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Speaker 1: We are gradually hollowing out on industrial base to maintain

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Speaker 1: our kind of global dollar empire. Nothing stops his train.

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Speaker 1: I refer to basically Walter White from Breaking Bad, where

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Speaker 1: you know, his allies trying to get him to stop

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Speaker 1: his drug empire and he's like, no, nothing stops his Trea.

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Speaker 1: You know, we're going to keep going, and we're just

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Speaker 1: getting started. And I think the US physical deficits are

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Speaker 1: the same that there are people in the demonstration even

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Speaker 1: talking about this is a shifting of the Overton window.

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Speaker 1: That's more of a break the glass type of decision,

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Speaker 1: and I think the more elegant approach is to let

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Speaker 1: that shift happen and make sure that we're kind of

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Speaker 1: benefiting from that shift rather than fighting it.

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Speaker 2: So would you say that given you know, death to

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Speaker 2: GDPs of the US one twenty in Japan, what are

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Speaker 2: they had two forty? I mean, so huge debt to

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Speaker 2: GDP ratios, giant deficit spending percentages.

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Speaker 3: And dollar amounts on that as well.

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Speaker 2: Any recession that we would have in the future would

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Speaker 2: almost be a politicy decision. So we're sitting here and

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Speaker 2: what I think is maybe a historical moment, maybe books

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Speaker 2: one hundred years from now will be talking about this.

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Speaker 2: Dates like nineteen thirteen or thirty three or seventy one

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Speaker 2: are maybe framing this up. Maybe give us the historical

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Speaker 2: context of what you see going on right now.

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Speaker 1: Yeah, it's a good question. I think that historically we

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Speaker 1: go through certain monetary changes. There are a couple of

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Speaker 1: different cycles that kind of overlap. One of them could

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Speaker 1: be considered the long term debt cycle. So debt builds

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Speaker 1: up in the private sector, then generally gets transferred more

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Speaker 1: toward the sovereign level, and then gets basically debased or

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Speaker 1: and flated away. That's kind of one big cycle that

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Speaker 1: developed economies go through in modern history on something like

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Speaker 1: an eighty year cadence, but you know, it can vary.

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Speaker 1: And then more broadly, there's this kind of imbalances that

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Speaker 1: build up in any sort of complex system the way

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Speaker 1: that these are currently constructed, Even between those say eighty

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Speaker 1: year periods, it's usually a midpoint where things change. So,

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Speaker 1: for example, the midpoint between the past kind of long

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Speaker 1: term debt cycle, which was the thirties and forties and

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Speaker 1: the current on was the early nineteen seventies. That was

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Speaker 1: a different type of default, a different type of monetary change,

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Speaker 1: and so I agree with you that this is kind

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Speaker 1: of historic moment. I don't know if there's a specific

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Speaker 1: date that's going to stand out quite the same way.

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Speaker 1: Maybe Liberation Day, maybe another time what we pick, maybe

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Speaker 1: the moment that Russia invade Ukraine and then there are all

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Speaker 1: these sanctions trigger that, you know, maybe it's maybe it's

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Speaker 1: just a pandemic itself that was kind of kind of

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Speaker 1: a catalyst for a lot of things as well physically speaking.

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Speaker 1: So I don't know exactly what date or period will

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Speaker 1: be highlighted as like the points, but I do think

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Speaker 1: that this era will be looked back upon much like

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Speaker 1: the seventies, much like the thirties and forties, as a

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Speaker 1: time of change in a way that the global monetary

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Speaker 1: systems constructed and the way that a lot of domestic

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Speaker 1: finances work.

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Speaker 2: So looking at more of a period as opposed to

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Speaker 2: a specific date. Some of those dates, I think when

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Speaker 2: you were talking about like the midpoint, so you think

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Speaker 2: like nineteen forty four Bretonwoods Agreement, and that's a date

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Speaker 2: because everybody sort of came together and agreed on something

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Speaker 2: at that time. Seventy one, again was a date from

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Speaker 2: Richard Nixon, but maybe like nineteen eighty five was like

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Speaker 2: a midpoint when maybe the world sort of came back

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Speaker 2: together with the Plaza Cord and sort of agreed to

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Speaker 2: sort of repeg and devalue at the same time. It

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Speaker 2: seemed like maybe, you know, the big catalyst here to

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Speaker 2: your point, Liberation Day tariffs being the big thing that

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Speaker 2: you know, Moran's talking about, these Mara Lago accords and

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Speaker 2: seemingly to maybe have I guess, in reference to the

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Speaker 2: Plaza Chords, maybe a chance for the US or the

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Speaker 2: other currency of the world sort of repegged back to

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Speaker 2: the dollar and allow the dollar to devalue. I mean,

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Speaker 2: maybe there could be some sort of coordinate agreement coming

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Speaker 2: around that.

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Speaker 1: Yeah, I think that's one of the aims of the

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Speaker 1: of the administration. I generally put something like the Plaza

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Speaker 1: Cord on a smaller level than these the bigger things

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Speaker 1: I mentioned, because that was more of like a pivot

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Speaker 1: point within a current structure. So that wasn't really like

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Speaker 1: the foundation shifting. That was more like a bunch of

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Speaker 1: entities agreeing to kind of keep that system going because

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Speaker 1: otherwise that's you know, the system that we've been in

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Speaker 1: since the seventies could have broken earlier had certain things

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Speaker 1: become totally inbounded, and that was one of the kind

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Speaker 1: of events that kind of kept it going, kept it

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Speaker 1: kind of sustainable, for lack of a better word, at

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Speaker 1: least longer, longer sustained. And I do think that something

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Speaker 1: like a mar Lago accord could absolutely occur here. If

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Speaker 1: you look back to the early nineteen seventies when this

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Speaker 1: current kind of floating exchange rate system really began, there's

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Speaker 1: really only been three dollar cycles, so major periods of

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Speaker 1: dollar strengthening compared to other currencies and the weakening compared

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Speaker 1: to other currencies. These have had very big investing implications

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Speaker 1: each time. Generally speaking, when you have this kind of

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Speaker 1: weaker dollar periods, you're looking at more inflationary periods, you're

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Speaker 1: looking at more value stock outperformance periods, you're looking at

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Speaker 1: more international stock outperformance periods, Whereas you're looking at the

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Speaker 1: stronger dollar periods, you're generally looking at more disinflation, you're

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Speaker 1: looking at more growth stock outperformance, you're looking at more

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Speaker 1: US stock outperformance. And so you know, we have been

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Speaker 1: in a strong dollar environment for quite a while now,

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Speaker 1: since about twenty fourteen, So We're something like eleven years

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Speaker 1: in what is a fairly strong dollar environment, and should

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Speaker 1: we get another leg lower in the dollar, either just

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Speaker 1: due to policy flow shifts, kind of like say the

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Speaker 1: early two thousands dollar bear cycle, or a more intentional

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Speaker 1: dollar bear cycle like nineteen eighty five, the Plaza cord.

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Speaker 1: We could have a more logo cord that has a

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Speaker 1: variety of major investing implications, but it's not necessarily a

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Speaker 1: structural change in how the system works. So I do

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Speaker 1: think that we could certainly be geared towards something more

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Speaker 1: than just that, because some of the things I've been

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Speaker 1: building up for a lot longer than just say a

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Speaker 1: dollar cycle. But that is kind of a one key

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Speaker 1: thing to watch for any of us that are involved

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Speaker 1: in markets or you know, follow the prices of assets

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Speaker 1: we own, So that is a certain a key thing.

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Speaker 2: To watch something bigger geared up to happen. I'm definitely

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Speaker 2: going to ask you about that, but I want to

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Speaker 2: go back just to the dollar for a second, because

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Speaker 2: you're talking about these different cycles, and I'm curious you

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Speaker 2: mentioned since twenty fourteen. When I look at maybe a

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Speaker 2: longer chart, I mean, the dollar seems to be very

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Speaker 2: strong obviously not as high as it was in nineteen

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Speaker 2: eighty five, but from a historical basis, it seems to

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Speaker 2: be pretty overvalued, would you say that? And then does

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Speaker 2: it look like it if it retraced back to its

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Speaker 2: historical mean, maybe it drops twenty or thirty percent from here.

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Speaker 1: That's why I do. I mean, if you look at

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Speaker 1: the three dollar cycles of modern history, each one is

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Speaker 1: kind of a lower high than the prior one thus far.

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Speaker 1: So even though, like you said, it's not as high

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Speaker 1: as nineteen eighty five, it's a different world than it

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Speaker 1: was back then, and so the system starts to kind

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Speaker 1: of break at a lower high than it used to

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Speaker 1: back in the nineteen eighties. There's both in the US

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Speaker 1: and elsewhere, there's a lot less debt in the system,

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Speaker 1: and so it could go a lot further before it

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Speaker 1: would run into problem, whereas now the feedback loop is

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Speaker 1: a lot tighter, and so it runs into issues sooner.

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Speaker 1: So yeah, Ever since, ever since twenty fourteen roughly coincided

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Speaker 1: with the end of QI three quantity of using three

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Speaker 1: the third round after the global financial crisis. When that ended,

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Speaker 1: we had a pretty strong dollar surge, and although it's

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Speaker 1: fluctuated you know, it goes up to it one hundred

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Speaker 1: one dollars indecks, you know, it's gotten as high as

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Speaker 1: like one fourteen, it's gotten down, So it goes to

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Speaker 1: these kind of these kind of waves in this period.

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Speaker 1: But during that eleven year stretch, it's all been pretty elevated,

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Speaker 1: and we look at on a trade balance basis, it's

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Speaker 1: very strong. When you look at its effects on you know,

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Speaker 1: what type of assets are doing well, what types of

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Speaker 1: economies are booming or not booming. It's all characteristic of

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Speaker 1: a stronger dollar environment. Gently, when you get a truly

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Speaker 1: weaker dollar move, you'll get something like an emerging markets

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Speaker 1: boom for maybe three to five years. You'll get probably

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Speaker 1: a round of inflation. You'll probably get a round of

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Speaker 1: kind of value stockout performance. We've not really seen any

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Speaker 1: of that at scale. Those you have individual years of

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Speaker 1: that happening. For example, twenty seventeen was a good kind

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Speaker 1: of rotation year for those types of assets. This year

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Speaker 1: so far has been somewhat of a rotation year. But

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Speaker 1: these are kind of smaller moves compared to what you

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Speaker 1: can get when you have a true, say twenty thirty

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Speaker 1: percent currency shift involving the dollars.

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Speaker 2: And then when you see these big shifts happen in

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Speaker 2: the dollar going back into a weeker dollar, then that

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Speaker 2: tends to correlate with like global M two increasing, So

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Speaker 2: the money supply starts increasing when that goes down, and

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Speaker 2: that's also part of what pushes these other markets back up. Uh.

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Speaker 1: Yes, indirectly because many cases Global M two will be

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Speaker 1: measured in dollars, because Global M two has a bunch

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Speaker 1: of different units, all the different units of the major currencies,

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Speaker 1: and so when you're kind of reporting what is the

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Speaker 1: value of this figure, it's normally reported dollar equivalents because

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Speaker 1: that's the major that's the globalserve currency. And the reason

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Speaker 1: it's really relevant is because out of all the major currencies,

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Speaker 1: the dollars by far the most important ass border funding currency.

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Speaker 1: So there's something like eighteen trillion dollars worth of dollars

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Speaker 1: dominated loans and bonds that are cross border in the world,

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Speaker 1: and so it's the unit of account for liabilities, which

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Speaker 1: is really important. So when the dollar is weakening, it

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Speaker 1: means various entities around the world their liabilities are weakening,

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Speaker 1: which is good for them. Whereas when the dollar's strengthening

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Speaker 1: their liabilities are hardening. It's like if you took if

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Speaker 1: you took out a mortgage in Swiss francs, but say

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Speaker 1: you're renting it out and all the cash flows are

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Speaker 1: in dollars. You're in a world of pain if the

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Speaker 1: Swiss franc doubles compared to the dollar, whereas you're doing

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Speaker 1: great if the Swiss franc gets cut in half relatively dollar.

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Speaker 1: And so that that's what happens kind of the whole world.

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Speaker 1: And so whenever you do get that weaker dollar environment, yeah,

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Speaker 1: you get a surgeon global into but it's mainly because

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Speaker 1: the denominators going down. But then also what that does

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Speaker 1: that allows emerging market central banks around the world to

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Speaker 1: kind of loosen a little bit because during strong dollar environments,

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Speaker 1: even if they encounter recession, they often have to be

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Speaker 1: pretty tight with their monetary policy to avoid currency crises.

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Speaker 1: And so when they do get that weeker dollar period,

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Speaker 1: they're able to kind of actually stimulate for a change.

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Speaker 1: And that's we tend to get that little bit of

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Speaker 1: a rotation.

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Speaker 3: Yeah, I know that all too well.

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Speaker 2: The last couple of years I was building a house

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Speaker 2: down in Mexico and trying to deal with multiple currencies

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Speaker 2: at the same time has been extremely difficult. The peso

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Speaker 2: has moved quite a bit, quite a bit against the

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Speaker 2: dollar over the last couple of years, and we're ordering supplies.

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Speaker 2: Some are coming from Europe, some are coming from Mexico,

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Speaker 2: some are coming from the US, and my vendors couldn't

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Speaker 2: give me any quotes, like it's all because we don't know.

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Speaker 3: What the price will be at those different times.

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Speaker 2: And then certainly you see these big moves and all

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Speaker 2: of sudden things get a lot more expensive for me.

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Speaker 2: So I can only imagine that on a much bigger

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Speaker 2: scale and living through that.

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Speaker 3: You know, I haven't built a.

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Speaker 2: House in another country before, and then you just start thinking, man,

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Speaker 2: how inevitable is something like bitcoin, because like, how can

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Speaker 2: the world work like this? Like it's it's madness that

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Speaker 2: people have to deal with that all the time.

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Speaker 1: Yeah, we built a home in Egypt. We went through

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Speaker 1: similar issues over the past two years. And it's also

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Speaker 1: even when you're just in a country with high inflation.

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Speaker 1: For example, in Egypt, they're dealing with something like twenty

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Speaker 1: five percent annual money supply growth in that country, and

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Speaker 1: so imagine all contracts in that country, whether it's wage contracts,

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Speaker 1: whether it's supplier contracts, all those things have to kind

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Speaker 1: of adjust on a regular basis or someone's getting really

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Speaker 1: messed up. And it adds a overhead problem to every

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Speaker 1: entity trying to do business in the country and every worker.

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Speaker 2: Yeah, and I didn't really think about it at this level.

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Speaker 2: But what it also does is it makes all of

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Speaker 2: those vendors become speculators because they're all now trying to

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Speaker 2: speculate on what the price changes will be on those currencies.

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Speaker 2: So like, I didn't really understand why at the gas

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Speaker 2: stations there's like one price for Mexican pesos and one

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Speaker 2: price for dollars, and it's like, well, because they can't

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Speaker 2: go exchange those dollars maybe till the end of the week,

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Speaker 2: and then we don't know what the exchange rates are

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Speaker 2: going to be, so they have to like make up

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Speaker 2: for that, And yeah, you just realize, like how how

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Speaker 2: broken the money is to your book, right before we

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Speaker 2: get into something bigger that I really want to get into.

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Speaker 2: The other thing sort of around this shift, or seems

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Speaker 2: to be maybe the catalyst for the shift, per Trump

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Speaker 2: is tariffs and resetting trade imbalances, and I think it's

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Speaker 2: bigger than just trade inbalances. But I'm curious in regards

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Speaker 2: to that. Seems like that's like a pretty big deal

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Speaker 2: shifting that back. So one, I mean, is it really

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Speaker 2: about trade, because I've seen you talking about this as well,

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Speaker 2: and it seems like in our society, like we don't

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Speaker 2: want to bring T shirts and sneakers back from Vietnam

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Speaker 2: one hundred years agoing to yes, we did that, we

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Speaker 2: did textiles, but we've moved on to higher things, and

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Speaker 2: so like bringing T shirts and sneakers back doesn't seem

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Speaker 2: to be the highest and best use case fixing those

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Speaker 2: trade inbalances. So I'm curious your take on that.

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Speaker 1: Yeah, I think what they want more is like higher

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Speaker 1: capital goods. Even when we look at China, for example,

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Speaker 1: that's the trade boogeyman at the current time, they've moved

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Speaker 1: up the capital stack. So you know, we used to

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Speaker 1: think of China as the biggest producer of like plastic

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Speaker 1: goods for example, and textiles. A lot of that has

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Speaker 1: rotated toward less expensive manufacturing places than China, whereas they've

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Speaker 1: moved up the capitol stack. China is now the biggest

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Speaker 1: exporter of vehicles in the world. They've passed South Korea,

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Speaker 1: Germany and Japan as the biggest exporter. And it's not

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Speaker 1: just you know, like electric vehicles, it's actually mostly ice vehicles.

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Speaker 1: Like when I go bring up Egypt again, the streets

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Speaker 1: just have tons of Chinese cars on them. And that's

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Speaker 1: true for a lot of developed developing countries in the world.

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Speaker 1: We don't see them in the US. We see them

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Speaker 1: other than a lot of other places. And I think,

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Speaker 1: you know, several enties in the US kind of want

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Speaker 1: that for the US. They want to be a semiconductor

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Speaker 1: manufacturing area, we want to be leaders in a robotics,

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Speaker 1: We want to be a leader in all sorts of

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Speaker 1: kind of higher in capital goods, rather than kind of

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Speaker 1: having give that industry up to Europe and East Asia

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Speaker 1: and places like that. And I do think it's bigger

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Speaker 1: than just trade, because a point that I've been making

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Speaker 1: a lot is that the current issues with the US

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Speaker 1: trades specifically are heavily tied to the global monetary system

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Speaker 1: as it's structured. So go back to by point that

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Speaker 1: you know, every several decades, these things tend to change

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Speaker 1: pretty substantially. This is potentially more than just a trade cycle.

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Speaker 1: Part of why so many nies even talking about a

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Speaker 1: monetary change or a change in structure is because it's

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Speaker 1: so tied to trade. And a point that I've made

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Speaker 1: is that basically the other side of being the global

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Speaker 1: reserve currency is something in your economy is generally getting

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Speaker 1: hollowed out. There's some sort of imbalance that's kind of

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Speaker 1: embedded into the system, and you're kind of paying this

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Speaker 1: cost to maintain the privilege of being the globalserve currency.

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Speaker 1: So back in the Breton Woods era, the cost was

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Speaker 1: that we were draining our gold reserves. We had pegging

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Speaker 1: the dollar to gold, A bunch of other currencies pegged

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Speaker 1: themselves to the dollar, and then the dollar was the

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Speaker 1: primary global funding currency. So the combination of fractures or

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Speaker 1: banks and depth spending made it so that the number

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Speaker 1: of dollars kept increasing dramatically, but our gold reserves were not.

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Speaker 1: And so over time, as you get more foreign redemptions,

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Speaker 1: our gold reserves fell from twenty thousand tons to nine

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Speaker 1: thousand tons, and then they quickly defaulted on the ability

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Speaker 1: to redeem dollars for gold. And ever since then, when

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Speaker 1: we shifted more toward the euro dollar system, petit dollar system, instead.

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Speaker 1: Kind of the cost that we're paying is de industrialization.

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Speaker 1: We are gradually hollowing out on industrial base to maintain

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Speaker 1: our kind of global dollar empire. But this has cumulative imbalances.

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Speaker 1: We're basically we're constantly taking away from Michigan and Ohio

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Speaker 1: and Pennsylvania and the rust belt and making it get

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Speaker 1: the name rust Belt. It's going then international, and then

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Speaker 1: they're reinvesting their proceeds in US stocks, US bonds, private equity,

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Speaker 1: so that's going back into New York, back in the

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Speaker 1: Silicon Valley, and so kind of the net result is

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Speaker 1: we're taking out of the Midwest that we're sticking it

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Speaker 1: the value into the coasts. So you get both both

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Speaker 1: domestic political issues and then you get these kind of

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Speaker 1: global big imbalances where China has all these massive surpluses,

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Speaker 1: the US has all these massive deficits, and other countries

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Speaker 1: kind of sit somewhere in the middle. And that's kind

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Speaker 1: of an artifact of the system that we've structured. And

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Speaker 1: the challenge is that if you want to bring back

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Speaker 1: some to give manufacturing and industrial vibrancy, it generally comes

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Speaker 1: with the cost of giving up some degree of the

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Speaker 1: currency power that they.

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Speaker 2: Have Why why does it? I mean, that's obviously Triven's dilemma,

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Speaker 2: which is the problem that we sort of get ourselves into,

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Speaker 2: and so having to supply the world with dollars in

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Speaker 2: exchange for giving those dollars for the goods that they

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Speaker 2: bring in. I'm guess that's what you're saying. But I mean,

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Speaker 2: is that why the world needs the dollars? I mean,

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Speaker 2: then the euro dollar system to create their own dollars. Now,

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Speaker 2: can't we just provide dollars another way? And then also

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Speaker 2: maybe a better question maybe that I'd like to ask specifically,

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Speaker 2: is like sort of in a capitalist's system, like the

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Speaker 2: goal is to move to higher levels and sort of

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Speaker 2: take care of those base needs and give those another

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Speaker 2: emerging market. So like one hundred years ago, we did

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Speaker 2: do textiles here, now.

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Speaker 3: Vietnam dos does.

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Speaker 2: But we now make digital products. We make Facebook and

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Speaker 2: social media platforms and financial products, and those get exported

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Speaker 2: to the world and the world imports those and that

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Speaker 2: doesn't show up in trade balance, does it?

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Speaker 3: So?

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Speaker 1: Yeah, so two questions, what is actually it does? So

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Speaker 1: there is a services component to trade balance, and our

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Speaker 1: trade balance has reported include services. We actually have a

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Speaker 1: services surplus to your point, and services can also include

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Speaker 1: things like tourism. You know, if a place doesn't really

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Speaker 1: export things, but everyone wants to go there to travel,

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Speaker 1: and they bring currency with them and they spend in

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Speaker 1: that economy, they're basically exporting tourism services, is the way

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Speaker 1: to think about it. So the US is exporting financial services,

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Speaker 1: software services, tourism services, things like that, and that is

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Speaker 1: taking away from some of our goods deficit, but we

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Speaker 1: still have a net deficit even after that's considered, and

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Speaker 1: it's pretty big. And to your you know, to your point,

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Speaker 1: like there special specialization matters, like the trade is is

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Speaker 1: a net good because it allows different areas to focus.

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Speaker 1: It only becomes an issue when it's not necessarily happening naturally.

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Speaker 1: It's happening because of an artifact of basically an intentional

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Speaker 1: system as designed. And two uh, there's usually a real

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Speaker 1: politic at some point that hits. There's natural security interests

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Speaker 1: that hit. And so for example, when a pandemic hits

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Speaker 1: and they're like, wait a second, we can't make ventilators.

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Speaker 1: Why can't we make ventilators or semic connectors is super important?

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Speaker 1: Why are all the semic conductors being made in like

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Speaker 1: Taiwan and South Korea, for example, that becomes an issue.

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Speaker 1: So people usually don't use use sleepover where shirts are made,

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Speaker 1: but they do lose sleep over where complex machinery is made,

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Speaker 1: especially if it's a handful of kind of places in

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Speaker 1: the warriant. So uh, and this is a weird thing

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Speaker 1: you don't think about, like pharmaceutical components, medical dies that

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Speaker 1: are needed in like imaging, the little little widgets here

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Speaker 1: and there that our industries just heavily reliant on. And

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Speaker 1: if so, if you do some sort of trade embargo,

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Speaker 1: you can have a national security issue and kind of

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Speaker 1: shortage and things like that.

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Speaker 3: As we saw in twenty twenty.

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Speaker 2: To your point, and I'm bullish on tariffs for the

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Speaker 2: most part, and I agree with you.

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Speaker 3: They're strategic, they're not blanket.

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Speaker 2: We're not trying to grow coconuts in the US, right,

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Speaker 2: we want to import those types of things. And also

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Speaker 2: tariffs also work for protecting certain industries, especially allowing industries

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Speaker 2: to grow. So for example, bringing back some of these

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Speaker 2: competitive things like microchips for example, and doing some tariffs

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Speaker 2: might make it more cost beneficial.

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Speaker 1: Here.

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Speaker 2: Also in the US, we've sort of shot ourselves in

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Speaker 2: the foot by doing a lot of environmental regulations against

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Speaker 2: rarest elements and certain minerals that we might need here

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Speaker 2: and bringing those things back just by loosing some of

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Speaker 2: those political I guess, if you'll call them, those political

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Speaker 2: regulations against that.

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Speaker 3: So I guess those are all important pieces.

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Speaker 2: And I think if I looked at sort of the plan,

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Speaker 2: it doesn't look like the goal was to bring sneakers

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Speaker 2: and T shirts back.

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Speaker 3: That's like a media headline.

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Speaker 2: I shouldn't probably repeat that, But I think maybe getting

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Speaker 2: back to fifteen percent manufacturing in the US, you know,

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Speaker 2: and then put in some of these tariffs will allow

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Speaker 2: us to sort of develop some of these automation technologies

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Speaker 2: that we need. Seems like a pretty good planned, at

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Speaker 2: least that's what I was seeing.

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Speaker 1: Yeah, potentially, I think the problem is that so if

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Speaker 1: you look at, for example, that Stephen Myron paper, So

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Speaker 1: Stephen Myron is Trump's chair of the Council of Economic

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Speaker 1: Advisors to the President, and he kind of outlined that

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Speaker 1: the trade imbalances directly tied to the currency issue and

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Speaker 1: that there is somewhat of a trade off there. One

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Speaker 1: of the challenges that I think the administration as they're

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Speaker 1: approaching it is not really talking about that other side

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Speaker 1: of it. They want to retain every single benefit of

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Speaker 1: the dollar as the globals of currency, but then they

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Speaker 1: also want to fix the trade element, even though they're

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Speaker 1: kind of tied at the hip, right, And I think

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Speaker 1: that's where they potentially run into frictions because it's more

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Speaker 1: like you're treating a series of symptoms rather than talking

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Speaker 1: about the elephant in the room, which is kind of

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Speaker 1: the root cause, because it's it's very wonky to talk about,

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Speaker 1: you know, it's not something like that. All the stuff

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Speaker 1: I just said is terrible at a political route. It's

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Speaker 1: it's not no one's in a collap it's not fun,

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Speaker 1: it's it's not energizing, there's no enemy. It's like it's

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Speaker 1: it's it's a cumulative decisions that US and others have

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Speaker 1: made collaborative movie for decades. And so that's the challenge

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Speaker 1: and and there's no there's no kind of narrative political

435
00:21:23,440 --> 00:21:26,560
Speaker 1: gain from saying we're actually being harmed by being the

436
00:21:26,600 --> 00:21:29,159
Speaker 1: solvers of currency now that the downsides of it are

437
00:21:29,240 --> 00:21:31,520
Speaker 1: kind of equal or exceeding the benefits of being it.

438
00:21:33,160 --> 00:21:36,280
Speaker 1: And it's it's it's a whole wonky subject to talk about.

439
00:21:36,320 --> 00:21:38,720
Speaker 1: It's more about kind of a we're in a more

440
00:21:38,800 --> 00:21:41,679
Speaker 1: multipolar world now and there are reality is associated with that,

441
00:21:42,040 --> 00:21:44,639
Speaker 1: but yeah, none of that carries political capital to bring up.

442
00:21:45,400 --> 00:21:47,320
Speaker 1: And so it's a lot of the focus is on

443
00:21:47,359 --> 00:21:50,439
Speaker 1: the terear side, the trade side, but the challenge being

444
00:21:50,480 --> 00:21:51,560
Speaker 1: that's only one side of the coin.

445
00:21:51,640 --> 00:21:54,119
Speaker 2: Yeah, and does that lead to something bigger that you

446
00:21:54,240 --> 00:21:56,800
Speaker 2: see kind of being geared up is maybe to change

447
00:21:56,840 --> 00:21:59,840
Speaker 2: that structure of the monetary system.

448
00:22:00,640 --> 00:22:02,840
Speaker 1: We have seen that in elements of the administration. So

449
00:22:02,960 --> 00:22:05,560
Speaker 1: to go back to Stephen Myern for example, you know

450
00:22:05,760 --> 00:22:07,760
Speaker 1: he in his paper he leterally talked about the potential

451
00:22:07,800 --> 00:22:11,320
Speaker 1: of putting a fee on investing in US assets by

452
00:22:11,480 --> 00:22:14,400
Speaker 1: a foreign sector. Now, you wouldn't really think a politician

453
00:22:14,520 --> 00:22:17,280
Speaker 1: or an advisor to a politician would think, hey, we

454
00:22:17,320 --> 00:22:20,479
Speaker 1: want the world to invest less in our assets. But

455
00:22:20,520 --> 00:22:22,560
Speaker 1: that's that's one side of the coin that's happening. The

456
00:22:22,600 --> 00:22:24,760
Speaker 1: other side of basically a current account depths is which

457
00:22:24,760 --> 00:22:28,560
Speaker 1: we have is a capital account surplus, and by all

458
00:22:28,560 --> 00:22:32,640
Speaker 1: these entities around the world owning US assets, it overvalues

459
00:22:32,680 --> 00:22:34,919
Speaker 1: a dollar and therefore makes it harder for us to

460
00:22:34,960 --> 00:22:38,840
Speaker 1: compete on manufactured goods, and so to the extent that

461
00:22:38,840 --> 00:22:43,119
Speaker 1: that's you know, become very extreme, there are elements in

462
00:22:43,119 --> 00:22:45,399
Speaker 1: the administration that want to push back on that and say, well,

463
00:22:45,440 --> 00:22:47,040
Speaker 1: how can we kind of maybe balance this out a

464
00:22:47,040 --> 00:22:50,359
Speaker 1: little bit. But then that sort of focus on some

465
00:22:50,400 --> 00:22:52,800
Speaker 1: of those bigger things doesn't necessarily make it up to

466
00:22:53,160 --> 00:22:56,480
Speaker 1: things that Trump will say out loud, for example. So

467
00:22:56,640 --> 00:22:58,720
Speaker 1: I think, like any administration, there are kind of different

468
00:22:58,720 --> 00:23:01,719
Speaker 1: factions within the administration. We saw this for example, there

469
00:23:01,840 --> 00:23:04,080
Speaker 1: there was a more of a free trade contingent with

470
00:23:04,080 --> 00:23:07,520
Speaker 1: the administration and more of a protectionist and tariff contingent.

471
00:23:07,960 --> 00:23:10,840
Speaker 1: And then similarly you have a somewhat more academic bent

472
00:23:11,359 --> 00:23:14,439
Speaker 1: within the administration, you know, the Stephen Myrons uh, and

473
00:23:14,480 --> 00:23:17,639
Speaker 1: then you have the other faction. So I think that's

474
00:23:17,800 --> 00:23:19,760
Speaker 1: that's one of the challenges, kind of seeing which which

475
00:23:19,760 --> 00:23:21,680
Speaker 1: side's winning it at being given time. There was a

476
00:23:21,720 --> 00:23:24,720
Speaker 1: similar dynamic in his prior term, but that was more

477
00:23:24,760 --> 00:23:29,879
Speaker 1: of an establishment versus ant establishment contingent. Uh. Where is

478
00:23:29,920 --> 00:23:32,760
Speaker 1: this this term he put together? This administration is more

479
00:23:34,119 --> 00:23:36,800
Speaker 1: it's more fully into establishment, but then there's still different

480
00:23:36,800 --> 00:23:37,639
Speaker 1: factions within that.

481
00:23:38,480 --> 00:23:40,560
Speaker 2: I guess what I was asking about is maybe some

482
00:23:40,960 --> 00:23:44,520
Speaker 2: fundamental transformation of the system getting away from the dollar

483
00:23:44,560 --> 00:23:47,200
Speaker 2: being that reserve currency that's always forced to an export

484
00:23:47,240 --> 00:23:49,960
Speaker 2: its manufacturing sector. So there's been hints, I mean, Luke

485
00:23:49,960 --> 00:23:52,679
Speaker 2: Grammin talks about quite often, but hints about, you know,

486
00:23:52,800 --> 00:23:56,639
Speaker 2: revaluing gold for example. Obviously there's strate a strategic Bitcoin

487
00:23:56,680 --> 00:23:59,680
Speaker 2: Reserve bill put forth, and so maybe doing something to

488
00:23:59,760 --> 00:24:02,720
Speaker 2: sort of of get away from that pure fiat you

489
00:24:02,720 --> 00:24:04,800
Speaker 2: know and US Treasury dollar system and going back to

490
00:24:04,840 --> 00:24:06,240
Speaker 2: something like the older bitcoin.

491
00:24:06,359 --> 00:24:07,400
Speaker 3: Is that what you were talking.

492
00:24:07,240 --> 00:24:09,359
Speaker 1: About, Well, yeah, that's what I mean by factions. So

493
00:24:09,400 --> 00:24:11,840
Speaker 1: for example, in Steven Myer's paper, he talked about how

494
00:24:12,760 --> 00:24:15,360
Speaker 1: if what he's saying he's basically as up happening, it'd

495
00:24:15,359 --> 00:24:19,240
Speaker 1: be beneficial for gold and cryptocurrencies, which would primarily be bitcoin.

496
00:24:19,359 --> 00:24:23,160
Speaker 1: He used the phrase cryptocurrencies, but basically golden bitcoin would

497
00:24:23,200 --> 00:24:26,359
Speaker 1: benefit from this more neutral reserve asset type of system

498
00:24:26,359 --> 00:24:29,720
Speaker 1: and a more multipolar system. Then there's you see a

499
00:24:29,720 --> 00:24:32,639
Speaker 1: little bit of pushback from within the same administration because

500
00:24:32,640 --> 00:24:35,040
Speaker 1: for example, Trump would say that if there's an attempt

501
00:24:35,040 --> 00:24:37,919
Speaker 1: to make a bricks currency, he would stop it or

502
00:24:37,960 --> 00:24:39,760
Speaker 1: try to you know, he was sanction it and things

503
00:24:39,800 --> 00:24:42,000
Speaker 1: like that, even though that would actually kind of play

504
00:24:42,000 --> 00:24:45,399
Speaker 1: into the Meyern playbook, uh to say, okay, let some

505
00:24:45,520 --> 00:24:48,320
Speaker 1: of that, you know, foreign trade happen in a different currency.

506
00:24:48,440 --> 00:24:51,000
Speaker 1: I think for separate reasons, the bricks currency doesn't make sense.

507
00:24:52,080 --> 00:24:55,280
Speaker 1: But basically one of the potential pass for reassuring some

508
00:24:55,320 --> 00:24:58,200
Speaker 1: of the higher end US manufacturing is to say, look,

509
00:24:58,240 --> 00:24:59,960
Speaker 1: I mean, if you want to do if China wants

510
00:25:00,119 --> 00:25:02,000
Speaker 1: to trade, they are already the biggest trading part of

511
00:25:02,400 --> 00:25:04,399
Speaker 1: most countries, they can do more of it in their

512
00:25:04,400 --> 00:25:06,639
Speaker 1: own currency. They can do more cross border funding in

513
00:25:06,680 --> 00:25:09,879
Speaker 1: their own currency, not have it always be the dollar,

514
00:25:10,280 --> 00:25:12,520
Speaker 1: and that actually allows some of the balances to shift

515
00:25:12,520 --> 00:25:15,040
Speaker 1: a little bit. So instead of the dollar being you know,

516
00:25:15,160 --> 00:25:20,000
Speaker 1: ninety percent of you know, currency exchange by far the

517
00:25:20,000 --> 00:25:22,840
Speaker 1: biggest cross border funding currency, bigger than all those combined,

518
00:25:23,160 --> 00:25:25,320
Speaker 1: you can have a potentially more multipolar world where the

519
00:25:25,359 --> 00:25:28,840
Speaker 1: dollar remains central in certain parts of the world and

520
00:25:29,000 --> 00:25:31,560
Speaker 1: other parts of the world it becomes you know, the

521
00:25:31,680 --> 00:25:36,080
Speaker 1: Chinese currency, and and that the biggest reserve assets become

522
00:25:36,640 --> 00:25:38,600
Speaker 1: you know, the neutral ones, ones that are not issued

523
00:25:38,600 --> 00:25:41,240
Speaker 1: by anyone country, so it's not as though another there's

524
00:25:41,240 --> 00:25:44,600
Speaker 1: no world where really another country becomes the global reserve

525
00:25:44,680 --> 00:25:46,760
Speaker 1: currency issuer, and the way that the States has been,

526
00:25:46,840 --> 00:25:48,680
Speaker 1: that's not that's not really in the cards for anyone.

527
00:25:49,040 --> 00:25:51,560
Speaker 1: It's more like, how quickly are we going to shift

528
00:25:51,560 --> 00:25:55,159
Speaker 1: toward a more multipolar system and one built around neutral

529
00:25:55,160 --> 00:25:57,800
Speaker 1: reserve assets, or to what extent we're going to fight

530
00:25:57,880 --> 00:26:01,040
Speaker 1: that shift? And I think the more elegant approach is

531
00:26:01,080 --> 00:26:03,760
Speaker 1: to let that shift happen and make sure that we're

532
00:26:04,000 --> 00:26:07,399
Speaker 1: kind of benefiting from that shift rather than fighting it.

533
00:26:07,400 --> 00:26:09,480
Speaker 1: It's kind of like if you realize you've you're the

534
00:26:09,560 --> 00:26:13,960
Speaker 1: Roman Empire, you've maybe spread your borders too thin, so

535
00:26:14,080 --> 00:26:16,479
Speaker 1: you're kind of too wide, and now you find yourself

536
00:26:16,520 --> 00:26:19,119
Speaker 1: doing tons of border skirmishes and realizing that you're facing

537
00:26:19,160 --> 00:26:22,160
Speaker 1: issues from such a big empire. The question is do

538
00:26:22,200 --> 00:26:24,639
Speaker 1: you keep fighting every every inch of the way to

539
00:26:24,720 --> 00:26:27,200
Speaker 1: keep your borders, which is probably not the best approach,

540
00:26:27,720 --> 00:26:30,280
Speaker 1: or do you kind of strategically assess, okay, which borders

541
00:26:30,280 --> 00:26:32,840
Speaker 1: don't make sense anymore? How can we come out of

542
00:26:32,840 --> 00:26:35,360
Speaker 1: this really strong from position of strength? And I think

543
00:26:35,359 --> 00:26:37,200
Speaker 1: you can do that with currencies.

544
00:26:36,760 --> 00:26:38,800
Speaker 2: And do you think I mean, was it a couple

545
00:26:38,800 --> 00:26:41,520
Speaker 2: of years ago Jerome Powell had said something about potentially

546
00:26:41,600 --> 00:26:44,520
Speaker 2: having more than one reserve currency global currency, and it

547
00:26:44,560 --> 00:26:47,160
Speaker 2: seems like, you know, obviously with the Trump administration, there's

548
00:26:47,160 --> 00:26:48,240
Speaker 2: been a lot of talk about it. I think the

549
00:26:48,359 --> 00:26:50,520
Speaker 2: Scent has maybe tried to squash that a little bit

550
00:26:50,520 --> 00:26:52,840
Speaker 2: about revaluing goal. But I mean we've seen I think

551
00:26:53,000 --> 00:26:57,159
Speaker 2: to your point, Steve Myron talking about it. I mean,

552
00:26:57,160 --> 00:26:59,200
Speaker 2: do you think that's something that they're talking about potentially

553
00:26:59,280 --> 00:27:01,840
Speaker 2: sort of letting that happen, I mean within this term

554
00:27:01,960 --> 00:27:04,480
Speaker 2: or is that much longer further.

555
00:27:04,240 --> 00:27:07,600
Speaker 1: Out the shortages. I don't know, but I will say

556
00:27:07,600 --> 00:27:10,760
Speaker 1: that this would have been a non starter in the

557
00:27:10,800 --> 00:27:14,160
Speaker 1: prior administration, for example. So the fact that like there

558
00:27:14,160 --> 00:27:17,959
Speaker 1: are people in the administration even talking about this is

559
00:27:18,000 --> 00:27:20,520
Speaker 1: a shifting of the Overton wind dial. So so like

560
00:27:20,560 --> 00:27:22,159
Speaker 1: this is, you know, that's more of a break the

561
00:27:22,160 --> 00:27:26,959
Speaker 1: glass type of decision, kind of an intentional major shift

562
00:27:27,119 --> 00:27:31,680
Speaker 1: in the global system. Much like how companies rarely disrupt themselves.

563
00:27:31,680 --> 00:27:36,440
Speaker 1: They usually get disrupted by external startups, but every once

564
00:27:36,480 --> 00:27:38,560
Speaker 1: in a while a big company will disrupt itself and

565
00:27:38,600 --> 00:27:41,080
Speaker 1: then they're therefore, you know, kind of pivot from a

566
00:27:41,080 --> 00:27:43,840
Speaker 1: position of strength. It's certainly possible, the US could do it,

567
00:27:44,600 --> 00:27:47,640
Speaker 1: and the fact that these discussions are even happening is interesting.

568
00:27:48,560 --> 00:27:51,480
Speaker 2: How does the sort of stable coin, the Genius Bill

569
00:27:51,520 --> 00:27:53,600
Speaker 2: that they're trying to get through, and Trump's executive orders

570
00:27:53,600 --> 00:27:56,320
Speaker 2: around that come into play, because on one hand, it

571
00:27:56,320 --> 00:27:58,600
Speaker 2: looks like the US is sort of trying to exert

572
00:27:58,600 --> 00:28:01,760
Speaker 2: the US dollar dominance as a currency at least throughout

573
00:28:01,800 --> 00:28:04,200
Speaker 2: the world. So we have all these currencies hyper inflating

574
00:28:04,480 --> 00:28:07,960
Speaker 2: or double digit inflation. The people want dollars, can't really

575
00:28:08,000 --> 00:28:10,600
Speaker 2: get them. The US wants people to buy treasuries, and

576
00:28:10,640 --> 00:28:12,280
Speaker 2: that stable coin sort of seems to be like that

577
00:28:12,320 --> 00:28:16,480
Speaker 2: perfect middleman. Is that a way that continues to keep

578
00:28:16,520 --> 00:28:19,080
Speaker 2: the dollar dominance going or not in the same regard,

579
00:28:19,119 --> 00:28:22,040
Speaker 2: because it's not a reserve, it's more of just a currency.

580
00:28:23,200 --> 00:28:25,520
Speaker 1: So that is a way to keep dollar dominance going.

581
00:28:25,520 --> 00:28:26,920
Speaker 1: But then it goes to the prior point, do you

582
00:28:26,920 --> 00:28:29,200
Speaker 1: even want dollar dominance to keep? The point? And that's

583
00:28:29,200 --> 00:28:31,080
Speaker 1: where you could have different factions, because you could have

584
00:28:31,560 --> 00:28:34,919
Speaker 1: there's literally the Myron factional potentially talking about having a

585
00:28:34,960 --> 00:28:38,440
Speaker 1: fee to owning US assets, and another faction saying, how

586
00:28:38,480 --> 00:28:40,360
Speaker 1: can we get more empties outside of the US to

587
00:28:40,400 --> 00:28:43,000
Speaker 1: own US assets via stable coin, right right, So there's

588
00:28:43,000 --> 00:28:46,360
Speaker 1: a little bit of a potential conflict there. Also. One

589
00:28:46,400 --> 00:28:48,960
Speaker 1: of the things that Myron proposed was trying to get

590
00:28:49,160 --> 00:28:53,440
Speaker 1: foreign holders to turn out their debt, so basically to say,

591
00:28:53,520 --> 00:28:56,200
Speaker 1: hold fewer T bills and two year T notes and

592
00:28:56,200 --> 00:28:58,160
Speaker 1: things like that, and how to get them to buy

593
00:28:58,200 --> 00:29:02,200
Speaker 1: potension newly issued fifty year bonds or century bonds, for example.

594
00:29:02,400 --> 00:29:05,080
Speaker 1: Whereas stable coins need the opposite. They generally need pretty

595
00:29:05,080 --> 00:29:08,920
Speaker 1: short term collateral or you're potentially risking a pretty big

596
00:29:08,960 --> 00:29:13,120
Speaker 1: mismatch of assets versus liabilities. And so if anything, I

597
00:29:13,120 --> 00:29:16,160
Speaker 1: mean that that increases the appetite for TEA bills uh,

598
00:29:16,240 --> 00:29:19,160
Speaker 1: and maybe potentially other other fairly short term treasuries.

599
00:29:19,560 --> 00:29:19,680
Speaker 2: Uh.

600
00:29:19,840 --> 00:29:24,080
Speaker 1: It's not functionally that much different than reserve holdings. Uh.

601
00:29:24,200 --> 00:29:25,800
Speaker 1: You know, it's kind of the money of the people

602
00:29:25,880 --> 00:29:27,719
Speaker 1: rather than money the central banks. We do see kind

603
00:29:27,720 --> 00:29:32,120
Speaker 1: of a GRADUALDP top down slight dedollarization, whereas you don't

604
00:29:32,120 --> 00:29:34,880
Speaker 1: see that on the bottom up. Gentliet. You know, when

605
00:29:34,880 --> 00:29:38,280
Speaker 1: you go to the black market in Cairo looking for money,

606
00:29:38,880 --> 00:29:40,960
Speaker 1: it's the dollar, it's not the year, it isn't less

607
00:29:40,960 --> 00:29:43,960
Speaker 1: so the euro less so the Chinese want even though

608
00:29:44,120 --> 00:29:46,320
Speaker 1: China is the biggest trading party with Egypt compared to

609
00:29:46,360 --> 00:29:50,280
Speaker 1: the US, it's still dollars that that are desired, and

610
00:29:50,320 --> 00:29:52,280
Speaker 1: so there is a lot of bottom up demand for

611
00:29:52,600 --> 00:29:56,920
Speaker 1: stable coins by extension T bills. Uh. And but that's

612
00:29:57,360 --> 00:30:00,360
Speaker 1: it doesn't really conform with Myyern's plan of either getting

613
00:30:00,360 --> 00:30:03,360
Speaker 1: the four sector to invest less or to they sent

614
00:30:03,440 --> 00:30:06,200
Speaker 1: that they're going to invest to term out their liabilities

615
00:30:06,480 --> 00:30:09,800
Speaker 1: to potentially reduce long term magistrates for the US, Because.

616
00:30:09,560 --> 00:30:11,520
Speaker 2: What you're saying is one is central bank demand which

617
00:30:11,520 --> 00:30:13,240
Speaker 2: has been going down, but then you have retail demand

618
00:30:13,320 --> 00:30:15,920
Speaker 2: picking up from the stable coins. But then the stable

619
00:30:15,920 --> 00:30:18,000
Speaker 2: coin companies turn around and buy the treasury debt. So

620
00:30:18,400 --> 00:30:19,120
Speaker 2: it's basically the.

621
00:30:19,040 --> 00:30:20,280
Speaker 3: Same thing one way or another.

622
00:30:21,200 --> 00:30:23,200
Speaker 2: But the demand from the stable coin companies would be

623
00:30:23,200 --> 00:30:25,120
Speaker 2: more in the short term on the bills versus at

624
00:30:25,160 --> 00:30:26,880
Speaker 2: least if central banks were buying it, they'd turn it

625
00:30:26,920 --> 00:30:27,720
Speaker 2: out a little bit further.

626
00:30:28,400 --> 00:30:30,520
Speaker 1: I guess yeah, they settled back Sholey hold a mix

627
00:30:30,560 --> 00:30:34,120
Speaker 1: of both for different purposes, where stable coins primarily need

628
00:30:34,120 --> 00:30:35,440
Speaker 1: that shorter term.

629
00:30:36,160 --> 00:30:39,440
Speaker 2: Now at the time of US are recording this here

630
00:30:39,840 --> 00:30:44,280
Speaker 2: May twenty one, we're seeing the Japanese long bond market

631
00:30:44,320 --> 00:30:48,120
Speaker 2: seemingly blowing out, which is looking very extreme when you

632
00:30:48,160 --> 00:30:49,680
Speaker 2: look at it on a chart. When I look at

633
00:30:49,720 --> 00:30:52,400
Speaker 2: the thirty years of the other developed world, the US,

634
00:30:52,400 --> 00:30:55,120
Speaker 2: in Germany and UK, they're also making new all time highs.

635
00:30:56,720 --> 00:30:57,520
Speaker 3: What's going on with that?

636
00:30:57,560 --> 00:31:00,680
Speaker 2: I mean, is Japan screaming something different then what the

637
00:31:00,720 --> 00:31:03,120
Speaker 2: rest of these developed world you know, long bonds are showing.

638
00:31:04,400 --> 00:31:07,360
Speaker 1: So Japan's on somewhat of a different cycle. I think

639
00:31:07,360 --> 00:31:10,120
Speaker 1: for Europe, a somewhat of a shift there is that

640
00:31:10,120 --> 00:31:12,719
Speaker 1: they're you know, they've they've historically been reticent to do

641
00:31:12,760 --> 00:31:16,520
Speaker 1: fiscal stimulus of various types. Japan's kind of in a

642
00:31:16,560 --> 00:31:20,000
Speaker 1: constant state of physical dominance. The US runs pretty heavy

643
00:31:20,000 --> 00:31:23,880
Speaker 1: fiscal spending depth sits on a regular basis. Europe's generally

644
00:31:23,920 --> 00:31:28,000
Speaker 1: been more constrained, primarily because of Germany, but because of

645
00:31:28,040 --> 00:31:32,920
Speaker 1: their defense situation and other factors. They've been increasingly over

646
00:31:32,960 --> 00:31:35,480
Speaker 1: the past several months inclined to, you know, looking at

647
00:31:35,520 --> 00:31:37,440
Speaker 1: more fiscal in the future of the markets, kind of

648
00:31:37,440 --> 00:31:41,480
Speaker 1: front running that which potentially means hot you know, hotter

649
00:31:41,680 --> 00:31:47,400
Speaker 1: not nominal GDP growth and longer higher long term interest rates.

650
00:31:48,040 --> 00:31:50,920
Speaker 1: In Japan's case, I mean, they basically have such high

651
00:31:51,160 --> 00:31:55,840
Speaker 1: public that the GDP that their bond market is not

652
00:31:55,920 --> 00:31:58,320
Speaker 1: really a free market. Uh. And when they try to

653
00:31:58,560 --> 00:32:01,360
Speaker 1: things like quantitative tightening, uh, they try to get out

654
00:32:01,400 --> 00:32:06,840
Speaker 1: of things a yield curve control, they face pretty significant issues. UH.

655
00:32:06,880 --> 00:32:09,200
Speaker 1: And basically because there's there's no end in sight to

656
00:32:09,320 --> 00:32:12,840
Speaker 1: their ongoing deficits uh. And there's no realistic fix for

657
00:32:12,920 --> 00:32:16,800
Speaker 1: their public debt to GDP other than inflating part of

658
00:32:16,840 --> 00:32:19,200
Speaker 1: it away and letting it kind of run hot and

659
00:32:19,240 --> 00:32:23,560
Speaker 1: trying to keep nominal GDP growing in line with that debt.

660
00:32:24,760 --> 00:32:27,800
Speaker 1: You know, I'm blessed of a bear on Japan. Then

661
00:32:28,040 --> 00:32:31,080
Speaker 1: some of the doom saves would be because Japan has,

662
00:32:31,760 --> 00:32:33,640
Speaker 1: you know, for a lot of the problems they have

663
00:32:33,720 --> 00:32:35,320
Speaker 1: with their public debt. The other side of it is

664
00:32:35,360 --> 00:32:38,760
Speaker 1: they've they've run decades of trade surpluses and current account surpluses.

665
00:32:39,160 --> 00:32:42,640
Speaker 1: So they have a huge stockpile of sovereign assets and

666
00:32:42,800 --> 00:32:46,720
Speaker 1: private assets. And so as we saw, for example, you

667
00:32:46,720 --> 00:32:48,520
Speaker 1: know a couple of years ago, when their currentcy was

668
00:32:48,560 --> 00:32:52,120
Speaker 1: weakening sharply, Uh, they can sell treasury, so they can

669
00:32:52,160 --> 00:32:56,600
Speaker 1: sell dollars to backstop their currency UH potentially break short attempts,

670
00:32:57,120 --> 00:32:58,720
Speaker 1: so they have a they have a lot of ammo

671
00:32:59,160 --> 00:33:03,360
Speaker 1: UH to really raw this out and potentially have, for example,

672
00:33:03,480 --> 00:33:06,360
Speaker 1: make the FED go back to QBA because of potential

673
00:33:06,360 --> 00:33:09,600
Speaker 1: dislocations in the treasure market before they would run into

674
00:33:09,640 --> 00:33:13,160
Speaker 1: a true crisis. We've seen some comparisons between Japan and

675
00:33:13,240 --> 00:33:15,600
Speaker 1: Greece that came up in the news. Likely that japan

676
00:33:15,800 --> 00:33:18,880
Speaker 1: debath the GDP is now higher than Greece's was at

677
00:33:18,920 --> 00:33:22,160
Speaker 1: the high point. But a key difference is one Japan

678
00:33:22,280 --> 00:33:25,280
Speaker 1: is incredibly productive compared to Greece. They have much more

679
00:33:25,280 --> 00:33:29,400
Speaker 1: diverse productive economy. And two that the debt is in

680
00:33:29,440 --> 00:33:32,280
Speaker 1: their own currency, whereas Greece was subject to recurrency that

681
00:33:32,280 --> 00:33:35,840
Speaker 1: they didn't fully or even have substantial control over, whereas

682
00:33:35,880 --> 00:33:38,560
Speaker 1: Japan does. And so they have a lot of different

683
00:33:38,600 --> 00:33:41,240
Speaker 1: levers that they can pull to keep the wheels on

684
00:33:41,320 --> 00:33:44,400
Speaker 1: the track for a lot longer, I think than people expect.

685
00:33:44,760 --> 00:33:46,600
Speaker 2: So you said it's sort of on a different cycle,

686
00:33:46,680 --> 00:33:49,640
Speaker 2: So like it's saying like it's showing the same thing.

687
00:33:49,680 --> 00:33:52,640
Speaker 2: It's the same fundamental thing as most of these developed countries,

688
00:33:52,840 --> 00:33:53,600
Speaker 2: but it's further ahead.

689
00:33:53,600 --> 00:33:54,640
Speaker 3: A lot of times people would say.

690
00:33:54,560 --> 00:33:56,960
Speaker 2: That Japan is twenty years ahead of US, so it's

691
00:33:57,000 --> 00:34:00,360
Speaker 2: like we'll get there, maybe the UK or Australia, Canada

692
00:34:00,400 --> 00:34:02,880
Speaker 2: get there eventually, but just Japan's a little bit further along.

693
00:34:03,320 --> 00:34:06,040
Speaker 2: But then also maybe like other compared to other countries,

694
00:34:06,040 --> 00:34:07,960
Speaker 2: it is more productive and has much more surplus, so

695
00:34:07,960 --> 00:34:10,000
Speaker 2: it could also sort of kind of hold it together longer.

696
00:34:11,360 --> 00:34:14,000
Speaker 1: Yeah, I think there's two ways of meaning that. So

697
00:34:14,080 --> 00:34:16,200
Speaker 1: one I kind of meant the more tactical sense through

698
00:34:16,239 --> 00:34:18,719
Speaker 1: on a different cycle, which is like, for example, when

699
00:34:18,800 --> 00:34:21,680
Speaker 1: the rest of the world was raising industrates, Japan wasn't.

700
00:34:22,080 --> 00:34:24,800
Speaker 1: They were like those the only dove in the room basically,

701
00:34:25,320 --> 00:34:27,840
Speaker 1: and that's why the end was weakening so much relative

702
00:34:27,880 --> 00:34:30,440
Speaker 1: to dollar, because you had this really big ustrate differential

703
00:34:30,480 --> 00:34:32,560
Speaker 1: opening up. But then as the rest of the world

704
00:34:32,600 --> 00:34:35,000
Speaker 1: got into like okay, we've maybe peaked industrates for going

705
00:34:35,040 --> 00:34:38,960
Speaker 1: down a little bit, Japan was still gradually increasing, so

706
00:34:39,000 --> 00:34:40,680
Speaker 1: they were actually the kind of the hawk in the

707
00:34:40,760 --> 00:34:44,160
Speaker 1: room on a relative basis, like you know, they're still

708
00:34:44,200 --> 00:34:46,600
Speaker 1: lower indust rates, but the direction they were going in

709
00:34:46,719 --> 00:34:49,960
Speaker 1: was kind of the outlier. But yeah, then in the

710
00:34:50,000 --> 00:34:51,920
Speaker 1: longer term sense, like you said, they are kind of

711
00:34:51,920 --> 00:34:55,160
Speaker 1: ten to twenty years ahead of many other developed countries

712
00:34:55,160 --> 00:35:00,960
Speaker 1: in terms of demographics and the debt situation. And they

713
00:35:01,000 --> 00:35:02,440
Speaker 1: do have a lot of strengths though, Like they have,

714
00:35:02,480 --> 00:35:05,360
Speaker 1: they're highly productive, and a statistic I like to point

715
00:35:05,360 --> 00:35:07,880
Speaker 1: out is that they spend way less per capita on

716
00:35:07,920 --> 00:35:12,040
Speaker 1: healthcare than the US and many other countries, despite having

717
00:35:12,160 --> 00:35:15,279
Speaker 1: way longer longevity and on average being something like ten

718
00:35:15,360 --> 00:35:19,400
Speaker 1: years older. And also they spend a lot less on defense,

719
00:35:19,719 --> 00:35:23,160
Speaker 1: so things that are generally viewed as inefficient types of spending.

720
00:35:23,440 --> 00:35:25,239
Speaker 1: You know, if you build a warship and then you

721
00:35:25,360 --> 00:35:27,680
Speaker 1: never have a war, it's kind of wasted spending. Now,

722
00:35:27,680 --> 00:35:29,680
Speaker 1: obviously you need a certain amount of defense, but it's

723
00:35:29,680 --> 00:35:33,120
Speaker 1: like it's generally better to reinvest in your economy when

724
00:35:33,160 --> 00:35:35,040
Speaker 1: you can. So the fact that they've been kind of

725
00:35:35,160 --> 00:35:39,480
Speaker 1: under the US security umbrella and the fact that they're

726
00:35:39,600 --> 00:35:42,480
Speaker 1: very efficient with health care spending and other habits that

727
00:35:42,520 --> 00:35:46,600
Speaker 1: contribute to longevity and good health, they've been able to

728
00:35:46,680 --> 00:35:49,560
Speaker 1: kind of get around a lot of their shortcomings by

729
00:35:49,640 --> 00:35:50,760
Speaker 1: leading into their strengths.

730
00:35:50,960 --> 00:35:53,000
Speaker 2: Okay, so maybe it's not as dire as a lot

731
00:35:53,040 --> 00:35:56,520
Speaker 2: of the doomsayers want to say, And as someone who

732
00:35:56,560 --> 00:36:00,680
Speaker 2: makes a ton of content. Man, does everybody want to

733
00:36:00,760 --> 00:36:03,160
Speaker 2: doom so bad? It's like it's like the only thing

734
00:36:03,200 --> 00:36:04,960
Speaker 2: that gets like views online anymore.

735
00:36:05,040 --> 00:36:05,239
Speaker 3: You know.

736
00:36:05,320 --> 00:36:07,520
Speaker 2: It's like you say anything positive, nobody wants to hear it.

737
00:36:08,760 --> 00:36:10,600
Speaker 2: But in regards to that, you know, something that you

738
00:36:10,680 --> 00:36:13,719
Speaker 2: talk a lot about is the nothing stops this train meme.

739
00:36:13,800 --> 00:36:16,719
Speaker 2: You've got that one going pretty well. And I think

740
00:36:16,760 --> 00:36:18,960
Speaker 2: when you're referring to the nothing stops his train, it's

741
00:36:19,000 --> 00:36:22,280
Speaker 2: basically what fiscal spending, government spending.

742
00:36:22,520 --> 00:36:24,960
Speaker 3: Debt, debt creation, right, they're just going to keep printing.

743
00:36:26,800 --> 00:36:28,360
Speaker 2: When I think about that, Like we saw like the

744
00:36:28,400 --> 00:36:32,040
Speaker 2: Trump administration come in, uh, fired up, ready to change

745
00:36:32,040 --> 00:36:35,760
Speaker 2: the world. We had Howard let Nick talking about getting

746
00:36:35,840 --> 00:36:38,759
Speaker 2: getting back onto a balanced budget, Elon Musk fired up

747
00:36:38,760 --> 00:36:41,120
Speaker 2: with Doge He's gonna, you know, find all this waste.

748
00:36:41,120 --> 00:36:43,919
Speaker 2: And now that seems to just like all have fizzled out.

749
00:36:44,239 --> 00:36:46,240
Speaker 2: Scott Assents on the news, I think a week ago

750
00:36:46,520 --> 00:36:48,400
Speaker 2: saying well, I think we're just going to try to

751
00:36:48,400 --> 00:36:49,160
Speaker 2: outgrow this thing.

752
00:36:50,120 --> 00:36:51,560
Speaker 3: Is that all the nothing stuffs?

753
00:36:53,040 --> 00:36:55,000
Speaker 1: Yeah, I think there's a few months of people thinking

754
00:36:55,040 --> 00:36:57,279
Speaker 1: they might slow down the train, and they're realizing that

755
00:36:57,320 --> 00:36:59,440
Speaker 1: they're not going to UH and now we're kind of

756
00:36:59,480 --> 00:37:03,160
Speaker 1: back on all steam ahead that you know, nothing stops

757
00:37:03,160 --> 00:37:05,960
Speaker 1: his train. I refer to basically Walter White from Breaking Bad,

758
00:37:07,000 --> 00:37:09,040
Speaker 1: where you know, his allies trying to get him to

759
00:37:09,080 --> 00:37:11,440
Speaker 1: stop his like drug empire, and he's like, no, nothing

760
00:37:11,440 --> 00:37:15,080
Speaker 1: stops his Trea. You know, we're gonna keep going, and

761
00:37:15,120 --> 00:37:18,040
Speaker 1: we're just getting started. And I think the US physical

762
00:37:18,040 --> 00:37:22,640
Speaker 1: deficits are the same. There's it's extremely low probability that

763
00:37:22,760 --> 00:37:24,879
Speaker 1: anytime in the next five to ten years that they're

764
00:37:24,880 --> 00:37:27,560
Speaker 1: going to meaningfully make reductions in the US fyscal depicit.

765
00:37:27,600 --> 00:37:30,160
Speaker 1: There's a bunch of reasons for that, and that has

766
00:37:30,200 --> 00:37:35,919
Speaker 1: all sorts of geopolitical implications, investing implications, economic implications, and

767
00:37:37,280 --> 00:37:39,919
Speaker 1: you know, sometimes people will phrase that as a doom

768
00:37:39,920 --> 00:37:42,680
Speaker 1: say anything to your prior point doom cells, but that's

769
00:37:42,719 --> 00:37:45,719
Speaker 1: actually not really how that's meant, because, for example, if

770
00:37:45,760 --> 00:37:49,200
Speaker 1: it was doomy, then the train would stop. As a

771
00:37:49,280 --> 00:37:51,440
Speaker 1: part of the nothing stops his train thesis is it's

772
00:37:51,520 --> 00:37:55,040
Speaker 1: kind of a balance between you know, it's basic on

773
00:37:55,200 --> 00:37:57,359
Speaker 1: saying on one hand, it's pessimistic because I'm saying they're

774
00:37:57,400 --> 00:38:01,120
Speaker 1: not going to meaningfully fix the depicit. Anytime soon. It's

775
00:38:01,239 --> 00:38:03,920
Speaker 1: very mathematically implausible that anyone's gonna be successful in that,

776
00:38:04,239 --> 00:38:07,040
Speaker 1: and as you've seen, has been pretty abrupt pfits and

777
00:38:07,080 --> 00:38:09,759
Speaker 1: even even the people that said they would now kind

778
00:38:09,760 --> 00:38:12,839
Speaker 1: of backtracking. But the other hand, it means that they're

779
00:38:12,880 --> 00:38:16,560
Speaker 1: going to keep the wheels on enough. And I think

780
00:38:16,560 --> 00:38:18,480
Speaker 1: that's true for the US. I think that's true for Japan,

781
00:38:19,480 --> 00:38:22,440
Speaker 1: where it's also not going to spiral to some crisis

782
00:38:22,480 --> 00:38:25,759
Speaker 1: the next year to three years and stop in that

783
00:38:25,800 --> 00:38:28,360
Speaker 1: way either. I think it's basically going to run hot

784
00:38:28,920 --> 00:38:32,360
Speaker 1: for any sort of investing time prising where we're looking

785
00:38:32,360 --> 00:38:34,759
Speaker 1: out two decades, that's a whole different world, right. I'm

786
00:38:34,760 --> 00:38:37,080
Speaker 1: not trying to make two decade predictionized. I'm not trying

787
00:38:37,120 --> 00:38:39,920
Speaker 1: to look five ten years ahead and basically that in

788
00:38:39,960 --> 00:38:45,000
Speaker 1: that timeframe, there's there's relatively low scenario probabilities for how

789
00:38:45,000 --> 00:38:47,440
Speaker 1: we're going to anything other than run hot for that period.

790
00:38:47,680 --> 00:38:48,239
Speaker 1: So would you.

791
00:38:48,200 --> 00:38:50,840
Speaker 2: Say that, given you know, death to GDPs of US

792
00:38:50,840 --> 00:38:52,760
Speaker 2: one twenty in Japan, what are they had two forty?

793
00:38:52,800 --> 00:38:56,040
Speaker 2: I mean, so huge debt to GDP ratios, giant deficit

794
00:38:56,120 --> 00:38:59,640
Speaker 2: spending percentages and dollar amounts on that as well, and

795
00:38:59,680 --> 00:39:01,600
Speaker 2: to your point about them being able to keep the

796
00:39:01,600 --> 00:39:05,040
Speaker 2: train on the track. Then almost like any recession that

797
00:39:05,120 --> 00:39:07,000
Speaker 2: we would have in the future would almost be a

798
00:39:07,000 --> 00:39:08,440
Speaker 2: policy decision.

799
00:39:09,800 --> 00:39:13,200
Speaker 1: In a way, Yes, when when another way of putting

800
00:39:13,280 --> 00:39:16,880
Speaker 1: it is that emerging market recessions and developed market processions

801
00:39:16,880 --> 00:39:21,400
Speaker 1: look different. So, for example, in an emerging market, you

802
00:39:21,920 --> 00:39:24,520
Speaker 1: often won't get an unemployment spike. I mean, it depends

803
00:39:24,560 --> 00:39:27,000
Speaker 1: on the type of recession they're having. But often what

804
00:39:27,080 --> 00:39:29,680
Speaker 1: happens is said is basically a currency crisis. It's kind

805
00:39:29,680 --> 00:39:33,799
Speaker 1: of like this inflation wave, and so everybody kind of

806
00:39:33,840 --> 00:39:37,719
Speaker 1: feels poor, and yet there's there's not really this big

807
00:39:37,760 --> 00:39:41,320
Speaker 1: leag labor cycle change. It's more just like imports more expensive,

808
00:39:42,280 --> 00:39:45,800
Speaker 1: they're getting less per hour work. There's an economic malays

809
00:39:45,880 --> 00:39:48,960
Speaker 1: that is happening, but the units are being treated differently.

810
00:39:49,400 --> 00:39:52,080
Speaker 1: If you look at a lot of numbers, in many ways,

811
00:39:52,080 --> 00:39:55,240
Speaker 1: twenty twenty two was a recession in the US. For example,

812
00:39:55,280 --> 00:39:57,839
Speaker 1: if you look at the misery index, which is unemployment

813
00:39:57,960 --> 00:40:03,560
Speaker 1: plus inflation, that was basically, you know, a recession level

814
00:40:03,640 --> 00:40:06,880
Speaker 1: misery index, but it was more from the inflation side

815
00:40:06,960 --> 00:40:09,840
Speaker 1: than the labor side. When you look at for example,

816
00:40:09,960 --> 00:40:12,880
Speaker 1: bank lending, so how many you know, what percentage of

817
00:40:12,880 --> 00:40:17,239
Speaker 1: banks are tightening credit availability versus loosening credit availability. That

818
00:40:17,640 --> 00:40:20,200
Speaker 1: twenty twenty two year was like the only time in

819
00:40:20,280 --> 00:40:22,440
Speaker 1: modern history where we hit something like forty percent of

820
00:40:22,440 --> 00:40:26,360
Speaker 1: banks tightening at once and without a recession on the record.

821
00:40:26,600 --> 00:40:28,239
Speaker 1: And again because that was kind of a I would

822
00:40:28,239 --> 00:40:30,879
Speaker 1: say that was basically a recession, Like most people were

823
00:40:30,920 --> 00:40:35,120
Speaker 1: worse off that year than six months or twelve months prior,

824
00:40:36,200 --> 00:40:38,000
Speaker 1: but it didn't show up in a big labor cycle

825
00:40:38,120 --> 00:40:41,160
Speaker 1: change instead showed up in this kind of inflation wave

826
00:40:41,200 --> 00:40:43,799
Speaker 1: where everybody's kind of a little worse off than they

827
00:40:43,800 --> 00:40:47,520
Speaker 1: were at the sugar high of the stimulus because that

828
00:40:47,640 --> 00:40:51,000
Speaker 1: delayed inflation hit and their wages were going up at

829
00:40:51,000 --> 00:40:53,320
Speaker 1: the same rate. Is so everybody's kind of taking this

830
00:40:53,440 --> 00:40:55,880
Speaker 1: kind of shared pain. So in a typical develop market

831
00:40:55,920 --> 00:40:59,319
Speaker 1: disinflation a recession, most people don't lose their jobs, but

832
00:40:59,360 --> 00:41:02,960
Speaker 1: those that do are greatly impacted, Whereas in a more inflationary,

833
00:41:03,000 --> 00:41:06,920
Speaker 1: emerging market style recession, fewer people lose their jobs, but

834
00:41:07,040 --> 00:41:10,200
Speaker 1: the pain is kind of spread through inflation, and so

835
00:41:10,360 --> 00:41:12,640
Speaker 1: it's a different type of pain. And I do think

836
00:41:12,640 --> 00:41:15,920
Speaker 1: that basically recessions going forward in the developed world are

837
00:41:15,960 --> 00:41:19,239
Speaker 1: more likely to have some of those characteristics where some

838
00:41:19,280 --> 00:41:24,680
Speaker 1: of the pain is felt more in monetary debasement rather

839
00:41:24,719 --> 00:41:27,319
Speaker 1: than these kind of typical cycles we've been through. And

840
00:41:27,400 --> 00:41:31,040
Speaker 1: part of that is because bank lending is less important

841
00:41:31,440 --> 00:41:34,960
Speaker 1: or less like a lower magnitude relative to fiscal deficits

842
00:41:35,000 --> 00:41:37,440
Speaker 1: than it used to be for most of the past

843
00:41:38,120 --> 00:41:41,080
Speaker 1: call it fifty years. In any given period of time,

844
00:41:41,880 --> 00:41:44,360
Speaker 1: net bank lending is a bigger dollar amount in a

845
00:41:44,400 --> 00:41:48,680
Speaker 1: given year than physical deficits with generally the only exceptions

846
00:41:48,719 --> 00:41:50,880
Speaker 1: were like, maybe you'll see a twelve month period during

847
00:41:50,960 --> 00:41:55,120
Speaker 1: recession where briefly physical deficits are bigger and lending has contracted.

848
00:41:55,400 --> 00:41:57,680
Speaker 1: But now in this kind of period of physical dominance,

849
00:41:58,239 --> 00:42:02,840
Speaker 1: even when you know we're not in a recession, physical

850
00:42:02,880 --> 00:42:05,279
Speaker 1: deficits are usually bigger than bank lending, and so this

851
00:42:05,360 --> 00:42:08,160
Speaker 1: is kind of this more background running hot. And so

852
00:42:08,280 --> 00:42:10,680
Speaker 1: it's actually pretty hard to have the type of recession

853
00:42:11,000 --> 00:42:13,160
Speaker 1: we've come to expect. But that doesn't mean you can't

854
00:42:13,160 --> 00:42:16,240
Speaker 1: have periods of economic weakness or people kind of correctly

855
00:42:16,600 --> 00:42:18,719
Speaker 1: off feeling that they're worse off than they were the

856
00:42:18,760 --> 00:42:19,200
Speaker 1: year before.

857
00:42:20,239 --> 00:42:22,799
Speaker 2: I guess what you're saying is since we typically see

858
00:42:23,480 --> 00:42:25,799
Speaker 2: money supply go down, banks aren't lending as much, so

859
00:42:25,800 --> 00:42:28,719
Speaker 2: the money supply is not expanding through decreation. But now

860
00:42:28,719 --> 00:42:32,600
Speaker 2: that fiscal dominance, government spending has eclipse that whatever the

861
00:42:32,600 --> 00:42:35,520
Speaker 2: banks are doing from tightening and loosening their lending regulations

862
00:42:35,560 --> 00:42:37,960
Speaker 2: doesn't affect it as much as it did because now

863
00:42:38,000 --> 00:42:39,080
Speaker 2: we have this fiscal dominance.

864
00:42:40,160 --> 00:42:42,400
Speaker 1: Yeah, it still affects part of the economy, like effects

865
00:42:42,400 --> 00:42:44,640
Speaker 1: small businesses that are either getting or not getting that

866
00:42:45,080 --> 00:42:48,040
Speaker 1: credit and what terms. But for example, the fact that

867
00:42:48,400 --> 00:42:51,280
Speaker 1: so security checks are still going out and medicare spending

868
00:42:51,320 --> 00:42:54,160
Speaker 1: still happening, and huge defense spending still happening, and interest

869
00:42:54,160 --> 00:42:57,560
Speaker 1: expense is still happening. Those are different vehicles where this

870
00:42:57,640 --> 00:43:01,000
Speaker 1: money is pouring into the economy, and so consumption stays

871
00:43:01,120 --> 00:43:04,440
Speaker 1: pretty strong, yeah, you know, for example. And so the

872
00:43:04,480 --> 00:43:07,680
Speaker 1: net result is that the thing runs hot compared to

873
00:43:07,719 --> 00:43:10,200
Speaker 1: what you normally expect in that type of environment.

874
00:43:10,280 --> 00:43:12,879
Speaker 2: And then when and then it seems like you said yes,

875
00:43:13,000 --> 00:43:14,839
Speaker 2: sort of like a policy decision. So when you look

876
00:43:14,920 --> 00:43:18,160
Speaker 2: back from previous crashes in the seventies or nineties or

877
00:43:18,160 --> 00:43:22,720
Speaker 2: two thousand, like they it seemed like they policy decision

878
00:43:22,800 --> 00:43:25,600
Speaker 2: was to allow the sort of bubble to deleverage, and

879
00:43:25,719 --> 00:43:27,800
Speaker 2: maybe in two thousand and eight they also tried to

880
00:43:27,840 --> 00:43:29,359
Speaker 2: let it do leverage, and then it got too big

881
00:43:29,400 --> 00:43:32,200
Speaker 2: and too systemic. They launched QE levered this thing back up,

882
00:43:32,680 --> 00:43:35,360
Speaker 2: and now today the decision is there's no appetite for

883
00:43:35,400 --> 00:43:39,239
Speaker 2: that at all. In twenty twenty two, it kind of

884
00:43:39,320 --> 00:43:41,040
Speaker 2: was a recession. The Biden administration had to come out

885
00:43:41,080 --> 00:43:44,000
Speaker 2: and say technically it wasn't. But that also seemed to

886
00:43:44,040 --> 00:43:46,080
Speaker 2: be a policy decision because that was right after the

887
00:43:46,120 --> 00:43:48,960
Speaker 2: FED started QT and tightening things back down, so it

888
00:43:49,000 --> 00:43:54,279
Speaker 2: sort of was a decision looking back historically, it was

889
00:43:54,600 --> 00:43:59,920
Speaker 2: a pretty minor correction overall, that was a decision.

890
00:43:59,480 --> 00:44:01,080
Speaker 3: By the FED to try to tighten things.

891
00:44:01,200 --> 00:44:03,919
Speaker 2: I'm curious what your view is on these like more

892
00:44:04,080 --> 00:44:07,040
Speaker 2: like four or five year global liquidity cycles like Michael

893
00:44:07,080 --> 00:44:10,759
Speaker 2: Holle talks about, which seems to sort of maybe be

894
00:44:10,880 --> 00:44:13,560
Speaker 2: in the macro driver's seat, right. So you look at

895
00:44:13,600 --> 00:44:17,080
Speaker 2: like two thousand and eight, a response to the global

896
00:44:17,080 --> 00:44:20,080
Speaker 2: financial crisis, interest rates were dropped to zero, which sort

897
00:44:20,080 --> 00:44:21,839
Speaker 2: of synked up the term on all the debt. And

898
00:44:21,880 --> 00:44:23,919
Speaker 2: now every about four to five years we have these

899
00:44:23,920 --> 00:44:26,640
Speaker 2: cycles which happens to coincide with the four year bitcoin

900
00:44:26,719 --> 00:44:29,560
Speaker 2: having cycle, happens to coincide with the four year presidential

901
00:44:29,600 --> 00:44:32,160
Speaker 2: election cycle, and that hit right in twenty twenty two.

902
00:44:33,320 --> 00:44:34,640
Speaker 2: What do you think about those cycles?

903
00:44:36,840 --> 00:44:39,000
Speaker 1: So I think those cycles are intact. I wouldn't say

904
00:44:39,200 --> 00:44:41,440
Speaker 1: what I think the specific timeframe is going to be.

905
00:44:41,920 --> 00:44:44,640
Speaker 1: On average, I think it's somewhat of like three year cycles,

906
00:44:44,640 --> 00:44:48,320
Speaker 1: but it varies, And you know, I do think they

907
00:44:48,400 --> 00:44:52,240
Speaker 1: tried a pretty pretty aggressive tightening cycle in twenty twenty two. Basically,

908
00:44:52,280 --> 00:44:54,880
Speaker 1: they decided that they kind of observed that the inflation

909
00:44:55,000 --> 00:44:56,880
Speaker 1: pain was worse than anything else, so they had to

910
00:44:56,920 --> 00:45:00,120
Speaker 1: get that under control, is try to, So they tightened policy,

911
00:45:00,000 --> 00:45:03,399
Speaker 1: they slowed down bank lending. There weren't any major new

912
00:45:03,400 --> 00:45:05,960
Speaker 1: fiscal bursts going on in twenty twenty two compared to

913
00:45:06,000 --> 00:45:08,200
Speaker 1: what we saw in the prior to years, and so

914
00:45:08,239 --> 00:45:11,440
Speaker 1: that was across the board a pretty contractionary year. But

915
00:45:11,520 --> 00:45:14,840
Speaker 1: then the pain became so much that the nthes started

916
00:45:14,840 --> 00:45:17,920
Speaker 1: to bend around it. So, for example, the UK guilt

917
00:45:17,920 --> 00:45:20,799
Speaker 1: crisis in twenty twenty two was an issue. At the

918
00:45:20,840 --> 00:45:23,160
Speaker 1: same time, the US treasure market didn't break the way

919
00:45:23,160 --> 00:45:25,839
Speaker 1: that the UK's did, but ours became wobbly like we

920
00:45:25,880 --> 00:45:29,279
Speaker 1: had like record high move index like meaning treasury volatility.

921
00:45:30,600 --> 00:45:34,759
Speaker 1: And over that year and then the next year, the

922
00:45:34,800 --> 00:45:38,359
Speaker 1: Treasure Department shifted toward kind of unprecedented issuance of tea

923
00:45:38,400 --> 00:45:41,800
Speaker 1: bills as a ratio of their debt, which they normally

924
00:45:41,840 --> 00:45:45,440
Speaker 1: only do in crises and recessions. But despite the fact

925
00:45:45,480 --> 00:45:48,359
Speaker 1: that there was no official crisis or recession, they were

926
00:45:48,360 --> 00:45:51,799
Speaker 1: shifting more and more toward t bills rather than issue

927
00:45:51,800 --> 00:45:53,360
Speaker 1: as much as they generally should have been doing on

928
00:45:53,400 --> 00:45:56,160
Speaker 1: the longer end. And so that was kind of a

929
00:45:56,200 --> 00:45:58,840
Speaker 1: softening of the you know, the treasury kind of offsetting

930
00:45:58,920 --> 00:46:01,959
Speaker 1: some of the FED tightening. And then in early twenty

931
00:46:02,160 --> 00:46:04,120
Speaker 1: and three, when the when the banks ran into issues,

932
00:46:04,680 --> 00:46:07,600
Speaker 1: uh they blinked, and so they you know, they gave

933
00:46:08,200 --> 00:46:11,839
Speaker 1: liquidity provisions and soon after they slowed down and then

934
00:46:11,880 --> 00:46:15,759
Speaker 1: stopped industrate increases. So they kind of ran into the

935
00:46:15,800 --> 00:46:18,919
Speaker 1: guardrails that they could do. And so some of these

936
00:46:19,120 --> 00:46:22,440
Speaker 1: background forces, like the big ongoing fiscal depths, it slowly

937
00:46:22,520 --> 00:46:25,000
Speaker 1: kind of overpowered some of those tightening attempts. So in

938
00:46:25,080 --> 00:46:26,839
Speaker 1: twenty twenty three and twenty twenty four we got this

939
00:46:26,960 --> 00:46:29,839
Speaker 1: we got this like other kind of kind of unintentional

940
00:46:29,880 --> 00:46:33,239
Speaker 1: loosening of a lot of things. And twenty twenty five

941
00:46:33,239 --> 00:46:34,960
Speaker 1: is obviously been a shaky year because of all this

942
00:46:35,080 --> 00:46:39,200
Speaker 1: terrif uncertainty, uh, currency volatility and things like that. But

943
00:46:39,239 --> 00:46:43,000
Speaker 1: I still think we're in a sustained period of you know,

944
00:46:43,560 --> 00:46:48,560
Speaker 1: oney supply running hot, nowmal GDP running hot. Attempts at

945
00:46:48,560 --> 00:46:52,320
Speaker 1: tightening are more about narratives and jawboning rather than anybody

946
00:46:52,480 --> 00:46:58,080
Speaker 1: meanifully cut into depicit doing anything that can really hurt banks.

947
00:46:58,200 --> 00:47:00,239
Speaker 1: And so the the the kind of the error tract

948
00:47:00,440 --> 00:47:04,960
Speaker 1: is normally toward when in doubt liquidity's okay, and things

949
00:47:04,960 --> 00:47:09,239
Speaker 1: tend to run hot rather than run into dissiflationary collaps.

950
00:47:09,680 --> 00:47:12,600
Speaker 2: And now all that, you know, we did have a

951
00:47:12,680 --> 00:47:14,880
Speaker 2: rough first quarter, like you said, all the tariff stuff,

952
00:47:14,920 --> 00:47:16,279
Speaker 2: you know, the new administration, et cetera.

953
00:47:16,360 --> 00:47:18,120
Speaker 3: Seems like we're on the other side of that.

954
00:47:18,200 --> 00:47:19,640
Speaker 2: Like I said, maybe percent sort of throw in the

955
00:47:19,640 --> 00:47:22,160
Speaker 2: towel elon, threw in the towel on that Bitcoin's off

956
00:47:22,160 --> 00:47:23,560
Speaker 2: to the race has hit a new all time high

957
00:47:23,560 --> 00:47:26,759
Speaker 2: one hundred and nine thousand. The thing that I have

958
00:47:26,840 --> 00:47:29,920
Speaker 2: been completely absorbed by and I'm guessing you have as well.

959
00:47:30,040 --> 00:47:33,560
Speaker 2: Is the new bitcoin treasury strategy companies that are popping up,

960
00:47:33,960 --> 00:47:35,319
Speaker 2: and it seems like we sort of have like this

961
00:47:35,400 --> 00:47:39,560
Speaker 2: new financial asset, creating these new financial products and maybe

962
00:47:39,600 --> 00:47:41,920
Speaker 2: creating a new financial system in front of us. And

963
00:47:42,320 --> 00:47:44,600
Speaker 2: there's all these new metrics like bitcoin per share and

964
00:47:44,800 --> 00:47:47,040
Speaker 2: m NAB and things like that. I'm curious your take

965
00:47:47,080 --> 00:47:51,400
Speaker 2: on this bitcoin treasury strategy play. Is this building a

966
00:47:51,440 --> 00:47:53,480
Speaker 2: new financial system with a new financial asset or is

967
00:47:53,520 --> 00:47:55,480
Speaker 2: it sort of running the old playbook on a new asset.

968
00:47:57,239 --> 00:47:59,520
Speaker 1: I think there are two things happening. Someone saneous to

969
00:47:59,600 --> 00:48:03,400
Speaker 1: I think on it just makes sense for balance sheets

970
00:48:03,400 --> 00:48:06,279
Speaker 1: to have the best money, and so I think that's

971
00:48:06,440 --> 00:48:10,120
Speaker 1: that's a more structural shift that basically, if you're a business,

972
00:48:10,719 --> 00:48:13,719
Speaker 1: instead of holding melting ice cubes, you know, fea currency,

973
00:48:14,239 --> 00:48:18,360
Speaker 1: or instead of decapitalizing yourself basically giving all your money

974
00:48:18,360 --> 00:48:22,200
Speaker 1: back to shareholders as share buybacks or dividends and purpose

975
00:48:22,280 --> 00:48:24,520
Speaker 1: taking on debt you don't need, Like Coca Cola has

976
00:48:24,560 --> 00:48:27,800
Speaker 1: like forty to fifty billion in debt despite being profitable

977
00:48:27,840 --> 00:48:30,080
Speaker 1: every year for like a century. And the reason they

978
00:48:30,120 --> 00:48:32,440
Speaker 1: do that is because why would you not take Why

979
00:48:32,440 --> 00:48:34,440
Speaker 1: would you not issue thirty your bonds to two percent

980
00:48:34,520 --> 00:48:37,759
Speaker 1: if you can. It's basically financial arbitrage, and so that's

981
00:48:37,760 --> 00:48:40,800
Speaker 1: been the name of the game. These big successful bluecher companies.

982
00:48:40,960 --> 00:48:42,920
Speaker 1: They take out debt they don't need because they can

983
00:48:43,000 --> 00:48:45,600
Speaker 1: and as cheap, and they you know, they basically shorten

984
00:48:45,640 --> 00:48:48,000
Speaker 1: the currency for thirty years at two percent, which is great.

985
00:48:48,560 --> 00:48:52,160
Speaker 1: They're buying back shares, they're paying dividends. So bitcoin introduces

986
00:48:52,200 --> 00:48:54,560
Speaker 1: another thing you can do, which is hold a scarce

987
00:48:54,600 --> 00:48:58,680
Speaker 1: asset on your balance sheet, so you're protecting yourself from debasement,

988
00:48:58,960 --> 00:49:01,920
Speaker 1: but you're also not you know, turing your whole balance

989
00:49:01,960 --> 00:49:05,280
Speaker 1: sheet into liabilities and basically decapitalizing yourself as much as possible.

990
00:49:05,520 --> 00:49:08,160
Speaker 1: When capital is not you know, kind of respected. All

991
00:49:08,160 --> 00:49:11,480
Speaker 1: these companies said, well, we don't want capital then, and

992
00:49:11,560 --> 00:49:13,640
Speaker 1: so this is a new tool to actually have capital.

993
00:49:14,800 --> 00:49:17,440
Speaker 1: The other strategy I think on top of that is arbitrage,

994
00:49:17,840 --> 00:49:20,320
Speaker 1: which is if this currency is going to keep weakening,

995
00:49:21,000 --> 00:49:22,759
Speaker 1: we're then going to try to issue debt in their

996
00:49:22,760 --> 00:49:25,600
Speaker 1: currency and buy this way better currency. You see this

997
00:49:25,600 --> 00:49:27,960
Speaker 1: to some extent whenever you have like an emerging market

998
00:49:27,960 --> 00:49:31,440
Speaker 1: currency crisis, there are companies there that say, well, we

999
00:49:31,480 --> 00:49:34,560
Speaker 1: could take out bank loans and are failing domestic currency

1000
00:49:34,560 --> 00:49:38,000
Speaker 1: and buy dollars with it. That seems like a good trade.

1001
00:49:38,080 --> 00:49:40,239
Speaker 1: And then sometimes you'll say, for example, like this is

1002
00:49:40,239 --> 00:49:43,000
Speaker 1: happening in Turkey, where they would then come in and say, well,

1003
00:49:43,040 --> 00:49:45,920
Speaker 1: if you're business, then holds dollars. You can't take out

1004
00:49:45,920 --> 00:49:49,720
Speaker 1: a loan in the local currency because we don't want you,

1005
00:49:49,719 --> 00:49:52,400
Speaker 1: you know, basically doing expective attack on our currency to

1006
00:49:52,400 --> 00:49:55,280
Speaker 1: buy dollars. That's kind of what's happening with these leverage

1007
00:49:55,320 --> 00:49:57,560
Speaker 1: bitcoin entities. They're kind of doing expecutive attack on the

1008
00:49:57,600 --> 00:50:01,640
Speaker 1: dollar buying bitcoin. But of course the dollar can absorb

1009
00:50:01,680 --> 00:50:07,000
Speaker 1: a lot bigger attack than a developing market currency, and

1010
00:50:07,080 --> 00:50:09,400
Speaker 1: so there are I think arbitrages that are happening, and

1011
00:50:09,480 --> 00:50:13,200
Speaker 1: rightly so because when when you know, when the opportunity

1012
00:50:13,239 --> 00:50:15,600
Speaker 1: is there, their anties are going to take it, and

1013
00:50:15,640 --> 00:50:18,960
Speaker 1: those that do it earlier get disproportionate gains. And then

1014
00:50:19,000 --> 00:50:22,400
Speaker 1: the question is what percentage of them or which ones

1015
00:50:22,640 --> 00:50:25,439
Speaker 1: will nail nail the turn like when this eventually gets

1016
00:50:25,440 --> 00:50:30,600
Speaker 1: overdone excessive and dangerous, which ones will have the best

1017
00:50:30,719 --> 00:50:34,440
Speaker 1: risk mitigation in play to get through a bear market

1018
00:50:34,480 --> 00:50:37,680
Speaker 1: without having to liquidata at an inopportune time. Uh, and

1019
00:50:37,760 --> 00:50:39,960
Speaker 1: otherwise just you know, knock it over their skis, right.

1020
00:50:40,400 --> 00:50:43,160
Speaker 2: So it's almost like, like you said, it gives gives

1021
00:50:43,160 --> 00:50:45,239
Speaker 2: these public companies a new option as opposed to just

1022
00:50:45,280 --> 00:50:47,799
Speaker 2: leveraging up with debt. So it's almost like maybe buying

1023
00:50:47,800 --> 00:50:51,880
Speaker 2: bitcoin is like the new buy back your shares strategy.

1024
00:50:52,120 --> 00:50:54,759
Speaker 1: It's a it's a new tool in the toolbox. And

1025
00:50:54,800 --> 00:50:57,759
Speaker 1: it's not necessarily that it's always a better choice, but

1026
00:50:57,800 --> 00:51:00,000
Speaker 1: it's certainly a new variable. All the all the other choices,

1027
00:51:00,040 --> 00:51:02,879
Speaker 1: it's just basically all decapitalization, and this is the first

1028
00:51:02,960 --> 00:51:07,080
Speaker 1: one where you know you can retain value without decapitalization.

1029
00:51:07,320 --> 00:51:09,000
Speaker 1: And I think that up to a point that makes

1030
00:51:09,000 --> 00:51:09,600
Speaker 1: a ton of sense.

1031
00:51:09,640 --> 00:51:11,799
Speaker 2: When I look at like a company like micro Strategy,

1032
00:51:11,840 --> 00:51:13,880
Speaker 2: you know, at the Bigger Opportunity Fund, we're.

1033
00:51:13,719 --> 00:51:14,640
Speaker 3: Looking at a lot of these deals.

1034
00:51:14,680 --> 00:51:16,120
Speaker 2: I'm sure you guys are where do you go death

1035
00:51:16,160 --> 00:51:17,880
Speaker 2: as well, And we're looking at these deals and it's

1036
00:51:17,880 --> 00:51:19,319
Speaker 2: always like, well, how do we value this thing?

1037
00:51:19,360 --> 00:51:20,000
Speaker 3: And it's like we have.

1038
00:51:20,000 --> 00:51:22,560
Speaker 2: These these new strategies, these new companies are building and

1039
00:51:22,719 --> 00:51:25,319
Speaker 2: and and a lot of the defaults to this old

1040
00:51:25,360 --> 00:51:28,120
Speaker 2: narrative is like, what's the underlying business model? When I

1041
00:51:28,120 --> 00:51:30,160
Speaker 2: look at like micro strategy, it's like, well, there used

1042
00:51:30,160 --> 00:51:32,120
Speaker 2: to be software, but now they're sort of just like

1043
00:51:32,160 --> 00:51:36,279
Speaker 2: financial products. So at mstr strk strfter sort of like

1044
00:51:36,360 --> 00:51:40,080
Speaker 2: financial products that they're bringing to market almost like maybe

1045
00:51:40,080 --> 00:51:41,840
Speaker 2: like an ETF. And then I think of it like, well,

1046
00:51:42,520 --> 00:51:44,799
Speaker 2: I mean, I guess the market could bear thousands of

1047
00:51:44,960 --> 00:51:48,480
Speaker 2: financial products, So maybe it's not as bubble asque as

1048
00:51:48,480 --> 00:51:50,400
Speaker 2: some people think it is right now, or do you

1049
00:51:50,400 --> 00:51:52,080
Speaker 2: think it's sort of hitting that level.

1050
00:51:53,000 --> 00:51:55,080
Speaker 1: I don't think it's too bubbleishous yet I think they're

1051
00:51:55,080 --> 00:51:57,120
Speaker 1: I mean, it goes to periods of micro bubbles. I

1052
00:51:57,200 --> 00:52:00,279
Speaker 1: tend to you know, when big when MicroStrategy is hitting

1053
00:52:00,320 --> 00:52:02,799
Speaker 1: like over three times NAF and every single person on

1054
00:52:02,800 --> 00:52:04,560
Speaker 1: Twitter is talking about it, that's when it tends to

1055
00:52:04,560 --> 00:52:07,839
Speaker 1: get temporarily overdone, and then it goes to period of consolidation.

1056
00:52:07,960 --> 00:52:10,280
Speaker 1: The market digests that move and then you know, potentially

1057
00:52:10,280 --> 00:52:13,080
Speaker 1: sets up a new round higher in the coming months.

1058
00:52:14,640 --> 00:52:17,719
Speaker 1: There is somewhat of a network effect here, so liquidity

1059
00:52:17,800 --> 00:52:21,480
Speaker 1: really matters, and having a liquid option market really matters.

1060
00:52:21,640 --> 00:52:23,880
Speaker 1: So micro strategy is kind of in a unique position

1061
00:52:23,960 --> 00:52:28,640
Speaker 1: where their equity is very liquid, uh, their options market

1062
00:52:28,800 --> 00:52:31,200
Speaker 1: is very liquid, and so that is a pretty you know,

1063
00:52:31,280 --> 00:52:34,040
Speaker 1: selfishinting network. It's it's hard for like another entity become

1064
00:52:34,280 --> 00:52:36,399
Speaker 1: micro strategy and have you know, one hundred different micro

1065
00:52:36,440 --> 00:52:38,319
Speaker 1: strategies on the market. But I do that that the

1066
00:52:38,360 --> 00:52:40,920
Speaker 1: overall market size can absorb quite a bit of this.

1067
00:52:41,480 --> 00:52:43,560
Speaker 1: I mean, you know that the FIA system is hundreds

1068
00:52:43,600 --> 00:52:46,800
Speaker 1: of trillions of dollars globally and bitcoins are two trainon

1069
00:52:46,840 --> 00:52:50,240
Speaker 1: dollar asset and so and then you know these leverage

1070
00:52:50,280 --> 00:52:53,239
Speaker 1: bitcoin entities are still in the hundreds of billions. Most

1071
00:52:53,239 --> 00:52:55,480
Speaker 1: of it's being micro strategy, but even though the long

1072
00:52:55,560 --> 00:52:57,320
Speaker 1: tail of a lot of others is still not that big.

1073
00:52:58,239 --> 00:53:00,080
Speaker 1: So I think that that over time, the market it

1074
00:53:00,080 --> 00:53:03,520
Speaker 1: can absorb more of it, and even MicroStrategy. You know,

1075
00:53:03,560 --> 00:53:05,480
Speaker 1: there was a pause during the bear market. They were

1076
00:53:05,600 --> 00:53:08,080
Speaker 1: really you know, it was the cycle was temporarily over,

1077
00:53:09,719 --> 00:53:14,360
Speaker 1: but then it came back once bitcoin entered another bull market.

1078
00:53:14,600 --> 00:53:17,120
Speaker 1: So it can absolutely get overdone for periods of time.

1079
00:53:17,400 --> 00:53:19,600
Speaker 1: It's like how much can the market absorb at once?

1080
00:53:20,920 --> 00:53:23,120
Speaker 1: But then when the dust settles and anyone who did

1081
00:53:23,160 --> 00:53:27,160
Speaker 1: it improperly, maybe gets washed out, a new base builds,

1082
00:53:27,239 --> 00:53:29,640
Speaker 1: and then potentially there's another round of arbitrage, and this

1083
00:53:29,760 --> 00:53:32,560
Speaker 1: can get pretty big because the mismatching size between the

1084
00:53:32,560 --> 00:53:34,799
Speaker 1: Bitcoin ecosystem the fit ecosysm is huge.

1085
00:53:34,880 --> 00:53:35,879
Speaker 3: Yeah, that's what I was thinking.

1086
00:53:35,920 --> 00:53:37,560
Speaker 2: It's like, as long as they can continue to RB

1087
00:53:37,640 --> 00:53:39,680
Speaker 2: that right, as long as the rate to borrow is

1088
00:53:39,680 --> 00:53:42,759
Speaker 2: well below the rate of appreciation, which seems like it's

1089
00:53:42,800 --> 00:53:44,480
Speaker 2: going to be that way for a very long time.

1090
00:53:44,680 --> 00:53:46,080
Speaker 3: But I guess then you have to decide how.

1091
00:53:46,080 --> 00:53:49,600
Speaker 2: Much liquidity will there be available for the for the debt.

1092
00:53:50,360 --> 00:53:52,200
Speaker 2: But I think to your point, you know, if you

1093
00:53:52,200 --> 00:53:54,160
Speaker 2: have a long enough timeframe and you believe in bitcoin,

1094
00:53:54,200 --> 00:53:56,280
Speaker 2: then seems directionally correct.

1095
00:53:56,280 --> 00:53:58,839
Speaker 3: But yeah, who knows who's gonna get caught upside.

1096
00:53:58,520 --> 00:53:59,960
Speaker 2: Down when the type he is out as warm Buffet

1097
00:54:00,160 --> 00:54:02,799
Speaker 2: say exactly.

1098
00:54:02,800 --> 00:54:05,120
Speaker 1: All right, well, uh and that and that and that

1099
00:54:05,239 --> 00:54:07,359
Speaker 1: was the Berkshire playbook on the lesser scale. I mean,

1100
00:54:07,400 --> 00:54:10,040
Speaker 1: part of why they're so successful is that basically what

1101
00:54:10,040 --> 00:54:12,680
Speaker 1: what Buffett and Munger did was they bought a bunch

1102
00:54:12,680 --> 00:54:16,799
Speaker 1: of blue chip equities, uh basically with debt uh, and

1103
00:54:16,840 --> 00:54:19,040
Speaker 1: they just they managed it so they never blew up.

1104
00:54:19,160 --> 00:54:23,480
Speaker 1: So the reason they basically bought insurance companies and operators

1105
00:54:23,520 --> 00:54:26,360
Speaker 1: a big insurance company is that's a really cheap source

1106
00:54:26,360 --> 00:54:31,400
Speaker 1: of leverage. That entire insurance float is basically their liabilities,

1107
00:54:32,160 --> 00:54:34,919
Speaker 1: and so they're you know, in addition to issuing debt,

1108
00:54:34,960 --> 00:54:38,400
Speaker 1: which which Berkshire would do, they would also just the

1109
00:54:38,520 --> 00:54:41,520
Speaker 1: insurance float is a type of leverage. Uh. And so

1110
00:54:41,560 --> 00:54:44,280
Speaker 1: they basically own a bunch of blue blue chip stuff

1111
00:54:44,360 --> 00:54:47,680
Speaker 1: at moderate leverage, make sure they don't blow up during recessions,

1112
00:54:47,719 --> 00:54:50,279
Speaker 1: and therefore compound at a at a good rate. And

1113
00:54:50,360 --> 00:54:53,320
Speaker 1: so that if the best leverage bitcoin entities do essentially

1114
00:54:53,400 --> 00:54:56,960
Speaker 1: the same thing with bitcoin, they can have similar long

1115
00:54:57,040 --> 00:54:59,360
Speaker 1: term success. And just that the key is never getting

1116
00:54:59,360 --> 00:55:00,319
Speaker 1: over your skis.

1117
00:55:00,160 --> 00:55:04,240
Speaker 2: Yeah, which is always hard to do human human nature.

1118
00:55:04,239 --> 00:55:06,440
Speaker 2: Alice pleas to plash it too far. I saw this

1119
00:55:06,520 --> 00:55:08,480
Speaker 2: quote from Elon he's talking about with Doze, and he

1120
00:55:08,560 --> 00:55:11,640
Speaker 2: said something like, if you don't have to add back in,

1121
00:55:11,719 --> 00:55:12,680
Speaker 2: you didn't cut enough.

1122
00:55:13,280 --> 00:55:14,360
Speaker 3: And it's kind of like the opposite.

1123
00:55:14,360 --> 00:55:15,919
Speaker 2: It's like if you if you don't have a couple

1124
00:55:15,880 --> 00:55:17,839
Speaker 2: of collapsing, you didn't push far enough.

1125
00:55:17,880 --> 00:55:20,759
Speaker 3: I guess would be the opposite of that. Man, I

1126
00:55:20,760 --> 00:55:22,200
Speaker 3: think that's a good place to stop. Lynn.

1127
00:55:22,280 --> 00:55:25,839
Speaker 2: Uh, what a wealth of information. I appreciate it. Like

1128
00:55:25,880 --> 00:55:28,640
Speaker 2: I said earlier, Man, you're so in demand that obviously. Uh,

1129
00:55:28,719 --> 00:55:30,320
Speaker 2: it's because of this wealth of information you have. I

1130
00:55:30,360 --> 00:55:32,680
Speaker 2: subscribe to your newsletter Lynn Alden dot com. We'll link

1131
00:55:32,719 --> 00:55:35,120
Speaker 2: to that down below. Obviously, your book Broken Money. I

1132
00:55:35,160 --> 00:55:36,080
Speaker 2: have a copy of that as well.

1133
00:55:36,080 --> 00:55:38,080
Speaker 3: It's amazing. Anything else you want to point people to,

1134
00:55:39,440 --> 00:55:39,600
Speaker 3: H No

1135
00:55:39,719 --> 00:55:41,319
Speaker 1: There's a two big things to check out Lindlon dot

1136
00:55:41,360 --> 00:55:43,200
Speaker 1: com in the book and thanks for having Yeah, we'll

1137
00:55:43,200 --> 00:55:44,040
Speaker 1: link that down below.