages. They have car loans.

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They have, you know, they go out to the movies, they buy groceries, all that kind of stuff.

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So, yeah, you start cutting too much and you get, you know, a contraction of GDP.

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If we were to balance a budget overnight, like with a magic wand and just wave that magic wand and we have a perfectly balanced fiscal budget, it would result in a GDP contraction worse than 2020, worse than 2008.

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So, yeah, like it would be great to cut a lot of spending. The problem is we have become so kind of strung out on that drug that, yeah, it's difficult to do quickly without collapsing the system.

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And, you know, once you start talking about a GDP contraction, well, the deficit goes up during a recession, during an economic contraction. So now, you know, we go from a 6% deficit to a 14 or 15% deficit. And, you know, what is how does a bond market reply to in the face of that sort of, you know, increase in supply in bond supply?

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yields might go up. And this went from being kind of a kooky theory to now, like even Jeffrey

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Gunlock and some pretty well-respected people are talking about the fact that yields might go up

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in the next recession. And then you're talking about a debt doom loop. So yeah, I think it's

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difficult to extricate ourselves from the two kind of dueling conundrums that we've gotten

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ourselves into both on the kind of current account side with the trade deficit, but also on the

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fiscal side, both of them are kind of difficult to fix overnight and difficult to fix without

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tolerating some economic pain. So yeah, I could, you know, if there was a way to balance the budget,

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it would be pretty ugly We would have to tolerate a significant amount of pain for you know in the short term But like I fall into the camp that OK so so what Right Like recession is part of the normal business cycle We basically like outlawed recessions

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Well, you know, just like a fire is necessary for a forest to regrow, you know, in a healthy way, you need a rinse of leverage and malinvestment needs to be flushed out. And we need to have, you know, the moral hazard that has been imposed over the past, I don't know, 20 years is pretty incredible.

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And I think it's led to some second and third order effects in our society that are pretty, pretty negative. So, yeah, I think it'd be good. You know, the problem is politically, how do you get elected on? Hey, I'm going to bring pain. You know, people kind of always bring this up. I make the point that the twin deficit, the only thing we can accumulate as a twin deficit nation is debt.

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Well, that's not sustainable, especially when you rely on creditors overseas to finance that.

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That's not sustainable.

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The only thing you can accumulate is debt is just blatantly unsustainable.

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But the problem becomes, you know, like when you tell someone the U.S. over consumes as a as a, you know, by nature of running a twin deficit, when you tell them, well, the U.S. over consumes, we by definition in the aggregate over consume.

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They look at you like, well, you're you're saying, you know, communist, you're saying something no different than Mao Zedong, you know, and it's it's just it's just economic reality.

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You know, it's just math like we have to address the fact that the U.S. over consumes the way that we are allowed to over consume is through debt, the accumulation of debt, whether, you know, in the aggregate.

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That is the only way the U.S. is able to run a sustained twin deficit of the size that we've been able to.

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Now, the reserve currency status kind of, you know, helped bolster that ability.

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But as that fades, so will our ability to over consume.

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Yeah, and a lot of that overconsumption is unearned, overconsumption with the fraud as well.

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Yeah, it is this conundrum we find ourselves in trying to grapple with this.

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And obviously, Bessent was in there, like, go baby, go, grow, baby, grow.

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I think that's his mindset is like, we just need to get productivity up to a point.

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And I don't know if this is his expressed opinion, but let's get people, let's reindustrialize,

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let's get the domestic economy back up and running.

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Let's get a lot of growth in the real economy, not the fraudulent sort of fiscal dominated side of the economy.

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And then maybe at some point in the future when things are stable and we're on a good growth trajectory, we begin to peel off the fraud, waste and abuse by by cutting the budget in certain areas.

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Yeah. And we we have really high productivity.

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I mean, Q2 came in really, really hot at three point three.

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The expectation for Q2 productivity was 2.3, 2.4. So Q2 came in quite hot. No one really talked about it. Then Q3 came in even hotter. I mean, we're looking at like 4.9% productivity. Now, the problem is who benefits from that.

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we know that real wages diverge from real product from productivity, you know, back in the early 1970s with Nixon shock.

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So, you know, high productivity is great from if you're the government and you're talking about, you know, fiscal health and sustainability, productivity gains are great for them.

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But the question becomes, you know, who actually benefits from all these productivity gains?

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And I think that that could set up, you know, quite a significant societal and political issue over the next decade as AI and robot, you know, not just AI, but eventually robotics.

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As all these kind of productivity enhancements come, we know from history, we know from the data that those productivity benefits don't flow to the media in America.

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And they flow the top 1%.

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00:41:44,692 --> 00:41:51,452
They flow to corporates and equity holders of those corporates who are all the top 1%, top 10%.

355
00:41:51,452 --> 00:41:56,252
So yeah, like you could get into a situation and a lot of people are kind of talking about this,

356
00:41:56,252 --> 00:42:04,552
the meme of like, you have four years to accumulate as much capital before you're in the permanent underclass sort of kind of meme.

357
00:42:04,892 --> 00:42:08,792
Well, there's a real chance that there's some truth to that.

358
00:42:09,872 --> 00:42:11,792
And does it lead to UBI?

359
00:42:12,092 --> 00:42:12,912
What does it look like?

360
00:42:12,912 --> 00:42:25,032
I'm not really sure, but I do think that it'll be one of the major turning points when it comes to political and societal kind of turning points will be this productivity boom.

361
00:42:25,612 --> 00:42:33,632
But then the people getting even more upset as productivity is going up, you're going to have people getting more and more and more unhappy.

362
00:42:34,252 --> 00:42:38,472
And eventually that'll have to come to a head and resolve somehow.

363
00:42:38,472 --> 00:42:50,492
I'm not sure how it will, but that that's, I think, a theme. These productivity gains are great for the government and they're great for kind of debt sustainability and fiscal solvency and all that kind of thing.

364
00:42:50,492 --> 00:42:57,372
but they could be setting up an even more dangerous situation when it comes to thinking

365
00:42:57,372 --> 00:43:03,092
of it politically and societally, because we already know the median Americans already crushed.

366
00:43:03,792 --> 00:43:08,752
And, you know, the middle class, if you're under 30 is gone. There is no middle class if you're

367
00:43:08,752 --> 00:43:14,492
under 30. So and don't own a home already. So I think that that's probably a theme. Maybe

368
00:43:14,492 --> 00:43:20,212
productivity continues to come in hot. Maybe they extricate themselves from the debt situation

369
00:43:20,212 --> 00:43:24,132
through those productivity gains, which are legitimately coming in quite hot.

370
00:43:24,912 --> 00:43:30,312
But then you might be setting up arguably an even worse situation, which is that people

371
00:43:30,312 --> 00:43:31,992
are going to get to a breaking point.

372
00:43:32,272 --> 00:43:34,212
And, you know, I don't want to see that.

373
00:43:35,012 --> 00:43:35,812
Near to a while.

374
00:43:35,892 --> 00:43:40,272
And I've been saying this last few weeks on shows that I've been doing and some talking

375
00:43:40,272 --> 00:43:43,672
head videos, but I think the productivity gains need to be paired with the heart currency.

376
00:43:43,672 --> 00:44:08,412
Like if you're going to have insane productivity gains that accrue predominantly to the top 10, top 1%, whatever it may be, I mean, you have to throw the lower classes a bone by at least using hard money that they can work a menial job, make a modest wage, but have the fruits of their labor saved in a currency that could increase some purchasing power over time.

377
00:44:08,412 --> 00:44:27,752
Yeah, I mean, you know, home prices in gold terms are basically at an all time low. So the whole housing affordability story, I think, is a major one. And once you once you look, once you realize that the issue is not that homes are overvalued, if anything, homes are are cheap in real terms.

378
00:44:27,752 --> 00:44:34,612
the issue is the purchasing power of the dollar and the fact that the denominator that we've used

379
00:44:34,612 --> 00:44:39,412
our whole lives is failing. As I've been saying for a couple of years now, the denominator is

380
00:44:39,412 --> 00:44:43,952
failing. Yeah, for decades, we didn't have to worry about the denominator like you would in

381
00:44:43,952 --> 00:44:50,272
Argentina, right? You go to Argentina, Lebanon, Turkey, they worry about the denominator. They

382
00:44:50,272 --> 00:44:56,512
spend half their day trying to set up a carry trade and figure out how to address the fact

383
00:44:56,512 --> 00:45:00,932
that their denominator is melting at a rapid rate.

384
00:45:01,452 --> 00:45:04,132
But we haven't needed to do that here in the US.

385
00:45:04,292 --> 00:45:05,892
And I think that the past five years,

386
00:45:06,412 --> 00:45:08,852
people are waking up to that reality.

387
00:45:09,652 --> 00:45:12,752
And this is kind of the gold and silver story.

388
00:45:12,852 --> 00:45:15,232
Eventually, you would hope that some of that flows

389
00:45:15,232 --> 00:45:17,332
into Bitcoin eventually,

390
00:45:17,712 --> 00:45:19,852
but we've underperformed gold by a lot.

391
00:45:20,812 --> 00:45:22,552
Like for example, like summer 2021,

392
00:45:22,892 --> 00:45:25,432
this is kind of the way I think of it,

393
00:45:25,432 --> 00:45:31,672
the framework I use that Luke Romans also mentioned in the summer 2021, you have Bitcoin at like 35k

394
00:45:31,672 --> 00:45:40,392
and in ounces of gold, it was 18 ounces of gold per Bitcoin. Well, now we're at 90k in dollar

395
00:45:40,392 --> 00:45:47,992
terms and we're at 18 ounces of gold per Bitcoin. So like, I really want to see that start to pick

396
00:45:47,992 --> 00:45:54,592
up. You know, the fact that we've held even with gold is not about, you know, it's, it's not an

397
00:45:54,592 --> 00:45:59,472
indictment, right? You're not, if we were holding even in dollar terms, that would be an indictment

398
00:45:59,472 --> 00:46:05,992
of Bitcoin, uh, holding even with, with gold over those four years, five years, not necessarily

399
00:46:05,992 --> 00:46:14,332
that horrible of a thing. Uh, but yeah, I, I, my bet is that the young people, especially

400
00:46:14,332 --> 00:46:20,252
who are much more kind of digitally native here in the U S uh, you know, the, the young people I

401
00:46:20,252 --> 00:46:25,092
know, they all know what Bitcoin is. They, you know, they know about gold, but the vast majority

402
00:46:25,092 --> 00:46:31,232
of them don't hold any gold. You know, they're not going out to buy gold bullion. So I think that,

403
00:46:31,332 --> 00:46:36,052
you know, I think I'm still very bullish Bitcoin. But, you know, I think that if we're going to,

404
00:46:36,052 --> 00:46:42,532
if we as Bitcoiners kind of our whole premise is the denominators breaking the denominator being

405
00:46:42,532 --> 00:46:48,212
the dollar, you know, and there's issues there with denominating your life in fiat. Well, then

406
00:46:48,212 --> 00:46:53,632
we need to stop talking about the Bitcoin price in dollar terms. We need to start talking about

407
00:46:53,632 --> 00:47:00,972
it in gold terms. And I think that that's going to be important. But whether or not we go to a

408
00:47:00,972 --> 00:47:07,312
hard money standard, I think it's pretty unlikely. But I do think that increasingly over the next

409
00:47:07,312 --> 00:47:13,172
decade, you will see average Americans kind of wake up to these issues that we've been talking,

410
00:47:13,172 --> 00:47:17,192
you know, some Bitcoin has been talking about for 15 years or whatever.

411
00:47:17,512 --> 00:47:20,132
I do think that there's kind of a growing appetite.

412
00:47:20,132 --> 00:47:23,092
The problem is, you know, most, you know,

413
00:47:23,132 --> 00:47:27,792
the median Americans got less than $1,000 in savings, right?

414
00:47:27,812 --> 00:47:31,512
Like the people I know are working three jobs, living paycheck to paycheck.

415
00:47:31,652 --> 00:47:34,012
They don't have $1,000 a month to put into Bitcoin.

416
00:47:34,512 --> 00:47:38,512
So that's kind of another issue that we have is, you know,

417
00:47:38,512 --> 00:47:43,192
Maybe people would like to save in hard money, gold, Bitcoin, whatever.

418
00:47:43,792 --> 00:47:48,032
But if you're working three jobs and living paycheck to paycheck,

419
00:47:48,392 --> 00:47:51,172
how are you going to contribute anything meaningful?

420
00:47:52,032 --> 00:47:54,252
I think that's another issue.

421
00:47:54,632 --> 00:47:55,772
I'm very bullish, Bitcoin.

422
00:47:55,992 --> 00:48:01,152
I've been buying here in the 80s when everyone else is giga bearish.

423
00:48:01,872 --> 00:48:03,312
So here's a Bitcoin and gold chart.

424
00:48:03,312 --> 00:48:10,312
here's the hopium for people looking at a looking at a rebound here from uh from the lows and this

425
00:48:10,312 --> 00:48:18,572
chart actually doesn't look bad uh if you ask me yeah i um you know the the part of me that is way

426
00:48:18,572 --> 00:48:24,932
more allocated to bitcoin rather than gold i do have gold i kind of wish it was more but uh you

427
00:48:24,932 --> 00:48:29,112
know that part of me is like looking at the bitcoin gold performance over the past couple years and

428
00:48:29,112 --> 00:48:30,852
I'm like, you know, it's not great.

429
00:48:30,852 --> 00:48:48,172
But if I remove my kind of, you know, very, very long, very high conviction bed of Bitcoin, my personal position, if I remove that from the equation and look at it just as a trader, I look at that as a reversal for for a contrarian trade.

430
00:48:48,172 --> 00:48:48,472
Right.

431
00:48:49,312 --> 00:48:57,072
You could put a pair trade, you know, short, short, gold, long Bitcoin for a reversal there because, yeah, it has been stretched.

432
00:48:57,072 --> 00:49:02,092
I mean, if you look over the past 12 months, it's just plummeted relative to gold.

433
00:49:02,612 --> 00:49:07,012
That's painful for Bitcoin holders like me and a lot of folks.

434
00:49:07,272 --> 00:49:12,632
But just remember that that is not usually how markets operate, right?

435
00:49:13,092 --> 00:49:15,032
Things don't go up or down forever.

436
00:49:16,312 --> 00:49:18,872
And contrarian trading is a thing for a reason.

437
00:49:19,392 --> 00:49:21,112
So reversals happen.

438
00:49:21,212 --> 00:49:24,292
They happen when you least expect them most often.

439
00:49:24,292 --> 00:49:27,552
And, you know, who knows what kind of catalyst we can get?

440
00:49:27,632 --> 00:49:33,532
I mean, I think that growth is looking pretty good, like in the aggregate for for the U.S. economy for 2026.

441
00:49:33,732 --> 00:49:45,032
I think you have a fiscal impulse coming from the one big, beautiful bill and probably future, you know, additional fiscal impulse from populist measures, you know, stimmy checks or something due to the midterms.

442
00:49:45,652 --> 00:49:49,312
I think that I think that global growth is, you know, picking up.

443
00:49:49,312 --> 00:49:56,752
And I think that, you know, on the fiscal side, we're not we're not seeing a dramatic fiscal contraction by any means.

444
00:49:57,152 --> 00:49:59,952
You have productivity, you know, quite decent.

445
00:50:00,412 --> 00:50:07,492
Tech has been underperforming going back to late October and Bitcoin trades off, you know, the Nasdaq, unfortunately.

446
00:50:08,392 --> 00:50:16,032
But, yeah, all those trends, I think, you know, especially in a run at hot environment where they're trying to get negative real rates.

447
00:50:16,032 --> 00:50:22,912
I think that I've been buying here in the 80s and kind of low 90s.

448
00:50:22,972 --> 00:50:23,912
I've been buying here.

449
00:50:24,732 --> 00:50:32,672
I think that over the next year, I think that we could now whether or not we outperform gold, that might be a different equation.

450
00:50:32,832 --> 00:50:34,952
But gold's had a significant run already.

451
00:50:35,732 --> 00:50:39,432
Gold generally front runs, monetary easing.

452
00:50:39,432 --> 00:50:43,492
We have the Fed printing $50 billion, $60 billion a month.

453
00:50:43,492 --> 00:50:49,652
that's going to probably go up over the year. And negative real rates on the horizon,

454
00:50:50,612 --> 00:50:58,312
you have Trump and Lutnik talking about the Fed funds being hundreds of basis points too high.

455
00:50:58,972 --> 00:51:02,712
So we're going to get negative real rates. That's going to be incredibly bullish for

456
00:51:02,712 --> 00:51:10,952
assets in general, but probably assets, scarce kind of debasement trade sort of assets like

457
00:51:10,952 --> 00:51:19,172
gold and Bitcoin. So yeah, I'm bullish. It's legitimately a bit of pain that I know a lot of

458
00:51:19,172 --> 00:51:25,492
people in Bitcoin land are looking at gold, looking at silver, and feeling quite a bit of

459
00:51:25,492 --> 00:51:32,252
FOMO or pain from that. But yeah, I'm bullish Bitcoin. Is there a chance that we get some sort

460
00:51:32,252 --> 00:51:38,412
of black swan out of nowhere? Because by definition, you can't foresee one happening.

461
00:51:38,412 --> 00:51:44,492
a hundred percent. There's always that risk. There's always the risk of a economic contraction,

462
00:51:44,692 --> 00:51:51,912
some sort of financial crisis causes, you know, kind of a VAR shock sort of phenomenon. But

463
00:51:51,912 --> 00:51:57,452
generally, like I'm, I'm, I'm pretty bullish for the next, definitely for the next five to 10 years,

464
00:51:57,452 --> 00:52:03,352
I think it all comes down to time horizon, right? A lot of people have a short time horizon,

465
00:52:03,512 --> 00:52:08,032
a high time preference. And I think that, you know, the more that you can zoom out and look

466
00:52:08,032 --> 00:52:12,432
at the longer trends, look at the mega trend. I think that the better you'll do.

467
00:52:13,512 --> 00:52:21,072
Completely agree. And speaking of mega trends and taking a sort of step back from the individual's

468
00:52:21,732 --> 00:52:26,612
balance sheet, getting into hard assets to preserve purchasing power in terms of the

469
00:52:26,612 --> 00:52:32,272
monetary order and the reshuffling, which we've discussed, obviously, percent coming in before

470
00:52:32,272 --> 00:52:37,692
Trump was even elected, was talking about it. I think the national security strategy that was

471
00:52:37,692 --> 00:52:44,412
released and all the speeches that were given this week, Davos, particularly point to the fact

472
00:52:44,412 --> 00:52:49,152
that like, hey, we're shifting things pretty tectonically in terms of geopolitical and by

473
00:52:49,152 --> 00:52:55,052
extension, the monetary order. How do you think that looks on the other side of whatever's happening

474
00:52:55,052 --> 00:53:01,732
right now? I think it's very bullish for gold and eventually very bullish for Bitcoin. I think that,

475
00:53:01,732 --> 00:53:16,632
You know, unfortunately, the market, you know, looks at Bitcoin generally, you know, overall in the aggregate looks at Bitcoin as a, you know, 3x NASDAQ, you know, tech tech stock beta.

476
00:53:17,552 --> 00:53:27,332
But, you know, I think that over the next five years, 10 years, you talk about like gold becoming the major neutral reserve asset.

477
00:53:27,332 --> 00:53:32,172
But I think that like as a net settlement layer, gold can work.

478
00:53:32,712 --> 00:53:35,252
But there's, you know, downside to it.

479
00:53:35,312 --> 00:53:37,572
You have to worry about storage.

480
00:53:37,632 --> 00:53:39,012
You have to worry about transport.

481
00:53:39,872 --> 00:53:41,272
You know, gold is not perfect.

482
00:53:41,272 --> 00:53:48,312
Gold has been centuries old money, you know, and it fulfills a particular purpose.

483
00:53:48,452 --> 00:53:49,912
Well, I like gold.

484
00:53:49,992 --> 00:53:50,472
I own it.

485
00:53:50,552 --> 00:53:51,292
I'm bullish gold.

486
00:53:51,712 --> 00:53:53,192
I would add on any dips.

487
00:53:53,192 --> 00:54:08,972
But yeah, I think that Bitcoin, the properties that you need, Bitcoin fulfills those properties better than gold. It's more verifiable. It's more transportable. It's more divisible. I would argue it's more secure.

488
00:54:08,972 --> 00:54:25,052
So, yeah, I think that, of course, without the whole quantum discussion, it's a whole other thing. But generally, it's very secure. It uses what? Like 1% of the global electricity, the network, right?

489
00:54:25,052 --> 00:54:34,112
So, yeah, I think that I think that Bitcoin has a place and I think that the market will wake up to the fact that it's not a 3x NASDAQ.

490
00:54:34,572 --> 00:54:39,312
You know, it's a it's a scarce asset that that anyone can own.

491
00:54:39,372 --> 00:54:41,452
That's uncensorable. That's decentralized.

492
00:54:41,932 --> 00:54:44,052
You know, so long as you're talking real Bitcoin.

493
00:54:45,052 --> 00:54:50,412
And I think that, yeah, I think that, you know, it might take a year, might take two, might take three.

494
00:54:50,412 --> 00:55:03,372
But I think that in a shifting kind of global monetary regime where you go from the U.S. Treasury being the primary reserve asset to gold, I think that Bitcoin eventually will start to take a place.

495
00:55:03,612 --> 00:55:12,132
If I had to bet, I would venture to bet that some major nation states have already started mining, if I had to bet.

496
00:55:12,412 --> 00:55:13,872
So I think it's already happening.

497
00:55:13,872 --> 00:55:15,252
I don't think you have to bet.

498
00:55:15,352 --> 00:55:16,572
I mean, Russia has talked about it.

499
00:55:16,592 --> 00:55:18,192
Venezuela historically has been doing it.

500
00:55:18,192 --> 00:55:20,632
Bhutan, not a major nation state, but they're doing it.

501
00:55:20,872 --> 00:55:21,832
Ethiopia is in the game.

502
00:55:22,052 --> 00:55:23,312
Argentina is talking about it.

503
00:55:23,352 --> 00:55:23,792
I think it's there.

504
00:55:24,632 --> 00:55:24,772
Yeah.

505
00:55:25,172 --> 00:55:25,592
Yeah.

506
00:55:25,612 --> 00:55:39,732
And I think that adoption will, again, it might take some time, though, because when you talk about the shift from U.S. Treasury to gold, you're talking a once in a generation, 70-year sort of trend reversing.

507
00:55:39,732 --> 00:55:40,912
It's not going to happen overnight.

508
00:55:40,912 --> 00:55:52,692
And for Bitcoin, smaller asset class, newer asset class for Bitcoin to start to benefit from that will take time on top of that, if that makes sense.

509
00:55:52,692 --> 00:56:07,992
So I think that as long as people are patient, I don't see any reason, you know, so long as, you know, certain issues can can be addressed and the market is able to feel reassured with particular risks.

510
00:56:08,632 --> 00:56:14,372
You know, the one that everyone's talking about being quantum, but, you know, other any other risk, right?

511
00:56:14,372 --> 00:56:28,418
the security budget and all that kind of stuff As long as like the general market starts to become assured that that those risks are yeah this is my thought So like yeah you gold

512
00:56:28,578 --> 00:56:30,378
gold will not last forever as,

513
00:56:30,678 --> 00:56:35,218
as this primary reserve asset due to exactly that.

514
00:56:36,078 --> 00:56:37,398
Well, and that's like, I'm just,

515
00:56:37,498 --> 00:56:40,218
I wanted to pull this up because we're talking about obviously quantum is the

516
00:56:40,218 --> 00:56:44,958
big FUD of FUD de jour, if you will, about Bitcoin.

517
00:56:44,958 --> 00:56:49,318
And I thought Gruble's tweet here was, I mean, just to put things in the context.

518
00:56:49,618 --> 00:56:51,298
And I think this is objectively true.

519
00:56:51,418 --> 00:56:57,838
And there's more progress instantiating gold molecules out of thin air than there is for quantum computers being able to attack Bitcoin.

520
00:56:58,618 --> 00:57:04,998
Well, the higher that gold goes, the more of an incentive there is to find out how to do that.

521
00:57:05,478 --> 00:57:05,678
Yeah.

522
00:57:05,778 --> 00:57:06,458
How to print gold.

523
00:57:07,198 --> 00:57:07,378
Yeah.

524
00:57:09,738 --> 00:57:10,138
Yeah.

525
00:57:10,198 --> 00:57:10,998
And I completely agree.

526
00:57:10,998 --> 00:57:13,278
adding to some of your points there,

527
00:57:13,318 --> 00:57:14,678
I've written about this and talked about it

528
00:57:14,678 --> 00:57:15,678
in the last couple of weeks too.

529
00:57:16,998 --> 00:57:20,858
The fact that people are butthurt about gold and silver

530
00:57:20,858 --> 00:57:24,538
having banning euros and Bitcoin being relatively flat to down,

531
00:57:25,118 --> 00:57:27,058
it's just mind-boggling because we had an 8x

532
00:57:27,058 --> 00:57:30,758
between November 2022 and October of last year.

533
00:57:30,758 --> 00:57:36,118
And between 2009 and up until 2024,

534
00:57:37,158 --> 00:57:38,878
Bitcoin was having all those gains.

535
00:57:38,878 --> 00:57:43,998
gold and silver bugs were sitting on the sidelines and we were um making fun of them so like the fact

536
00:57:43,998 --> 00:57:49,278
that they have one banner year performance which is well deserved the thesis i think is pretty sound

537
00:57:49,278 --> 00:57:53,678
and they're being rewarded for that it's like you can't get butt hurt like you said it's a long-term

538
00:57:53,678 --> 00:58:00,398
game and it's objective like there's a familiarity with gold as a reserve asset going back millennia

539
00:58:00,958 --> 00:58:05,918
and there's a structure a structural aspect to it too where bitcoin's only had a 1.85

540
00:58:05,918 --> 00:58:13,838
trillion market cap like if you wanted to rotate um funds and rotate flows out of assets that you

541
00:58:13,838 --> 00:58:19,998
deem risky particularly government bonds and into a hard asset like structurally like gold and silver

542
00:58:19,998 --> 00:58:25,518
just easier to do that without a ton of slippage yeah yeah and this is where the upside would come

543
00:58:25,518 --> 00:58:32,478
with bitcoin and part of why you know i'm young i have you know a lot to catch up um in terms of

544
00:58:32,478 --> 00:58:36,198
where I want to be in terms of kind of like wealth or net worth or, you know, whatever.

545
00:58:36,558 --> 00:58:41,538
So, you know, I'm willing to take more risk, but that's where the upside comes from is

546
00:58:41,538 --> 00:58:47,418
the fact that it is a much newer, younger, smaller asset class.

547
00:58:48,418 --> 00:58:52,738
And, you know, just in the past three years, Bitcoin's up 320%.

548
00:58:53,278 --> 00:58:59,118
And if you go back just to when the ETFs were approved, we're up, you know, 280, 290%

549
00:58:59,118 --> 00:58:59,558
basically.

550
00:58:59,558 --> 00:59:08,038
uh so yeah like i i i think that perspective is important um because uh yeah like it's easy to get

551
00:59:08,038 --> 00:59:16,458
stuck in the drawdown but uh and and and and focus on that um but 100 120 percent since etf

552
00:59:16,458 --> 00:59:23,578
um yeah it's easy to get you know upset we were at all-time highs you know just uh what a quarter

553
00:59:23,578 --> 00:59:30,018
ago basically um and it's easy to feel the pain of a 30 drawdown i think that if we had this 30

554
00:59:30,018 --> 00:59:36,198
drawdown but gold and silver we're going we're going nowhere i think the sentiment on like twitter

555
00:59:36,198 --> 00:59:42,178
would be much different i think that it's mainly the fact that you pair the two of them where you

556
00:59:42,178 --> 00:59:50,518
have a 30 drawdown from an all-time high that we literally like just hit um you pair that with the

557
00:59:50,518 --> 00:59:55,778
fact that gold and silver are going parabolic. I think that two of them combined is what make,

558
00:59:55,898 --> 01:00:01,538
is making sentiment so bad. But, um, but yeah, I like when sentiment's really bad that that's

559
01:00:01,538 --> 01:00:06,078
the best time to buy something. Uh, generally you're going to get a pretty, pretty, you know,

560
01:00:06,078 --> 01:00:11,918
gnarly reversal. So completely agree. And to your point about younger generations getting

561
01:00:11,918 --> 01:00:19,458
Bitcoin and simply being able to access it easier. I actually, uh, I've been giving a

562
01:00:19,458 --> 01:00:24,878
Bitcoin 101 presentation at a local high school. I mean, I moved back to Philadelphia recently,

563
01:00:24,878 --> 01:00:29,178
so it's local to me now, but I was doing it remotely for the last two years. And I gave

564
01:00:29,178 --> 01:00:35,738
the presentation yesterday and the amount of good questions I got after and the amount of

565
01:00:35,738 --> 01:00:40,818
sort of enthusiasm in the room was palpable. A number of kids, one kid raised his hand

566
01:00:40,818 --> 01:00:46,658
and asked, can I get a, I have a job with a direct deposit. Am I able to direct deposit that

567
01:00:46,658 --> 01:00:50,018
into bitcoin like if so what apps should i use i was like yeah you can do that with strike

568
01:00:50,018 --> 01:00:55,978
cash app fold whatever and so like i thought to your point that's actually one of the other

569
01:00:55,978 --> 01:01:02,218
questions i got from um one of the kids was uh why uh why don't you think bitcoin adoption's been

570
01:01:02,218 --> 01:01:07,078
uh been as strong as as many would like it to be and i said because you guys don't have enough

571
01:01:07,078 --> 01:01:11,578
money yet because i think yeah once once you're in the job market you're making money if you get

572
01:01:11,578 --> 01:01:17,478
a job hopefully you do you're a smart gentleman here uh i was an all-boys school um you'll you'll

573
01:01:17,478 --> 01:01:22,478
get bitcoin it's gonna be much easier for you to spin up a bitcoin wallet and receive and send

574
01:01:22,478 --> 01:01:28,378
bitcoin as opposed to a bank account and i think you're more tech savvy and this is something that's

575
01:01:28,378 --> 01:01:32,318
native to the internet which is native to your to your life you've never lived without the internet

576
01:01:32,318 --> 01:01:39,738
and i think just naturally your generation will will um will connect with a native digital currency

577
01:01:39,738 --> 01:01:47,518
yeah and and the sentiment will shift on a dime like if we you know just just envision a rally

578
01:01:47,518 --> 01:01:52,958
back to like i don't know 105 uh on bitcoin like the sentiment will come back you know people will

579
01:01:52,958 --> 01:02:00,178
be super bullish oh now we're going to 300k like you know these things um you know are are uh

580
01:02:00,178 --> 01:02:07,898
they shift on a dime and and it doesn't take much to get people bullish again um my my worry is like

581
01:02:07,898 --> 01:02:12,198
when it comes to the younger generations and, you know, people my age, it's like,

582
01:02:12,538 --> 01:02:19,538
you know, if we're falling further and further behind, how much of a decision

583
01:02:19,538 --> 01:02:24,538
dynamic is being made where, you know, people are thinking to themselves, well,

584
01:02:25,018 --> 01:02:30,678
you know, Bitcoin could double right from here. Maybe it goes to 160. Maybe it does a 3x.

585
01:02:30,678 --> 01:02:38,658
but you know I need a 20x because the further the longer that it goes longer time goes on

586
01:02:38,658 --> 01:02:43,638
the more ground I have to make up especially in kind of the environment I see coming over the next

587
01:02:43,638 --> 01:02:50,098
couple years with negative real rates and fiscal dominance so yeah there's like kind of a concern

588
01:02:50,098 --> 01:02:56,178
I have a bit where you know I worry that there might be even more gambling even more risk-taking

589
01:02:56,178 --> 01:03:03,078
and that Bitcoin is going to not be able to be seen the way that it was in the early days where

590
01:03:03,078 --> 01:03:09,718
there was huge upside and, you know, early adopters were rewarded handsomely, that sort of thing.

591
01:03:09,778 --> 01:03:16,278
Right. So like I see the rise of gambling and Calci and, you know, I figured because I talk

592
01:03:16,278 --> 01:03:22,918
about this stuff all the time, I needed to set up a Calci account and like do it, have some experience.

593
01:03:22,918 --> 01:03:41,478
And so I did. And I was like, you can bet in an afternoon and 12x your money. Like, you know what I mean? It's wild. And so you have that where you can 12x your money in an afternoon. You know, you got Zoomers that are so far behind, for example, to buy a home.

594
01:03:41,478 --> 01:03:49,598
how much are they going to that's my concern uh as as the young fall further and further behind

595
01:03:49,598 --> 01:03:56,298
uh you know how much is the risk appetite going to grow beyond what bitcoin seems to provide

596
01:03:56,298 --> 01:04:04,518
that that's i think another concern uh that to to be wary of you know uh i i don't do that um i mean

597
01:04:04,518 --> 01:04:09,778
i trade but it's like one percent of my total net worth and any profits i basically just put back

598
01:04:09,778 --> 01:04:17,638
into Bitcoin. But yeah, that risk-taking, I think, is going to be increasing as kind of financial

599
01:04:17,638 --> 01:04:22,998
nihilism grows. The other thing I would say, too, when it comes to a potential catalyst that is

600
01:04:22,998 --> 01:04:30,998
positive for Bitcoin is not to be political, but what we're seeing in the US starting to develop

601
01:04:30,998 --> 01:04:39,758
is kind of scary in terms of a potential for some really ugly sort of political dynamic.

602
01:04:39,778 --> 01:04:43,278
and violence here in the U.S. domestically.

603
01:04:43,558 --> 01:04:45,618
That's characteristic of a fourth turning.

604
01:04:45,798 --> 01:04:47,378
Well, some kind of violence, right?

605
01:04:47,758 --> 01:04:49,778
Either international or domestic.

606
01:04:50,578 --> 01:04:54,578
But yeah, I'm kind of like coming around to this view

607
01:04:54,578 --> 01:04:57,858
that the risk of a domestic conflict here in the U.S.

608
01:04:57,858 --> 01:05:01,398
is growing significantly faster by the day

609
01:05:01,398 --> 01:05:02,238
than I thought it would.

610
01:05:03,118 --> 01:05:05,198
How do, you know, when you're talking about a world

611
01:05:05,198 --> 01:05:08,538
where people are maybe not able to cross state lines,

612
01:05:08,538 --> 01:05:16,638
Maybe, you know, there's people that look at what might start to happen and start to flee the country and all those sorts of things.

613
01:05:16,738 --> 01:05:22,798
You look at like, well, what is the single best way to store wealth in that sort of environment?

614
01:05:23,078 --> 01:05:25,198
My opinion is Bitcoin by a long shot.

615
01:05:25,198 --> 01:05:32,858
Like you can't, if you have any, you know, any, any decent amount of, of wealth can't even do it in gold, you know?

616
01:05:33,538 --> 01:05:44,298
So because you would be fleeing through, you know, maybe check, but I mean, I'm not trying to be doomer, but like, you know, it could get pretty ugly here in the U S.

617
01:05:45,238 --> 01:05:54,398
And, and what, what is the single best way to transport your wealth that, you know, memorize 12 words and no one knows, you know,

618
01:05:54,398 --> 01:05:57,418
they're not searching you and finding gold bars and you're not, you know,

619
01:05:57,418 --> 01:06:01,298
so I think that's another thing that I've been thinking about more and more

620
01:06:01,298 --> 01:06:08,138
recently seeing what's going on just kind of in the societal pulse,

621
01:06:08,278 --> 01:06:12,838
I guess. And I know that the internet's not, you know, real life and stuff,

622
01:06:12,838 --> 01:06:17,678
but you're seeing all these sort of escalating tensions out of Minnesota with

623
01:06:17,678 --> 01:06:20,698
insurrection act and you know,

624
01:06:20,898 --> 01:06:24,338
kind of some of the scenes coming out of there are a little sketchy and

625
01:06:24,338 --> 01:06:31,498
kind of concerning. So yeah, like it's, uh, it, yeah, you know, in a world where you might not

626
01:06:31,498 --> 01:06:36,638
feel super safe to walk around your neighborhood because your political views, that's a different

627
01:06:36,638 --> 01:06:43,698
America than we've grown up in. Um, you know, I live in LA and, uh, you know, envisioning a world

628
01:06:43,698 --> 01:06:50,138
where, you know, you have to watch what you, what clothing items you wear, uh, you know, for fear of

629
01:06:50,138 --> 01:06:58,118
a mob of, you know, people attacking you for perceived political opinions. I mean,

630
01:06:58,118 --> 01:07:02,238
we're seeing all that kind of stuff that like it's characteristic of a foreturning. It was kind

631
01:07:02,238 --> 01:07:07,238
of predicted it would happen. But like, it's kind of scary when you really take a couple steps back

632
01:07:07,238 --> 01:07:14,358
and look at how that picture is looking like it's developing. And yeah, in my opinion, that could be,

633
01:07:14,358 --> 01:07:21,758
you know, in a positive way, at least a bullish indicator for Bitcoin. Because, yeah, you know,

634
01:07:21,818 --> 01:07:27,998
I'm kind of putting myself in that position, you know, thinking that through over the next 10 years,

635
01:07:28,058 --> 01:07:33,338
right, preparing for a possible situation where these sorts of things start to happen. And

636
01:07:33,338 --> 01:07:40,598
the asset I keep coming back to is Bitcoin. That's what I want to own in a world of kind of,

637
01:07:40,598 --> 01:07:49,298
you know, especially when you talk about even if it doesn't get violent, even if it's just kind of hyper political, you know, pendulum swinging back and forth to extreme to extreme.

638
01:07:50,038 --> 01:07:53,638
Well, they can't seize Bitcoin on the blockchain, right?

639
01:07:53,638 --> 01:08:01,438
Like if you envision, you know, a socialist taking power and going full blown socialist, they can't they can seize your stocks.

640
01:08:01,438 --> 01:08:02,718
They can seize your house.

641
01:08:03,018 --> 01:08:06,158
I don't think they would, but they could definitely seize stock.

642
01:08:06,278 --> 01:08:07,978
They could definitely seize bonds.

643
01:08:07,978 --> 01:08:13,658
and if you own gold in the wrong way, not self-custody buried in your backyard, they could

644
01:08:13,658 --> 01:08:19,078
seize that too. What can't they seize? The only thing they can't seize is 12 words out of your

645
01:08:19,078 --> 01:08:26,658
head. So I think thinking about that sort of thing, it's ugly and it's not what we want for

646
01:08:26,658 --> 01:08:32,318
our country. But when it comes to potential bullish catalysts for Bitcoin, it's one that

647
01:08:32,318 --> 01:08:36,638
I'm kind of increasingly coming around to, if that makes sense. Yeah. I mean, I was reading something

648
01:08:36,638 --> 01:08:44,718
this morning about a hospital in New York City that refused to operate on plainclothes NYPD

649
01:08:44,718 --> 01:08:49,538
officers because they thought they were ICE agents. And I mean, you're getting to that point where

650
01:08:49,538 --> 01:08:57,018
you're absconding the hypocriticals because of your political views, which is not a good

651
01:08:57,018 --> 01:09:03,738
social environment to be living in. Yeah, it's pretty ugly out there.

652
01:09:03,738 --> 01:09:19,918
Like, again, you know, Internet's not real life. And we we see some of the most extreme stuff right on the Internet. And hopefully we can avoid, you know, domestic violence, you know, violence within within the domestic politics.

653
01:09:19,918 --> 01:09:31,198
But but I don't know, I see seeing the way things are developing and seeing how like deranged people are when it comes to politics nowadays.

654
01:09:31,358 --> 01:09:39,558
Like, you know, it's just it's concerning, you know, like I'm starting to think like I want to buy a house, want to start a family.

655
01:09:40,438 --> 01:09:49,358
You know, I'm thinking about like, OK, well, I need to figure out like where to to live right where you live could determine whether or not you live or die.

656
01:09:49,358 --> 01:09:54,978
like over the next decade. And that's a scary thought. There's huge consequence to, you know,

657
01:09:54,998 --> 01:09:58,618
you have to look at the fiscal health of the city you're going to live in. You have to look at the

658
01:09:58,618 --> 01:10:03,158
fiscal health of the state, because as much as we talk about the fiscal health of the feds,

659
01:10:03,158 --> 01:10:08,898
like California here, you know, they're about to go into like a fiscal crisis within the next

660
01:10:08,898 --> 01:10:13,198
couple of years, if nothing improves. They're trying to tax their way out of it like the UK,

661
01:10:13,418 --> 01:10:18,438
but we know that doesn't work. You know, tax revenue as a share of GDP plummeted

662
01:10:18,438 --> 01:10:20,578
over the past couple quarters in the UK.

663
01:10:20,578 --> 01:10:23,798
You had a historic amount of wealth flee.

664
01:10:24,358 --> 01:10:26,038
So you can't tax your way out, right?

665
01:10:26,138 --> 01:10:28,998
So you're trying to think, okay, well, cities are,

666
01:10:29,438 --> 01:10:32,478
they have these huge pension funds that are underfunded.

667
01:10:33,098 --> 01:10:36,258
The state, a lot of blue states mainly,

668
01:10:36,438 --> 01:10:39,878
have these enormous state budget deficits.

669
01:10:40,678 --> 01:10:43,618
So you have to worry about that,

670
01:10:43,658 --> 01:10:46,918
and then you have to worry about the geographics

671
01:10:46,918 --> 01:10:53,178
of, you know, God forbid there's ever a potential conflict within our country. Like, where do you

672
01:10:53,178 --> 01:10:57,398
want to be all that sort of thing? Like my parents never had to think about any of that, you know?

673
01:10:57,938 --> 01:11:03,838
But I think that if, if we're being honest with ourselves, like these are conversations that I

674
01:11:03,838 --> 01:11:08,658
think, you know, a lot of people are going to have to have over the next decade. Cause I don't see

675
01:11:08,658 --> 01:11:15,798
political polarization and all that kind of vitriol and just derangement. I don't, I don't

676
01:11:15,798 --> 01:11:20,838
see it getting better, you know? And, and then you come to the next logical question, which is

677
01:11:20,838 --> 01:11:27,398
how do these people co like, how do you coexist with people like that, you know, and like all

678
01:11:27,398 --> 01:11:33,758
these nasty, uh, sort of, um, uh, you know, implications from that. And yeah, like, it's

679
01:11:33,758 --> 01:11:37,618
just all ugly, you know? And, and I think about when it comes to assets, when it comes to like

680
01:11:37,618 --> 01:11:42,358
financial markets, it's not good for equities to, to, to go into a world of increasing populism,

681
01:11:42,358 --> 01:11:46,918
increasing political polarization and potential, you know, full-blown socialism.

682
01:11:47,638 --> 01:11:53,758
And look, even with MAGA, we're nationalizing, you know, the federal government's nationalizing

683
01:11:53,758 --> 01:11:59,178
companies, right? Even MAGA is not free market capitalism. And that's, you know,

684
01:11:59,198 --> 01:12:04,798
you're suspending buybacks, right? You're capping salaries at the defense company.

685
01:12:05,458 --> 01:12:08,898
Yeah. Capping credit card rates, all this stuff, right? So it's like,

686
01:12:08,898 --> 01:12:14,798
do i want to own equities when they're talking about like a windfall tax on the mag 7 to fund

687
01:12:14,798 --> 01:12:21,398
electricity you know power generation so like i don't know equities just for a number of reasons

688
01:12:21,398 --> 01:12:26,678
don't look good uh bonds certainly don't look good on that windfall taxes like we fought this

689
01:12:26,678 --> 01:12:32,398
battle in bitcoin mining um in the united states two years ago when they they i forget it was the

690
01:12:32,398 --> 01:12:38,298
epa or whatever sent out the survey to basically identify self-serving energy source to try to

691
01:12:38,298 --> 01:12:40,118
to try to tax them more.

692
01:12:40,318 --> 01:12:41,518
And it's like, oh, interesting.

693
01:12:42,098 --> 01:12:42,858
And we're doing this now.

694
01:12:43,678 --> 01:12:46,198
Yeah, like what do you want to own in a world

695
01:12:46,198 --> 01:12:47,958
that looks like that?

696
01:12:48,538 --> 01:12:50,378
Where you have, look, I'll point out

697
01:12:50,378 --> 01:12:53,858
that the last time we really had like a massive impulse

698
01:12:53,858 --> 01:12:56,798
when it comes to like fiscal spending and populism,

699
01:12:56,898 --> 01:12:59,638
back from 1965 to 1982,

700
01:13:00,438 --> 01:13:04,018
the S&P 500 collapsed 92% in gold terms.

701
01:13:04,698 --> 01:13:06,658
So yeah, in dollar terms, you went nowhere.

702
01:13:06,658 --> 01:13:16,718
In dollar terms, you got back all the dollars you were owed, but in gold terms, you lost 92% of the real value that you had in equity exposure.

703
01:13:17,078 --> 01:13:25,118
So I think that those sorts of things, and again, what we see the government, and this is the free market party, right?

704
01:13:25,158 --> 01:13:29,598
This is the conservatives or whatever you want to call it, right, that's doing it.

705
01:13:29,838 --> 01:13:32,018
What is it going to look like when it's present at AOC?

706
01:13:33,318 --> 01:13:34,458
It's going to be even worse.

707
01:13:34,458 --> 01:13:38,778
and like ask, ask yourself, well, do you really want to own equities in that sort of landscape

708
01:13:38,778 --> 01:13:46,358
where it's all centralized? And you know, yeah, there, there's a number of issues I see with

709
01:13:46,358 --> 01:13:50,938
equities where I don't want to store my wealth in them. There are of course, bonds, like, you know,

710
01:13:51,038 --> 01:13:56,838
bonds could not be worse when it comes to the way I see things over the next 10 years. And really

711
01:13:56,838 --> 01:14:00,618
kind of the only thing I keep coming back to is like gold, silver, and Bitcoin. I bought, I was

712
01:14:00,618 --> 01:14:06,818
buying a lot of gold and silver in 22, 23, 24. And I plan to hold that. I would like to add some

713
01:14:06,818 --> 01:14:11,718
a little bit, you know, I'm still heavily in, uh, primarily vast majorities in Bitcoin,

714
01:14:11,718 --> 01:14:18,418
but, uh, but those are the only two assets that really, when I take like 10 steps back and look at

715
01:14:18,418 --> 01:14:23,858
the political setup, the societal setup, the fiscal setup, the international kind of global

716
01:14:23,858 --> 01:14:30,178
trade setup, I, it's pretty clear that like the only thing I'm like super bullish on is gold.

717
01:14:30,618 --> 01:14:34,038
some degree silver and, and, and definitely Bitcoin,

718
01:14:34,138 --> 01:14:38,118
definitely Bitcoin at $89,000 per dollars per Bitcoin.

719
01:14:38,258 --> 01:14:39,898
I'm definitely bullish here.

720
01:14:40,858 --> 01:14:42,918
Me as well. And I want to be respectful of your time.

721
01:14:42,998 --> 01:14:46,898
Cause I know you got to run here, but I really appreciate you taking the time

722
01:14:46,898 --> 01:14:51,098
this morning to catch up. It was as always incredibly intellectually

723
01:14:51,098 --> 01:14:54,738
stimulating and a high signal. So thank you for the work that you're doing,

724
01:14:54,738 --> 01:14:57,218
sir. Yeah. Thank you. I appreciate that.

725
01:14:57,918 --> 01:14:59,018
We'll have to do it again soon.

726
01:14:59,018 --> 01:15:02,398
We should keep on this cadence once a quarter catching up.

727
01:15:02,598 --> 01:15:03,678
Yeah, absolutely.

728
01:15:03,998 --> 01:15:04,678
It's always a good time.

729
01:15:05,338 --> 01:15:05,598
All right.

730
01:15:05,758 --> 01:15:06,438
Peace and love freaks.