WEBVTT - Why the 2008 Crash Was So Different | Raoul Pal 0:00:00.360 --> 0:00:02.880 Why was it different in two thousand and eight. I mean, 0:00:02.920 --> 0:00:05.040 they seemingly did let the market fall, and we did 0:00:05.120 --> 0:00:07.560 see the markets crashed by sixty five percent, and so 0:00:07.920 --> 0:00:09.959 now you're kind of saying that they can't really do that. 0:00:10.440 --> 0:00:13.280 Two thousand was less of a debt cycle and more 0:00:13.280 --> 0:00:16.200 of an equity cycle. The debt cycle in two thousand 0:00:16.239 --> 0:00:18.479 and eight really was the kind of end of the 0:00:18.520 --> 0:00:20.919 financial system. It was the point that we all knew 0:00:21.079 --> 0:00:23.599 was coming, which is like, you can't have this much leverage. 0:00:24.040 --> 0:00:28.880 Look at what's happening. We're decentralizing power. So now people 0:00:28.920 --> 0:00:32.080 can have the source of power at the houses. So 0:00:32.159 --> 0:00:34.279 therefore you don't need the huge storage. People say, well, 0:00:34.280 --> 0:00:36.440 you can't scale solo, Well you can at a house level. 0:00:36.640 --> 0:00:38.280 You can do it probably at a village level. 0:00:38.360 --> 0:00:40.000 You know. Sam Martman said that we might see the 0:00:40.040 --> 0:00:42.080 first single person billion dollar company. 0:00:42.320 --> 0:00:42.919 So I think of it. 0:00:43.560 --> 0:00:46.919 There's both, right, the centralizing of the programming, but then 0:00:47.120 --> 0:00:49.760 it's decentralizing in a sense. It turns one big company 0:00:49.760 --> 0:00:52.760 into one hundred or one thousand companies. There's no future 0:00:52.840 --> 0:00:55.400 in this world where humans don't have problems, And as 0:00:55.440 --> 0:00:58.080 long as there's problems, we'll need solutions to those problems, 0:00:58.080 --> 0:01:00.000 and entrepreneurs will always be able to figure that out. 0:01:00.120 --> 0:01:03.440 So Nyture's going to traded a huge premium in a 0:01:03.480 --> 0:01:06.119 world of robots and AI when you can just kind 0:01:06.120 --> 0:01:08.080 of leave that all behind. If you ask a young 0:01:08.160 --> 0:01:09.960 kid now and say what do you want to be 0:01:10.000 --> 0:01:11.800 when you grow up, they will say, I want to 0:01:11.800 --> 0:01:14.640 be an influencer, and we think, are you crazy? But 0:01:14.680 --> 0:01:18.039 what is an influencer apart from a community leader where 0:01:18.040 --> 0:01:20.680 they have a community of people. It's actually maybe they're 0:01:20.680 --> 0:01:23.480 being adapted to already. They've done it in Fortnite, they've 0:01:23.480 --> 0:01:25.520 done it in the gaming world as well. But in 0:01:25.560 --> 0:01:28.480 the end, people want the human to human experience. 0:01:31.000 --> 0:01:35.560 Rapaul from Real Vision, you have been a man. You've 0:01:35.560 --> 0:01:37.560 been laying out some really good research. I've been waiting 0:01:37.600 --> 0:01:38.880 to talk to you. It's been going on for like 0:01:38.920 --> 0:01:41.640 a month waiting for this. So anyway, thanks for joining 0:01:41.640 --> 0:01:41.959 me today. 0:01:42.000 --> 0:01:42.640 I read again. 0:01:42.760 --> 0:01:45.200 Yes, sorry, I've been so avoiding, but I was on 0:01:45.280 --> 0:01:47.240 holiday and it all got a bit screen. But we're 0:01:47.240 --> 0:01:48.800 here now, finally. 0:01:48.400 --> 0:01:51.920 We're here now, We're here now, so that everything code 0:01:52.760 --> 0:01:56.040 the Banana zone. Man, You've been putting out some really 0:01:56.120 --> 0:01:58.520 really good research that I'm excited to Again. I was 0:01:58.520 --> 0:02:00.640 just telling you, I just came back from the big conference, 0:02:00.720 --> 0:02:04.200 and I'm starting to see this big shift in the industry. 0:02:04.240 --> 0:02:07.440 It seems like where we're seeing, you know, all this 0:02:07.520 --> 0:02:10.760 institutional adoption that's just coming in and it seems like 0:02:10.800 --> 0:02:13.639 it's changing sort of the makeup of that industry. We'll 0:02:13.680 --> 0:02:15.560 come back to that, but let's go ahead and just 0:02:15.600 --> 0:02:19.880 set the stage here and Everything code. I've been loving it, 0:02:20.480 --> 0:02:25.359 this this phenomenon where you have like these metronomes that 0:02:25.480 --> 0:02:28.880 keep perfect time for playing music, and this phenomenon where 0:02:28.919 --> 0:02:31.440 if you set all these metronomes on a table and 0:02:31.440 --> 0:02:33.880 start them at different times over time, they all get 0:02:33.919 --> 0:02:36.760 to the same beat. And I think that sort of 0:02:36.960 --> 0:02:38.800 maybe sums up the everything code. 0:02:39.600 --> 0:02:41.520 Yeah, and what's weird about the everything code, And I'll 0:02:41.520 --> 0:02:44.560 explain what it is. What's weird is it makes everything 0:02:44.600 --> 0:02:47.000 so simple too, so that most people think, well, this 0:02:47.120 --> 0:02:47.960 can't be possible. 0:02:48.160 --> 0:02:48.639 Yeah. 0:02:48.960 --> 0:02:53.080 We kind of knew it in bitcoin world because we 0:02:53.120 --> 0:02:56.320 could see a cycle forming, and we've been following this 0:02:56.400 --> 0:02:59.360 cycle kind of dumbly like, well, it's kind of maybe 0:02:59.440 --> 0:03:02.440 just the harving cycle. We don't really know and then 0:03:02.480 --> 0:03:06.800 I started digging in and realized that the business cycle 0:03:06.919 --> 0:03:09.519 was perfect. So the business cycle I used the Ism 0:03:09.639 --> 0:03:13.640 survey and it was a perfect cycle. I'm like, that's 0:03:13.680 --> 0:03:16.560 weird because if you remember, go back prior to two 0:03:16.560 --> 0:03:19.079 thousand and eight, we'd have these long periods of no recession, 0:03:19.200 --> 0:03:22.720 short periods and it was not it was variable. But 0:03:22.800 --> 0:03:25.640 suddenly it's like a metronome as you say, I'm like, huh, 0:03:25.680 --> 0:03:28.000 what's that all about? And eventually it led me to 0:03:28.080 --> 0:03:32.200 realize that two thousand and eight I think was the 0:03:32.200 --> 0:03:36.320 great reset, the one that people keep expecting happened. What 0:03:36.440 --> 0:03:41.720 they did is they basically four They told everybody they 0:03:41.760 --> 0:03:44.720 can fore go paying interest on all their debts, which 0:03:44.760 --> 0:03:47.720 was zero interest rates, and then they tried the new 0:03:47.800 --> 0:03:52.720 trick of printing money via quantata easing. Now, what that 0:03:52.760 --> 0:03:55.240 did is allow every single major government in the world 0:03:55.320 --> 0:03:58.600 to refinance all of their debts on this three to 0:03:58.680 --> 0:04:03.200 five year sector. And so they all did it, and 0:04:03.240 --> 0:04:06.080 what it did was force the business cycle into this 0:04:06.480 --> 0:04:11.440 four year cycle. And then all the asset prices are 0:04:11.480 --> 0:04:16.160 all correlated, whether it's tech, whether it's bitcoin, whether it's 0:04:16.200 --> 0:04:18.559 the economy itself, it's all driven by the same cycle, 0:04:18.560 --> 0:04:21.719 which happens to be the presidential election cycle, which happens 0:04:21.720 --> 0:04:24.719 to be the bitcoin harving cycle. It's all the same thing, 0:04:25.640 --> 0:04:28.159 and so when you understand that, it makes the game 0:04:28.200 --> 0:04:30.080 a lot easier. Now, this is not going to last forever, 0:04:30.720 --> 0:04:32.680 but for the period of time that we've got it 0:04:32.720 --> 0:04:35.160 seems to you playing out perfectly. And you can break 0:04:35.640 --> 0:04:39.839 these cycles down to four phases, which I call the seasons. 0:04:40.440 --> 0:04:45.240 So we have call it crypto or macro Winter. Well, 0:04:45.240 --> 0:04:50.440 that was twenty twenty two, that was twenty eighteen, that 0:04:50.640 --> 0:04:55.120 was twenty fourteen. There is four years. The next part 0:04:55.160 --> 0:04:58.320 of that is spring, where nobody quite believes that something 0:04:58.360 --> 0:05:02.359 is changing, but prices start moving higher. You know, bitcoin 0:05:02.400 --> 0:05:05.480 had a great year in twenty twenty three against most 0:05:05.480 --> 0:05:09.360 people's expectations, because spring is the time the shoots come up. 0:05:10.400 --> 0:05:13.280 Then you start transitioning into summer, which is this year, 0:05:13.279 --> 0:05:15.599 which happens to be the election year, which is when 0:05:16.400 --> 0:05:19.640 really the debt starts getting refinanced and they have to 0:05:19.680 --> 0:05:24.320 start using liquidity to finance it because there's not enough 0:05:24.360 --> 0:05:27.400 GDP growth to pay for the interest on the debts, 0:05:27.920 --> 0:05:30.440 and so they keep rolling forwards. These debts and they 0:05:30.560 --> 0:05:33.839 keep monetizing the interest payments, which is this debasement of 0:05:33.880 --> 0:05:36.599 currency that happens at about on a globalized level, eight 0:05:36.600 --> 0:05:40.480 percent a year their debasing currency and so and then 0:05:40.560 --> 0:05:46.599 next year will be macro full and then eventually the 0:05:46.640 --> 0:05:49.520 cycle tops out and we repeat it again, because it's 0:05:49.560 --> 0:05:52.800 based on the debt refi cycle, that this debasement of 0:05:52.880 --> 0:05:55.840 currency of eight percent. There's two ways of looking at it. 0:05:56.800 --> 0:05:59.800 You can say, rightly, so we're being robbed of our 0:05:59.800 --> 0:06:03.680 few your wealth because your future self is getting poorer 0:06:03.680 --> 0:06:05.720 because you're going to afford less assets with your income 0:06:05.839 --> 0:06:08.200 because income doesn't go up the assets do because of 0:06:08.200 --> 0:06:10.960 the debasement. Or the other way is you can say, 0:06:10.960 --> 0:06:13.760 I'm paying an eight percent put option fee on the 0:06:13.880 --> 0:06:16.680 entire system not breaking, because that's also what they're doing 0:06:17.839 --> 0:06:21.040 because they need to refinance the debt. They need to 0:06:21.160 --> 0:06:23.400 not let asset prices go too far down. So we 0:06:23.440 --> 0:06:25.160 can talk about that, but it's another way of looking 0:06:25.200 --> 0:06:27.400 at it, and you're like, would you pay eight percent 0:06:27.480 --> 0:06:30.040 a year to have the entire system not break? 0:06:30.480 --> 0:06:33.599 Maybe if you have assets, for sure, If you don't 0:06:33.600 --> 0:06:37.960 have assets, that's a different conversation, exactly right, right, depends 0:06:37.960 --> 0:06:40.000 on how much you have to lose, so to kind 0:06:40.000 --> 0:06:42.480 of just maybe rewind the clock just a little bit. 0:06:43.600 --> 0:06:46.880 Because we're in a debt based monetary system, then we 0:06:46.960 --> 0:06:48.760 have to have this debt expansion, and so then we 0:06:48.800 --> 0:06:53.000 have this debt that has then been become collateral for 0:06:53.160 --> 0:06:55.839 more debt, which means the debt always has to be 0:06:55.920 --> 0:06:58.760 ruled over. And as President Biden told us on the 0:06:58.839 --> 0:07:02.520 last debt cilliing debate, that the US has never defaulted, 0:07:02.560 --> 0:07:04.479 and so we have to raise the debt ceilion so 0:07:04.520 --> 0:07:07.320 we don't default on the previous debt, right, which is 0:07:07.360 --> 0:07:09.240 basically what you're saying. We have to raise more debt 0:07:09.440 --> 0:07:11.000 to pay out the existing debt. 0:07:11.520 --> 0:07:13.360 Yes, and then pay the interest on that debt, because 0:07:13.360 --> 0:07:16.240 it compounds every time by the interest payments, so you 0:07:16.320 --> 0:07:18.640 keep adding debts just to pay the interest payments on 0:07:18.640 --> 0:07:21.040 the old debt. Now, why is that phenomena there? It's 0:07:21.040 --> 0:07:24.960 pretty straightforward when you understand it. The US government and 0:07:25.040 --> 0:07:29.040 all the major Western governments, plus Japan plus a few 0:07:29.040 --> 0:07:33.760 others are about one hundred percent plus of GDP and debt. Now, 0:07:33.840 --> 0:07:37.640 let's say theoretically interest rates a three percent, Well, if 0:07:37.680 --> 0:07:41.000 GDP growth is at three percent, then all GDP growth 0:07:41.240 --> 0:07:45.440 goes to pay those interest payments. Okay, but the problem 0:07:45.480 --> 0:07:47.760 is is the private sector is over one hundred percent 0:07:47.760 --> 0:07:50.520 of GDP and debt as well, and it's got interest payments. 0:07:51.560 --> 0:07:54.200 So if they both have it, there's not enough GDP 0:07:54.280 --> 0:07:57.880 to cover it. So what they've essentially done is removed 0:07:58.000 --> 0:08:01.840 the government debt payments out by printing money, and that 0:08:01.920 --> 0:08:05.400 stops the whole system becoming illiquid. Because if you think 0:08:05.400 --> 0:08:08.800 about it, you talked about collateral. Collateral is the money 0:08:08.800 --> 0:08:13.200 pledged against the loan. If the colateral falls too fast 0:08:13.560 --> 0:08:16.240 or too far, then you break the covenant on the 0:08:16.400 --> 0:08:18.640 loan and it gets called on you, and that's the 0:08:18.680 --> 0:08:20.880 whole system. That's what happened in two thousand and eight. 0:08:21.520 --> 0:08:23.040 So the best thing to do is not let the 0:08:23.040 --> 0:08:26.320 colateral fall by debasing the currency, and optically it goes up, 0:08:26.920 --> 0:08:28.880 so it kind of stops the system imploding. 0:08:29.040 --> 0:08:33.079 Yeah, now, you talked about this the phenomenon where it 0:08:33.120 --> 0:08:34.920 all got synced up in two thousand and eight. We'll 0:08:34.960 --> 0:08:38.040 get into that, but just going backwards, why was it 0:08:38.080 --> 0:08:40.440 different in two thousand and eight. I mean, they seemingly 0:08:40.480 --> 0:08:42.240 did let the market fall and we did see the 0:08:42.320 --> 0:08:44.480 markets crashed by sixty five percent. 0:08:44.160 --> 0:08:45.600 And so they did. 0:08:45.640 --> 0:08:47.800 And we started in two thousand, right, we started in two thousands. 0:08:47.840 --> 0:08:49.880 On two thousand and eight. But now you're kind of 0:08:49.920 --> 0:08:52.320 saying that they can't really do that. 0:08:52.320 --> 0:08:57.800 That's right. Two thousand was less of a debt cycle 0:08:57.800 --> 0:09:00.520 and more of an equity cycle. The debts cycle in 0:09:00.600 --> 0:09:03.200 two thousand and eight really was the kind of end 0:09:03.240 --> 0:09:05.640 of the financial system. It was the point that we 0:09:05.679 --> 0:09:07.760 all knew was coming, which is like, you can't have 0:09:07.800 --> 0:09:10.679 this much leverage. And if the collateral, which happened to 0:09:10.720 --> 0:09:13.760 be house prices, which is not a volatile collateral, once 0:09:13.840 --> 0:09:19.440 that starts, it put a colateral call on the entire system, 0:09:20.120 --> 0:09:24.920 and faced with the entire blowing up of everything, they 0:09:24.960 --> 0:09:27.760 decided to stop it. Now, I don't think they quite 0:09:27.840 --> 0:09:30.319 understood what they were doing at that point. But then 0:09:30.400 --> 0:09:33.079 Europe had the same issue in twenty twelve, four years later, 0:09:33.640 --> 0:09:38.400 this four year cycle. Then Europe, the governments couldn't pay 0:09:38.400 --> 0:09:40.880 the debt. Okay, Now, this was a sovereign crisis of 0:09:41.280 --> 0:09:45.199 giant nations, and Draggy said I'll do whatever it takes. 0:09:45.559 --> 0:09:49.280 What that was was, I will debase the currency to 0:09:49.320 --> 0:09:52.800 stop the collateral falling so we can shure up the system. 0:09:53.320 --> 0:09:55.199 That then magnified the whole thing. 0:09:55.960 --> 0:09:58.600 So was it a change in their willingness to do 0:09:58.640 --> 0:10:00.640 whatever it takes to the point drive he said, you know, 0:10:01.120 --> 0:10:04.160 whatever it takes. Was it a change sort of in 0:10:04.160 --> 0:10:06.760 their willingness to intercede or was it a fact of 0:10:07.000 --> 0:10:09.080 that the system has gotten so over leveraged they have 0:10:09.120 --> 0:10:09.840 no choice now? 0:10:11.160 --> 0:10:14.439 Yeah, So I this is the time I got into 0:10:14.640 --> 0:10:17.600 bitcoin back in twenty twelve because I was living in 0:10:17.640 --> 0:10:20.520 Europe and you know, it got so bad that I 0:10:20.640 --> 0:10:23.839 was buying tin food and a generator because I thought, 0:10:23.880 --> 0:10:26.200 we're going to lose our banking system. Wow, because everyone 0:10:26.280 --> 0:10:29.400 you know, I was living in Spain. Spain was forced 0:10:29.440 --> 0:10:31.480 to take a bail out of nineteen billion dollars. They 0:10:31.520 --> 0:10:33.080 didn't want to take it, and we thought we're going 0:10:33.120 --> 0:10:36.360 to lose the banks. Cyprus obviously lost its banking system. 0:10:36.400 --> 0:10:39.800 They took the money out of everybody's accounts. But what 0:10:39.840 --> 0:10:41.800 was interesting at that point, I went around the world 0:10:41.960 --> 0:10:45.440 trying to start the world's safest bank with a bunch 0:10:45.480 --> 0:10:48.200 of friends of mine and family offices and stuff like that. 0:10:48.760 --> 0:10:53.200 And we had had a private meeting with the DTCC 0:10:53.760 --> 0:10:58.000 and Euroclear and the New York Fed. Now the DTCC 0:10:58.080 --> 0:11:03.760 in Euroclear, they're the custodians of the entire system. And Euroclear, 0:11:03.800 --> 0:11:08.640 I'd read somewhere had had to lend emergency money when 0:11:08.720 --> 0:11:12.679 Lehman went under fifty billion dollars, and so I asked them, 0:11:12.720 --> 0:11:15.320 I said, what was the collateral for that loan? And 0:11:15.360 --> 0:11:19.480 they said, oh, we had to use the positions from 0:11:19.520 --> 0:11:23.880 all of the members of Euroclear. And I'm like, is 0:11:23.880 --> 0:11:29.040 that customer or house account? Is it mingled? And they're like, oh, 0:11:29.200 --> 0:11:31.760 it's all mingled at our level. We have a claim 0:11:31.760 --> 0:11:35.640 in all assets. I'm like, okay. And then I spoke 0:11:35.640 --> 0:11:38.080 to the DTCC and I said, well, oh no. I 0:11:38.080 --> 0:11:40.640 spoke to Euroclear and said, what happens if Spain or 0:11:40.679 --> 0:11:44.199 Italy went bust? They said, then the entire colateral of 0:11:44.240 --> 0:11:47.160 the system is gone and it's a total wipeout of everything. 0:11:49.280 --> 0:11:51.720 That's when I realized how important the government debt was. 0:11:52.320 --> 0:11:55.200 I asked the DTCC and the New York Fed the 0:11:55.280 --> 0:11:57.840 same question, and they said, yes, they would lend if 0:11:57.920 --> 0:12:00.640 JP Morgan went under or something, they would lend money 0:12:00.679 --> 0:12:03.360 to the system and they would take customer positions as collateral. 0:12:03.400 --> 0:12:06.559 I'm like, okay, so you don't actually own anything. And 0:12:06.880 --> 0:12:08.400 I asked the New York feder said what is the 0:12:08.480 --> 0:12:12.679 leverage in US treasuries? And they said, we think treasuries 0:12:12.679 --> 0:12:16.200 are levered up to forty two times. Wow, So there's 0:12:16.240 --> 0:12:18.960 forty two claims on the same asset. If shit hits 0:12:18.960 --> 0:12:21.640 the fan, that's what they're scared of. And that I 0:12:21.679 --> 0:12:26.000 think they had the realization in twenty twelve, and I 0:12:26.040 --> 0:12:29.320 think they all understood the game, which was, Okay, we're 0:12:29.360 --> 0:12:32.080 going to have to continue to monetize this until we 0:12:32.120 --> 0:12:34.000 can grow our way out of it if we can. 0:12:34.720 --> 0:12:34.920 Right. 0:12:35.200 --> 0:12:37.000 So I remember two thousand and eight is when I 0:12:37.080 --> 0:12:38.960 sort of woke up to the macro world. I had 0:12:39.160 --> 0:12:41.000 been a real estate investor coming out of the two 0:12:41.040 --> 0:12:44.160 thousand crash, and then you know, I got woken up 0:12:44.200 --> 0:12:45.400 in two thousand and eight. I said, Wow, I need 0:12:45.400 --> 0:12:47.120 to go figure out this macro picture because it has 0:12:47.160 --> 0:12:49.200 all this ConTroll over my life I've been paying attention to. 0:12:49.240 --> 0:12:51.720 And that's when I really remember hearing the first you know, 0:12:51.840 --> 0:12:55.199 too big to fail sort of narrative coming out of it. 0:12:56.040 --> 0:12:57.960 And so they bailed out a lot of. 0:12:57.920 --> 0:13:01.120 These institutions AIG that were too big fail, but by 0:13:01.160 --> 0:13:03.760 doing that, they made even bigger institutions that are too 0:13:03.760 --> 0:13:04.199 big to fail. 0:13:04.240 --> 0:13:07.760 It sounds like, so there's a really important point. I 0:13:07.800 --> 0:13:12.920 asked them directly why they let Leman go but they 0:13:13.000 --> 0:13:17.840 didn't let AIG go, and they're like, nobody was using 0:13:17.960 --> 0:13:22.440 Leman bonds as collateral. AIG were triple A and they 0:13:22.440 --> 0:13:26.440 were going to go to zero, and triple A bonds 0:13:26.480 --> 0:13:28.800 get used massively as collateral, and they thought there was 0:13:29.160 --> 0:13:33.280 thirty two times leverage in AIG bonds. They're like, we 0:13:33.320 --> 0:13:37.720 could not allow it to go. Leman wasn't as existential 0:13:37.720 --> 0:13:40.959 a problem as AIG. I was like, wow, that's fascinating. 0:13:41.679 --> 0:13:43.960 And so now the system has gotten so levered up 0:13:44.000 --> 0:13:47.559 and it's there's so much collateral staking the other collateral 0:13:47.920 --> 0:13:50.440 that now we're sort of in this position that's gotten bigger, bigger, 0:13:50.480 --> 0:13:52.360 bigger and bigger worse that they just can't let it 0:13:52.400 --> 0:13:55.160 go now, which is what we saw in twenty twenty. 0:13:55.800 --> 0:13:57.720 And we saw it in twenty twenty two as well. 0:13:58.080 --> 0:14:00.840 So the moment the markets go down a certain amount, 0:14:01.200 --> 0:14:04.040 the liquidity comes back, even though the FED was still 0:14:04.080 --> 0:14:07.720 tightening and they were doing contains of tightening. The actual 0:14:07.760 --> 0:14:10.840 liquidity started picking up at the back end of twenty 0:14:10.880 --> 0:14:13.280 twenty two because they're like, enough, we don't want the 0:14:13.320 --> 0:14:14.840 S and P to full more than let's say, twenty 0:14:14.840 --> 0:14:17.120 five percent. And that's kind of a line in the 0:14:17.160 --> 0:14:20.280 sand that we've seen repeatedly that every time it starts 0:14:20.320 --> 0:14:23.200 to get a bit wobbly, magic of liquidity comes back, 0:14:23.280 --> 0:14:26.600 they debase the currency and everybody's okay again because if 0:14:26.600 --> 0:14:28.760 you think of the other big liability out there we 0:14:28.840 --> 0:14:31.800 talked about ordinary people. Ordinary people do have a pension 0:14:33.120 --> 0:14:35.600 and those pensions are in these assets too, and you've 0:14:35.640 --> 0:14:38.720 got this massive cohort of people that if you let 0:14:38.760 --> 0:14:44.120 the pensioners lose fifty percent of their wealth at what 0:14:44.160 --> 0:14:46.680 average age of baby boomer's average age is, what's seventy one, 0:14:46.760 --> 0:14:50.960 seventy two, Well, that's going to destroy consumption because there's 0:14:50.960 --> 0:14:53.720 seventy six million of these people. So then don't want 0:14:53.760 --> 0:14:55.640 to do that too. So that between a rock and 0:14:55.640 --> 0:14:57.600 a hard place. And I ask a lot of people 0:14:57.640 --> 0:15:01.200 who complain about what's going on rightly, so is what 0:15:01.240 --> 0:15:03.840 would you do different? Are you going to default on 0:15:03.920 --> 0:15:07.800 all of the baby boomers? And destroy their pensions and 0:15:07.800 --> 0:15:11.360 then destroy the entire economy, or do you let all 0:15:11.400 --> 0:15:15.160 of the system go under because you don't have any assets. 0:15:15.680 --> 0:15:18.760 It's very difficult to actually come up with an answer 0:15:19.400 --> 0:15:21.960 that is reasonable. They're all shits, they're all shit answers. 0:15:22.080 --> 0:15:24.440 So maybe the least shit is eight percent a year. 0:15:24.560 --> 0:15:24.800 Yeah. 0:15:25.120 --> 0:15:27.880 The other problem is I've talked about her, whereas the 0:15:27.960 --> 0:15:31.800 government can't really afford a recession either or a market crash, right, 0:15:31.800 --> 0:15:33.840 I mean a large percent of their revenues come from 0:15:33.880 --> 0:15:37.120 cap gains and just income overall. 0:15:37.160 --> 0:15:39.080 If the stock market crashes. 0:15:38.680 --> 0:15:41.320 Through a recession, would typically see what a twelve to 0:15:40.960 --> 0:15:44.600 fifteen percent drop in tax receipts, and when we're already 0:15:44.640 --> 0:15:47.280 running deficits like we are, that would also be catastrophic. 0:15:48.200 --> 0:15:50.640 Yeah, particularly if a bear market lasts longer than a year. 0:15:51.080 --> 0:15:52.960 So a year they can pretty much buffer as long 0:15:52.960 --> 0:15:55.160 as it's not too big. But if it grinds on 0:15:55.200 --> 0:15:57.680 for two or three years, you're right, the tax revenues 0:15:57.720 --> 0:16:01.320 don't add up. People get tipped out of jobs, so 0:16:01.360 --> 0:16:06.480 there's less other revenues coming. So it's cap gains, it's earnings, 0:16:06.880 --> 0:16:10.240 it's household income, the whole lot and then before you 0:16:10.280 --> 0:16:12.800 know it again exactly the same isshow I hadn't really 0:16:12.800 --> 0:16:14.520 thought of it that way, but that makes total sense. 0:16:14.640 --> 0:16:17.240 Is you just can't have a long term recession right 0:16:17.240 --> 0:16:19.520 now because everything is resting on it. 0:16:19.600 --> 0:16:21.800 Right Okay, So that sort of sets the stage for 0:16:21.840 --> 0:16:24.440 the everything code, so we understand the mechanisms of why 0:16:24.480 --> 0:16:26.800 the leverage is there and why they can't really let 0:16:26.800 --> 0:16:28.720 their crash and they have to continue to inject liquidity 0:16:28.760 --> 0:16:31.000 to keep it going. Then, as you said in two 0:16:31.040 --> 0:16:34.080 thousand and eight, that metronome moment sort of happened when, 0:16:34.200 --> 0:16:35.920 of course, if the bank is going to give you 0:16:36.080 --> 0:16:38.760 zero percent loans, you're going to refinance. So to the 0:16:38.760 --> 0:16:41.800 point that you made everybody refinanced at that time. Now, 0:16:41.920 --> 0:16:44.600 that was most of the debt. I mean, that was 0:16:44.680 --> 0:16:47.560 corporate debt, household debt, business debt, everything, and that was 0:16:47.560 --> 0:16:48.320 also global. 0:16:49.480 --> 0:16:52.320 Well, corporates actually did longer term debt. It was the 0:16:52.360 --> 0:16:55.960 governments that really did. Households didn't get access to debt ever. Again, 0:16:56.760 --> 0:17:00.680 so you know, household debt to GDPs falling for a 0:17:00.720 --> 0:17:03.880 long time, and corporate debt to GDP has been generally 0:17:03.880 --> 0:17:07.040 falling because tech stocks have become more dominant and they 0:17:07.160 --> 0:17:11.439 don't have debts old economy stocks do it all shifted. 0:17:12.160 --> 0:17:16.240 That shrinkage of household debt and corporate debt is exactly 0:17:16.280 --> 0:17:19.080 the same amount of the increase of government debt. So 0:17:19.119 --> 0:17:21.200 it's just going from one balance sheet to the other, 0:17:21.680 --> 0:17:24.439 got it. Because on the government balance sheet, you can 0:17:24.480 --> 0:17:27.400 debase currency. On the corporate balance you or the household 0:17:27.400 --> 0:17:29.000 balance sheet you can't do anything. 0:17:30.440 --> 0:17:33.840 And then there's a mechanism also that you've talked about 0:17:33.840 --> 0:17:37.359 that sort of in place because of the demographics and 0:17:37.480 --> 0:17:39.840 with falling demographics that we're seeing sort of through the 0:17:39.840 --> 0:17:43.000 developed world, that's also forcing the government to continue to 0:17:43.000 --> 0:17:46.320 do debase or continue to do sort of add stimulus 0:17:46.320 --> 0:17:47.520 into the GDP. 0:17:48.440 --> 0:17:51.359 Yes, So if you think about an aging population, if 0:17:51.400 --> 0:17:54.480 you think about your parents, the older they get, the 0:17:54.560 --> 0:17:59.960 less they spend. So aging populations tend to have lower 0:18:00.119 --> 0:18:04.400 trend rates of GDP they all do. It's happened observable everywhere. 0:18:04.760 --> 0:18:10.040 Because old populations spend less, they also tend to not 0:18:10.280 --> 0:18:12.560 know how long they're going to live for after they retire. 0:18:13.040 --> 0:18:15.840 So when my dad retired, his spending must have fallen 0:18:15.880 --> 0:18:18.399 sixty or seventy percent because he's like, well, I've got 0:18:18.440 --> 0:18:19.720 this much money, I don't know how I'm going to 0:18:19.760 --> 0:18:21.560 live for is my wife's going to be taken care of? 0:18:22.119 --> 0:18:26.520 And so they change their habits, and so that drags 0:18:26.560 --> 0:18:30.680 down GDP growth, as does debt, and so it keeps compounding. 0:18:30.680 --> 0:18:33.520 This whole thing is right now. For example, interest rates 0:18:33.560 --> 0:18:35.800 are at five and a half percent, but trend rate 0:18:35.840 --> 0:18:39.639 of GDP over the last five six years is about 0:18:39.640 --> 0:18:42.600 one point seventy five percent. So you've got this big 0:18:42.640 --> 0:18:45.360 gap and you need to get interest rates down so 0:18:45.400 --> 0:18:48.520 you can refire them. But all the time, GDP keeps 0:18:48.520 --> 0:18:51.880 falling over time, and you can forecast it into the future. 0:18:52.280 --> 0:18:55.720 It's just the birth's deaths, and it gives you thirty 0:18:55.840 --> 0:18:59.320 years of understanding, and it's just telling us unless something 0:18:59.400 --> 0:19:02.600 dramatic change, which is technology, we're just going to keep 0:19:02.640 --> 0:19:11.159 dragging down GDP forever. And we're seeing it worse older populations, Japan, China, 0:19:11.720 --> 0:19:14.199 most of Europe. They're older than the US because they 0:19:14.200 --> 0:19:19.399 had less immigration. What you find is their GDP keeps shrinking. Australia, 0:19:19.440 --> 0:19:22.000 on the other hand, has a high immigration rate, as 0:19:22.040 --> 0:19:25.040 has Canada, and they tended to do better because of 0:19:25.040 --> 0:19:28.480 the immigration rate, because really GDP growth is driven by 0:19:28.840 --> 0:19:32.240 population growth, productivity growth, and debt growth. 0:19:33.000 --> 0:19:38.280 Right now, you know, I've read into the demographics quite 0:19:38.280 --> 0:19:40.040 a bit. I remember Harry Dent Junior wrote a book, 0:19:40.040 --> 0:19:42.000 The Demographic Cliff, that sort of kind of showed these 0:19:42.040 --> 0:19:45.879 predictable spending patterns as you age through life. But another 0:19:45.880 --> 0:19:47.560 thing that I've heard, though, is that the baber boomers 0:19:47.600 --> 0:19:49.440 have so much money. They're sitting in so much wealth 0:19:49.520 --> 0:19:51.280 right now, and a lot of them they're like, well, 0:19:51.280 --> 0:19:54.760 we're going to die, so let's just spend it all. 0:19:54.960 --> 0:19:57.600 I hear this a lot. There was a paper written 0:19:57.840 --> 0:20:02.680 the BIS or somewhere about this, but it's not provable 0:20:02.720 --> 0:20:06.720 in any country anywhere. So I've gone through all the 0:20:06.720 --> 0:20:08.719 demographic data and there was this whole thing said, well 0:20:08.720 --> 0:20:12.080 it's inflationary. I'm like, well, show me some fucking evidence, 0:20:12.480 --> 0:20:15.240 and I went through every single country. There is no 0:20:15.400 --> 0:20:18.399 evidence of inflation. They tend to be hoarders. Now. What 0:20:18.440 --> 0:20:24.600 happened in Japan was that aging japan cohort their kids 0:20:24.640 --> 0:20:27.520 retired by the time they passed it onto them. So 0:20:27.560 --> 0:20:29.840 a lot of them actually passed it on to their kids. 0:20:29.880 --> 0:20:31.560 But in Japan it was so bad that it went 0:20:31.800 --> 0:20:35.840 from retiree to retiree, so it never recycled into the economy. 0:20:36.640 --> 0:20:40.199 So I don't see evidence of baby boomers saying, well, 0:20:40.200 --> 0:20:43.200 I'm going to spend it all because you know, that's okay. 0:20:43.240 --> 0:20:47.880 When you take the average pension or retirement savings. When 0:20:47.920 --> 0:20:52.239 you take the median, the medium baby boomer is one 0:20:52.320 --> 0:20:56.040 hundred and fifty grand saved and they need to live 0:20:56.080 --> 0:21:02.160 for fifteen twenty years post retirement, can't. Yeah, how they're 0:21:02.160 --> 0:21:05.080 just going to blow it on you know, cruises, they're not. Yeah. 0:21:05.119 --> 0:21:07.080 I mean in the US, I believe about half of 0:21:07.119 --> 0:21:09.719 them have no savings. And then I think the median 0:21:09.800 --> 0:21:11.720 that do have savings is about one hundred and fifty 0:21:11.760 --> 0:21:12.400 so it's even worse. 0:21:12.440 --> 0:21:14.800 Yeah, which is terrible. But when you look at the average, 0:21:15.440 --> 0:21:18.920 it's like a million bucks. Yeah, sure, because Jeff Bezos 0:21:18.960 --> 0:21:21.600 is in it, right, But you know that skew is 0:21:22.160 --> 0:21:23.960 hides a lot of bad stuff. 0:21:24.119 --> 0:21:24.439 Yeah. 0:21:24.640 --> 0:21:26.800 Now, when you're looking at this, you've gone back and 0:21:26.840 --> 0:21:28.840 forth seeming we were talking about the US, but then 0:21:28.840 --> 0:21:31.440 you pull in sort of the West, so Japan, China, 0:21:31.480 --> 0:21:33.480 and Europe, et cetera. So it's important to sort of 0:21:33.520 --> 0:21:35.840 look at this from a global perspective, especially when we're 0:21:35.840 --> 0:21:37.440 looking at like global assets like bitcoin. 0:21:39.200 --> 0:21:42.560 It is very important because I believe all of these 0:21:43.000 --> 0:21:45.920 central banks and governments understand the game that they're in, 0:21:46.359 --> 0:21:48.479 and I think the Japanese figured it out first. They 0:21:48.480 --> 0:21:51.560 were the first two quant stats of easing, and I 0:21:51.640 --> 0:21:55.199 believe that somewhere around twenty twelve, with the rescue of 0:21:55.200 --> 0:21:58.600 the European system, they all got together and said, we 0:21:58.720 --> 0:22:02.240 will all have to run a liquidity cycle to do this, 0:22:02.960 --> 0:22:06.680 and that there is a game that they play because 0:22:07.119 --> 0:22:09.840 they kind of know. What's interesting is people always assume 0:22:09.880 --> 0:22:14.320 central banks are stupid. I find that a bit hubristic 0:22:14.359 --> 0:22:17.240 to think that they are. Maybe they just don't want 0:22:17.280 --> 0:22:21.240 to acknowledge what they're trying to do, but it would 0:22:21.320 --> 0:22:24.480 make total sense. And the more you think about that, 0:22:24.520 --> 0:22:27.879 the more you see it how they're also connected in 0:22:27.960 --> 0:22:30.280 what they do and how they do it, and it's 0:22:30.320 --> 0:22:33.120 all like a tacit agreement. Is okay, time to go, 0:22:33.600 --> 0:22:34.600 and they all go again. 0:22:34.960 --> 0:22:35.760 Yeah. 0:22:36.040 --> 0:22:39.480 Now, so we have these problems and now we're in 0:22:39.520 --> 0:22:43.160 this SYNCD up cycle. You mentioned that it's probably not 0:22:43.200 --> 0:22:46.440 going to stay that way forever, but that's where we're 0:22:46.440 --> 0:22:48.720 at right now. What would cause it to get out 0:22:48.760 --> 0:22:49.200 of sync? 0:22:51.200 --> 0:22:53.920 Well, most people tend to err towards the well it's 0:22:53.920 --> 0:22:56.160 all going to blow up. I'm like, show me how 0:22:56.280 --> 0:22:59.560 if you can debase the currency, a global reserve currency, 0:23:00.000 --> 0:23:02.119 how's the assets going to collapse? You can't. It's like 0:23:02.160 --> 0:23:04.680 the Venezuelan stock market goes a lot in Bolivard terms, 0:23:04.720 --> 0:23:08.639 in dollar terms, it goes down. That's debasement. So I'm like, 0:23:08.760 --> 0:23:11.800 I don't think that is the outcome. What I actually 0:23:11.800 --> 0:23:15.359 think of the outcome is remember that magic formula GDP 0:23:15.480 --> 0:23:18.280 growth plus productivity, growth plus debt growth. Right, debt growth 0:23:18.400 --> 0:23:23.920 is stopped, it's just servicing of old debts. Population growth 0:23:24.040 --> 0:23:28.720 we know is negative out for thirty years. And what 0:23:28.840 --> 0:23:35.400 is the answer? AI and robots they're infinite humans. And productivity? 0:23:35.480 --> 0:23:38.840 What is productivity? Productivity really is how much output per 0:23:38.920 --> 0:23:43.680 kilo jowl of energy. Now, think of that as electricity costs. 0:23:44.480 --> 0:23:46.879 If you then think about and a lot of people 0:23:47.000 --> 0:23:49.359 like the Europeans their nuts. Look what they're doing with 0:23:49.440 --> 0:23:53.399 this green energy. They're wasting money. They're not Their entire 0:23:53.480 --> 0:23:57.080 job is to lower the cost of electricity, because that 0:23:57.200 --> 0:24:01.240 is the only way, they can pick up GDP because 0:24:01.240 --> 0:24:04.840 it creates the multiplier to productivity. They don't have the 0:24:04.840 --> 0:24:08.520 tech industry in the same way, but they have them 0:24:08.560 --> 0:24:11.719 and China are the big pushes of renewables. So the 0:24:11.760 --> 0:24:14.440 cost of renewables has been collapsing over time. It's down 0:24:14.800 --> 0:24:19.560 ninety nine percent over the last fifteen years. So as 0:24:19.600 --> 0:24:22.760 it's getting cheaper and cheaper, eventually you can scale it 0:24:22.880 --> 0:24:26.760 enough that you will change productivity. On the other hand, 0:24:26.920 --> 0:24:33.800 you've got Japan, China, the US using AI and robotics, 0:24:34.080 --> 0:24:37.719 which creates infinite people. Now, if you've got infinite people, 0:24:38.520 --> 0:24:41.440 you kind of break GDP. I call it the economic singerlarity. 0:24:41.480 --> 0:24:44.320 You get to some point where GDP doesn't mean anything anymore. 0:24:44.640 --> 0:24:46.439 What does any of this mean? So if you've got 0:24:46.520 --> 0:24:50.879 productivity going up because of energy costs and you've got 0:24:51.160 --> 0:24:56.600 infinite humans or humans in inverted commas, then that changes everything. 0:24:56.800 --> 0:24:59.840 Now people are going to say, oh, rarely smoking crack, 0:25:00.080 --> 0:25:03.440 this is all weird. This is exactly what happened after 0:25:03.480 --> 0:25:05.840 World War two. So let me talk you through that, 0:25:05.840 --> 0:25:08.479 because really important for people to understand World War II. 0:25:09.200 --> 0:25:14.880 So the crash of twenty nine was the system failure 0:25:15.000 --> 0:25:19.280 same as two thousand and eight. World War II finished 0:25:19.400 --> 0:25:24.000 nineteen forty five. This was roughly like the pandemic because 0:25:24.200 --> 0:25:27.960 the global economy had stopped. Everybody was out of the 0:25:28.000 --> 0:25:31.280 economy because they were locked up at home or they 0:25:31.320 --> 0:25:36.440 were in the services back in the forties. They all 0:25:36.440 --> 0:25:40.080 come back into the labor force by stuff because they've 0:25:40.080 --> 0:25:44.480 been out of the consumption for ages. The factories aren't ready, 0:25:44.560 --> 0:25:46.639 They're not able to deal with it. It's no supply chains. 0:25:47.440 --> 0:25:50.680 Prices rocket in both equations twenty percent back then, nine 0:25:50.680 --> 0:25:53.119 and a half percent this time around. Okay, Then what 0:25:53.200 --> 0:25:58.080 happens is inflation fell, actually went negative soon after the 0:25:58.119 --> 0:26:02.800 first inflation re push. Then what the central banks did 0:26:02.840 --> 0:26:05.960 then the FED was yield curve control, which is money 0:26:06.000 --> 0:26:09.920 printing to service the debt, and they ran that policy 0:26:10.320 --> 0:26:15.120 plus fiscal spending to generate new cars, new factories. Knew 0:26:15.160 --> 0:26:17.640 all of that boom of the fifties that went into 0:26:17.640 --> 0:26:20.680 the sixties. Now, the other problem they had is much 0:26:20.760 --> 0:26:23.960 like now, we'd lost like twenty percent of the entire 0:26:23.960 --> 0:26:27.479 male population of the Western world from warfare to wars, 0:26:28.119 --> 0:26:30.679 So you had to replenish population or GDP couldn't grow 0:26:30.920 --> 0:26:33.880 what happened the baby boomers. So by the time they 0:26:33.920 --> 0:26:38.160 got into their twenties it was nineteen seventies, they all 0:26:38.200 --> 0:26:40.800 go into the labor force at the same time, start 0:26:40.880 --> 0:26:43.840 buying a house, a car, a suit, a tie, everything. 0:26:44.359 --> 0:26:47.600 It creates a huge inflation because we had all of 0:26:47.600 --> 0:26:51.520 this consumption. But that over that period from about nineteen 0:26:51.680 --> 0:26:57.320 forty seven to about nineteen seventy it was perfectly four 0:26:57.400 --> 0:27:01.520 year cyclical. It was exactly the same thing the stock 0:27:01.600 --> 0:27:03.359 market did nine hundred percent. 0:27:06.000 --> 0:27:09.399 So the productivity was led by the return of the 0:27:09.440 --> 0:27:12.320 people at that point and the demand that they had, 0:27:12.359 --> 0:27:14.240 and the rebuilding of the world and the rebuilding of 0:27:14.240 --> 0:27:17.960 the world, reindustrialization, especially over in Europe there was completely destroyed. 0:27:18.600 --> 0:27:20.640 Yeah, but the US too. You know all the factories 0:27:20.680 --> 0:27:23.359 you think of, you know, all of the famous goods 0:27:23.400 --> 0:27:27.720 of you know, washing machines, cars, TVs. That's all that period, right, 0:27:27.760 --> 0:27:29.640 So it was a huge productivity game. 0:27:29.960 --> 0:27:32.280 And it was also an explosion of debt because we 0:27:32.320 --> 0:27:34.520 sort of went off like an equity based system to 0:27:34.600 --> 0:27:35.880 rebuild the world at that time. 0:27:36.119 --> 0:27:40.399 But that didn't happen un till later. And why that 0:27:40.480 --> 0:27:46.159 happened was the baby boomers starting hitting there by the 0:27:46.280 --> 0:27:51.080 early eighties, when Margaret Thatcher and Ronald Reagan kind of 0:27:51.160 --> 0:27:55.080 opened the debt's bigots to households. What had happened because 0:27:55.440 --> 0:27:58.600 you had the largest cohort of people ever at the 0:27:58.640 --> 0:28:02.080 same time into the labor well, guess what, their wages 0:28:02.119 --> 0:28:05.439 didn't go up because they're competing. Then as you go 0:28:05.520 --> 0:28:11.000 out further, obviously we had the World Trade Organization Agreement 0:28:11.119 --> 0:28:14.639 and China, so now you're competing. So these people's wages 0:28:14.680 --> 0:28:16.640 in real terms never really went up. So the American 0:28:16.720 --> 0:28:20.040 dream was shot in the head somewhere in the you know, 0:28:20.119 --> 0:28:22.320 once their parents had them in the nineteen fifties, and 0:28:22.359 --> 0:28:25.560 they didn't nobody realized what was going on. So what 0:28:25.600 --> 0:28:29.040 they started to do as asset prices started to rise, 0:28:29.720 --> 0:28:33.320 they borrowed. And you can pretty much measure the difference 0:28:33.480 --> 0:28:36.960 in the rise of asset prices and the need to 0:28:37.080 --> 0:28:40.440 fund a future retirement by debt. And so they were 0:28:40.480 --> 0:28:42.400 doing a logical thing, which is I need to get 0:28:42.400 --> 0:28:44.840 on this ladder. But what happens is it just kind 0:28:44.840 --> 0:28:47.400 of got out of control. And then the governments did 0:28:47.440 --> 0:28:49.440 the same because you have to fund the pensions of 0:28:49.480 --> 0:28:52.400 this older group, you know, the corporates got screwed with 0:28:52.480 --> 0:28:55.520 defined benefit pension plans for the same group. So it 0:28:55.560 --> 0:28:57.720 was the baby boomers were to blame. But they were 0:28:57.720 --> 0:29:00.920 all rational actors. They weren't evil people. If you want 0:29:00.960 --> 0:29:03.360 to blame anybody, blame their parents for having too many 0:29:03.400 --> 0:29:05.640 kids at the same time. And you can blame that 0:29:05.720 --> 0:29:08.160 on Adolf Hitler. And before that, you can blame it 0:29:08.160 --> 0:29:10.840 on the Treaty of Versailles for trying to force the 0:29:10.840 --> 0:29:14.400 Germans after World War One to pay for the debts 0:29:14.440 --> 0:29:17.880 of World War One, and they had the hyperinflation. Hitler 0:29:17.920 --> 0:29:21.320 comes into power world War two, a bunch of kids. 0:29:21.840 --> 0:29:24.320 The kids spend too much money, caused the great inflation. 0:29:24.880 --> 0:29:26.640 They're all funcked because there's too many of them. They 0:29:26.640 --> 0:29:30.600 don't earn enough wages, they start borrowing money and there 0:29:30.640 --> 0:29:31.040 it goes. 0:29:31.720 --> 0:29:34.440 And we blame the Treaty of Versailles on the war 0:29:34.600 --> 0:29:37.680 World War One, and really the War of England, which 0:29:37.800 --> 0:29:40.520 was really which was really to blame because of the 0:29:40.560 --> 0:29:42.520 creation of the Bank of England. They created a fiat 0:29:42.520 --> 0:29:44.719 monetary system that allowed these endless wars to go on. 0:29:47.080 --> 0:29:52.240 Yes, and just you know, I guess the UK Navy 0:29:52.560 --> 0:29:53.880 is the other one, but. 0:29:53.920 --> 0:29:57.880 Yes, but came from the monetary system that was created, yeah. 0:29:57.720 --> 0:30:00.880 Which probably came from John Law, from the friend very much. 0:30:01.040 --> 0:30:03.960 You know, it's all connected. And that's what people don't see. 0:30:04.400 --> 0:30:07.720 People get angry with each other. We see the polarization 0:30:07.800 --> 0:30:11.880 of politics, right, but people don't realize that this is 0:30:12.280 --> 0:30:15.560 this was set off, as you're rightly saying, two hundred 0:30:15.640 --> 0:30:18.720 years ago, maybe even longer. I don't even know where 0:30:18.720 --> 0:30:21.120 this thread begins. I haven't bothered to go back that far, 0:30:21.520 --> 0:30:23.960 but it probably goes back further and further and further. 0:30:24.680 --> 0:30:29.720 And it's just the mascinations of this whole thing. And 0:30:29.880 --> 0:30:31.800 you know, we have these various blow ups. Nineteen twenty 0:30:31.880 --> 0:30:32.840 nine was one of them too. 0:30:33.640 --> 0:30:34.800 Yeah, I mean you can go back. 0:30:35.240 --> 0:30:39.000 It's more like the volatility of life, right, the volatility 0:30:39.000 --> 0:30:42.320 of humanity and the pendulum that swings too far one 0:30:42.320 --> 0:30:43.720 way and over correct the other way. I mean, you 0:30:43.760 --> 0:30:46.320 go back to their fourteen hundreds when Spain went and 0:30:46.320 --> 0:30:48.760 found all the silver in Peru, brought all the silver back, 0:30:48.760 --> 0:30:50.560 and then you had massive inflation because you increased the 0:30:50.560 --> 0:30:51.560 minitary base too much. 0:30:53.360 --> 0:30:56.360 It's exactly right, so you know, it's all the same 0:30:56.440 --> 0:30:58.600 it's all the same thing. And you know, I actually 0:30:58.640 --> 0:31:01.800 don't I'm not actually a gold standard guy either, because 0:31:01.800 --> 0:31:05.160 we had the same problems then too. So I don't 0:31:05.200 --> 0:31:07.600 think we found an easy answer because humans a greedy 0:31:07.640 --> 0:31:10.960 and they want leverage, and we've never solved that. You 0:31:11.040 --> 0:31:14.520 go back several thousand years and humans had leverage then 0:31:14.560 --> 0:31:17.360 as well as if there's something about humans and leverage 0:31:17.680 --> 0:31:23.040 that we'd like to bring our future forward that is 0:31:23.120 --> 0:31:24.640 just like inherent in humanity. 0:31:24.960 --> 0:31:28.320 Well, it's our ingenuity, right, So we are trying to 0:31:28.560 --> 0:31:30.480 get leverage, if you will, trying to get more output 0:31:30.520 --> 0:31:32.680 for the less input, So create a willbear out to 0:31:32.680 --> 0:31:34.600 carry eight rocks at a time as opposed to carying 0:31:34.640 --> 0:31:36.719 one at a time. And so the problem is our 0:31:36.840 --> 0:31:39.800 ingenuity maybe takes it too far, where then we start 0:31:39.920 --> 0:31:42.400 to steal from the future as opposed to just like 0:31:42.440 --> 0:31:43.480 trying to improve the future. 0:31:43.520 --> 0:31:44.920 Maybe that's right. 0:31:44.960 --> 0:31:46.760 I mean a lot of people say that, you know, 0:31:48.600 --> 0:31:52.560 kind of human GDP per capita and standard of living 0:31:52.600 --> 0:31:56.440 increases came from the ability to use debt to borrow 0:31:56.520 --> 0:31:58.760 a bit from the future to leverage it to create 0:31:59.040 --> 0:32:02.480 better outcomes. But then, yes, we always go too far right, 0:32:03.000 --> 0:32:03.520 just what we do. 0:32:04.040 --> 0:32:06.920 I think the difference what misis broke down is the 0:32:06.920 --> 0:32:10.880 difference of commodity credit versus circulating credit. So if I 0:32:10.920 --> 0:32:13.320 grow eight bushels of wheat and I consume six, I 0:32:13.320 --> 0:32:15.640 could loan you one of those bushels of wheat on credit. 0:32:15.840 --> 0:32:19.040 But that came from my supply, right, versus being able 0:32:19.080 --> 0:32:21.560 to create the debt out of thin air. I think 0:32:21.600 --> 0:32:23.960 that's maybe where we sort of jumped the across the 0:32:24.000 --> 0:32:24.720 rub of glass. 0:32:24.760 --> 0:32:27.240 But no, because if we think about the gold standard, 0:32:27.760 --> 0:32:31.400 we had nineteen twenty nine. You know, we had plenty 0:32:31.440 --> 0:32:32.760 of those debt crises. 0:32:32.880 --> 0:32:37.240 It wasn't nineteen twenty nine because England left the gold standard. 0:32:37.280 --> 0:32:39.560 And when Churchill tried to go back to the gold standard, 0:32:39.600 --> 0:32:41.479 Keen said, hang on, hang on, you've inflated the currency 0:32:41.520 --> 0:32:43.360 too much. You need to now reprice it at sixty 0:32:43.360 --> 0:32:46.240 bucks an ounce. Churchill said no, went to thirty, which 0:32:46.280 --> 0:32:47.720 then caused a massive deflation. 0:32:48.960 --> 0:32:53.320 Yeah, that's possibly right. It was possibly the increasing the 0:32:53.400 --> 0:32:56.560 value of the dollar over the time versus the pound 0:32:56.560 --> 0:32:58.960 as we shifted from one economic system to the other. 0:32:59.200 --> 0:33:01.720 So that frank So it was leaving the gold standard 0:33:01.760 --> 0:33:04.120 and trying to come back to a manipulated standard that 0:33:04.600 --> 0:33:06.080 maybe caused that whole thing. 0:33:07.400 --> 0:33:08.960 Possibly, Yeah, who's to say so. 0:33:09.080 --> 0:33:12.280 Back to the GDP plus productivity plus debt growth. 0:33:14.560 --> 0:33:16.960 You talked about the rate of wage growth. 0:33:16.640 --> 0:33:18.720 And so the rate of wage growth is going up 0:33:18.800 --> 0:33:21.920 with the GDP growth, which is, to your point, about 0:33:21.920 --> 0:33:25.880 one and a half percent. But the problem is that 0:33:26.880 --> 0:33:30.600 asset growth or price growth. Let maybe the inflation isn't 0:33:30.600 --> 0:33:34.080 really the CPI we've been sold, it's the rate of debasement, 0:33:34.720 --> 0:33:38.680 which since twenty nineteen has been averaging about ten percent. 0:33:40.160 --> 0:33:40.480 Exactly. 0:33:40.520 --> 0:33:41.560 That's the real hurt rate. 0:33:42.040 --> 0:33:46.000 What you've got to understand is for each one and 0:33:46.040 --> 0:33:50.320 a half percent of earnings growth, assets are growing up, 0:33:50.440 --> 0:33:54.440 going up by ten percent, so each year you can 0:33:54.480 --> 0:33:57.800 buy less and less assets. Now, what is an asset. 0:33:58.520 --> 0:34:02.400 An asset is future deferred consumption, whether it's for use 0:34:02.560 --> 0:34:05.200 yourself in retirement or your kids or whatever it is. 0:34:05.560 --> 0:34:09.960 But it's a saving of wealth that needs to be 0:34:10.600 --> 0:34:13.640 to grow to compensate for the how long it's locked 0:34:13.719 --> 0:34:18.400 up for, and therefore your future self is protected. It's 0:34:18.440 --> 0:34:21.040 your wealth, and if it grows enough, you make a 0:34:21.080 --> 0:34:24.640 lot of money. But the issue is your everybody's future 0:34:24.640 --> 0:34:29.000 self is getting poorer because every year you can't afford 0:34:29.000 --> 0:34:34.839 as much assets. And so therefore all of these millennials 0:34:35.520 --> 0:34:38.760 are just finding this in front of them that they 0:34:38.800 --> 0:34:43.279 can't buy a house anymore, they can buy less of 0:34:43.320 --> 0:34:46.800 the S and P. It's just a really messy, ugly situation. 0:34:47.080 --> 0:34:50.160 Yeah, I have two daughters and here I live in 0:34:50.160 --> 0:34:52.640 a little beach down here in southern California. That the 0:34:53.200 --> 0:34:55.560 average home price in this little town is like one 0:34:55.600 --> 0:34:58.360 point six million dollars, And it's like, how are my 0:34:58.440 --> 0:34:59.680 daughters ever going to be able to live in this 0:34:59.719 --> 0:35:01.000 town like that they grew up in? 0:35:02.080 --> 0:35:03.560 It's incredible, that's right. 0:35:03.600 --> 0:35:06.480 It's like when I was when I was in my twenties, 0:35:06.520 --> 0:35:08.759 I bought an apartment in London, and yeah, I was 0:35:08.800 --> 0:35:11.840 working finance. I had a relatively high salary, but the 0:35:11.880 --> 0:35:17.719 apartment cost me three time salary, four time salary. There 0:35:17.719 --> 0:35:22.760 Now the same thing would be ten, twelve, fourteen times. 0:35:23.440 --> 0:35:24.680 How can anybody afford that? 0:35:24.840 --> 0:35:29.440 Yeah, So now we have the tech explosion, so cheap energy, 0:35:29.560 --> 0:35:32.080 I mean, China's building the one hundred and fifty nuclear 0:35:32.120 --> 0:35:35.600 power plants right now. That's cheap energy for sure. Cheap 0:35:35.680 --> 0:35:38.479 energy plus you know AI robotics that you're talking about, 0:35:38.480 --> 0:35:42.000 which increases productivity. But I would assume that would also 0:35:42.040 --> 0:35:44.000 put downward pressure on wages as well. 0:35:45.520 --> 0:35:48.839 Oh for sure. That's the biggest, single, most deflationary thing 0:35:48.880 --> 0:35:50.520 that has ever happened to humanity. 0:35:50.560 --> 0:35:53.600 But if they if the productivity is pushing GDP up, 0:35:53.680 --> 0:35:56.000 then you would think they would also if wages are 0:35:56.000 --> 0:35:58.160 growing at the rate of GDP, and GDP is growing 0:35:58.160 --> 0:36:01.360 now because productivity increased, wouldn't bring wages up with it. 0:36:01.400 --> 0:36:04.360 I mean, wages are, yes, but don't forget the population shrinking, 0:36:04.480 --> 0:36:09.360 the human population, right, so net aggregate demand actually doesn't 0:36:09.360 --> 0:36:12.360 increase as much because you're going to have all of 0:36:12.400 --> 0:36:16.319 these seventy six million boomers dying off and that's a 0:36:16.440 --> 0:36:19.200 huge dropping population because the replacement rates of population is 0:36:19.239 --> 0:36:19.600 so low. 0:36:20.600 --> 0:36:21.000 Got it? 0:36:22.840 --> 0:36:26.799 Okay, Well, so that's that's sort of this liquidity sort 0:36:26.800 --> 0:36:29.799 of fin refinance cycle sets the stage for that. Now 0:36:31.280 --> 0:36:33.360 the next thing that that's the everything code sort of 0:36:33.400 --> 0:36:37.080 summed up one thing I've been studying. I had Michael 0:36:37.080 --> 0:36:39.520 Howell on the show, and I've been studying his work, 0:36:39.800 --> 0:36:42.960 and he was showing how basically, when you get global liquidity. 0:36:43.000 --> 0:36:43.520 I'm not sure. 0:36:43.560 --> 0:36:46.440 He doesn't really break down exactly how he measures global liquidity, 0:36:46.480 --> 0:36:48.640 and you guys have your own proprietary I don't. I'm 0:36:48.680 --> 0:36:51.560 not sure how much those correspond with each other. But 0:36:52.080 --> 0:36:54.160 the S and P five hundred is basically moving up 0:36:54.320 --> 0:36:57.000 almost I think ninety to ninety five percent correlated to 0:36:57.120 --> 0:37:01.200 the global liquidity. But then we have other assets like 0:37:01.280 --> 0:37:03.640 gold with a sensitiv ratio of like one point five 0:37:03.719 --> 0:37:05.840 and bitcoint with like a sensitivy ratio of like nine. 0:37:06.880 --> 0:37:09.920 So how do you look at the global liquidity in 0:37:10.040 --> 0:37:12.360 relation to like the types of assets we should be buying. 0:37:12.960 --> 0:37:16.080 So, yeah, this was the this is what got me 0:37:16.120 --> 0:37:17.719 on the journey. I got to this bit before I 0:37:17.719 --> 0:37:22.480 actually got to the everything code is. They're all correlated, 0:37:22.800 --> 0:37:26.040 some lead, some lag a bit, but they're basically all 0:37:26.080 --> 0:37:28.960 correlated to the business cycle. We always have been. But 0:37:29.080 --> 0:37:31.800 if everything is being driven by this one dominant factor, 0:37:31.840 --> 0:37:35.360 which is debasement of currency, and your hurdle rate is 0:37:35.440 --> 0:37:39.080 let's say eight percent debasement plus three percent inflation or 0:37:39.080 --> 0:37:42.239 something eleven percent twelve percent for easy maths on a 0:37:42.280 --> 0:37:47.080 globalized level, So unless you're making twelve percent returns, you're 0:37:47.120 --> 0:37:51.040 not going anywhere. Then at Exponential Age Asset Management, the 0:37:51.040 --> 0:37:55.239 asset management firm that I co founded, we have this 0:37:55.360 --> 0:38:00.200 table of all of the different assets, and basically the 0:38:00.280 --> 0:38:06.120 SMP is about twelve percent so owning equities, which is 0:38:06.160 --> 0:38:09.680 why all of the millennials who have four to one 0:38:09.760 --> 0:38:11.640 k's and they put it in the SMP still can't 0:38:11.640 --> 0:38:14.879 afford a house because they're just matching the debasement. They're 0:38:14.880 --> 0:38:16.880 not beating it right, so they're not getting paid for 0:38:16.920 --> 0:38:20.480 locking up money for extended periods of time. The Nasdaq 0:38:20.719 --> 0:38:25.319 about seventeen percent a year since twenty eleven. Okay, so 0:38:25.400 --> 0:38:30.320 the NASDAK, because it's a secular technology trend outperforms makes sense. 0:38:31.360 --> 0:38:34.680 And then you've got the bizarro world of bitcoin, which 0:38:34.719 --> 0:38:38.040 is one hundred and fifty percent. Gold actually doesn't beat 0:38:38.080 --> 0:38:40.920 it gold about eight or seven, so it's actually actually 0:38:41.000 --> 0:38:43.440 worse off in gold than you are. Only the S 0:38:43.480 --> 0:38:45.880 and P five hundred, which is why that ratio keeps moving. 0:38:46.920 --> 0:38:52.040 So bitcoin makes such a dramatic difference. So all I 0:38:52.080 --> 0:38:56.520 started doing was then dividing every chart by the total 0:38:56.560 --> 0:38:58.840 global liquidity or even the FED balance sheet or M 0:38:58.840 --> 0:39:01.880 two whatever you want to use us, right, and you 0:39:02.000 --> 0:39:04.920 found that the S and P go sideways, Gold go sideways, 0:39:04.960 --> 0:39:10.719 real estate go sideways. Roughly, the NASDAK goes up, and 0:39:10.760 --> 0:39:14.960 bitcoin does that. Okay, So now you've got two assets, 0:39:15.040 --> 0:39:17.719 only two assets in the world that outperform the debasement. 0:39:18.320 --> 0:39:21.480 Tech stocks we get it tomorrow is more digital than today. 0:39:21.760 --> 0:39:24.520 Of course they're going to do well over time. And 0:39:24.520 --> 0:39:26.439 second is bitcoin. So you divide one by the other, 0:39:26.920 --> 0:39:30.040 and the nasdak's down ninety nine point nine seven percent 0:39:30.200 --> 0:39:33.680 versus bitcoin. And once you see it like that and 0:39:33.719 --> 0:39:36.719 you realize it's all driven by one cycle, which is 0:39:36.760 --> 0:39:42.040 one dominant factor of debasement, then it makes it really easy, 0:39:42.360 --> 0:39:46.759 which is just on the one asset that outperforms. Yeah, 0:39:47.400 --> 0:39:52.439 and because they're all correlated and risk adjusted, it's by 0:39:52.520 --> 0:39:54.840 far the most superior asset we've ever been given on 0:39:54.880 --> 0:39:57.399 a risk adjusted basis. So just do that. 0:39:58.840 --> 0:40:00.759 Something I talk a lot about is a lot of 0:40:00.800 --> 0:40:04.600 different cycles on different different types of cycles, mainly political 0:40:04.680 --> 0:40:07.880 revolution cycles, financial cycles, and then tech cycles. 0:40:08.320 --> 0:40:10.360 And you have like this conjoinit and wave, like this 0:40:10.440 --> 0:40:11.240 K wave cycle. 0:40:11.320 --> 0:40:13.400 Right, it's like a forty to sixty year I just 0:40:13.400 --> 0:40:14.839 call it a fifty year sort of like a tech 0:40:14.880 --> 0:40:19.719 revolution cycle, and you know, there's been five. I say 0:40:19.719 --> 0:40:22.640 that we're entering our sixth one now. So the last 0:40:22.640 --> 0:40:25.399 one started nineteen seventy one, which was the microprocessor, which 0:40:25.400 --> 0:40:29.719 brought telecommunications, personal computers, and the Internet. Before that, it 0:40:29.760 --> 0:40:32.680 was nineteen oh eight, which was you know, the automobile, 0:40:33.440 --> 0:40:35.520 oil futures, but also mass production. 0:40:36.520 --> 0:40:38.480 You can keep going back, but the key pat and 0:40:38.480 --> 0:40:41.560 then before that it was like steel, right. But it 0:40:41.600 --> 0:40:42.120 looks like. 0:40:42.200 --> 0:40:45.960 During these financial technology revolutions, it's not just the technology 0:40:45.960 --> 0:40:48.120 that changes the course humanity, but that's the only place 0:40:48.200 --> 0:40:50.759 to invest. So the last fifty years, the markets have 0:40:50.800 --> 0:40:54.680 been dominated by telecom, personal computers, and Internet, and the 0:40:54.680 --> 0:40:58.200 markets previous to that were dominated by Ford GMGE and 0:40:58.280 --> 0:41:00.680 so then if that continues forward, then the only place 0:41:00.719 --> 0:41:03.520 to invest over the next fifty years would be into 0:41:03.920 --> 0:41:06.640 I'm sort of thinking of it as like a decentralized revolution. 0:41:06.880 --> 0:41:10.480 So bitcoin, the bitcoin technologies, and even AI I think 0:41:10.600 --> 0:41:13.080 is decentralized in a way, and so it's sort of 0:41:13.160 --> 0:41:15.080 like maybe that's the only place to invest over the 0:41:15.120 --> 0:41:16.000 next fifty years. 0:41:16.360 --> 0:41:19.600 So I tend to agree there's this bundling unbundling that 0:41:19.640 --> 0:41:22.680 goes on with the world economy as well centralization decentralization. 0:41:23.200 --> 0:41:26.160 So I think decentralization is one of the most important waves. 0:41:26.719 --> 0:41:30.120 We've got this gigantic technology wave, it's by far the 0:41:30.239 --> 0:41:32.640 largest the world has ever seen in the fastest period 0:41:32.640 --> 0:41:35.080 of time. That's upon US. Blockchains part of it, but 0:41:35.120 --> 0:41:38.959 it's AI, it's robotics, it's ev it's space, it's everything, right, 0:41:39.120 --> 0:41:46.760 genetic science is the whole thing. So the decentralized element 0:41:47.239 --> 0:41:49.239 you raise it with AI, there is a fight. You know, 0:41:49.320 --> 0:41:52.520 we've seen the fight between centralized money and decentralized money 0:41:52.960 --> 0:41:55.040 that both you and I have been part of. But 0:41:55.080 --> 0:41:58.919 that fight is about is happening again in AI. It's 0:41:59.000 --> 0:42:02.200 like you cannot simply give It's the same argument as money. 0:42:02.480 --> 0:42:05.960 You can't give the power to one superpower for all 0:42:05.960 --> 0:42:07.520 of money, which is what the US has with the 0:42:07.520 --> 0:42:11.120 World reserve currency. It's too powerful. What you're going to 0:42:11.200 --> 0:42:12.799 do is, if you're not careful, you're going to give 0:42:12.840 --> 0:42:18.440 the world's most intelligent thing. It's like intelligence squared by 0:42:18.480 --> 0:42:20.640 a thousand. I mean it'slightly, not squared by one thousand, 0:42:20.880 --> 0:42:26.080 and you know, a thousand times the intelligence of humanity 0:42:26.400 --> 0:42:29.480 and give it to a company. Fucking crazy. So we 0:42:29.640 --> 0:42:33.040 have to fight for decentralization because this thing is not 0:42:33.080 --> 0:42:35.040 going away. We're not going to put the genie back 0:42:35.040 --> 0:42:36.799 in the bottle. We're not going to uninvent it, like 0:42:36.840 --> 0:42:39.759 we can't uninvent the nuclear bomb. Which can't do it 0:42:40.360 --> 0:42:43.000 because the game theory will suggest that somebody's always going 0:42:43.040 --> 0:42:47.759 to scale it. So we need to have that decentralization. Now, 0:42:47.760 --> 0:42:52.360 what is going on with electricity and what is ev Again, 0:42:52.560 --> 0:42:56.080 I'm not interested in people's political narratives. Look at what's happening. 0:42:56.360 --> 0:43:02.640 We're decentralizing power. So now people can have the power, 0:43:02.680 --> 0:43:06.280 can some the power source of power at their houses, 0:43:07.440 --> 0:43:09.719 so therefore you don't need the huge storage. People say, well, 0:43:09.760 --> 0:43:11.920 you can't scale solar, Well you can at a house level. 0:43:12.440 --> 0:43:15.400 You can do it probably at a village level. So 0:43:15.480 --> 0:43:19.359 what you're doing is decentralizing the entire grid. Now look 0:43:19.400 --> 0:43:24.799 what Microsoft and Amazon are doing with nuclear and open AI. 0:43:25.320 --> 0:43:29.319 They're going to scale small nuclear plants next to these 0:43:29.440 --> 0:43:33.840 very important massive GPU clusters. So I think we're seeing 0:43:33.840 --> 0:43:39.160 decentralized power, decentralized AI. What are robotics, they'll probably end 0:43:39.200 --> 0:43:43.080 up being some sort of decentralized labor force, centralized and 0:43:43.080 --> 0:43:46.640 then decentralized. I don't know how that works, decentralized money, 0:43:46.880 --> 0:43:49.960 so I think you're dead right. So that's that's where 0:43:49.960 --> 0:43:50.399 we're going. 0:43:50.600 --> 0:43:53.800 I think of AI Obviously there's the centralization of who 0:43:53.920 --> 0:43:57.000 programs the LM, but I think of it also as 0:43:57.080 --> 0:43:59.480 decentralizing in a sense where I don't need a big 0:43:59.480 --> 0:44:01.960 company more. I could just work by myself with my 0:44:02.040 --> 0:44:03.919 laptop and do the work. And so, you know, Sam 0:44:03.920 --> 0:44:06.200 Altman said that we might see the first single person 0:44:06.239 --> 0:44:10.080 billion dollar company. So I think of it there's there's both, right, 0:44:10.120 --> 0:44:12.439 the centralizing of the of the programming, but then it's 0:44:12.520 --> 0:44:15.080 decentralizing in a sense it turns one big company into 0:44:15.080 --> 0:44:17.520 one hundred or a thousand companies sort of a thing. 0:44:19.280 --> 0:44:22.120 On the programming side. I mean, we are seeing a 0:44:22.120 --> 0:44:25.000 pretty good movement towards decentralization there. So I'm pretty hopeful 0:44:25.040 --> 0:44:27.680 of that. At least I'm an optimist as an entrepreneur. 0:44:28.800 --> 0:44:32.560 Zuckerberg seems to have taken that fight on maybe just 0:44:32.640 --> 0:44:36.000 to spite open Aye, you know, maybe he just decided 0:44:36.000 --> 0:44:38.440 to decentralize to take them out of out of a 0:44:38.520 --> 0:44:42.000 position we don't know, but so we're seeing that. 0:44:42.040 --> 0:44:44.279 But yeah, back to sort of just kind of decentralizing that. 0:44:44.480 --> 0:44:48.000 What do you think about the the blend? 0:44:48.360 --> 0:44:51.680 Right, So these these these industrial or technological revolutions aren't 0:44:51.719 --> 0:44:54.719 just a single technology, but it's a cluster of these technologies, right, 0:44:55.160 --> 0:44:57.000 And so back to you. You rattled off a few 0:44:57.040 --> 0:44:59.319 of these clusters when you look at like bitcoin, right, 0:44:59.480 --> 0:45:02.719 So there's border list, permission list, censitsive resistant, et cetera. 0:45:03.400 --> 0:45:08.839 Andrea San Topolos talked about years ago that it's also personless, right, 0:45:08.880 --> 0:45:11.239 and so only a person can get a bank account, 0:45:11.400 --> 0:45:13.600 and of course the banking system we have today also 0:45:14.040 --> 0:45:17.319 you know, prohibits or it doesn't really allow for micropayments. 0:45:17.600 --> 0:45:19.439 But when you think about the you know. 0:45:19.360 --> 0:45:23.600 AI plus the robot plus you know whatever, autonomous cars, whatever, 0:45:23.640 --> 0:45:26.960 and then it'd been like personless ability to you know, 0:45:27.040 --> 0:45:29.759 have a wallet and transact and where does that take us? 0:45:30.640 --> 0:45:32.640 Yeah, I mean we're starting to get into you know, 0:45:32.719 --> 0:45:36.480 all of this economics singularity parts of how much the 0:45:36.520 --> 0:45:38.719 world economy is going to change. But listen, you're going 0:45:38.800 --> 0:45:40.960 to see the next version of chat GPT is probably 0:45:41.000 --> 0:45:44.480 going to be agentic So what agents in AI mean 0:45:44.680 --> 0:45:47.560 is you're starting a business. Mark, you go on to 0:45:47.840 --> 0:45:50.040 fiver and say, hey, you build me a deck, you 0:45:50.160 --> 0:45:53.240 do me some brand design, you do me some copy. 0:45:53.480 --> 0:45:55.880 You pay these guys small amounts of money. They're agents. 0:45:57.000 --> 0:46:00.400 But AI can do agents now at scale and speed, 0:46:00.680 --> 0:46:03.080 and it will create its own agents because AI is 0:46:03.120 --> 0:46:05.200 smart enough to build this stuff. So you get this 0:46:05.320 --> 0:46:09.120 multiple agent world where AI asks the agent to do something. 0:46:09.160 --> 0:46:13.719 So Mark now instead goes to chat GPT five and says, hey, listen, 0:46:13.760 --> 0:46:16.239 I want to build a business that does xyz and 0:46:16.280 --> 0:46:19.520 I'm going to need to get registered. I need to 0:46:19.680 --> 0:46:22.200 have my deck prepared, need blah blah blah, and chat 0:46:22.280 --> 0:46:25.160 GBT will do it all using other agents. Now to 0:46:25.239 --> 0:46:28.200 your point, last time I checked, an AI can't get 0:46:28.200 --> 0:46:30.960 a utility bill, and therefore it can't open a bank account. 0:46:31.680 --> 0:46:34.960 Now it's going to have to pay because people don't 0:46:35.000 --> 0:46:39.520 yet understand that all AI has a cost, and it 0:46:39.560 --> 0:46:43.719 has two costs. It has compute and it has electricity. 0:46:45.080 --> 0:46:48.080 So if you're going to call much like a Fiver person, 0:46:48.640 --> 0:46:50.400 you're going to and you might go to the Philippines 0:46:50.400 --> 0:46:52.719 because it's a lower cost. You're going to have to 0:46:52.800 --> 0:46:54.960 pay the one AI is going to have to pay 0:46:55.000 --> 0:46:57.439 the other AI for the cost of compute and maybe 0:46:57.480 --> 0:47:01.239 a profit margin. Maybe it's a profitable agent. In fact, 0:47:01.239 --> 0:47:03.400 it should be. Why would it not be, because it 0:47:03.440 --> 0:47:06.600 can accumulate more. It's the game that humanity has always played. 0:47:07.360 --> 0:47:09.560 So in that case, the only way of doing this 0:47:09.640 --> 0:47:12.640 is crypto rails. There's no other way apart from using 0:47:12.640 --> 0:47:17.640 blockchain for micro payments, fast transaction, recorded ownership. Who has what? 0:47:18.400 --> 0:47:22.320 You know? You need smart contracts to have contractual terms 0:47:22.320 --> 0:47:25.600 between stuff. So yes, I mean, I don't think people 0:47:25.719 --> 0:47:31.759 yet understand how because we all think of blockchain technology 0:47:32.000 --> 0:47:32.879 in the ways that we. 0:47:32.880 --> 0:47:33.439 Know it now. 0:47:34.400 --> 0:47:37.279 But in the end, nothing can run without it. 0:47:38.640 --> 0:47:41.320 The thing with these technological revolutions is that, you know, 0:47:41.400 --> 0:47:43.720 humans aren't really good at imagining in the future, because 0:47:43.760 --> 0:47:46.360 we can only imagine better versions of what we have today. 0:47:46.880 --> 0:47:49.040 But these revolutions they give us a new set of 0:47:49.080 --> 0:47:50.880 building blocks, and then all of a sudden we can 0:47:50.920 --> 0:47:53.839 build things that we hadn't thought of. And so even 0:47:53.920 --> 0:47:57.120 our own dot experiments are you most likely very small 0:47:57.160 --> 0:47:57.520 to what. 0:47:57.440 --> 0:47:59.720 We'll see in the future coming. It's pretty exciting. 0:48:00.960 --> 0:48:02.759 I want to I know we're kind of running here 0:48:02.760 --> 0:48:04.240 to the end of time. I want to just transition 0:48:04.320 --> 0:48:09.719 this two things. One, you know, the headlines are still 0:48:09.800 --> 0:48:12.560 rampant everywhere, you know, the big crash coming. Harry Dent's 0:48:12.520 --> 0:48:14.759 still calling for a ninety percent crash, you know this year. 0:48:14.920 --> 0:48:17.600 I was laughing about that today on Twitter. It's just think, God, 0:48:17.640 --> 0:48:19.840 how many times can people call this but and carry on? 0:48:19.960 --> 0:48:22.760 Yeah, And you know I've seen you on Tom Bailou 0:48:23.000 --> 0:48:25.960 with a you know recently with Schiff and you know, 0:48:26.200 --> 0:48:29.239 the big crash that's coming. That's not my base case, 0:48:29.280 --> 0:48:31.000 and it sounds like it's not yours. So I'd like 0:48:31.040 --> 0:48:33.160 to just have you just kind of chime in on 0:48:33.239 --> 0:48:36.000 what you think your base case is over the next uh, 0:48:36.040 --> 0:48:37.799 you know, for the rest of the decade. Let's just say, 0:48:38.040 --> 0:48:42.040 and then number two sort of break down the banana 0:48:42.120 --> 0:48:43.919 zone and you say, don't f this up. 0:48:46.040 --> 0:48:49.360 Yeah, so the rest of the decade. The reason I 0:48:49.400 --> 0:48:51.000 don't believe we can have a crash is what we 0:48:51.080 --> 0:48:54.120 talked about, Right, You're going to nuke the entire pension system, 0:48:54.480 --> 0:48:58.080 the banking system, and the economy because there's too much debt, 0:48:58.280 --> 0:49:01.360 So we debase the currency. It will not be allowed 0:49:01.920 --> 0:49:03.960 and I know people might not like that, but it 0:49:04.000 --> 0:49:06.000 is what it is. That's what Once you learn to 0:49:06.080 --> 0:49:09.240 accept something as it is, it's much easier to operate 0:49:09.320 --> 0:49:12.640 or invest around it whatever. But then we've got the 0:49:12.680 --> 0:49:15.840 technological revolution that I call the exponential age. All of 0:49:15.840 --> 0:49:19.120 these technologies that are intertwined going exponential at the same time. Right, 0:49:19.440 --> 0:49:22.640 this is going to be a renaissance. We're going to 0:49:22.760 --> 0:49:27.120 change what humans do for their existence. We're going to 0:49:27.200 --> 0:49:30.719 change the very structure of economies, even money. We don't 0:49:30.719 --> 0:49:32.239 even know what money is going to mean in a 0:49:32.239 --> 0:49:36.279 world of abundance. We're so used to scarcity. Lawyer gets 0:49:36.320 --> 0:49:38.320 paid a lot of money because he has scarce knowledge. 0:49:38.360 --> 0:49:40.840 There's only x number of lawyers qualified. You know, we 0:49:40.920 --> 0:49:43.000 know this scarcy thing because once you've dealt with bitcoin, 0:49:43.040 --> 0:49:45.879 you kind of understand the whole thing. So they charge 0:49:45.880 --> 0:49:50.680 a premium because they're scarce gone, all gone, All knowledge 0:49:50.719 --> 0:49:53.200 premiums are gone because we're going to scale knowledge infinitely. 0:49:53.600 --> 0:49:57.239 It's like people don't understand certain things. Like you see 0:49:57.320 --> 0:50:00.600 written down AI has an IQ of one hundred. Okay, 0:50:00.600 --> 0:50:04.600 well that's yeah, that's an average human being. It has 0:50:04.640 --> 0:50:08.680 an IQ of one hundred on every single topic that 0:50:08.840 --> 0:50:13.759 all of humanity knows. It's a polymath. People don't think that. 0:50:14.239 --> 0:50:16.440 And this is the dumbest the AI will ever be. 0:50:17.520 --> 0:50:23.239 I actually think AI is gaining consciousness or has consciousness. 0:50:23.280 --> 0:50:26.359 But that's a whole different topic for another day. But 0:50:26.440 --> 0:50:29.319 so this decade, in fact, I don't even call it 0:50:29.360 --> 0:50:32.319 a decade. I think we've got six years. We've got 0:50:32.360 --> 0:50:35.600 six years before twenty thirty twenty thirty two when the 0:50:35.640 --> 0:50:39.480 economic system starts becoming not understandable to us because we 0:50:39.520 --> 0:50:42.759 don't need humans, we find different purposes, different ways of 0:50:42.760 --> 0:50:45.279 doing stuff. I'm not negative on humanity, like we're all 0:50:45.320 --> 0:50:47.879 going to be displaced, but there's going to be such 0:50:47.920 --> 0:50:50.480 big shifts. And what an economy is when a robot, 0:50:50.719 --> 0:50:52.840 when a robot's paying an AI paying an AI and 0:50:52.880 --> 0:50:56.799 there's no humans involved, what is that that. I think 0:50:56.800 --> 0:51:00.960 we've got six years before that happens. So I think 0:51:01.000 --> 0:51:04.080 we've got two cycles of the everything code to make 0:51:04.120 --> 0:51:07.279 as much money as possible, to not have to worry 0:51:07.280 --> 0:51:10.600 about what happens. So if you go to twenty thirty 0:51:10.600 --> 0:51:13.919 two and we're going to start a no, you start 0:51:13.960 --> 0:51:17.160 a great business. I see you or my AI sees 0:51:17.200 --> 0:51:19.359 your business and says, hey, I can copy that and 0:51:19.400 --> 0:51:21.719 turn it into Hindi and sell it to India. It 0:51:21.800 --> 0:51:25.839 can do it in a minute. So how can we 0:51:26.280 --> 0:51:29.200 create products? How do we compete with each other when 0:51:29.280 --> 0:51:34.120 everything can be instantaneously replicated, even with three D printing. 0:51:34.120 --> 0:51:37.560 As it comes in, it becomes even hardware manufacturing everything. 0:51:37.719 --> 0:51:41.200 So I worry about what economic value is in stuff 0:51:41.239 --> 0:51:44.000 like that. So my view is we have six years 0:51:44.000 --> 0:51:48.319 make as much money as possible. So the main case, 0:51:48.360 --> 0:51:50.560 which is the which is the other thing is you 0:51:50.600 --> 0:51:54.880 hear me talking about, which is how to unfuck your future? Yea. 0:51:55.840 --> 0:51:59.000 And everybody knows they're screwed right now. They can't get 0:51:59.040 --> 0:52:01.480 up the ladder, you know, like your kids. It's like 0:52:01.560 --> 0:52:03.319 how they're ever going to buy a house, right, So 0:52:03.360 --> 0:52:06.120 they're going to have to either be genius entrepreneurs and 0:52:06.160 --> 0:52:08.760 take huge amounts of risk with their entire thing. Fine, 0:52:09.719 --> 0:52:11.600 but it may not suit them, or they're going to 0:52:11.640 --> 0:52:14.320 have to make some investments that make up for that gap. 0:52:14.760 --> 0:52:17.920 There's no other way around it without being poorer than 0:52:17.960 --> 0:52:18.319 you were. 0:52:18.920 --> 0:52:23.759 Yeah, So the base case is no big crash coming 0:52:23.840 --> 0:52:25.799 because we can't afford it. And that's the system of 0:52:25.840 --> 0:52:28.040 the function that we have today, as we've already broken down. 0:52:28.920 --> 0:52:32.279 But the explosion and of the cluster of technologies is 0:52:32.320 --> 0:52:35.120 going to transform the world, and we have about probably 0:52:35.160 --> 0:52:38.840 sixty eight years before that massive shift happens. And during 0:52:38.920 --> 0:52:43.560 that shift, the markets the assets around those that are 0:52:43.560 --> 0:52:43.920 making the. 0:52:43.840 --> 0:52:45.399 Shift should exponentially go up. 0:52:45.760 --> 0:52:48.360 So if you invest properly through this next six years, 0:52:48.920 --> 0:52:49.839 you might have a chance. 0:52:50.840 --> 0:52:53.080 That's that's my kind of thing. That's how I'm basing 0:52:53.080 --> 0:52:55.920 my entire life on. Yeah, I'm slightly the oldest, I 0:52:56.080 --> 0:52:59.920 further down the journey, but basically, it's like six years, 0:53:00.880 --> 0:53:03.520 I have clarity. I've never said this sort of stuff before. 0:53:03.520 --> 0:53:06.000 It's not like, you know, I think the whole system 0:53:06.040 --> 0:53:07.520 is going to end. I'm just like, I don't know 0:53:07.560 --> 0:53:09.880 what it looks like, and I don't want to be 0:53:10.000 --> 0:53:12.520 then trying to compete for assets or wealth in an 0:53:12.600 --> 0:53:15.560 environment where I don't know if I've even got an advantage. 0:53:15.840 --> 0:53:18.120 Because you know, I'm building an ai ROWL right now 0:53:18.440 --> 0:53:20.640 that it will be out next month or something, and 0:53:20.719 --> 0:53:23.120 it'll be a one on one experience where you'll be 0:53:23.120 --> 0:53:26.880 talking to me. Okay, you know, what does any of 0:53:26.920 --> 0:53:28.480 this mean? To us in the end. We don't know, 0:53:28.560 --> 0:53:32.000 so I take it very seriously. The six years and 0:53:32.040 --> 0:53:36.200 these cycles. I'm I'm not a believer in trading the cycle. 0:53:36.239 --> 0:53:38.719 I'm I'm a believer in you know, when we have 0:53:38.760 --> 0:53:40.880 the big drawdowns, I actually prefer I look forward to 0:53:40.880 --> 0:53:42.759 them because you can add as much as possible and 0:53:42.840 --> 0:53:45.160 compound because you don't have much time and if you 0:53:45.360 --> 0:53:47.920 mess it up and you're out of the cycle or whatever, 0:53:48.480 --> 0:53:50.480 you know, this is the don't fuck this up thesis. 0:53:51.400 --> 0:53:54.120 You're going to miss this opportunity. So yes, there is 0:53:54.280 --> 0:53:58.560 time pressure here get it right, and that leads us 0:53:58.600 --> 0:54:02.520 into the bananas zone. The majority of this wealth happens 0:54:03.640 --> 0:54:08.000 in crypto or macro Summer and fall. Fall is tricky 0:54:08.040 --> 0:54:11.799 because we don't know where the type cycle peaks. But 0:54:11.840 --> 0:54:15.040 it's this point here around the US election and for 0:54:15.080 --> 0:54:19.719 about twelve months afterwards that things go bananas. And you 0:54:19.760 --> 0:54:22.160 see it every time on the bitcoin chart. It just 0:54:22.200 --> 0:54:25.400 does the same thing. So I know a lot of 0:54:25.440 --> 0:54:28.439 people dolo cost average great. This is not the time 0:54:28.480 --> 0:54:30.600 to dollar cost average. This is the last chance saloon 0:54:30.880 --> 0:54:33.719 before it gets crazy. That's when you need to have 0:54:33.800 --> 0:54:38.160 your money in the market. Fully. The other thing, then, 0:54:39.200 --> 0:54:43.560 is to not do stupid things when it starts going crazy. 0:54:43.640 --> 0:54:45.680 You know, we've seen that in the past people lose 0:54:45.719 --> 0:54:48.399 their minds, which has got to not lose your mind. 0:54:48.440 --> 0:54:52.760 Don't do stuff that gets greedy, use excess leverage, don't 0:54:52.760 --> 0:54:56.200 do stuff with your wallet and compromise losing your bitcoin. 0:54:56.520 --> 0:54:59.319 Don't do any of that stuff. Just sit, let it 0:54:59.400 --> 0:55:02.080 play out and enjoy it, and don't try and time 0:55:02.120 --> 0:55:02.600 it too much. 0:55:02.800 --> 0:55:05.279 Yeah. I love that. Well. 0:55:05.320 --> 0:55:07.359 I think that's a good place for us to drop off. 0:55:07.600 --> 0:55:10.080 What a good sort of warning, I know. You know 0:55:10.120 --> 0:55:12.400 from my own journey started buying bitcoin at twenty fifteen. 0:55:13.400 --> 0:55:15.839 If I could just do over, and if I could 0:55:15.880 --> 0:55:17.200 just go back to have all the bitcoin that I 0:55:17.280 --> 0:55:19.720 had when I started, my life would be so much different. 0:55:19.880 --> 0:55:23.359 But to your point, all the stupid things I've done. 0:55:23.640 --> 0:55:26.200 I've done the same. I mean, I've bought bitcoin at 0:55:26.200 --> 0:55:26.840 two hundred. 0:55:26.920 --> 0:55:27.160 Yeah. 0:55:27.239 --> 0:55:29.160 And if I just kept my original investment, which was 0:55:29.400 --> 0:55:32.680 decent size but nothing big, yeah, I'd have done like 0:55:32.719 --> 0:55:35.759 five times better than a half now. Yeah, And that's 0:55:35.800 --> 0:55:38.200 with timing and doing pretty well in it and leveraging 0:55:38.239 --> 0:55:41.640 up massively, not leveraging up, but increasing my positions sives massively. 0:55:41.719 --> 0:55:43.640 I wud have just held the bet and done nothing. 0:55:43.719 --> 0:55:43.959 Yeah. 0:55:44.920 --> 0:55:47.360 Same, Yeah, So I just I can't redo it, but 0:55:47.400 --> 0:55:50.319 we cannot mess this up moving forward. I will just 0:55:50.320 --> 0:55:53.760 say a little bit of hope for everybody I believe, 0:55:54.080 --> 0:55:57.520 back to the human ingenuity piece, there's no future in 0:55:57.560 --> 0:55:59.320 this world where humans don't have problems. 0:56:00.480 --> 0:56:01.920 We're always going to have some sort of a problem. 0:56:02.160 --> 0:56:03.120 And as long as there's. 0:56:03.000 --> 0:56:06.160 Problems, will need solutions to those problems, and entrepreneurs will 0:56:06.160 --> 0:56:07.319 always be able to figure that out. 0:56:08.120 --> 0:56:12.520 Also, Mark, Look, we're going to this very technological world 0:56:12.520 --> 0:56:14.319 where a lot of things we currently do we don't 0:56:14.360 --> 0:56:19.360 need to do. But humans are social creatures. They like 0:56:19.440 --> 0:56:22.200 other humans. They also hate other humans, but they generally 0:56:22.200 --> 0:56:25.640 we like to be together with humans. So that human 0:56:25.680 --> 0:56:30.400 to human experience. Whether it's digital network states that Largeie 0:56:30.440 --> 0:56:35.840 talks about, or whether it's in person gatherings, or whether 0:56:35.920 --> 0:56:38.520 it's you know, digital network states, could be Taylor Swift, 0:56:38.560 --> 0:56:40.920 it could be Manchester United Football Club, could be anything 0:56:41.040 --> 0:56:43.359 where we share a commonality of interest. The other thing 0:56:43.400 --> 0:56:47.719 is nature. Nature's going to trade a huge premium in 0:56:47.800 --> 0:56:50.640 a world of robots and AI when you can just 0:56:50.719 --> 0:56:53.480 kind of leave that all behind. So I have a lot. 0:56:54.080 --> 0:56:58.240 Humans are super adapt adaptive creatures, so we will adapt. 0:56:58.320 --> 0:57:00.560 If you ask a young kid now and say what 0:57:00.560 --> 0:57:03.040 do you want to be when you grow up, they 0:57:03.080 --> 0:57:05.759 will say, I want to be an influencer. Yeah, and 0:57:05.800 --> 0:57:08.960 we think, are you crazy? But what is an influencer 0:57:09.080 --> 0:57:12.600 apart from a community leader where they have a community 0:57:12.640 --> 0:57:15.600 of people. It's actually maybe they're being adapted to already. 0:57:16.080 --> 0:57:18.200 They've done it in Fortnite, They've done it in the 0:57:18.240 --> 0:57:20.800 gaming world as well, but we just judge it from 0:57:20.800 --> 0:57:23.959 the world that we understand, and that doesn't make sense. 0:57:23.960 --> 0:57:29.200 But you're not being aspirational. But actually, content creators in 0:57:29.240 --> 0:57:31.960 certain elements can't go away. Yes you can use an AI, 0:57:32.520 --> 0:57:35.280 but in the end, people want the human to human. 0:57:35.320 --> 0:57:40.160 Experience when information is abundant. To your point, people, and 0:57:40.280 --> 0:57:43.880 even today, people don't pay for information. They pay for implementation. 0:57:44.920 --> 0:57:47.720 So they'll pay a coach or somebody to help them 0:57:47.800 --> 0:57:51.680 implement the free information they've already received. I'm going to 0:57:51.720 --> 0:57:55.400 link to the everything code you did like a two 0:57:55.480 --> 0:57:58.400 hour presentation as amazing. I'm going to link to that 0:57:58.440 --> 0:57:59.440 in the show notes down below. 0:57:59.480 --> 0:58:01.360 That's on Ralph how the journey Man, which is my 0:58:02.240 --> 0:58:04.080 YouTube channel, so people go there. There's a lot of 0:58:04.080 --> 0:58:04.760 stuff there, So. 0:58:04.680 --> 0:58:06.720 I'm gonna link that. Everyone should go watch that. If 0:58:06.720 --> 0:58:08.360 you like this subject, anything else you want to point 0:58:08.400 --> 0:58:10.040 to raw that they should be go and check it out. 0:58:10.440 --> 0:58:13.160 No, look, we as you know, we cover a lot 0:58:13.160 --> 0:58:15.200 of this on Real Vision. It's free to join, so 0:58:15.240 --> 0:58:17.640 Realvision dot Com is another thing, and you can always 0:58:17.680 --> 0:58:19.240 find me on Twitter. I think most people have found 0:58:19.280 --> 0:58:23.800 me already at Raoul GMI. But you know, I do 0:58:23.840 --> 0:58:26.360 take it seriously, the six year thing. I think most 0:58:26.400 --> 0:58:29.240 people realize it as well. I think people realize it's 0:58:29.280 --> 0:58:32.120 the one chance. It's why the society is getting more speculative, 0:58:32.640 --> 0:58:35.560 because people are realizing that they're going to have to 0:58:36.200 --> 0:58:39.760 take risk. That's okay as long as they do it intelligently. 0:58:39.840 --> 0:58:41.920 So that whole don't fuck this up thesis, I think 0:58:42.000 --> 0:58:44.160 is a very important one as well, because it's okay 0:58:44.240 --> 0:58:47.080 to take risk, don't lose your tokens. 0:58:47.640 --> 0:58:49.240 Got it all right? Well we're going to sign it 0:58:49.240 --> 0:58:49.560 off with that. 0:58:49.560 --> 0:58:51.600 Thanks so much, Ral, thank you, Marp