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Speaker 1: This is the only way that banks will survive. Now,

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Speaker 1: unless you've been living under rock, you know that the

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Speaker 1: banks have been under amazing stress. As a matter of fact,

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Speaker 1: we have seen more banks collapsing at a higher level,

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Speaker 1: at a higher dollar value than we saw in two.

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Speaker 2: Thousand and eight.

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Speaker 1: And while many people think it's getting over, it is not.

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Speaker 2: It's only just beginning.

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Speaker 1: And so I'm sitting down with a banking expert. I'm

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Speaker 1: talking about Caitlin Long, someone who's been in the inner

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Speaker 1: workings of the banking and financial industry and is in

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Speaker 1: the process of setting up her own bank right now.

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Speaker 1: We're going to talk about the problem that's been created,

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Speaker 1: but from a whole different level than.

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Speaker 2: You've heard before.

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Speaker 1: We're talking about the way money is flowing, how the

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Speaker 1: Fed is causing this, the only way the banks are

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Speaker 1: going to be able to protect themselves from this damage

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Speaker 1: and destruction that's coming in the way. We're going to

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Speaker 1: talk about the damage that will happen in the economy

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Speaker 1: from centralizing the entire banking process. We're going to talk

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Speaker 1: about her revolutionary bank and why the Federal Reserve does

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Speaker 1: not want to allow it to happen.

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Speaker 2: We're going to talk.

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Speaker 1: About the FED now system and the new CBDC that

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Speaker 1: everybody's afraid of, the UCC Universal Commercial Code filings that

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Speaker 1: are making it so you don't own any more money

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Speaker 1: than so much more. We cover a lot of ground.

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Speaker 1: It was amazing conversation with Kitlin.

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Speaker 2: Long.

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Speaker 1: Let's go ahead and just jump right into it. Caitlin,

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Speaker 1: thanks so much for taking the time to join me today.

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Speaker 1: I know you are super busy, so I appreciate it.

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Speaker 2: Dealing with all kinds of banking stuff.

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Speaker 1: So I want to dig into the banking stuff, past,

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Speaker 1: current and potential future where this is going. And so

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Speaker 1: you're certainly one of the people that are kind of

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Speaker 1: on the forefront that can help with this. But I

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Speaker 1: first wanted to start in talking about you know, I

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Speaker 1: know you're the founder ce CEO of Custodia Bank, and

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Speaker 1: so I want to get into that. But before we

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Speaker 1: kind of get into that, I just want to talk

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Speaker 1: about like this current banking shuffle that we're in right now,

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Speaker 1: this consolidation of banking, and so we're seeing smaller banks

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Speaker 1: going down consolidating to bigger banks. At this point, we

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Speaker 1: have like eight banks that are probably you know, too

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Speaker 1: big to fail, right and We're starting to see kind

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Speaker 1: of this flow to these too big defail.

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Speaker 2: And it seems like.

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Speaker 1: It's almost like the only banks that can survive this

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Speaker 1: type of situation the FED has put them in is

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Speaker 1: these two big defail banks unless maybe one the FED

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Speaker 1: decides to cut rates down below the two to three

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Speaker 1: percent range where where the banks can be profitable, you know,

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Speaker 1: or they greatly loosen the financial conditions.

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Speaker 2: So one or the other.

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Speaker 1: And if it's not that, then it seems almost like

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Speaker 1: we would need a fully reserved bank.

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Speaker 3: Ah wow, okay, yes, well, so I actually tweeted out today.

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Speaker 3: We're recording this on the twenty third of May. I

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Speaker 3: tweeted out today in response to Jamie diamond saying there's

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Speaker 3: going to be more consolidation in banking, And of course

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Speaker 3: I suspect he's looking as chops at JP Morgan because

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Speaker 3: they are beneficiary. They're one of the eight or so

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Speaker 3: banks that you describe as likely too big defail, and

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Speaker 3: because they've been subject to Basil three, they've had to

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Speaker 3: pay attention to their liquidity in a way that all

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Speaker 3: the other banks that are not subject. The vast majority

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Speaker 3: of the quantity of banks in the United States are

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Speaker 3: not subject to any real liquidity requirements. They'll run some

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Speaker 3: stress tests, but they'll assume, you know that thirty five

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Speaker 3: percent of their deposits get withdrawn within the span of

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Speaker 3: a week as a stress test. Well, we saw in

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Speaker 3: Silicon Valley Bank twenty five percent be withdrawn within the

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Speaker 3: span of hours. And the small banks in this country

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Speaker 3: have about seven cents now of cash on their balance sheets.

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Speaker 3: Only seven cents for every dollar on their balance sheet

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Speaker 3: is cash. So if twenty five cents gets withdrawn in

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Speaker 3: this short period of time, you start to see the problem.

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Speaker 3: They need to start to liquid aid assets, and they're

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Speaker 3: liquid aiding assets at a loss, which is what took

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Speaker 3: Silicon Valley Bank down. Okay, so that's the background. I

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Speaker 3: tweeted up today that in ninety four there was a

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Speaker 3: huge consolidation wave and it was something I worked on

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Speaker 3: at the early stage of my career in the bank world.

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Speaker 3: There were more than ten thousand banks back then, and

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Speaker 3: what caused that consolidation wave was that they were very

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Speaker 3: cost and efficient in spite of the fact that green

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Speaker 3: Span at the time had engineered a steep yeal curve.

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Speaker 3: So I would go back to the way you asked

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Speaker 3: the question. It's not so much rates coming down to

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Speaker 3: two or three percent, it's the steepness of a yeld

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Speaker 3: curve because those businesses, those banks, traditional banks, make money

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Speaker 3: based upon borrowing short term and lending long term, and

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Speaker 3: they don't really care in the grand scheme of things,

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Speaker 3: with the exception of mark to markets, which will come

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Speaker 3: back to in a minute, whether interest rates are you know,

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Speaker 3: five percent short term and eight percent long term and

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Speaker 3: they capture the three percent spread, or you know, one

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Speaker 3: percent short term versus four percent long term and capture

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Speaker 3: the three percent spread. It's a three percent spread either way.

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Speaker 3: Now that presumes.

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Speaker 1: Yeah, except go ahead, I could ask, except for the

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Speaker 1: big draw away from the banks is because the FED

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Speaker 1: is paying five percent so well, folks are forced to

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Speaker 1: compete with that, So if the Fed were to bring

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Speaker 1: it down, then it wouldn't be as competitive.

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Speaker 3: Well, that's absolutely right in the So that's why you

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Speaker 3: can't look at this in a vacuum. First of all,

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Speaker 3: I was going to add that the banks may have

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Speaker 3: marked to market losses on their balance sheet, which is

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Speaker 3: what's killing the regional and community banks right now because

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Speaker 3: they during all the COVID era. The way the plumbing works.

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Speaker 3: Is all that money that came from all the fiscal

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Speaker 3: stimulus had to go through the banking system. So the

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Speaker 3: banks suddenly found themselves flush with cash and there was

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Speaker 3: no loan demand. And so what did they do. They

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Speaker 3: bought treasuries. But because treasuries had no capital charge, they

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Speaker 3: rolled the dice and played the yield curve. And this

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Speaker 3: is where the management's made the mistake. They didn't have

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Speaker 3: to do what they did. They invested in long term treasuries.

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Speaker 3: Now those long term treasuries have a big mark to

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Speaker 3: market loss. And your point is also very well taken,

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Speaker 3: which is their something different now that didn't exist back

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Speaker 3: in nineteen ninety four, the last time we came off

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Speaker 3: a big rate rising environment. But the FED had engineered

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Speaker 3: a steep yield curve, and that is money market funds,

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Speaker 3: ding ding ding ding. You can earn right now north

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Speaker 3: of five percent in a US government money market fund,

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Speaker 3: where you're taking US government credit risk, whereas banks are

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Speaker 3: paying little to no interest and you're taking bank credit risk.

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Speaker 3: A lot of money is walking with its feet. In fact,

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Speaker 3: actually at one point there was an estimate that eight

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Speaker 3: hundred and fifty billion of deposits had been had exited

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Speaker 3: the traditional banks for the crypto industry back at the

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Speaker 3: peak of the crypto craze, and now we're almost at

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Speaker 3: that amount of money that's been withdrawn from the banking

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Speaker 3: industry to go to the money market funds. It's really

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Speaker 3: stunning how much money has moved from the banking industry,

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Speaker 3: and traditional banks were just not ready for this.

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Speaker 2: So that's one of the things.

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Speaker 1: So obviously one the risk that you said bank risk

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Speaker 1: versus government risk. So there's the risk that they're dealing with,

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Speaker 1: and so that has people on edge. And then there's

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Speaker 1: the carrot dangling where like, hey, I can go make

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Speaker 1: five percent instead of the two percent or I'm sorry,

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Speaker 1: the zero point two five.

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Speaker 3: Or whatever it is.

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Speaker 1: Yeah, yeah, whatever, And I've got counterparty.

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Speaker 3: Credit risk, right, so if you adjust that for the

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Speaker 3: counterparty credit risk, it's negative yield.

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Speaker 1: Yeah, which, while I was thinking, so, if inflation stays

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Speaker 1: where it's at, interest rates and banking regulations remain where

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Speaker 1: they're at, it just seems like there's just no way

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Speaker 1: these small, too big defail or non two big defail

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Speaker 1: banks can stay in business.

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Speaker 2: It just seems like they're almost guaranteed.

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Speaker 1: To fail, Like I said, unless something were to happen,

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Speaker 1: and that's what I was saying. If the FED were

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Speaker 1: to bring the rates down, it eases the banks. Also

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Speaker 1: takes away that big demand for people to move like

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Speaker 1: that'd be one thing that I was thinking.

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Speaker 3: But if they're going to recapitalize the banks, they need

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Speaker 3: to do what green Span did in the early nineties

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Speaker 3: and engineer a steep yield curve, which is what he did,

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Speaker 3: and it recapitalized the banks back then. And that's the

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Speaker 3: last time we really had rising rates and you had

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Speaker 3: a big bank consolidation wave, big banking consolidation wave. We

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Speaker 3: didn't have the giant banks back then that we do today.

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Speaker 3: But right now there's a balance sheet problem in the

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Speaker 3: banking industry. And so long story short, this is the

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Speaker 3: type of consolidation wave where profits are going to be

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Speaker 3: privatized and losses are going to be socialized, unlike the

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Speaker 3: bank consolidation wave I worked on in beginning of nineteen

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Speaker 3: ninety four, where it was a win win because you

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Speaker 3: had a lot of banks that, in spite of the

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Speaker 3: fact that they were earning high spreads, just couldn't keep

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Speaker 3: up because they were cost inefficient. So it was a

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Speaker 3: win win to consolidate back then. Now this consolidation wave

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Speaker 3: is more about balance sheet weakness. And you have seen

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Speaker 3: a couple of really strongly performing bank stocks, and as

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Speaker 3: who they've been, they've been the winners of the auction processes,

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Speaker 3: buying these these defunct banks out of the bank auction

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Speaker 3: process and immediately booking again and their stocks go up. Okay,

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Speaker 3: that's that's the privatization of profits and socialization of losses

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Speaker 3: that everybody should be upset about.

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Speaker 2: Yeah, certainly.

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Speaker 1: Now, you know, one of the big things with consolidation

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Speaker 1: of bank is through the consolidation getting getting rid of

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Speaker 1: sort of this like local regional relationship of the banker

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Speaker 1: and then potentially pushing more and more like credit decisions

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Speaker 1: up to the larger you know, national type corporations and

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Speaker 1: things like that. I know, about half of US employment

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Speaker 1: is with firms that have less than five hundred employees,

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Speaker 1: so about half of that business environment could potentially be affected.

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Speaker 2: I mean, these some of the risks that you see

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Speaker 2: with consolidation.

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Speaker 3: Absolutely, but it's happening anyway. Matt Levine at Bloomberg has

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Speaker 3: been correctly pointing out money market funds are basically just

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Speaker 3: narrow banks. Okay, so the bank, all the almost six

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Speaker 3: hundred billion of deposits that have been withdrawn from the

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Speaker 3: banking system and deposited into money market funds, is maybe

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Speaker 3: permanently leaving the banking industry. And so all the concern

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Speaker 3: about that's implied in your question, which is that that's

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Speaker 3: where credit comes from. You got to have regional banks

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Speaker 3: that can provide that can make loans, because that's where

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Speaker 3: credit to small and medium sized businesses comes from. It

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Speaker 3: doesn't come from the large banks. They're not set up

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Speaker 3: to do that. And so but yet I look at

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Speaker 3: it and say, it's already happening, folks, because people are

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Speaker 3: voting with their feet to go to money market funds.

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Speaker 3: This is not rocket science. And unfortunately, if we had

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Speaker 3: to start all over again, we wouldn't structure the banking

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Speaker 3: system the way it's structured today, where you have this

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Speaker 3: enormous maturity transformation maturity mismatch in banks borrowing short term,

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Speaker 3: lending long term, and trying to capture a three percent spread.

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Speaker 3: Why because it's fundamentally unstable. As Matt pointed out, I

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Speaker 3: think it was in yesterday's column that the assumption that

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Speaker 3: was made for decades is that banking deposits were sticky

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Speaker 3: and they might be withdrawn from one bank to go

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Speaker 3: to another, but that would that was a zero sum

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Speaker 3: game because it all stayed within the banking system. Well,

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Speaker 3: now they're not sticky. The banking deposits are leaving. They

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Speaker 3: left to go to crypto and now they're leaving to

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Speaker 3: go to the money market fund industry, and that is

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Speaker 3: outside of the banking industry. And here's the irony. This

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Speaker 3: is where those of us who liked to talk plumbing

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Speaker 3: of the money markets. Look at what the FED did

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Speaker 3: with the RRP facility, the reverse repo facility. That's exactly

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Speaker 3: what's allowing the money market fund industry to invest in

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Speaker 3: all of these high yielding US government instruments and they

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Speaker 3: can invest in repail and pick up even extra yield.

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Speaker 3: And the impact of that is if anybody could get

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Speaker 3: direct balance sheet exposure to the FED, then there's an

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Speaker 3: incentive to there's less credit risk than going through a bank,

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Speaker 3: so you're picking up higher yields and you're getting US

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Speaker 3: government slash FED counterparty credit risk. It's it's you know,

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Speaker 3: this is why money is voting with its feet. And

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Speaker 3: so the concern about credit availability in the small and

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Speaker 3: medium sized businesses. Boy, the bank regulators should have had

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Speaker 3: that concern in mind a long time ago. It's so

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Speaker 3: interesting because this is bread and butter stuff for the

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Speaker 3: banking industry, and yet it's amazing how many really smart

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Speaker 3: people missed it.

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Speaker 2: Yeah.

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Speaker 1: I think banking is sticky. It's just getting less and

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Speaker 1: less sticky.

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Speaker 2: Right. Technology has made it easier to move.

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Speaker 1: I've been with my same bank since ever I first

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Speaker 1: been kind of overopened, and it's like still there because

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Speaker 1: it's a pain the butt to go close bank accounts.

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Speaker 1: It's really difficult, and so it is pretty sticky. But

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Speaker 1: to your point, it's getting much easier and money moves

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Speaker 1: a lot faster now than I ever did before. I

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Speaker 1: was reading a report from Christopher Whale, and he was

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Speaker 1: talking about the FDIC report saying that most of the

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Speaker 1: banking system is insolvent already. Yes, they're just not realizing

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Speaker 1: the losses correct, right, And so a lot of these

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Speaker 1: assets that they have on their books potentially like commercial

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Speaker 1: real estate and regular mortgage backed securities, et cetera, underwater,

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Speaker 1: you know, mortgage loans, things like that. We can see

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Speaker 1: delinquencies are going through the roof cars, credit cards, et cetera.

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Speaker 2: Things like that.

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Speaker 1: And so we have this, but every time it seems

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Speaker 1: like they, you know, FED or the banking systems kind

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Speaker 1: of like backs against the wall. It's like another three

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Speaker 1: or four letter letter special.

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Speaker 2: Yeah, pops up, right. So I mean, I mean, there's

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Speaker 2: really nothing stopping them.

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Speaker 1: I mean, the FED can just continue to take these

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Speaker 1: assets off the books apar, put them off the balance

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Speaker 1: sheet in some tucked away.

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Speaker 2: Corner, and just kind of keep this going. Right.

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Speaker 3: Well, sure, right, but here's the thing, and this is

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Speaker 3: where I think those who thought that the expansion of

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Speaker 3: the Fed's balance sheet is by definition inflationary, the credit

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Speaker 3: creation is what's inflationary. And you know, prior to the

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Speaker 3: financial crisis, the fed's balance sheet was eight hundred billion.

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Speaker 3: It was you know, it was nothing compared to what

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Speaker 3: it's been in the trillions today. And and nonfinancial sector

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Speaker 3: debt is ninety five trillion ish last I looked. Okay,

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Speaker 3: so there's been ninety five trillion ish of US dollar

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Speaker 3: credit issued in the United States, of which nine trillion

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Speaker 3: ish has been monetized by the FED. Those are approximate numbers.

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Speaker 3: But you see the point where I'm going about ten percent.

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Speaker 3: The FED has monetized about ten percent of the credit

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Speaker 3: that got issued. Okay, by the time this is all

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Speaker 3: said and done, a lot of it's going to end

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Speaker 3: up on the fed's balance sheet through the mechanisms you

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Speaker 3: just talked about. But what a lot of folks miss

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Speaker 3: is that that's not the inflation. The inflation occurred when

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Speaker 3: the credit got created in the first place. How did

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Speaker 3: it get created. It got created in the banking system,

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Speaker 3: and it got created in the shadow banking system, which

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Speaker 3: is through securities markets, et cetera. But the credit creation

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Speaker 3: was what was inflationary. It wasn't the expansion of the

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Speaker 3: fed's balance sheet per se. That's a piece of it,

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Speaker 3: but it's not the vast majority of it, even with

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Speaker 3: the FED basically backstopping. So what they're doing is basically

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Speaker 3: filling a hole. Right when you get into deflationary environments

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Speaker 3: where debt is defaulting, the credit outstanding is shrinking, that

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Speaker 3: is small d deflation. The FED has expanded its balance

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Speaker 3: sheet in order to keep credit inflated. Okay, So they're

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Speaker 3: not trying to issue ninety five trillion more of debt.

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Speaker 3: What they're trying to do is keep that ninety five

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Speaker 3: trillion on its normal trajectory. And here's the interesting thing.

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Speaker 3: If you go look at the data. I haven't updated

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Speaker 3: this in a little while, but if you look at

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Speaker 3: the non financial sector debt in the United States, it's

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Speaker 3: pretty much to straight line up and you can't tell

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Speaker 3: when Republicans were in charge, which is when Democrats were

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Speaker 3: in charge. Okay, so we've had two and a half

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Speaker 3: to three trillion dollars of non financial sector debt growth

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Speaker 3: in each of the last ten years, and it's you know,

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Speaker 3: it's essentially keeping me total economy inflated. Only a small

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Speaker 3: percentage of that historically has been the FED itself. The

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Speaker 3: real inflation came from the credit that was created in

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Speaker 3: both the traditional banking system and in the non traditional

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Speaker 3: i either shadow banking system. But it all got created

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Speaker 3: in the financial system and then got intermediated out into

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Speaker 3: the real economy. And so you know, basically there's a

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Speaker 3: big debate over the stability of the US dollar banking system.

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Speaker 3: I look at it, and you know, as you said,

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Speaker 3: the FDIICE is saying, hey, the banking systems in soolveent. Okay, well,

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Speaker 3: it really always has been. This is not new fractional

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Speaker 3: reserve banking is not new. Bank runs are not new.

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Speaker 3: None of this is new. What's new is that people

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Speaker 3: are much more aware of what the issue has been

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Speaker 3: all along. But it was always there, bubbling under the surface,

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Speaker 3: building up, and fundamentally, this is not a stable system.

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Speaker 3: It seems stable because they've been able, as you point out,

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Speaker 3: to pull the rabbit out of the hat with the

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Speaker 3: latest alphabet soup program. But all that is doing is

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Speaker 3: taking defaulted credit off the traditional banking system's balance sheet

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Speaker 3: and putting it onto the Fed's balance sheet to try

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Speaker 3: to keep the aggregate of total credit inflated.

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Speaker 1: And while that doesn't cause the deflation, because the aggregate

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Speaker 1: credit is still there, and even though it may be

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Speaker 1: tucked away somewhere, it's still a drag on the overall economy,

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Speaker 1: and it's still a drag on growth and production because

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Speaker 1: whoever owes that debt is still being held down by that,

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Speaker 1: right So even though it's kind of like tucked away, hidden,

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Speaker 1: you know, out ofside, out of mind, it's still there.

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Speaker 1: It's still dragging the situation down. So it never allows

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Speaker 1: us to kind of heal and start growing again.

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Speaker 3: Absolutely well, and we don't know what real market interest

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Speaker 3: rates are We have no idea. The one thing I'm

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Speaker 3: pretty confident of, although no one knows for sure, is

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Speaker 3: that they would be hired than they are today right

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Speaker 3: if free markets really rained. But this is why the

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Speaker 3: most important price that needs to be left alone and

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Speaker 3: not controlled by the government is the price of borrowing money,

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Speaker 3: because it is the traffic light that allocates capital across

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Speaker 3: industries and across time. And when that is controlled, which

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Speaker 3: it is in every major economy in the world right now,

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Speaker 3: because there's something called a central bank, and the central

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Speaker 3: banks have desks that literally buy and sell government obligations

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Speaker 3: to control those interest rates. And so when they're controlling

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Speaker 3: those interest rates to their target levels, you know they're

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Speaker 3: not free market interest rates. And so to your point,

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Speaker 3: we're not allowing all of the dead weight of the

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Speaker 3: economy to burn. And I like a nessin Teleb's analogy

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Speaker 3: of forest fires. If you don't allow the underbelly, the

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Speaker 3: undergrowth to burn every now and then when the real

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Speaker 3: one comes, you get a conflagration, and it might burn

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Speaker 3: hot enough that it burns all the bacteria in the soil,

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Speaker 3: and nothing grows for decades until you know an elk

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Speaker 3: or a moose comes along and takes you know what,

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Speaker 3: and then the bacteria regenerates in the soil, but it

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Speaker 3: takes decades for that to happen. I'm literally watching that happen.

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Speaker 3: There were terrible forest fires not far from where I

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Speaker 3: live here in Wyoming a couple of years ago, and

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Speaker 3: nothing is growing back because they didn't let it burn

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Speaker 3: in the more mild years, and when it finally came,

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Speaker 3: everything including the bacteria in the soil, burned. It's really sad.

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Speaker 2: I recently went out to Wyoming.

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Speaker 1: I was out there earlier this year for the Bitcoinski

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Speaker 1: Week and boy was it beautiful. Absolutely, Oh yes, sure

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Speaker 1: it is. Yeah, it is wild, big country out there,

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Speaker 1: for sure.

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Speaker 2: Man, Wow, God blessed.

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Speaker 3: Whyom I go? I keep it wild's yeah, that's for sure.

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Speaker 2: It made me. It made me think, I mean, this

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Speaker 2: is off track. But we went. I went.

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Speaker 1: We were there in Jackson Hole, right and then we

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Speaker 1: went about to forty five minutes out and did a

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Speaker 1: little helly scheme. But I got to kind of drive

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Speaker 1: out and see that that rugged country and just get

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Speaker 1: to meet some of the people that are out there.

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Speaker 1: And I left thinking these people are never going to

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Speaker 1: live in fifteen minute cities in metaverse like correct, these

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Speaker 1: are the cowboys out here, right, And it made me

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Speaker 1: feel a little bit better.

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Speaker 2: So I'm just gonna say, Hey, I lived on.

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Speaker 3: The East Coast for thirty years in big cities, so

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Speaker 3: I can move easily from one environment to the other.

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Speaker 3: But I grew up here, and I totally get it.

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Speaker 3: I'm much, you know, much more, much more comfortable here,

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Speaker 3: and you know, boy, there are a lot of people

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Speaker 3: who are moving here who are like that, escaping the

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Speaker 3: cities and appreciating the big, wide open spaces and generally

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Speaker 3: being left alone.

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Speaker 1: Though. I can say I'm here in southern California and

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Speaker 1: in Orange County along the beach Newport Beach, Corona del Mar,

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Speaker 1: Laguna Beach, I mean some of the most expensive real

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Speaker 1: estate anywhere, and I was completely shocked how expensive it

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Speaker 1: was out Jacksonming.

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Speaker 3: Yeah.

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Speaker 1: I mean, I'm like thirty forty minutes from the airport

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Speaker 1: in the in the middle of seemingly nowhere, and these

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Speaker 1: homes are like fifteen million dollars on yep, what is

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Speaker 1: going on us?

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Speaker 3: Oh? I watched that for years, and you know, they're

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Speaker 3: very land constrained around Jackson. The rest of Wyoming's not

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Speaker 3: like that. When I moved from the New York City area,

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Speaker 3: my cost of living went down by two thirds. It's

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Speaker 3: the rest of Wyoming isn't like that. But you know

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Speaker 3: what's interesting is people Jackson's like a gateway drug to Wyoming.

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Speaker 3: A lot of people fall in love with Wyoming when

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Speaker 3: they see that, and then they realize, wow, the once

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Speaker 3: you go not far from Jackson any directions, it's equally beautiful,

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Speaker 3: but the real estate prices are a lot lower, and

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Speaker 3: you don't have the craziness of the resort town. And

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Speaker 3: so now the joke is the billionaires are driving out

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Speaker 3: the millionaires, and the millionaires in Jackson who used to

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Speaker 3: be in Jackson are now really scattered all over Wyoming,

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Speaker 3: and as you can imagine, it's causing a little bit

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Speaker 3: of friction with the locals.

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Speaker 1: Yeah yeah, yeah, So jumping back onto this, you know

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Speaker 1: what we were saying about kind of setting the price

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Speaker 1: of money. A lot of people don't realize that you

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Speaker 1: actually buy money. You use money to buy things, but

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Speaker 1: you also buy money when you borrow the money. And

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Speaker 1: while most people understand the dangers of price fixing, which

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Speaker 1: of course we're already starting to hear talks of price

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Speaker 1: fixing because inflation is so bad yield curve control. So

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Speaker 1: most people kind of understand intuitively that price fixing.

438
00:22:43,320 --> 00:22:45,479
Speaker 2: Isn't a good thing. It's actually a very dangerous thing.

439
00:22:45,600 --> 00:22:47,120
Speaker 1: But they don't think to the point that you made,

440
00:22:47,119 --> 00:22:49,680
Speaker 1: that setting the price of money actually sets the price

441
00:22:49,760 --> 00:22:53,920
Speaker 1: of everything. And also they don't realize how much information

442
00:22:54,200 --> 00:22:56,439
Speaker 1: is in that price. So if I'm a business owner,

443
00:22:56,800 --> 00:22:59,280
Speaker 1: if the interest rate is very low, that means there's

444
00:22:59,320 --> 00:23:01,440
Speaker 1: lots of excess some money in the system, and people

445
00:23:01,440 --> 00:23:03,680
Speaker 1: are healthy and wealthy, and I should probably launch a

446
00:23:03,760 --> 00:23:06,080
Speaker 1: new product or business, and if the rates are high, I.

447
00:23:06,119 --> 00:23:07,600
Speaker 2: Might I might know the opposite.

448
00:23:07,600 --> 00:23:10,800
Speaker 1: And so when that's all distorted, all types of misallocation, unfortunately,

449
00:23:10,800 --> 00:23:14,000
Speaker 1: people's lives get ruined, you know, in a small business

450
00:23:14,040 --> 00:23:18,480
Speaker 1: sector specifically, going back to this, so in this you know,

451
00:23:18,520 --> 00:23:22,000
Speaker 1: banking situation, as I kind of said, it almost seems

452
00:23:22,040 --> 00:23:24,400
Speaker 1: like no bank's really going to survive unless either these

453
00:23:24,400 --> 00:23:26,879
Speaker 1: conditions change or there was like some sort of like

454
00:23:26,920 --> 00:23:29,159
Speaker 1: a full reserve bank, which of course Custodia Bank was

455
00:23:29,200 --> 00:23:31,840
Speaker 1: trying to do. And I know that you and I

456
00:23:31,920 --> 00:23:33,200
Speaker 1: got to talk about this a little bit in Miami,

457
00:23:33,240 --> 00:23:34,760
Speaker 1: and I know you can't lay out a whole lot

458
00:23:34,760 --> 00:23:39,960
Speaker 1: of details, but you had a full reserve bank idea.

459
00:23:40,480 --> 00:23:43,720
Speaker 1: Seemingly they didn't want that, at least that's what it appears, like,

460
00:23:44,200 --> 00:23:45,879
Speaker 1: what kind of information can you give us on that?

461
00:23:46,280 --> 00:23:50,240
Speaker 3: What it's so interesting because we have full reserve banks.

462
00:23:50,280 --> 00:23:53,439
Speaker 3: They're called money market funds. They're not banks in the

463
00:23:53,440 --> 00:23:56,639
Speaker 3: sense that they don't take deposits, but they're really the

464
00:23:56,680 --> 00:23:59,320
Speaker 3: same thing, right. They have liabilities in the form of

465
00:23:59,359 --> 00:24:01,439
Speaker 3: fund shares, and they have assets in the form of

466
00:24:01,600 --> 00:24:06,440
Speaker 3: t bills and repo that back one hundred percent of

467
00:24:06,520 --> 00:24:10,160
Speaker 3: the obligations. That's really one hundred percent reserve bank. And again,

468
00:24:10,200 --> 00:24:12,880
Speaker 3: people are voting the money market funds, taking money out

469
00:24:12,880 --> 00:24:15,199
Speaker 3: of the banking system to put them into money market funds,

470
00:24:15,560 --> 00:24:17,560
Speaker 3: voting with their feet because that's what they that's what

471
00:24:17,600 --> 00:24:20,880
Speaker 3: they want. There's something else out there that is essentially

472
00:24:20,960 --> 00:24:23,879
Speaker 3: a full reserve bank. It's called a money transmitter. The

473
00:24:23,960 --> 00:24:27,960
Speaker 3: fifty states have money transmitter licensing regimes. That's how most

474
00:24:28,000 --> 00:24:31,040
Speaker 3: of fintech's are licensed. They just can't take a US

475
00:24:31,080 --> 00:24:34,280
Speaker 3: dollar deposit. A bank is a unique animal. It is

476
00:24:34,320 --> 00:24:37,320
Speaker 3: a corporation bestowed by law with the right to accept

477
00:24:37,440 --> 00:24:42,359
Speaker 3: US dollar deposits. But the FinTechs are not banks yet,

478
00:24:42,440 --> 00:24:46,680
Speaker 3: they're effectively one hundred percent reserve banks. Why because they

479
00:24:46,720 --> 00:24:49,639
Speaker 3: are not allowed to lend their customer funds. They have

480
00:24:49,680 --> 00:24:52,199
Speaker 3: to hold one hundred percent of their customer funds in

481
00:24:52,280 --> 00:24:56,880
Speaker 3: something called permissible investments, and the permissible investments are generally

482
00:24:57,480 --> 00:25:02,000
Speaker 3: short term, high quality liquid asset. Okay, So if we

483
00:25:02,160 --> 00:25:05,879
Speaker 3: want to step back and look at it objectively, we

484
00:25:05,960 --> 00:25:08,600
Speaker 3: already have one hundred percent reserve banks. They're just not

485
00:25:08,880 --> 00:25:13,359
Speaker 3: legally banks because they can't accept deposits, but they're effectively

486
00:25:13,400 --> 00:25:16,440
Speaker 3: the same thing. They're called FinTechs, and they're called money

487
00:25:16,440 --> 00:25:19,400
Speaker 3: market funds. And so what's funny is.

488
00:25:19,280 --> 00:25:21,719
Speaker 1: How do they money market funds not collect deposits?

489
00:25:22,400 --> 00:25:28,840
Speaker 3: Well, because deposits are a US dollar that is deposited

490
00:25:28,960 --> 00:25:32,480
Speaker 3: into a bank. So legally, a money market fund is

491
00:25:32,480 --> 00:25:36,080
Speaker 3: a security. You're buying a security. Now, you and I

492
00:25:36,119 --> 00:25:38,680
Speaker 3: look at that and say, it's effectively the same thing,

493
00:25:39,400 --> 00:25:42,720
Speaker 3: but the plumbing is very different and the legal structure

494
00:25:42,800 --> 00:25:46,120
Speaker 3: is very different. A money market fund cannot be used

495
00:25:46,119 --> 00:25:48,680
Speaker 3: to make a payment that has to be done through

496
00:25:48,680 --> 00:25:52,119
Speaker 3: a bank. Now, if we segregate out what are the

497
00:25:52,200 --> 00:25:57,600
Speaker 3: functions of our bank. We really use our bank for

498
00:25:57,920 --> 00:26:04,120
Speaker 3: basically two things, for storing our deposits, storing our US

499
00:26:04,240 --> 00:26:08,960
Speaker 3: dollars and for making payments. So the storage of the

500
00:26:09,040 --> 00:26:11,560
Speaker 3: US deposits that can be handled through a money market

501
00:26:11,600 --> 00:26:15,960
Speaker 3: fund with arguably higher yields and lower risk, which is

502
00:26:15,960 --> 00:26:18,240
Speaker 3: why again so many people are voting with their feet.

503
00:26:19,080 --> 00:26:20,919
Speaker 3: A lot of people have commented that this isn't a

504
00:26:20,920 --> 00:26:23,919
Speaker 3: bank run, it's a bank walk. It's the slow bleed

505
00:26:24,400 --> 00:26:28,679
Speaker 3: of deposits out of the banking system into money market

506
00:26:28,680 --> 00:26:31,800
Speaker 3: funds just simply because of the economics, the risk adjusted

507
00:26:31,840 --> 00:26:35,080
Speaker 3: returns okay, And that's a situation that has been created

508
00:26:35,080 --> 00:26:38,960
Speaker 3: by the FED itself. But we also use the bank

509
00:26:39,000 --> 00:26:43,440
Speaker 3: for payments, and the money market fund cannot offer access

510
00:26:43,480 --> 00:26:46,119
Speaker 3: to fedwire and ACCH. In order to get access to

511
00:26:46,160 --> 00:26:49,439
Speaker 3: fedwire and ACCH as a financial institution, you must be

512
00:26:49,480 --> 00:26:49,879
Speaker 3: a bank.

513
00:26:50,560 --> 00:26:54,960
Speaker 1: Where where do like Charles Schwab and those types, because

514
00:26:55,000 --> 00:26:58,000
Speaker 1: they offer they have bank subsidiaries.

515
00:26:58,160 --> 00:27:00,560
Speaker 3: They either have bank subsidiaries, which is what Charles Schwab

516
00:27:00,600 --> 00:27:03,199
Speaker 3: and Morgan Stanley for example, have, or they use a

517
00:27:03,240 --> 00:27:08,119
Speaker 3: clearing bank like a JP. Morgan what would be called

518
00:27:08,119 --> 00:27:13,240
Speaker 3: a correspondent bank, and basically it's really passing through their

519
00:27:13,320 --> 00:27:15,840
Speaker 3: balance sheet and that's how they get access to the FED.

520
00:27:16,040 --> 00:27:18,200
Speaker 3: So this whole question of who gets access to FED

521
00:27:18,240 --> 00:27:21,280
Speaker 3: accounts is a very interesting one because in other countries,

522
00:27:22,160 --> 00:27:25,560
Speaker 3: non banks get access to central bank accounts. So the

523
00:27:25,600 --> 00:27:28,159
Speaker 3: FinTechs like the paypals and Stripes and squares of the

524
00:27:28,200 --> 00:27:31,240
Speaker 3: world in the UK, for example, would be eligible to

525
00:27:31,320 --> 00:27:34,080
Speaker 3: get a clearing account at the FED. However in the

526
00:27:34,160 --> 00:27:37,360
Speaker 3: US that's not the case. Well, in the UK would

527
00:27:37,359 --> 00:27:39,400
Speaker 3: be the Bank of England, but in the US that's

528
00:27:39,440 --> 00:27:41,520
Speaker 3: not the case. The law says you have to be

529
00:27:41,560 --> 00:27:45,919
Speaker 3: a depository institution. Now, an eligible depository institution. What is

530
00:27:45,920 --> 00:27:50,000
Speaker 3: that defined as? Number one, it's insured depository institutions, so

531
00:27:50,160 --> 00:27:54,280
Speaker 3: FDIC insured banks or NCUA insured credit unions. That's a

532
00:27:54,280 --> 00:27:58,240
Speaker 3: group number one insured depository institutions. And number two is

533
00:27:58,680 --> 00:28:03,440
Speaker 3: depository institutions eligible to apply for insurance. Custodia falls into

534
00:28:03,480 --> 00:28:06,760
Speaker 3: that second bucket. We are uninsured. The FDIC was refusing

535
00:28:06,800 --> 00:28:11,679
Speaker 3: to ensure any companies applying for insurance that were involved

536
00:28:11,680 --> 00:28:14,760
Speaker 3: in the digital asset industry. Incidentally, I agree with them.

537
00:28:15,640 --> 00:28:17,199
Speaker 3: We can come back and talk about that later if

538
00:28:17,240 --> 00:28:20,800
Speaker 3: you want to. But the point is that second bucket

539
00:28:20,960 --> 00:28:24,359
Speaker 3: is in federal statute, and federal law says the Federal

540
00:28:24,400 --> 00:28:29,399
Speaker 3: Reserve shall provide services to eligible depository institutions. If shall

541
00:28:29,440 --> 00:28:32,760
Speaker 3: means shall, then that means a federal reserve should or

542
00:28:32,800 --> 00:28:37,320
Speaker 3: will have to provide those services. Both the FED and

543
00:28:37,400 --> 00:28:42,920
Speaker 3: the FDIC started to reinterpret the laws that apply to them,

544
00:28:43,000 --> 00:28:44,000
Speaker 3: shall we say.

545
00:28:44,600 --> 00:28:44,680
Speaker 1: And.

546
00:28:46,240 --> 00:28:49,040
Speaker 3: Start to pick and choose who they got to serve

547
00:28:49,120 --> 00:28:53,160
Speaker 3: and who they didn't want to serve. And that has

548
00:28:53,280 --> 00:28:57,080
Speaker 3: resulted in the politicization of the banking system. And that

549
00:28:57,200 --> 00:29:00,960
Speaker 3: is something I have spoken out about broadly. Banking should

550
00:29:00,960 --> 00:29:05,520
Speaker 3: not be politicized. If there are fights over whether marijuana

551
00:29:05,600 --> 00:29:09,800
Speaker 3: is legal, or whether abortion clinics should have access to

552
00:29:09,880 --> 00:29:12,920
Speaker 3: the financial service to you know, to banks, or whether

553
00:29:12,960 --> 00:29:16,960
Speaker 3: oil and gas companies should have access to banks, those

554
00:29:16,960 --> 00:29:22,920
Speaker 3: should be fought out in the regulatory realm, not behind

555
00:29:23,080 --> 00:29:28,840
Speaker 3: closed doors in a bank supervisors exam one.

556
00:29:30,000 --> 00:29:32,320
Speaker 2: Yeah, that's a big deal. That's a big deal.

557
00:29:32,400 --> 00:29:34,920
Speaker 1: Now what about you'd said the two functions of the bank,

558
00:29:34,920 --> 00:29:36,560
Speaker 1: But there's a third function of the bank too, which

559
00:29:36,600 --> 00:29:39,960
Speaker 1: is extending credit. That's to the point that you're making earlier.

560
00:29:40,000 --> 00:29:42,920
Speaker 1: That's where the money is actually created issues through the bank.

561
00:29:43,280 --> 00:29:46,440
Speaker 3: Correct. Not everybody borrows from a bank, right, So now

562
00:29:46,480 --> 00:29:49,320
Speaker 3: we can actually do we can divide banks into lending

563
00:29:49,360 --> 00:29:52,920
Speaker 3: banks and banks that are really just payment banks. Or

564
00:29:53,200 --> 00:29:56,960
Speaker 3: there's a third category, which is custody banks. So custody

565
00:29:56,960 --> 00:30:01,320
Speaker 3: banks like Bank of New York, Mellon, Stay Street, Northern Trust,

566
00:30:01,720 --> 00:30:05,760
Speaker 3: most of their business is providing custody for securities. They

567
00:30:05,800 --> 00:30:09,560
Speaker 3: do have small lending books, but that if you go

568
00:30:09,640 --> 00:30:11,920
Speaker 3: if you look at the balance sheets of those banks,

569
00:30:12,400 --> 00:30:16,120
Speaker 3: they are teeny tiny compared to the assets under custody.

570
00:30:16,560 --> 00:30:20,200
Speaker 3: It's i don't know, like one hundred billion of on

571
00:30:20,400 --> 00:30:24,920
Speaker 3: balance sheet assets and twenty trillion of off balance sheet

572
00:30:24,960 --> 00:30:29,880
Speaker 3: assets under custody at those banks. Directionally, those ratios are right.

573
00:30:30,000 --> 00:30:32,360
Speaker 3: They really are not in the business of making loans.

574
00:30:32,400 --> 00:30:35,760
Speaker 3: They're mostly in the business of providing services. And that's

575
00:30:36,640 --> 00:30:41,560
Speaker 3: that's that's a well trodden path for banks. So it's

576
00:30:41,680 --> 00:30:44,400
Speaker 3: not the case that every bank makes loans.

577
00:30:44,960 --> 00:30:49,560
Speaker 1: Okay, So custodia is not dead in the water. You're

578
00:30:49,680 --> 00:30:52,160
Speaker 1: up and running, just not full services at this point,

579
00:30:52,240 --> 00:30:52,800
Speaker 1: is that correct?

580
00:30:53,400 --> 00:30:56,440
Speaker 3: We're not taking third party customer funds right now. We've

581
00:30:56,480 --> 00:30:59,280
Speaker 3: actually been operating since October. We kept it quiet, but

582
00:30:59,320 --> 00:31:02,720
Speaker 3: we've been operating since October, and we got our certificate

583
00:31:02,760 --> 00:31:04,960
Speaker 3: of authority to operate from the Wyoming Division of Banking

584
00:31:05,040 --> 00:31:08,600
Speaker 3: last October. But stay tuned. We will have announcements coming

585
00:31:08,680 --> 00:31:11,840
Speaker 3: out relatively soon about a pivot.

586
00:31:12,120 --> 00:31:15,480
Speaker 1: Yeah, we'll certainly be hanging on that. I'm curious then,

587
00:31:15,960 --> 00:31:18,720
Speaker 1: you know, part of I think what custodia and maybe

588
00:31:18,800 --> 00:31:20,680
Speaker 1: potentially you can tell me about the name, but kind

589
00:31:20,680 --> 00:31:22,720
Speaker 1: of like custodian I'm guessing right.

590
00:31:22,640 --> 00:31:25,320
Speaker 2: Full reserve, but also involved.

591
00:31:24,920 --> 00:31:27,400
Speaker 1: Bitcoin and I think maybe other crypto assets as well,

592
00:31:27,640 --> 00:31:30,440
Speaker 1: and taking custody of those. And I'm just curious, you know,

593
00:31:30,880 --> 00:31:34,400
Speaker 1: like we're obviously in this transition and most of us

594
00:31:34,520 --> 00:31:38,200
Speaker 1: alive today are used to banks holding our money for us. Now,

595
00:31:38,280 --> 00:31:40,000
Speaker 1: of course, we have bitcoin that allows us to take

596
00:31:40,000 --> 00:31:41,200
Speaker 1: custody of our own assets.

597
00:31:41,640 --> 00:31:42,360
Speaker 2: You know, we have this.

598
00:31:42,480 --> 00:31:44,400
Speaker 1: We're kind of stuck between generations. Some people are still

599
00:31:44,400 --> 00:31:48,320
Speaker 1: going to want that custody, et cetera, and especially maybe

600
00:31:48,320 --> 00:31:51,200
Speaker 1: with institutions and things like that. I'm just curious your

601
00:31:51,200 --> 00:31:54,200
Speaker 1: take on that, given what's happened over the weekend with Ledger.

602
00:31:54,960 --> 00:31:59,040
Speaker 3: Well, look, I mean what Ledger revealed is something that

603
00:31:59,120 --> 00:32:03,480
Speaker 3: a lot of folks did not understand about the nature

604
00:32:03,760 --> 00:32:10,680
Speaker 3: of the hardware provider having software control over the extraction

605
00:32:10,720 --> 00:32:13,560
Speaker 3: of private keys and a hardware device. Okay, So what

606
00:32:13,720 --> 00:32:19,000
Speaker 3: that's underscoring is that if you are not self custodying

607
00:32:19,720 --> 00:32:24,880
Speaker 3: literally by you generating a random seed phrase and you

608
00:32:25,000 --> 00:32:29,360
Speaker 3: storing it yourselves in a secure way, then you're relying

609
00:32:29,400 --> 00:32:33,200
Speaker 3: on someone else and it's just a different layer of trust. So,

610
00:32:34,000 --> 00:32:35,640
Speaker 3: you know, I think a lot of the engineers who

611
00:32:35,680 --> 00:32:38,840
Speaker 3: said this is no big deal understood it all along.

612
00:32:39,120 --> 00:32:41,960
Speaker 3: A lot of people who were really shocked just didn't

613
00:32:42,040 --> 00:32:45,080
Speaker 3: understand that's what that's what the hardware devices were all along.

614
00:32:45,600 --> 00:32:48,400
Speaker 3: So there was a really interesting panel that I was

615
00:32:48,640 --> 00:32:51,120
Speaker 3: honored to be part of that Jamison Lop of KASA

616
00:32:51,400 --> 00:32:57,560
Speaker 3: hosted with Obe of Fetiment, and it's basically three different

617
00:32:57,600 --> 00:33:04,440
Speaker 3: models of custody, with KASA being self being a three

618
00:33:04,440 --> 00:33:09,320
Speaker 3: of five multi sig, with custodia being a structure that

619
00:33:09,440 --> 00:33:13,200
Speaker 3: is very different than traditional full service third party custody

620
00:33:13,640 --> 00:33:17,479
Speaker 3: because the legal structure of the Wyoming law allows you

621
00:33:17,560 --> 00:33:21,160
Speaker 3: to retain title legal title to your assets even when

622
00:33:21,200 --> 00:33:23,880
Speaker 3: you turn over your private keys. And then there's the

623
00:33:23,920 --> 00:33:28,760
Speaker 3: community custody model, where essentially you're segregating out parts of

624
00:33:28,800 --> 00:33:31,400
Speaker 3: the keys into the your trusted community.

625
00:33:32,200 --> 00:33:34,560
Speaker 1: And then of course would you put that third model

626
00:33:34,600 --> 00:33:37,320
Speaker 1: sort of like with a coinbase kind of model.

627
00:33:37,160 --> 00:33:40,480
Speaker 3: Well, no, it's not, because in that case you're keeping

628
00:33:40,520 --> 00:33:43,600
Speaker 3: parts of your key, as I understand it, with trusted

629
00:33:43,760 --> 00:33:49,840
Speaker 3: people in your community. Coinbase full service counterparty risk. What

630
00:33:49,880 --> 00:33:51,920
Speaker 3: you have as an IOU, you don't have legal title

631
00:33:51,960 --> 00:33:56,960
Speaker 3: to the asset, and as the SEC properly required Coinbase

632
00:33:57,040 --> 00:34:01,320
Speaker 3: to disclose last spring, and this applies to all third

633
00:34:01,400 --> 00:34:03,960
Speaker 3: party custody that exists in the US market right now.

634
00:34:05,440 --> 00:34:08,319
Speaker 3: The way that legal structure works is when you turn

635
00:34:08,360 --> 00:34:11,200
Speaker 3: over your bitcoin to a custodian, they give you an

636
00:34:11,200 --> 00:34:14,360
Speaker 3: IOU back, and if they go out of business because

637
00:34:14,400 --> 00:34:17,000
Speaker 3: of their legal structure, they're subject to the US Bankruptcy

638
00:34:17,000 --> 00:34:20,400
Speaker 3: Code and you're stuck in a bankruptcy line getting your

639
00:34:20,440 --> 00:34:20,919
Speaker 3: money back.

640
00:34:21,320 --> 00:34:24,280
Speaker 1: It looks like though, with Celsius and Blockfi they're letting

641
00:34:24,280 --> 00:34:26,719
Speaker 1: people who are in custody solutions get their money back,

642
00:34:26,800 --> 00:34:28,960
Speaker 1: but not in their earn or yield products.

643
00:34:29,440 --> 00:34:33,680
Speaker 3: Well, again, some of that is a function of just

644
00:34:33,800 --> 00:34:38,160
Speaker 3: how much money the custodian has. So they were able

645
00:34:38,200 --> 00:34:42,000
Speaker 3: and willing to be able to pay those out and

646
00:34:42,120 --> 00:34:45,080
Speaker 3: they were deemed to be senior claims. So now we

647
00:34:45,120 --> 00:34:49,800
Speaker 3: get into some very esoteric legal structures as to whether

648
00:34:49,840 --> 00:34:51,960
Speaker 3: the account was an omnibus account or not. If it's

649
00:34:51,960 --> 00:34:53,960
Speaker 3: an omnibus account or not, you are definitely in a

650
00:34:54,000 --> 00:34:59,600
Speaker 3: debtor credit or relationship. But if you have a trust

651
00:34:59,640 --> 00:35:03,560
Speaker 3: account owned, there's a better argument for segregation. What Coinbase

652
00:35:03,719 --> 00:35:05,960
Speaker 3: was required by the SEC to disclose, and it was

653
00:35:06,000 --> 00:35:08,880
Speaker 3: about a year ago. There was a big bruhaha over oh,

654
00:35:08,920 --> 00:35:11,480
Speaker 3: it's Coinbase going bankrupt. Well, no, I didn't think they

655
00:35:11,480 --> 00:35:14,000
Speaker 3: were going bankrupt. What they asked. What the SEC made

656
00:35:14,000 --> 00:35:17,839
Speaker 3: them disclosed is that if they ever did that, there

657
00:35:17,960 --> 00:35:22,680
Speaker 3: is a risk that that the people who are holding

658
00:35:22,719 --> 00:35:26,279
Speaker 3: money in their trust company might not find that their

659
00:35:26,320 --> 00:35:29,800
Speaker 3: assets are segregated right at the moment when they need

660
00:35:29,880 --> 00:35:33,480
Speaker 3: the assets to be segregated. Why. Because the US Bankruptcy

661
00:35:33,520 --> 00:35:38,920
Speaker 3: Code is US bankruptcy Court judges are empowered under the

662
00:35:39,000 --> 00:35:42,000
Speaker 3: US Bankruptcy Code to be able to break contracts and

663
00:35:42,680 --> 00:35:45,040
Speaker 3: in a trust company or a money transmitter legally in

664
00:35:45,040 --> 00:35:48,960
Speaker 3: the United States, the asset segregation is by contract, Okay,

665
00:35:49,200 --> 00:35:52,440
Speaker 3: big difference with a bank like Custodia or a broker dealer.

666
00:35:52,680 --> 00:35:57,200
Speaker 3: Banks and broker dealers have special statutory segregation of assets

667
00:35:57,560 --> 00:36:02,040
Speaker 3: and special receivership regimes. A bank judge cannot break the

668
00:36:02,080 --> 00:36:06,360
Speaker 3: statutory segregation of assets. That judge must respect it. Okay.

669
00:36:06,400 --> 00:36:09,520
Speaker 3: So what that means, and that is that the greater

670
00:36:09,760 --> 00:36:12,239
Speaker 3: likelihood is that if anything happened to a custodian that

671
00:36:12,280 --> 00:36:14,919
Speaker 3: was a bank or a broker dealer, you were more

672
00:36:15,040 --> 00:36:17,560
Speaker 3: likely to get your money back. Ultimately, in the case

673
00:36:17,600 --> 00:36:20,360
Speaker 3: of Lehman, pretty much everybody got their money back. It

674
00:36:20,400 --> 00:36:23,840
Speaker 3: took some time, but that's because they had statutory segregation

675
00:36:23,920 --> 00:36:27,320
Speaker 3: of assets and they paid out the money fairly quickly.

676
00:36:27,360 --> 00:36:30,319
Speaker 3: So it does depend on how deep the loss is

677
00:36:31,360 --> 00:36:35,040
Speaker 3: and whether they recover sufficient assets to start to pay

678
00:36:35,080 --> 00:36:39,160
Speaker 3: out creditors fast. Bankruptcy judges want to pay out creditors fast,

679
00:36:39,239 --> 00:36:45,400
Speaker 3: for sure. But the gist is this is complicated stuff.

680
00:36:45,400 --> 00:36:47,719
Speaker 3: There's one other piece I'll add, which is that Wyoming

681
00:36:47,760 --> 00:36:52,160
Speaker 3: offers something called bailman. Bailman is the law of valet

682
00:36:52,440 --> 00:36:55,200
Speaker 3: parking for your car or a code check you are

683
00:36:55,239 --> 00:36:57,919
Speaker 3: not handing legal title to your car when you perk

684
00:36:58,000 --> 00:37:01,520
Speaker 3: it at the garage to the garage, the garage can

685
00:37:01,560 --> 00:37:03,600
Speaker 3: do one and one only one thing only, which is

686
00:37:03,600 --> 00:37:06,080
Speaker 3: park your car. They can't take it on a joy ride.

687
00:37:06,200 --> 00:37:08,759
Speaker 3: They can't, you know, rent it out to an uber

688
00:37:08,840 --> 00:37:13,280
Speaker 3: driver and pocket the earnings and securities custody. That's exactly

689
00:37:13,280 --> 00:37:17,560
Speaker 3: how it works. You custody, You deposit your securities with

690
00:37:17,640 --> 00:37:20,680
Speaker 3: a custody bank. They take your securities for a joy ride,

691
00:37:21,200 --> 00:37:24,240
Speaker 3: stick you with the risk, and they pocket the losses.

692
00:37:24,280 --> 00:37:27,440
Speaker 3: That's the way it works. Okay. So the Wyoming bailment

693
00:37:27,560 --> 00:37:32,600
Speaker 3: law not only keeps title with statutory segregation with the

694
00:37:32,640 --> 00:37:37,520
Speaker 3: customer if the customer elects the bailance. However, also it

695
00:37:38,239 --> 00:37:42,280
Speaker 3: prohibits the custodian from the proverbial joy ride with your assets.

696
00:37:42,640 --> 00:37:45,759
Speaker 3: The only thing that you can do as a custodian

697
00:37:45,840 --> 00:37:49,880
Speaker 3: under Wyoming law is what your customer specifically directs you

698
00:37:49,960 --> 00:37:53,640
Speaker 3: to do. Whereas in the securities custody world, the Bank

699
00:37:53,680 --> 00:37:57,680
Speaker 3: of New York's the you know, the the Northern Trust,

700
00:37:57,760 --> 00:38:01,319
Speaker 3: the State streets go read the fine for rent. They

701
00:38:01,360 --> 00:38:05,120
Speaker 3: can they can lend out your assets without your express

702
00:38:05,160 --> 00:38:09,080
Speaker 3: consent and it's called securities lending. These are big, big

703
00:38:09,120 --> 00:38:13,160
Speaker 3: businesses for these banks. Uh, and they're pocketing profits.

704
00:38:13,320 --> 00:38:13,640
Speaker 1: Uh.

705
00:38:13,680 --> 00:38:16,719
Speaker 3: And you're arguably getting a lot of risk that you're.

706
00:38:16,520 --> 00:38:21,439
Speaker 1: Part of the whole rehypothification and it goes down absolutely right, Yes,

707
00:38:21,680 --> 00:38:24,239
Speaker 1: without getting going down that whole rabbit hole. But I'm

708
00:38:24,280 --> 00:38:28,359
Speaker 1: just curious, you know, to the point of the securities.

709
00:38:28,400 --> 00:38:30,840
Speaker 1: I mean, like, so I don't own the apple stock.

710
00:38:31,560 --> 00:38:33,120
Speaker 1: E trade owns it and they owe it to me.

711
00:38:33,600 --> 00:38:36,120
Speaker 1: But then E Trade doesn't own it either. It's owed

712
00:38:36,160 --> 00:38:38,080
Speaker 1: to them, which is owed to them, And there's I

713
00:38:38,080 --> 00:38:41,160
Speaker 1: don't know, five five, five six people in this process,

714
00:38:41,200 --> 00:38:44,600
Speaker 1: this DTCC kind of clearing services that does all this.

715
00:38:45,680 --> 00:38:49,279
Speaker 1: It seems like now we have technology that could fix

716
00:38:49,320 --> 00:38:52,400
Speaker 1: that problem. So you know, whether that be on some

717
00:38:52,480 --> 00:38:54,880
Speaker 1: blockchain or on top of the bitcoin blockchain, we have

718
00:38:54,960 --> 00:38:58,360
Speaker 1: like you know, potentially like a taro layer that we could.

719
00:38:58,160 --> 00:38:59,440
Speaker 2: Now own securities.

720
00:38:59,719 --> 00:38:59,919
Speaker 3: Yeah.

721
00:39:00,120 --> 00:39:00,359
Speaker 2: Yeah.

722
00:39:00,520 --> 00:39:02,880
Speaker 1: And it wasn't that long ago that stocks used to

723
00:39:02,880 --> 00:39:05,400
Speaker 1: be bearer instruments. It was a stock certificate. It was

724
00:39:05,400 --> 00:39:07,799
Speaker 1: actually a certificate. You know, we've we've we've grown yeah,

725
00:39:07,840 --> 00:39:09,920
Speaker 1: paper and we've grown up. Seen the movies. I don't

726
00:39:09,920 --> 00:39:10,960
Speaker 1: know if they still do it, but they had, like

727
00:39:11,040 --> 00:39:13,160
Speaker 1: you know, the criminals, like give me the bearer bonds, right,

728
00:39:13,239 --> 00:39:16,239
Speaker 1: like bear bonds were like bear instruments and so like.

729
00:39:16,320 --> 00:39:19,400
Speaker 1: It wasn't that long ago that these securities were bare instruments,

730
00:39:19,440 --> 00:39:21,560
Speaker 1: and now we have the technology to do that again. However,

731
00:39:22,040 --> 00:39:26,880
Speaker 1: there's this whole establishment that seems to rent seek in

732
00:39:26,920 --> 00:39:27,480
Speaker 1: the middle.

733
00:39:27,280 --> 00:39:29,000
Speaker 2: Of every opportunity to hear back.

734
00:39:29,120 --> 00:39:31,320
Speaker 1: And not just rent seek taking a piece of the transaction,

735
00:39:31,360 --> 00:39:34,080
Speaker 1: but actually leveraging them out, use them to your point

736
00:39:34,080 --> 00:39:36,520
Speaker 1: of joy, joy writing your cart while you're gone.

737
00:39:37,120 --> 00:39:38,440
Speaker 2: Do you think I mean, is that going to be

738
00:39:38,520 --> 00:39:39,640
Speaker 2: a big.

739
00:39:39,480 --> 00:39:44,040
Speaker 1: If not almost insurmountable obstacle in the way of letting

740
00:39:44,080 --> 00:39:45,400
Speaker 1: technology fix that solution.

741
00:39:46,000 --> 00:39:48,520
Speaker 3: Well, so this is interesting. This is a broader question.

742
00:39:49,120 --> 00:39:54,280
Speaker 3: Do the bank regulators want technology innovation in the banking system?

743
00:39:54,680 --> 00:39:57,360
Speaker 3: And here's what I think happened. I think the answer

744
00:39:57,440 --> 00:39:57,680
Speaker 3: is no.

745
00:39:58,040 --> 00:39:58,680
Speaker 2: I would say no.

746
00:39:59,120 --> 00:40:02,759
Speaker 3: And here's why they let the back end systems of

747
00:40:02,800 --> 00:40:06,840
Speaker 3: the banking industry atrophy. And now here come all these

748
00:40:07,280 --> 00:40:10,920
Speaker 3: FinTechs with these ferrari front ends that have to plug

749
00:40:10,960 --> 00:40:13,960
Speaker 3: into the horse and buggy back end. And then here

750
00:40:14,000 --> 00:40:16,960
Speaker 3: comes crypto on top of that, which is in some

751
00:40:17,000 --> 00:40:20,439
Speaker 3: ways even faster and more efficient than the FinTechs because

752
00:40:20,440 --> 00:40:25,480
Speaker 3: they've got their own separate settlement systems. Wow, that's scarce.

753
00:40:25,560 --> 00:40:30,000
Speaker 3: The banking regulators and here's the problem. They're in a

754
00:40:30,040 --> 00:40:31,920
Speaker 3: catch twenty two. We talked at the beginning of this

755
00:40:32,000 --> 00:40:34,680
Speaker 3: conversation about the catch twenty two they're in with, which is,

756
00:40:34,719 --> 00:40:36,920
Speaker 3: if they keep raising interest rates and have an inverted

757
00:40:36,960 --> 00:40:40,640
Speaker 3: yield curve, they cause more banks to go bust. Now

758
00:40:40,680 --> 00:40:42,640
Speaker 3: they're in a catch twenty two on technology too, that

759
00:40:42,800 --> 00:40:45,600
Speaker 3: very few people are talking about. People are voting with

760
00:40:45,680 --> 00:40:49,400
Speaker 3: their feet to use the better technology, especially the millennials

761
00:40:49,400 --> 00:40:52,560
Speaker 3: and gen zs. They've never set foot in a bank branch.

762
00:40:53,239 --> 00:40:57,160
Speaker 3: Yet liquidity and capital in the banking world are calibrated

763
00:40:57,160 --> 00:41:00,759
Speaker 3: to an analog world. So people are voting with their

764
00:41:00,800 --> 00:41:07,359
Speaker 3: feet to go digital. They want regulated digital asset service providers.

765
00:41:08,160 --> 00:41:13,400
Speaker 3: They'd rather do business within the regulated world, but the

766
00:41:13,520 --> 00:41:17,960
Speaker 3: traditional regulators are trying to shove them backwards in technology.

767
00:41:18,239 --> 00:41:21,320
Speaker 3: I talked to one of the gen Z folks at Miami.

768
00:41:21,960 --> 00:41:25,120
Speaker 3: He's never written a check and has only set foot

769
00:41:25,160 --> 00:41:29,600
Speaker 3: in a bank branch once in his life. So there

770
00:41:29,640 --> 00:41:31,960
Speaker 3: you go. Now, try to make somebody like that live

771
00:41:31,960 --> 00:41:34,680
Speaker 3: in an analog world. Yeah, not going backwards.

772
00:41:34,800 --> 00:41:37,160
Speaker 1: Yeah, they're not going back It makes me think of

773
00:41:38,160 --> 00:41:41,160
Speaker 1: a quote from Christine Legard and she said that innovation

774
00:41:41,400 --> 00:41:43,400
Speaker 1: is a threat to our financial stability.

775
00:41:44,080 --> 00:41:45,120
Speaker 2: Which it is.

776
00:41:45,440 --> 00:41:48,520
Speaker 1: I mean, it's innovation. It disrupts the old way of

777
00:41:48,560 --> 00:41:51,160
Speaker 1: doing things. That's the entire point. And it's actually a

778
00:41:51,200 --> 00:41:53,960
Speaker 1: conversation I had with Robert Breedlove while we were in Miami,

779
00:41:54,080 --> 00:41:55,840
Speaker 1: and I was explaining kind of how I was thinking

780
00:41:55,880 --> 00:41:59,080
Speaker 1: through this, and like from many ways, we had a

781
00:41:59,080 --> 00:42:00,720
Speaker 1: long rip on his podcast.

782
00:42:00,760 --> 00:42:02,200
Speaker 2: We talked about it, but how like.

783
00:42:02,160 --> 00:42:04,759
Speaker 1: Our current form of government was built for the industrial

784
00:42:04,800 --> 00:42:07,640
Speaker 1: age and now we've moved, we've moved to the information age,

785
00:42:07,880 --> 00:42:10,799
Speaker 1: and we still have an industrial age government, but we

786
00:42:10,840 --> 00:42:13,239
Speaker 1: have an information age world. And one of those things

787
00:42:13,239 --> 00:42:14,799
Speaker 1: I didn't talk about it necessarily with him, but one

788
00:42:14,840 --> 00:42:16,600
Speaker 1: of those things that I was thinking about is that,

789
00:42:17,000 --> 00:42:20,280
Speaker 1: you know, we've gone from a slow settlement to instance

790
00:42:20,600 --> 00:42:24,239
Speaker 1: or not I'm sorry, slow transactions to instant transactions, and

791
00:42:24,280 --> 00:42:26,160
Speaker 1: so kind of to the point earlier about moving money

792
00:42:26,160 --> 00:42:27,600
Speaker 1: from bank to bank, I can literally do it with

793
00:42:27,600 --> 00:42:29,719
Speaker 1: a push of a button instead of driving to the

794
00:42:29,760 --> 00:42:32,239
Speaker 1: bank and filling out the forms, et cetera, and or

795
00:42:32,280 --> 00:42:33,640
Speaker 1: whether I buy things, you know, I used to have

796
00:42:33,680 --> 00:42:34,919
Speaker 1: to go to the store and I push a button.

797
00:42:34,960 --> 00:42:38,360
Speaker 1: So now we have instant transactions, but the settlement still

798
00:42:38,600 --> 00:42:41,040
Speaker 1: is in the dark ages here, right, And so that's

799
00:42:41,080 --> 00:42:42,680
Speaker 1: kind of the point that you're making. The banks have

800
00:42:42,760 --> 00:42:45,320
Speaker 1: this cart and buggy back end, and how we have

801
00:42:45,400 --> 00:42:49,640
Speaker 1: these ferrari or even spaceship set transactions, and so there's

802
00:42:49,680 --> 00:42:50,919
Speaker 1: just this big gap that's there.

803
00:42:51,400 --> 00:42:53,800
Speaker 3: Well, and that's what Custodia set out to solve. We

804
00:42:54,000 --> 00:42:57,920
Speaker 3: we really truly were a friendly and we're actively working

805
00:42:58,520 --> 00:43:00,919
Speaker 3: with both sides to figure out how to make sure

806
00:43:00,920 --> 00:43:04,439
Speaker 3: that neither side caused problems for the other. And in fact,

807
00:43:04,520 --> 00:43:09,080
Speaker 3: unfortunately what happened is both sides caused problems for the other. Right,

808
00:43:09,200 --> 00:43:13,600
Speaker 3: we saw the traditional banking system, you know, through the

809
00:43:13,840 --> 00:43:17,000
Speaker 3: through the d banking, and just like the small number

810
00:43:17,000 --> 00:43:19,479
Speaker 3: of banks that were willing to serve this industry caused

811
00:43:19,480 --> 00:43:21,520
Speaker 3: a lot of problems for the digital asset industry. And

812
00:43:21,560 --> 00:43:24,400
Speaker 3: by the way, the digital asset industry arguably blew up

813
00:43:24,440 --> 00:43:27,640
Speaker 3: some of those banks because going back to FTX, there

814
00:43:27,640 --> 00:43:32,520
Speaker 3: were eleven banks, including three gesibs that provided financial services

815
00:43:32,520 --> 00:43:37,680
Speaker 3: to FTX, which which appears to have been just a

816
00:43:37,719 --> 00:43:44,160
Speaker 3: giant fraud and allegedly and yet eleven banks didn't catch that,

817
00:43:44,440 --> 00:43:48,279
Speaker 3: including three gesives including by the way, three us G SIPs.

818
00:43:48,320 --> 00:43:50,640
Speaker 3: I think there were two non us G SIPs as well.

819
00:43:50,920 --> 00:43:52,800
Speaker 3: These are supposed to be the best of the best

820
00:43:52,880 --> 00:43:56,640
Speaker 3: at catching money laundering, at catching you know, know, your

821
00:43:56,680 --> 00:44:02,640
Speaker 3: customer violations, and they were apparently allowing wires allegedly to

822
00:44:03,000 --> 00:44:07,120
Speaker 3: be sent to FTX that ended up instead being sent

823
00:44:07,160 --> 00:44:07,959
Speaker 3: to Alameda.

824
00:44:08,040 --> 00:44:08,279
Speaker 2: Yeah.

825
00:44:08,400 --> 00:44:10,160
Speaker 1: I saw that with silver Gate, and I was just like,

826
00:44:10,160 --> 00:44:11,560
Speaker 1: I couldn't believe it. I mean, how do you not

827
00:44:11,560 --> 00:44:12,640
Speaker 1: pick something like that up.

828
00:44:13,280 --> 00:44:14,920
Speaker 3: Well, I got to tell you, this is one of

829
00:44:14,920 --> 00:44:18,520
Speaker 3: the things that makes me sad about the attempt to

830
00:44:18,520 --> 00:44:21,319
Speaker 3: just shove this entire industry offshore and out of the

831
00:44:21,320 --> 00:44:24,560
Speaker 3: banking industry, is that there were some of us as

832
00:44:24,640 --> 00:44:30,000
Speaker 3: I think you know, who actively knew about some of

833
00:44:30,040 --> 00:44:33,120
Speaker 3: the frauds. Right, let's go back to my public statements

834
00:44:33,480 --> 00:44:35,840
Speaker 3: against the lenders. It was clear to me the lenders

835
00:44:35,840 --> 00:44:37,960
Speaker 3: were going to blow up. You cannot take an asset

836
00:44:38,320 --> 00:44:41,799
Speaker 3: that is finite in quantity and start rehapothecating it. The

837
00:44:41,840 --> 00:44:44,759
Speaker 3: moment you do that, somebody's insolvent and it's just a

838
00:44:44,800 --> 00:44:47,239
Speaker 3: matter of time before they blow up. And there is

839
00:44:47,280 --> 00:44:49,200
Speaker 3: no lender of last resort, unlike there is in the

840
00:44:49,239 --> 00:44:53,440
Speaker 3: traditional finance industry. And then I have publicly disclosed that.

841
00:44:54,239 --> 00:44:56,200
Speaker 1: You've been about that since you came into the space

842
00:44:56,320 --> 00:44:58,840
Speaker 1: years now, You've been pounded the table on that, right.

843
00:44:58,680 --> 00:45:01,359
Speaker 3: And so those of us who spun all that and

844
00:45:01,400 --> 00:45:05,120
Speaker 3: who and who also were working with law enforcement, to

845
00:45:05,440 --> 00:45:08,879
Speaker 3: the criticism of people in the in the you know,

846
00:45:08,920 --> 00:45:12,640
Speaker 3: the purists, I look at that and say, even the

847
00:45:12,640 --> 00:45:17,759
Speaker 3: purest libertarians should recognize that fraud is an attack on

848
00:45:17,840 --> 00:45:21,719
Speaker 3: property rights, and we should want to rid this industry

849
00:45:21,719 --> 00:45:25,560
Speaker 3: of fraud. And you know, behind the scenes, I've been helping.

850
00:45:25,560 --> 00:45:29,000
Speaker 3: I just heard of a horrific situation yesterday where somebody

851
00:45:29,719 --> 00:45:33,040
Speaker 3: was defrauded a substantial amount of money out of their IRA.

852
00:45:33,719 --> 00:45:37,000
Speaker 3: And you know the sad thing is it was done

853
00:45:37,040 --> 00:45:40,239
Speaker 3: through an offshore crypto exchange into a D five protocol.

854
00:45:40,760 --> 00:45:44,879
Speaker 3: He thought this was a regulated entity, and had there

855
00:45:44,920 --> 00:45:47,840
Speaker 3: been a regulated entity, he would have been handling his

856
00:45:47,920 --> 00:45:50,200
Speaker 3: business through the regulated entity. But because of the way

857
00:45:50,239 --> 00:45:53,719
Speaker 3: the US has shoved this all offshore. What have they done.

858
00:45:53,760 --> 00:45:57,120
Speaker 3: They've just empowered the criminals and the illicit finance part

859
00:45:57,120 --> 00:46:00,680
Speaker 3: of the industry and the crazy leverage I'm seeing now

860
00:46:00,719 --> 00:46:04,920
Speaker 3: two hundred to one leverage futures come back. I mean,

861
00:46:04,960 --> 00:46:06,160
Speaker 3: this is just awful.

862
00:46:06,200 --> 00:46:08,600
Speaker 1: I wish we could there's certainly that, and there's a

863
00:46:08,600 --> 00:46:11,920
Speaker 1: complete breakdown in our regulatory agency as well, which I

864
00:46:11,960 --> 00:46:14,400
Speaker 1: always have to preface this with a disclaimer, I'm not

865
00:46:14,560 --> 00:46:15,920
Speaker 1: for this. I think we should be free to do

866
00:46:15,920 --> 00:46:18,000
Speaker 1: what we want with our property and we'll take the responsibility,

867
00:46:18,040 --> 00:46:19,920
Speaker 1: and I think the SEC should shut down in disgrace.

868
00:46:20,280 --> 00:46:21,960
Speaker 2: That being said, they're here, so I guess we got

869
00:46:22,000 --> 00:46:22,480
Speaker 2: to deal with that.

870
00:46:22,560 --> 00:46:25,480
Speaker 1: But you know, back to the FTX scenario, okay, I

871
00:46:25,480 --> 00:46:27,839
Speaker 1: mean it was part in the US. Part was of Bahamas.

872
00:46:28,280 --> 00:46:30,600
Speaker 1: It was American investors, and we consider here and argue

873
00:46:30,600 --> 00:46:34,560
Speaker 1: about that. But they bought what the only US licensed

874
00:46:34,560 --> 00:46:38,879
Speaker 1: crypto derivatives exchange Ledger, and that went through the CFTC.

875
00:46:40,280 --> 00:46:43,520
Speaker 1: They don't even have any bank accounts. Everything was commingled

876
00:46:43,600 --> 00:46:45,919
Speaker 1: like nobody even looked at that, and supposedly they kept

877
00:46:45,920 --> 00:46:47,760
Speaker 1: everything on a spreadsheet.

878
00:46:47,400 --> 00:46:49,200
Speaker 2: Like what kind of compliance are they doing?

879
00:46:50,040 --> 00:46:50,920
Speaker 3: Yeah, I don't know about that.

880
00:46:50,920 --> 00:46:54,480
Speaker 1: With led Ledterx was not part of the bankruptcy, but

881
00:46:54,520 --> 00:46:57,720
Speaker 1: that because I was bought by FTX US or whatever.

882
00:46:58,560 --> 00:47:00,520
Speaker 3: Yes, but it was a separate legal So here's the

883
00:47:00,520 --> 00:47:05,200
Speaker 3: interesting thing this is, this is a really important point.

884
00:47:05,800 --> 00:47:09,560
Speaker 3: Ledger X just got sold. It had positive equity value,

885
00:47:09,719 --> 00:47:12,839
Speaker 3: it was solvent, and I don't believe ledier X was

886
00:47:12,880 --> 00:47:17,000
Speaker 3: included in the bankruptcy filing and it just got sold.

887
00:47:17,000 --> 00:47:20,000
Speaker 3: Of course the equity interest was owned by FTX.

888
00:47:19,680 --> 00:47:23,439
Speaker 1: But business the CFTC approved the sell for.

889
00:47:23,440 --> 00:47:24,279
Speaker 2: FTX to buy that.

890
00:47:25,520 --> 00:47:27,719
Speaker 1: Yes, they did, right, and they didn't they didn't look

891
00:47:27,719 --> 00:47:28,520
Speaker 1: into FTX.

892
00:47:29,120 --> 00:47:30,720
Speaker 2: That that's my that's my point.

893
00:47:30,920 --> 00:47:34,520
Speaker 3: I agree. Uh And again like I don't there were

894
00:47:34,520 --> 00:47:36,960
Speaker 3: so many due diligence failures. But again I got to

895
00:47:37,000 --> 00:47:39,360
Speaker 3: tell you, like you know, what was going on behind

896
00:47:39,360 --> 00:47:43,120
Speaker 3: the scenes of this industry. Those of us who had

897
00:47:43,120 --> 00:47:46,719
Speaker 3: been around for a while were quietly all talking to

898
00:47:46,800 --> 00:47:49,799
Speaker 3: each other saying, how the hell did FTX make as

899
00:47:49,880 --> 00:47:51,959
Speaker 3: much money as it did as fast as it did.

900
00:47:52,239 --> 00:47:55,080
Speaker 3: We knew what the economics were in this industry, and

901
00:47:55,160 --> 00:47:58,920
Speaker 3: we were we knew something was wrong there, and it

902
00:47:59,000 --> 00:48:03,920
Speaker 3: wasn't until until later that evidence started piling up that

903
00:48:04,000 --> 00:48:07,120
Speaker 3: something was very wrong there, and how is it that

904
00:48:07,160 --> 00:48:10,799
Speaker 3: the banks didn't catch that? You know? Unfortunately, for better

905
00:48:10,880 --> 00:48:14,440
Speaker 3: or for worse, the structure of the US system relies

906
00:48:14,480 --> 00:48:19,640
Speaker 3: on the banks as the government's cop right. They're supposed

907
00:48:19,640 --> 00:48:23,120
Speaker 3: to do the anti money laundering and know your customer

908
00:48:23,239 --> 00:48:26,879
Speaker 3: and O fact checks. And based on what I saw

909
00:48:26,920 --> 00:48:31,800
Speaker 3: from the FDICS Inspector General report, eleven US banks plus

910
00:48:31,800 --> 00:48:35,560
Speaker 3: several other non US banks failed on that front. What happened?

911
00:48:35,960 --> 00:48:38,600
Speaker 2: Yeah, yeah, so that was a little bit of a rapple.

912
00:48:38,719 --> 00:48:40,080
Speaker 1: I didn't really intend to go down to but it

913
00:48:40,120 --> 00:48:42,200
Speaker 1: is super interesting and it's important to understand as we

914
00:48:42,239 --> 00:48:44,399
Speaker 1: go through this transition. But going back to here kind

915
00:48:44,400 --> 00:48:47,120
Speaker 1: of the horse and buggy bank back end and strapping

916
00:48:47,160 --> 00:48:50,080
Speaker 1: to a Ferrari front end, we now have the launch

917
00:48:50,120 --> 00:48:52,680
Speaker 1: of the fed now system that's coming up in about

918
00:48:52,840 --> 00:48:55,080
Speaker 1: forty days, about just a little over a month that's

919
00:48:55,080 --> 00:48:58,200
Speaker 1: supposed to launch. Now I've tried to do my research.

920
00:48:58,239 --> 00:49:00,520
Speaker 1: I don't see a whole lot of information on this.

921
00:49:01,280 --> 00:49:03,480
Speaker 1: You know, it allows the banks to move money back

922
00:49:03,560 --> 00:49:06,200
Speaker 1: and forth faster. It's a new rail, it's not a currency.

923
00:49:06,280 --> 00:49:08,120
Speaker 1: So if we have like the BI we have the

924
00:49:08,160 --> 00:49:10,000
Speaker 1: bitcoin network, which is the network, and then we have

925
00:49:10,000 --> 00:49:11,880
Speaker 1: Bitcoin is the asset that SIT's honest, this is just

926
00:49:11,920 --> 00:49:13,840
Speaker 1: the network, the rail, not the asset.

927
00:49:14,280 --> 00:49:15,399
Speaker 2: But when I look at that, you.

928
00:49:15,320 --> 00:49:17,240
Speaker 1: Know, one of the things that doing is they're allowing okay,

929
00:49:17,440 --> 00:49:20,759
Speaker 1: you know now twenty four to seven settlement. But like,

930
00:49:21,920 --> 00:49:25,040
Speaker 1: if there's no asset moving back and forth, what settlement

931
00:49:25,360 --> 00:49:27,840
Speaker 1: is there? All there is is a ledger that the

932
00:49:27,840 --> 00:49:30,439
Speaker 1: Fed's going, okay from bank number one to bank number two.

933
00:49:31,680 --> 00:49:34,400
Speaker 1: I mean, I would imagine this can happen in a database,

934
00:49:35,000 --> 00:49:39,279
Speaker 1: a blockchain, a database or whatever. Yeah, I mean yeah,

935
00:49:39,320 --> 00:49:40,759
Speaker 1: it's not like you need somebody there with like a

936
00:49:40,800 --> 00:49:42,800
Speaker 1: pencil like tracking it. So like he went home or

937
00:49:42,840 --> 00:49:44,440
Speaker 1: took a break to go to lunch or something, and

938
00:49:44,480 --> 00:49:47,239
Speaker 1: so I was like, okay, so like what are they settling?

939
00:49:47,600 --> 00:49:50,080
Speaker 2: I mean yeah, I mean what you.

940
00:49:50,160 --> 00:49:53,000
Speaker 3: What you're underscoring is that all money is really just

941
00:49:53,120 --> 00:49:55,759
Speaker 3: a ledger. System used to be done you know, in

942
00:49:55,880 --> 00:49:59,280
Speaker 3: caweri shells. Then it was done in you know, pencil

943
00:49:59,320 --> 00:50:02,840
Speaker 3: and paper, and now it's done in bits in a

944
00:50:02,920 --> 00:50:06,799
Speaker 3: computer database. But it's just a ledger, that's all it is.

945
00:50:07,200 --> 00:50:09,759
Speaker 3: And the whole reason why there is such a thing

946
00:50:09,840 --> 00:50:12,480
Speaker 3: called settlement, is that the adults screwed up with the

947
00:50:12,560 --> 00:50:15,560
Speaker 3: kids understood. The kids used to trade baseball cards with

948
00:50:15,640 --> 00:50:19,120
Speaker 3: both kids holding both baseball cards, and on account of

949
00:50:19,160 --> 00:50:21,080
Speaker 3: three you let go of the one you're trading right now,

950
00:50:21,080 --> 00:50:22,440
Speaker 3: that's simultaneous settlement.

951
00:50:22,600 --> 00:50:24,000
Speaker 2: Give me the drugs, No, give me the money. No

952
00:50:24,080 --> 00:50:25,239
Speaker 2: give me the drugs, give me the money.

953
00:50:25,719 --> 00:50:30,080
Speaker 3: But obviously it doesn't work that way because of the

954
00:50:30,160 --> 00:50:33,200
Speaker 3: layers of intermediaries and the way technology has worked and

955
00:50:33,320 --> 00:50:36,799
Speaker 3: still works at most banks, by quantity is that they're

956
00:50:36,840 --> 00:50:41,800
Speaker 3: batch processing their transactions, so they're not real time settling.

957
00:50:41,920 --> 00:50:44,719
Speaker 3: They're delayed settling, and then trying to settle as many

958
00:50:44,719 --> 00:50:47,720
Speaker 3: of them net, they'll net all the debits and credits together.

959
00:50:48,200 --> 00:50:50,960
Speaker 3: It used to be when processing power is expensive and

960
00:50:51,040 --> 00:50:55,560
Speaker 3: when computer storage was expensive, that it made sense to

961
00:50:55,600 --> 00:50:58,680
Speaker 3: do it that way. Well, now those two things are

962
00:50:58,719 --> 00:51:00,920
Speaker 3: not expensive anymore. We can move data at the speed

963
00:51:00,920 --> 00:51:03,280
Speaker 3: of light. We can go back to what the kids

964
00:51:03,320 --> 00:51:06,440
Speaker 3: we're so smart about, which is real time grows settlement.

965
00:51:06,760 --> 00:51:09,240
Speaker 3: Both legs of the transaction happen at the same time.

966
00:51:09,880 --> 00:51:13,960
Speaker 3: Nobody therefore carries an unsettled transaction, which is really a

967
00:51:14,000 --> 00:51:17,000
Speaker 3: counterparty credit risk, and we can reduce the risk in

968
00:51:17,040 --> 00:51:20,080
Speaker 3: the system as a whole. So FED now is designed

969
00:51:20,120 --> 00:51:22,920
Speaker 3: to do that. Now here's the problem. Remember when I

970
00:51:22,960 --> 00:51:26,480
Speaker 3: said that the bank's balance sheets and liquidity were calibrated

971
00:51:26,520 --> 00:51:29,680
Speaker 3: for an analog world. They were calibrated for the world

972
00:51:29,719 --> 00:51:33,319
Speaker 3: where you had to go line up and fill out

973
00:51:33,320 --> 00:51:36,600
Speaker 3: a form to get money out of a bank. Now,

974
00:51:36,640 --> 00:51:39,560
Speaker 3: with online banking, we've now learned everything moves a lot

975
00:51:39,719 --> 00:51:43,439
Speaker 3: faster in terms of transaction instructions. The settlement is still

976
00:51:43,440 --> 00:51:45,799
Speaker 3: happening behind the scenes on the back end in the

977
00:51:45,800 --> 00:51:47,920
Speaker 3: horse and buggy. But FED now is going to replace

978
00:51:47,960 --> 00:51:50,520
Speaker 3: that horse and buggy settlement system. So now we're going

979
00:51:50,520 --> 00:51:52,520
Speaker 3: to twenty four to seven three sixty five. What do

980
00:51:52,560 --> 00:51:56,200
Speaker 3: you think is going to happen to bank runs if

981
00:51:56,200 --> 00:51:58,640
Speaker 3: we can start to settle US dollars twenty four seven

982
00:51:58,680 --> 00:51:59,680
Speaker 3: three sixty five.

983
00:52:00,400 --> 00:52:02,719
Speaker 2: Well, certainly speed it up, you bet.

984
00:52:03,120 --> 00:52:06,960
Speaker 3: Big increase in bank runs, big increase in problems in

985
00:52:07,000 --> 00:52:10,080
Speaker 3: the banks. Ergo, here's the punchline. They're gonna have to

986
00:52:10,160 --> 00:52:14,600
Speaker 3: gate it. It's not really going to be a widely

987
00:52:14,719 --> 00:52:19,040
Speaker 3: used real time gross settlement payment system because right now

988
00:52:19,120 --> 00:52:21,280
Speaker 3: they're proposing to have a two hundred and fifty thousand

989
00:52:21,320 --> 00:52:25,040
Speaker 3: dollars payment cap. Well, heck, if you've got fifteen employees

990
00:52:25,080 --> 00:52:27,160
Speaker 3: in your business, your payrolls more than two hundred and

991
00:52:27,160 --> 00:52:31,560
Speaker 3: fifty thousand. Okay, how useful is this? Really, it's not

992
00:52:31,600 --> 00:52:34,600
Speaker 3: going to be that useful. But the alternative is to

993
00:52:34,600 --> 00:52:37,279
Speaker 3: go to one hundred percent reserve banks and then have

994
00:52:37,320 --> 00:52:42,120
Speaker 3: an unlimited cap on the payments because everything has to

995
00:52:42,160 --> 00:52:45,600
Speaker 3: be pre funded and it's real time grows settlement. That

996
00:52:45,600 --> 00:52:46,920
Speaker 3: that would be a real innovation.

997
00:52:49,280 --> 00:52:53,960
Speaker 1: I read this very very interesting article from Deep Throat

998
00:52:54,040 --> 00:52:55,240
Speaker 1: Deep Throat Ipo.

999
00:52:55,360 --> 00:52:56,000
Speaker 2: I think it is.

1000
00:52:56,440 --> 00:52:57,800
Speaker 1: I sent it to a few people. I sent it

1001
00:52:57,920 --> 00:52:59,800
Speaker 1: Joseph Wing, you know the fed guy. I sent to

1002
00:52:59,800 --> 00:53:03,279
Speaker 1: a people get their opinions on it, and he basically

1003
00:53:03,360 --> 00:53:04,320
Speaker 1: highlights how.

1004
00:53:05,760 --> 00:53:05,960
Speaker 2: Well.

1005
00:53:06,000 --> 00:53:07,399
Speaker 1: I won't go into the whole background of the story,

1006
00:53:07,400 --> 00:53:11,520
Speaker 1: but basically, how you have these the four largest banks

1007
00:53:11,520 --> 00:53:15,640
Speaker 1: in the world being Chinese banks having having money offshore.

1008
00:53:16,600 --> 00:53:18,880
Speaker 1: Tong Longo says, yeah, but don't forget about the eurobanks,

1009
00:53:19,000 --> 00:53:21,640
Speaker 1: the Euro dollar banks as well. But let's just say in

1010
00:53:21,680 --> 00:53:23,480
Speaker 1: the point we have we have four for of the

1011
00:53:23,560 --> 00:53:26,120
Speaker 1: largest banks in the world are Chinese banks that are

1012
00:53:26,160 --> 00:53:28,399
Speaker 1: in the you know, Cayman Islands or whatever they're in,

1013
00:53:28,920 --> 00:53:34,759
Speaker 1: and they're trillions and trillions of dollars. They He has

1014
00:53:34,800 --> 00:53:37,919
Speaker 1: all the math. It's an amazing article, so so dense.

1015
00:53:37,920 --> 00:53:40,360
Speaker 1: He had to highlight just the key points. But in

1016
00:53:40,440 --> 00:53:43,480
Speaker 1: the US banking system, we have like eight hundred billion.

1017
00:53:44,680 --> 00:53:46,840
Speaker 1: So he's like, they have trillions. All they have to

1018
00:53:46,840 --> 00:53:48,960
Speaker 1: do is just move from bank A to bank B

1019
00:53:49,080 --> 00:53:50,319
Speaker 1: with a bank with a push of a button and

1020
00:53:50,400 --> 00:53:51,480
Speaker 1: up that bank's done up.

1021
00:53:51,520 --> 00:53:52,320
Speaker 2: Now transfer from this.

1022
00:53:52,800 --> 00:53:55,520
Speaker 1: And he's like, even JP Morgan is powerless to this,

1023
00:53:56,120 --> 00:53:58,320
Speaker 1: and and he goes on to say, like, the only

1024
00:53:58,440 --> 00:54:01,239
Speaker 1: way that the US could defend itself from this is

1025
00:54:01,280 --> 00:54:03,799
Speaker 1: by putting in the gates exactly what you just.

1026
00:54:03,800 --> 00:54:05,880
Speaker 3: Said, right, They have to get all this right. But

1027
00:54:05,920 --> 00:54:08,880
Speaker 3: remember also what I just said. As the banks fail,

1028
00:54:09,760 --> 00:54:12,759
Speaker 3: it's a swap from the bank's balance sheets when they

1029
00:54:12,800 --> 00:54:16,399
Speaker 3: fail to the FED through these alphabet soup.

1030
00:54:16,800 --> 00:54:16,920
Speaker 1: Right.

1031
00:54:17,080 --> 00:54:20,400
Speaker 3: So I have always expected the Fed's balance sheet to

1032
00:54:20,520 --> 00:54:23,960
Speaker 3: expand massively. It's not a shock to me that it

1033
00:54:24,000 --> 00:54:26,960
Speaker 3: went from eight hundred billion to almost ten trillion at

1034
00:54:26,960 --> 00:54:30,240
Speaker 3: its peak. It's going to go a lot higher over time,

1035
00:54:30,719 --> 00:54:33,800
Speaker 3: but that's not necessarily inflationary. This is where the Austrian

1036
00:54:33,840 --> 00:54:37,560
Speaker 3: school folks got it wrong, because all they're doing is

1037
00:54:38,000 --> 00:54:42,960
Speaker 3: filling up the whole from the defunct balance sheet whose

1038
00:54:43,320 --> 00:54:46,040
Speaker 3: credit creation went away when the bank failed.

1039
00:54:47,160 --> 00:54:51,160
Speaker 1: But that's where I have a little bit of a

1040
00:54:51,320 --> 00:54:53,800
Speaker 1: disagreement with the likes of the Jeff Schneiders of the

1041
00:54:53,840 --> 00:54:57,919
Speaker 1: world that maybe take that viewpoint, because to your point

1042
00:54:57,920 --> 00:55:00,400
Speaker 1: from an Austrian lens, you're not increasing the money supply,

1043
00:55:00,560 --> 00:55:05,879
Speaker 1: you're just moving it. But by making that, by making

1044
00:55:05,920 --> 00:55:09,080
Speaker 1: that policy decision, by putting that fed put into play,

1045
00:55:09,600 --> 00:55:12,839
Speaker 1: it puts people into this easy mindset that makes them, yes,

1046
00:55:12,920 --> 00:55:13,480
Speaker 1: spend more.

1047
00:55:13,360 --> 00:55:18,439
Speaker 3: Money, privatized profits, socialized losses. Again, this should make every

1048
00:55:18,719 --> 00:55:20,560
Speaker 3: fair minded human angry.

1049
00:55:20,880 --> 00:55:24,759
Speaker 1: Right, So, even though that's factually correct, it's not. It

1050
00:55:24,800 --> 00:55:27,680
Speaker 1: didn't increase the money supply, it's not inflationary. It's actually

1051
00:55:27,719 --> 00:55:30,280
Speaker 1: not correct because by seeing that, it makes me feel

1052
00:55:30,280 --> 00:55:32,319
Speaker 1: better about going to getting a loan, which then did

1053
00:55:32,360 --> 00:55:33,400
Speaker 1: increase the money supply.

1054
00:55:34,400 --> 00:55:38,080
Speaker 3: Absolutely, the money'pply already increased. That's the point. It's already there. Right.

1055
00:55:38,080 --> 00:55:41,200
Speaker 3: There's ninety five trillion of non financial sector debt outstanding

1056
00:55:41,719 --> 00:55:45,640
Speaker 3: that all got intermediated through the financial system and it's

1057
00:55:45,680 --> 00:55:48,480
Speaker 3: been growing two and after three trillion a year, and

1058
00:55:48,600 --> 00:55:50,200
Speaker 3: as long as the FED can keep it growing too

1059
00:55:50,239 --> 00:55:52,720
Speaker 3: and after three trillion a year, through turning the dials

1060
00:55:52,760 --> 00:55:56,240
Speaker 3: behind the curtain, they keep the economy inflated. The moment

1061
00:55:56,320 --> 00:55:59,920
Speaker 3: they can't keep that number continuing to go up to

1062
00:56:00,000 --> 00:56:03,160
Speaker 3: and after three trillion a year, that's when things start

1063
00:56:03,239 --> 00:56:06,759
Speaker 3: to become really dicey. But your point is that that

1064
00:56:08,280 --> 00:56:12,359
Speaker 3: caused distortions. I agree, absolutely it did. So I don't

1065
00:56:12,360 --> 00:56:16,560
Speaker 3: think we're disagreeing. I just think we're talking past each

1066
00:56:16,600 --> 00:56:18,520
Speaker 3: other a little bit on the semantics.

1067
00:56:18,600 --> 00:56:22,440
Speaker 1: Yeah, so back to the FED now then, very interesting.

1068
00:56:22,480 --> 00:56:24,480
Speaker 2: I hadn't really thought about that part specifically.

1069
00:56:24,520 --> 00:56:27,160
Speaker 1: So it's not really real time settlement because they have

1070
00:56:27,239 --> 00:56:29,080
Speaker 1: to put these gates in play. To your point, it's

1071
00:56:29,080 --> 00:56:31,719
Speaker 1: actually a pretty low number. So yeah, I mean, is

1072
00:56:31,760 --> 00:56:33,719
Speaker 1: this then just kind of like the first step that

1073
00:56:33,760 --> 00:56:36,759
Speaker 1: you think this kind of is this gateway drug, kind

1074
00:56:36,760 --> 00:56:38,799
Speaker 1: of like Jackson Jackson Hill.

1075
00:56:39,200 --> 00:56:40,440
Speaker 2: It's like this gateway drug where it.

1076
00:56:40,480 --> 00:56:42,960
Speaker 1: Kind of opens up to the FED in the banking system,

1077
00:56:43,000 --> 00:56:45,640
Speaker 1: to these new rails, and over time they'll probably grow

1078
00:56:45,680 --> 00:56:47,440
Speaker 1: it and maybe it moves towards sort of like a

1079
00:56:47,440 --> 00:56:50,279
Speaker 1: CBDC Or is it just like, hey, they updated their

1080
00:56:50,280 --> 00:56:52,080
Speaker 1: software on the back end, We don't care what software

1081
00:56:52,080 --> 00:56:52,560
Speaker 1: they used today.

1082
00:56:52,560 --> 00:56:54,200
Speaker 2: Why do I care what software they used tomorrow? Kind

1083
00:56:54,200 --> 00:56:54,480
Speaker 2: of thing.

1084
00:56:54,920 --> 00:56:57,200
Speaker 3: Well, no, we really do care what software they use.

1085
00:56:57,400 --> 00:57:01,800
Speaker 3: But there's not a limit on fedwire. Fed Now is

1086
00:57:01,840 --> 00:57:05,920
Speaker 3: supposed to replace fedwire, but until the banking system's liquidity

1087
00:57:06,760 --> 00:57:11,799
Speaker 3: gets massively increased, then it's not really a replacement. They're

1088
00:57:11,800 --> 00:57:14,400
Speaker 3: going to keep both systems going for a long time anyway,

1089
00:57:14,719 --> 00:57:17,000
Speaker 3: but they're never really going to be able to take

1090
00:57:17,040 --> 00:57:20,480
Speaker 3: the gate off fed now until you get to essentially

1091
00:57:20,480 --> 00:57:22,800
Speaker 3: one hundred percent reserve system. Why, because the money is

1092
00:57:22,840 --> 00:57:25,520
Speaker 3: going to be slashing around like that old Hoover quote.

1093
00:57:25,760 --> 00:57:28,960
Speaker 3: You know, it's like a cannon ball loose on a

1094
00:57:29,720 --> 00:57:33,320
Speaker 3: on a ship during a tempest tossed era, right, the money.

1095
00:57:33,520 --> 00:57:36,320
Speaker 3: Can you imagine if Silicon Valley Bank weekend, if we'd

1096
00:57:36,320 --> 00:57:40,720
Speaker 3: had twenty four seven three sixty five withdrawls, the amount

1097
00:57:40,720 --> 00:57:43,360
Speaker 3: of money slashing around the banking system from bank to

1098
00:57:43,400 --> 00:57:46,720
Speaker 3: bank that weekend would have been staggering. Right, But this

1099
00:57:46,840 --> 00:57:49,520
Speaker 3: is exactly why they have to gate it, and so

1100
00:57:49,560 --> 00:57:52,840
Speaker 3: it really isn't going to replace fedwire fedwire is the

1101
00:57:52,880 --> 00:57:58,360
Speaker 3: slow analog system that's basically digitizing analog data. It's not

1102
00:57:58,440 --> 00:58:01,600
Speaker 3: literally paper, so there is a digitization, but it's not

1103
00:58:01,760 --> 00:58:05,720
Speaker 3: natively digital data. And so but it's a slow system.

1104
00:58:05,760 --> 00:58:08,600
Speaker 3: You're still filling out the form in an analog way.

1105
00:58:08,720 --> 00:58:11,440
Speaker 3: Even if it's a form fill on your bank's online

1106
00:58:11,440 --> 00:58:16,000
Speaker 3: banking website, it's still analog. And as a result, you

1107
00:58:16,040 --> 00:58:19,760
Speaker 3: can't program it to have a wire go through at

1108
00:58:19,760 --> 00:58:22,880
Speaker 3: eleven fifty nine pm on a Saturday night. You can't

1109
00:58:22,920 --> 00:58:27,720
Speaker 3: do that. It settles only during business hours and only

1110
00:58:27,720 --> 00:58:31,240
Speaker 3: when the FED gets around to settling it. So you

1111
00:58:31,280 --> 00:58:33,880
Speaker 3: know it's that's the only scenario in which the FED

1112
00:58:33,960 --> 00:58:38,439
Speaker 3: is willing to have an unlimited transfer value. But not

1113
00:58:38,520 --> 00:58:41,120
Speaker 3: with not with FED. Now where I thought you were

1114
00:58:41,120 --> 00:58:44,080
Speaker 3: going as the CBDC debate, which is is this a

1115
00:58:44,080 --> 00:58:47,560
Speaker 3: gateway drug to CBDCs? And you know this is a

1116
00:58:47,800 --> 00:58:53,640
Speaker 3: this is an interesting question because the states, the Red states,

1117
00:58:53,640 --> 00:58:56,760
Speaker 3: it started with South Dakota and Florida got involved in

1118
00:58:56,800 --> 00:59:00,680
Speaker 3: now Texas and Alabama. I mean, a number of are

1119
00:59:00,800 --> 00:59:04,200
Speaker 3: saying they're not going to adopt the proposed UCC Article twelve,

1120
00:59:04,240 --> 00:59:09,240
Speaker 3: which is the update to allow electronic controllable records electronic

1121
00:59:09,280 --> 00:59:13,640
Speaker 3: financial instruments right, including crypto of all forms. It's an

1122
00:59:13,640 --> 00:59:17,680
Speaker 3: important update and it got politicized unfortunately because of the

1123
00:59:17,720 --> 00:59:22,440
Speaker 3: way they handled the concept of a prospective center by

1124
00:59:22,480 --> 00:59:26,520
Speaker 3: digital currency. And so now there is zero possibility of

1125
00:59:26,520 --> 00:59:31,240
Speaker 3: all fifty states having a uniform commercial code on controllable

1126
00:59:31,240 --> 00:59:34,920
Speaker 3: electronic records. But that said, I have said that a

1127
00:59:34,920 --> 00:59:38,120
Speaker 3: CBDC is a hill I'm willing to die on, because

1128
00:59:38,880 --> 00:59:42,880
Speaker 3: it is true that once you get to a digitized

1129
00:59:42,880 --> 00:59:47,240
Speaker 3: government money, you get to government control. One thing most

1130
00:59:47,280 --> 00:59:51,360
Speaker 3: folks don't realize now is how surveiled all financial transactions are.

1131
00:59:51,640 --> 00:59:55,080
Speaker 3: The government can and will get every financial transaction on

1132
00:59:55,160 --> 00:59:58,920
Speaker 3: you if it wants to without even without having to

1133
00:59:59,120 --> 01:00:01,440
Speaker 3: show probable cost. Doesn't get a warrant. There is no

1134
01:00:01,560 --> 01:00:06,160
Speaker 3: Fourth Amendment anymore on data that you provide to a

1135
01:00:06,200 --> 01:00:09,400
Speaker 3: third party. It's called the third party doctrine. It's been

1136
01:00:09,840 --> 01:00:12,240
Speaker 3: upheld at the Supreme Court as valid. You have no

1137
01:00:12,280 --> 01:00:15,320
Speaker 3: privacy interests in data that you give up to a

1138
01:00:15,360 --> 01:00:18,760
Speaker 3: third party. And this was a Supreme Court case, the

1139
01:00:18,760 --> 01:00:21,720
Speaker 3: Miller case in nineteen seventy seven that upheld the Bank

1140
01:00:21,800 --> 01:00:25,400
Speaker 3: Secrecy Act, and then it was started to it's been

1141
01:00:25,440 --> 01:00:29,600
Speaker 3: starting to chip away because cell phone location data is

1142
01:00:29,640 --> 01:00:32,840
Speaker 3: something anyone, not just the government, but anyone can buy

1143
01:00:32,880 --> 01:00:37,080
Speaker 3: so they can track you using your cell phone pings

1144
01:00:37,200 --> 01:00:43,680
Speaker 3: on cell phone towers, and a lot of Fourth Amendment violations,

1145
01:00:43,680 --> 01:00:46,840
Speaker 3: in my mind, have taken place by the government just

1146
01:00:46,880 --> 01:00:49,040
Speaker 3: going out and buying that data from a third party

1147
01:00:49,800 --> 01:00:52,920
Speaker 3: under the guise that you have no privacy interest anymore

1148
01:00:53,400 --> 01:00:56,800
Speaker 3: because you gave up your data to a third party. Well,

1149
01:00:57,040 --> 01:01:00,000
Speaker 3: luckily in the Carpenter case two years ago, three years ago,

1150
01:01:00,000 --> 01:01:02,680
Speaker 3: now the Supreme Court has started to walk that back

1151
01:01:02,760 --> 01:01:05,760
Speaker 3: and say, you can't live in the modern world without

1152
01:01:05,800 --> 01:01:08,960
Speaker 3: giving up your you know, some data to a third party,

1153
01:01:09,000 --> 01:01:11,040
Speaker 3: and you might not have even realized you did it.

1154
01:01:11,520 --> 01:01:14,840
Speaker 3: And so they started to carve back a third party doctrine.

1155
01:01:15,040 --> 01:01:18,000
Speaker 3: But what I want to the listeners to realize is

1156
01:01:18,000 --> 01:01:20,880
Speaker 3: there is no financial privacy. You should assume there already

1157
01:01:20,960 --> 01:01:24,800
Speaker 3: is none. And so the CBDC proponents look at that

1158
01:01:24,960 --> 01:01:27,400
Speaker 3: and say it's no different than where it is now.

1159
01:01:27,720 --> 01:01:31,479
Speaker 3: Most people they'll perceive that their bank is only going

1160
01:01:31,520 --> 01:01:34,520
Speaker 3: to give up their give up data to the government

1161
01:01:35,600 --> 01:01:38,920
Speaker 3: if there's a valid search warrant or a subpoena.

1162
01:01:39,240 --> 01:01:41,440
Speaker 1: Yeah, yeah, and to your point, I mean they already

1163
01:01:41,480 --> 01:01:43,360
Speaker 1: have all that data, even with the whole to your point,

1164
01:01:43,400 --> 01:01:45,840
Speaker 1: your cell phones tracking you and this whole uh, you know,

1165
01:01:45,880 --> 01:01:48,240
Speaker 1: this whole noise being made about the whole TikTok situation,

1166
01:01:48,280 --> 01:01:49,880
Speaker 1: and the Chinese are still in your data. It's like

1167
01:01:50,040 --> 01:01:52,640
Speaker 1: that they're they already sell all that data, like they're

1168
01:01:52,640 --> 01:01:53,959
Speaker 1: probably already buying that data.

1169
01:01:55,120 --> 01:01:56,000
Speaker 2: It's all out there.

1170
01:01:56,440 --> 01:01:58,560
Speaker 1: But in regards to this back to yes, I did

1171
01:01:58,560 --> 01:02:01,600
Speaker 1: want to take from the FED noalysid into this UCC filing.

1172
01:02:02,040 --> 01:02:03,920
Speaker 1: And part of what I was thinking I wanted to

1173
01:02:03,920 --> 01:02:06,040
Speaker 1: ask you about on the UCC filing is that it's

1174
01:02:06,080 --> 01:02:09,200
Speaker 1: about who owns the property, right, That's what the UCC

1175
01:02:09,320 --> 01:02:11,560
Speaker 1: filings about, right, who owns the property. And so we

1176
01:02:11,680 --> 01:02:14,240
Speaker 1: kind of already understand that, like okay, well, you know,

1177
01:02:14,360 --> 01:02:15,920
Speaker 1: most people don't put they're waking up to the fact

1178
01:02:15,920 --> 01:02:18,560
Speaker 1: that the money in my bank is isn't my money anymore,

1179
01:02:18,560 --> 01:02:20,200
Speaker 1: it's the bank's money. And I have a claim and

1180
01:02:20,200 --> 01:02:22,760
Speaker 1: I owe you to that. And in regards to the

1181
01:02:22,760 --> 01:02:27,000
Speaker 1: CBDC versus a bitcoin or another crypto asset, if I

1182
01:02:27,160 --> 01:02:29,640
Speaker 1: have that bitcoin or a crypto asset, then that's my property.

1183
01:02:29,680 --> 01:02:32,160
Speaker 1: But if I have a CBDC, I think per the

1184
01:02:32,240 --> 01:02:35,760
Speaker 1: UCC filing, it's not my CBDC, it's not my money.

1185
01:02:36,480 --> 01:02:38,600
Speaker 1: Is that part of what that UCC was about to

1186
01:02:38,640 --> 01:02:41,800
Speaker 1: basically say that all of the CBDC money that exists

1187
01:02:41,800 --> 01:02:46,200
Speaker 1: in society will actually be owned by the banks, not

1188
01:02:46,320 --> 01:02:47,400
Speaker 1: by us the people.

1189
01:02:47,880 --> 01:02:51,120
Speaker 3: Well, again, it was set up to recognize that that

1190
01:02:51,840 --> 01:02:55,360
Speaker 3: government issued money isnt io you. So really is it

1191
01:02:55,440 --> 01:02:58,160
Speaker 3: that different than the dollar bill in your wallet if

1192
01:02:58,160 --> 01:03:01,480
Speaker 3: you still carry one, Because if you pull out that

1193
01:03:01,520 --> 01:03:04,120
Speaker 3: dollar bill, it says pay to the order of that

1194
01:03:04,280 --> 01:03:05,320
Speaker 3: dollar bill is in iou.

1195
01:03:05,840 --> 01:03:08,720
Speaker 1: So it used to be an iou for gold, right,

1196
01:03:08,720 --> 01:03:10,800
Speaker 1: But when they severed the gold standard to iow you

1197
01:03:10,800 --> 01:03:12,040
Speaker 1: for it's not io you anymore.

1198
01:03:12,080 --> 01:03:13,880
Speaker 3: Turtles all the way down. It's an io you to

1199
01:03:13,920 --> 01:03:15,720
Speaker 3: an io you to an i owe you to to

1200
01:03:15,720 --> 01:03:18,920
Speaker 3: an io Right. What is the full faith and credit

1201
01:03:18,920 --> 01:03:21,040
Speaker 3: of the US government? People would say, well, it's the

1202
01:03:21,080 --> 01:03:25,320
Speaker 3: taxing authority, or it's the you know, warships or you

1203
01:03:25,360 --> 01:03:28,560
Speaker 3: know national parks. Right, there are there are some massets there,

1204
01:03:28,560 --> 01:03:30,240
Speaker 3: but the government itself is insolved.

1205
01:03:30,400 --> 01:03:32,640
Speaker 1: It's it's only as good, it's only as good as

1206
01:03:32,680 --> 01:03:33,880
Speaker 1: the next person will take it from me.

1207
01:03:34,560 --> 01:03:36,880
Speaker 3: Well, but that's the point where this gets to. Once

1208
01:03:36,920 --> 01:03:39,360
Speaker 3: you make that leap, you just made the most important

1209
01:03:39,760 --> 01:03:43,919
Speaker 3: leap to understanding why bitcoin has value. And a lot

1210
01:03:43,960 --> 01:03:47,000
Speaker 3: of folks who were trained in a traditional world think

1211
01:03:47,040 --> 01:03:49,840
Speaker 3: that money has to be backed by something. No, what

1212
01:03:49,880 --> 01:03:54,080
Speaker 3: you just said is brilliant. Everything is subjective everything. Okay,

1213
01:03:55,080 --> 01:03:57,960
Speaker 3: once you realize that that piece of paper in your

1214
01:03:58,000 --> 01:04:01,439
Speaker 3: wallet with a picture of a dead president in green ink,

1215
01:04:01,920 --> 01:04:05,200
Speaker 3: the intrinsic value of that is a fraction of a penny.

1216
01:04:05,240 --> 01:04:07,080
Speaker 3: It's just a piece of linen with some green ink

1217
01:04:07,160 --> 01:04:10,560
Speaker 3: on it. But yet, why is it that I can

1218
01:04:10,600 --> 01:04:13,200
Speaker 3: trade one of those pieces of paper that says a

1219
01:04:13,240 --> 01:04:17,240
Speaker 3: dollar one dollar on it for a can of Coca

1220
01:04:17,280 --> 01:04:21,880
Speaker 3: cola because it's a recognized medium of exchange. What makes

1221
01:04:21,880 --> 01:04:25,000
Speaker 3: it recognized even though it's intrinsic value as virtually zero,

1222
01:04:25,560 --> 01:04:29,960
Speaker 3: It's because somebody else accepts it as that. It's all subjective.

1223
01:04:30,040 --> 01:04:34,400
Speaker 3: It is always all subjective, And once you realize that

1224
01:04:34,400 --> 01:04:38,080
Speaker 3: it's always all subjective, that's why bitcoin has value. So

1225
01:04:38,200 --> 01:04:42,320
Speaker 3: many people say, so many smart people, so many well trained,

1226
01:04:42,520 --> 01:04:46,040
Speaker 3: including economics PhDs, we'll say bitcoin has no value because

1227
01:04:46,080 --> 01:04:48,520
Speaker 3: they're not backed by anything. What you've got to realize

1228
01:04:48,600 --> 01:04:51,360
Speaker 3: is neither is the US dollar. It's not backed by anything.

1229
01:04:51,400 --> 01:04:53,400
Speaker 3: The full faith and credit of the US government is

1230
01:04:53,400 --> 01:04:57,000
Speaker 3: as ephemeral as anything. In fact, I would much rather

1231
01:04:57,080 --> 01:05:00,880
Speaker 3: trust math than trust the wa of math and trust

1232
01:05:00,920 --> 01:05:01,640
Speaker 3: the laws of man.

1233
01:05:02,240 --> 01:05:06,320
Speaker 1: The backed by something is when gold was money and

1234
01:05:06,360 --> 01:05:08,800
Speaker 1: the paper was the iou for that.

1235
01:05:09,040 --> 01:05:10,200
Speaker 2: So the dollar that I.

1236
01:05:10,200 --> 01:05:13,240
Speaker 1: Had was backed by the gold that was in the bank,

1237
01:05:13,400 --> 01:05:15,120
Speaker 1: and so if I gave it to you, you can go

1238
01:05:15,200 --> 01:05:17,080
Speaker 1: redeem it. So it was backed by that.

1239
01:05:17,160 --> 01:05:18,960
Speaker 3: But what gave the gold value?

1240
01:05:19,160 --> 01:05:21,720
Speaker 2: Nothing? It was suggested. Yeah, no, I know.

1241
01:05:22,240 --> 01:05:24,160
Speaker 1: The point I was trying to make is only debt

1242
01:05:24,320 --> 01:05:27,360
Speaker 1: needs to be backed by something. Oil is not backed

1243
01:05:27,360 --> 01:05:30,240
Speaker 1: by anything. Gold's not backed by anythink Bitcoin's not backed

1244
01:05:30,280 --> 01:05:33,560
Speaker 1: by anything. Only debt is backed and so anyone that says,

1245
01:05:33,680 --> 01:05:36,520
Speaker 1: but what is it backed by? In my opinion, shows

1246
01:05:36,560 --> 01:05:39,120
Speaker 1: that they don't really understand how this system works. They're

1247
01:05:39,160 --> 01:05:42,320
Speaker 1: referring to a debt based system when dollars actually used

1248
01:05:42,360 --> 01:05:44,120
Speaker 1: to be backed by something they're not anymore either.

1249
01:05:45,080 --> 01:05:47,760
Speaker 3: So well, that's a great point because the way I

1250
01:05:47,800 --> 01:05:50,520
Speaker 3: like to phrase it is slightly different than but it's

1251
01:05:50,560 --> 01:05:52,920
Speaker 3: exactly the same point you just made, which is that

1252
01:05:54,240 --> 01:05:57,360
Speaker 3: you don't want money to be issued by anyone. So

1253
01:05:57,480 --> 01:06:02,520
Speaker 3: Toshi gifted society, gifted humanity with money that is not

1254
01:06:02,600 --> 01:06:06,120
Speaker 3: issued by anyone. And gold was not issued by anyone.

1255
01:06:07,080 --> 01:06:12,000
Speaker 3: Silver was not issued by anyone. Calalie shells, wamp them,

1256
01:06:12,000 --> 01:06:16,440
Speaker 3: beads were not issued by anyone. They were things that

1257
01:06:16,480 --> 01:06:22,480
Speaker 3: occurred in nature and Satoshi's invention their commodities exactly, and

1258
01:06:22,520 --> 01:06:27,240
Speaker 3: they were goods that exchange, were commonly accepted in exchange,

1259
01:06:27,640 --> 01:06:30,960
Speaker 3: and then evolved because they were so commonly accepted in

1260
01:06:31,000 --> 01:06:33,920
Speaker 3: exchange to be what we know as money. Here's the

1261
01:06:33,920 --> 01:06:36,280
Speaker 3: crazy thing. The vast majority of people working in the

1262
01:06:36,320 --> 01:06:39,680
Speaker 3: financial services industry don't understand money. It took me a

1263
01:06:39,720 --> 01:06:41,520
Speaker 3: long time to figure that out. Took me a long

1264
01:06:41,560 --> 01:06:44,760
Speaker 3: time to understand money. Most people don't realize what money is.

1265
01:06:44,920 --> 01:06:49,200
Speaker 3: It's the most confusing concept in society, and yet every

1266
01:06:49,280 --> 01:06:53,520
Speaker 3: day we all interact with it. But you know, to

1267
01:06:53,600 --> 01:06:56,920
Speaker 3: your point about social media and the bank runs, More

1268
01:06:56,960 --> 01:06:59,040
Speaker 3: and more people are waking up to realize that the

1269
01:06:59,120 --> 01:07:02,160
Speaker 3: money in their bank is not theirs legally, it's alone.

1270
01:07:02,240 --> 01:07:05,720
Speaker 3: You've lent your money to the bank and the bank

1271
01:07:05,760 --> 01:07:08,840
Speaker 3: goes it back to you. Even fewer people realized the

1272
01:07:08,840 --> 01:07:11,440
Speaker 3: same is true of securities. You've lent your securities to

1273
01:07:11,440 --> 01:07:13,680
Speaker 3: your broker dealer, and they owe it back to you.

1274
01:07:14,240 --> 01:07:17,760
Speaker 3: And what we realize is that when companies like FTX

1275
01:07:17,840 --> 01:07:21,880
Speaker 3: took money in exchange for bitcoin, they sold bitcoin to

1276
01:07:21,920 --> 01:07:24,440
Speaker 3: their customers, they didn't go out and actually buy the bitcoin.

1277
01:07:24,440 --> 01:07:27,040
Speaker 3: They just pocketed the money. But that bitcoin I owe

1278
01:07:27,080 --> 01:07:29,560
Speaker 3: you was always there. Now that ended up with a

1279
01:07:29,600 --> 01:07:32,640
Speaker 3: lot more people thinking they owned bitcoin than really did.

1280
01:07:33,520 --> 01:07:38,120
Speaker 3: And anytime an institution goes naked short, that's called naked short.

1281
01:07:38,160 --> 01:07:41,600
Speaker 3: They sold more bitcoin than they actually had. Anytime they

1282
01:07:41,640 --> 01:07:44,040
Speaker 3: do that, it's just a matter of time before that

1283
01:07:44,160 --> 01:07:47,720
Speaker 3: institution blows up. And this is one of the reasons

1284
01:07:47,760 --> 01:07:49,840
Speaker 3: why I'm a big proponent of not your keys, not

1285
01:07:49,920 --> 01:07:54,040
Speaker 3: your coins. You only own the assets that you directly control.

1286
01:07:54,080 --> 01:07:57,960
Speaker 3: And back to the UCC point, that's what's sad about

1287
01:07:58,040 --> 01:08:01,040
Speaker 3: the way this whole thing evolved. The Wyoming original version.

1288
01:08:01,040 --> 01:08:04,520
Speaker 3: Wyoming was the first state to create an appendix for

1289
01:08:04,560 --> 01:08:08,880
Speaker 3: digital assets, an interpretive appendix to the UCC Uniform Commercial Code.

1290
01:08:09,040 --> 01:08:12,320
Speaker 3: Why did Wyoming do that? Wanted to make a roadmap

1291
01:08:12,360 --> 01:08:15,720
Speaker 3: for judges so that judges had a means by which

1292
01:08:15,760 --> 01:08:20,040
Speaker 3: to adjudicate disputes and not clog up the court system.

1293
01:08:20,479 --> 01:08:24,120
Speaker 3: We want clear obligations, rights and obligations of parties to

1294
01:08:24,240 --> 01:08:27,120
Speaker 3: a transaction involving digital assets, so that the legal system

1295
01:08:27,160 --> 01:08:29,920
Speaker 3: couldn't be used as an attack vector on bitcoin. That

1296
01:08:30,080 --> 01:08:34,040
Speaker 3: was the concept. So Wyoming started this whole thing, and

1297
01:08:34,080 --> 01:08:38,519
Speaker 3: guess what Wyoming did. Wyoming created an appendix that defines

1298
01:08:38,600 --> 01:08:42,920
Speaker 3: bitcoin in the category of money, So digital assets with

1299
01:08:42,960 --> 01:08:45,400
Speaker 3: no issuer are in the category of money for commercial

1300
01:08:45,439 --> 01:08:48,559
Speaker 3: law purposes in Wyoming. And I think ultimately many of

1301
01:08:48,560 --> 01:08:50,200
Speaker 3: the Red States are going to end up going in

1302
01:08:50,240 --> 01:08:53,360
Speaker 3: that same direction. But it's sad because it kind of

1303
01:08:53,439 --> 01:08:56,720
Speaker 3: got co opted. This whole multi state effort for the

1304
01:08:56,840 --> 01:08:59,880
Speaker 3: Uniform Law Commission, of which I supported and was in

1305
01:09:00,760 --> 01:09:04,040
Speaker 3: to be an observer. The whole thing got co opted

1306
01:09:04,200 --> 01:09:07,960
Speaker 3: by this central bank digital currency issue. And it's sad

1307
01:09:08,040 --> 01:09:10,920
Speaker 3: because the Uniform Law Commission did a lot of good

1308
01:09:10,920 --> 01:09:14,560
Speaker 3: work there, but because of that one sentence in the

1309
01:09:14,680 --> 01:09:21,559
Speaker 3: draft Uniform Law, it got vetoed. And it's the governors

1310
01:09:21,560 --> 01:09:24,200
Speaker 3: who are vetoing it are not wrong in their sentiment,

1311
01:09:24,320 --> 01:09:26,920
Speaker 3: they were looking in the wrong place. But they were

1312
01:09:26,920 --> 01:09:29,560
Speaker 3: not wrong in their sentiment that they want to avoid

1313
01:09:29,720 --> 01:09:34,280
Speaker 3: having a central bank digital currency recognized in their states

1314
01:09:34,760 --> 01:09:37,080
Speaker 3: as a means by which to protect their citizens. They

1315
01:09:37,120 --> 01:09:40,040
Speaker 3: are absolutely right in that philosophy.

1316
01:09:40,320 --> 01:09:45,519
Speaker 1: Yeah, man, that's a lot. We've covered a lot, and

1317
01:09:45,880 --> 01:09:47,880
Speaker 1: I kind of got involved in that UCC and a

1318
01:09:47,880 --> 01:09:50,519
Speaker 1: couple conversations around that, and it was a little bit confusing.

1319
01:09:51,680 --> 01:09:53,840
Speaker 1: But to your point, that's the helial dion, so we

1320
01:09:53,880 --> 01:09:56,960
Speaker 1: have to stay vigilant on that. And so you know,

1321
01:09:57,080 --> 01:09:59,840
Speaker 1: sometimes these laws seem a little bit vague, and maybe

1322
01:09:59,880 --> 01:10:01,559
Speaker 1: the should clean that up and try it again. But

1323
01:10:02,120 --> 01:10:04,519
Speaker 1: I think we'll stop with that. We've gone super long.

1324
01:10:04,720 --> 01:10:07,759
Speaker 1: I really appreciate how your time. You've been more than generous.

1325
01:10:08,160 --> 01:10:12,639
Speaker 1: Custodiabank dot com. Follow that what's going on Caitlin long

1326
01:10:12,760 --> 01:10:15,080
Speaker 1: underscore on Twitter, will link to all that down below.

1327
01:10:15,120 --> 01:10:17,439
Speaker 1: Anything else you want to call attention to or close

1328
01:10:17,479 --> 01:10:17,840
Speaker 1: it out with.

1329
01:10:18,760 --> 01:10:22,040
Speaker 3: No, thank you, it's just fun. We missed each other

1330
01:10:22,280 --> 01:10:24,519
Speaker 3: in Miami and we got to actually go a little

1331
01:10:24,520 --> 01:10:26,600
Speaker 3: bit deeper as a result, So thanks for making the

1332
01:10:26,640 --> 01:10:28,280
Speaker 3: time to reschedule. Really appreciate it.

1333
01:10:28,560 --> 01:10:30,559
Speaker 1: Yeah, it works out all right, Caitlyn, Thank you so much.

1334
01:10:31,120 --> 01:10:32,799
Speaker 2: Thank you all right. That's a wrap.

1335
01:10:33,000 --> 01:10:35,400
Speaker 1: Hopefully you enjoy this conversation with Caitlin as much as

1336
01:10:35,520 --> 01:10:38,720
Speaker 1: I did. Now, I've done another conversation with Caitlin, just

1337
01:10:39,080 --> 01:10:41,000
Speaker 1: in the past, not too far ago. We'll link to

1338
01:10:41,000 --> 01:10:42,599
Speaker 1: that down below if you want to get caught up

1339
01:10:42,800 --> 01:10:45,240
Speaker 1: so you can stay at the same pace with us. Otherwise,

1340
01:10:45,320 --> 01:10:46,800
Speaker 1: let me know what you think. Leave me a comment,

1341
01:10:46,840 --> 01:10:48,000
Speaker 1: give me thumbs up if you like it. If you

1342
01:10:48,040 --> 01:10:50,160
Speaker 1: don't give me thumbs down, that's okay, but at least

1343
01:10:50,160 --> 01:10:52,240
Speaker 1: tell me why I hit that subscribe button so you

1344
01:10:52,280 --> 01:10:54,360
Speaker 1: don't when I put new videos out, and that's what I.

1345
01:10:54,280 --> 01:10:55,520
Speaker 2: Got to your success.

1346
01:10:55,920 --> 01:11:04,160
Speaker 1: I'm out.