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Speaker 1: Everybody can feel that things have changed and are changing rapidly,

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Speaker 1: especially after the COVID lockdowns. They have the sense that

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Speaker 1: something is not the same as it used to be.

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Speaker 1: The FIT is trying to fight inflation, yet it's not

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Speaker 1: really working. It's coming down the inflation rate. And really

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Speaker 1: what it all has to do with, and it all

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Speaker 1: comes down to, is the manipulation of money.

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Speaker 2: My bond is paying me five and it's costing me three, Like,

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Speaker 2: all right, man, that's two percent spread, Like I'm doing

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Speaker 2: pretty good. Or if the S and P five hundred

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Speaker 2: is making me eight or ten percent and inflation is

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Speaker 2: at three or four, like I'm doing pretty good.

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Speaker 3: Right.

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Speaker 1: But if you're a consumer, go home and do the

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Speaker 1: work and add up all your expenses and compare them

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Speaker 1: to last year and the year before and the year

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Speaker 1: before that. It's a lot of work. It's easier just

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Speaker 1: to listen to what the pundits tell you.

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Speaker 2: And then if we think about the dollar, we also

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Speaker 2: have to think about it and measured against other things.

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Speaker 2: So if I'm looking at only in dollars, like my

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Speaker 2: house is worth, you know it's three hundred and eighty

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Speaker 2: thousand dollars. A couple years ago. Now it's four hundred

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Speaker 2: and eighty thousand for like a media in US home.

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Speaker 2: But it went down in oil barrels per oil, or

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Speaker 2: it went down in ounces per ounces of gold, and

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Speaker 2: it went down in bitcoin terms as well. And if

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Speaker 2: you think about it again, back to the Bology's point,

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Speaker 2: measured in bitcoin, we are seeing hyper inflation.

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Speaker 1: And a dollar bitcoin is seen as a risk asset.

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Speaker 1: We talked before about how we're kind of in a

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Speaker 1: gambler's economy like there, we have a lot of people

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Speaker 1: out there we just feel like they're getting behind and

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Speaker 1: they're gambling to try to catch back up or get

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Speaker 1: ahead and taking a lot of risk. And so bitcoin

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Speaker 1: is seen that way in a lot of ways. And

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Speaker 1: eyes are the mean coins, and we see the mean

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Speaker 1: coins take off. It's because people are just risking money.

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Speaker 1: They're like, come on, I hope that I can I

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Speaker 1: can catch up the inflation.

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Speaker 2: All right, So James, welcome back to the show.

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Speaker 1: By the way, thank you for having me.

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Speaker 2: Glad we can do this in person. I love doing

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Speaker 2: it in person, so you know for the audience. You're

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Speaker 2: my partner. We have the Bitcoin Opportunity Fund. You're a

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Speaker 2: hedge fun guy, you write the newsletter The Informationist, which

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Speaker 2: is amazing information on the macro space. But you're sort

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Speaker 2: of known, or maybe in my mind, you talk a

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Speaker 2: lot about like the debt doom loop that we're in.

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Speaker 2: Sort of how not just the US government and the

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Speaker 2: Federal Reserve, but really all the nations and central banks

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Speaker 2: of the world are sort of in this proverbial rock

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Speaker 2: in the hard place that keeps getting closer and closer

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Speaker 2: and closer, right, And so we're in this like debt

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Speaker 2: doom loop. I want to frame that up and what

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Speaker 2: does that mean? How does that progress? Like over what

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Speaker 2: time frame? But then I want to bring it down

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Speaker 2: into like more practical terms, So like if I'm a

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Speaker 2: business owner, like what does that mean to me? Right,

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Speaker 2: if I'm an if I'm trying to manage money for

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Speaker 2: my family or like make sure I don't go broke,

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Speaker 2: what does that mean to me? So then like how

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Speaker 2: do we think about measuring that looking at cycles and

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Speaker 2: what do we do about that? So let's start up

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Speaker 2: with the frame up the debt doom loop for us?

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Speaker 1: Sure, Well, first of all, thank you for having me again, Mark.

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Speaker 3: Always good to be here.

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Speaker 1: I'm on vacation and even my son and the audience.

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Speaker 2: Yeah, we got we have someone in the audience, all right, But.

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Speaker 1: It's always good to have people on vacation in your hometown. Yeah,

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Speaker 1: so I know that coming from Vegas. But the debt

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Speaker 1: doom lop, well, you know, I mean, I do talk

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Speaker 1: about this a lot, and the reason is because everybody

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Speaker 1: can feel that things have changed and are changing rapidly,

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Speaker 1: especially after the COVID lockdowns and uh, and they they

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Speaker 1: have the sense that something is not the same as

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Speaker 1: it used to be. And they you've seen the price

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Speaker 1: of skyrocket, You've seen homes skyrocket and price and then

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Speaker 1: get really I liquid, So they're not moving. Interest rates

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Speaker 1: are up. The FED is trying to fight inflation, yet

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Speaker 1: it's not really working. It's coming down the inflation rate,

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Speaker 1: meaning prices are still going up and and it's confusing

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Speaker 1: a lot of people.

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Speaker 3: And really what it all has to do with, and it.

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Speaker 1: All comes down to, which you and I talk about extensively,

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Speaker 1: is the manipulation of money. And that manipulation of money

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Speaker 1: has been necessary because we've gotten ourselves in this situation

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Speaker 1: where and this has all developed central banks, like we're

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Speaker 1: talking about, they've all gotten themselves in a situation where

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Speaker 1: they're borrowing and borrowing and borrowing so much money that

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Speaker 1: they wind up having to manipulate their interest rates and

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Speaker 1: their currencies in order.

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Speaker 3: To keep up with that borrowing.

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Speaker 1: And just before the show, you were talking about how

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Speaker 1: you know, debt is kind of stealing from the future,

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Speaker 1: and I think about it much in a similar way.

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Speaker 1: I think of it more of like it's borrowing from

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Speaker 1: the future and you can use it properly. And you know,

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Speaker 1: so if you're an individual and you want to have

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Speaker 1: a business, but you don't, you know, you're kind of

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Speaker 1: stuck in your job. You don't really have enough money.

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Speaker 1: Maybe you've got you want to start a restaurant. It's

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Speaker 1: going to cost you one hundred thousand dollars to start it,

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Speaker 1: but you only have ten thousand dollars in the bank.

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Speaker 1: And you're like, well, I can continue to work and

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Speaker 1: grind away and keep putting money away, or I can

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Speaker 1: use that ten thousand dollars as a leverage for a

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Speaker 1: loan that I can then pull that money into the now,

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Speaker 1: borrow it from a bank, and start the business right away.

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Speaker 1: Start buying the materials I need, and the cookware and

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Speaker 1: and the ovens, and all and hiring people, start paying salaries,

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Speaker 1: and then you open up the restaurant and suddenly you're

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Speaker 1: generating income right away, you're generating productivity. Well, that's borrowing

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Speaker 1: from the future. And if you do it responsibly.

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Speaker 3: Restaurants.

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Speaker 1: I use this example because it's really easy for people

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Speaker 1: to visualize not maybe not the best.

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Speaker 2: Yeah, don't do the restaurant, but don't do the restaurant.

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Speaker 1: But but if you do it responsibly, that's great. You

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Speaker 1: you you've built a business, you're producing, You're you're adding

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Speaker 1: productivity into the into the national GDP. Right, but we've

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Speaker 1: gotten ourselves in a situation now. Mark that the entire nation,

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Speaker 1: all of the western nations and developed nations, they're all

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Speaker 1: using debt ad nauseum to paper up inefficiencies, whether it's

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Speaker 1: it's energy and efficiencies or it's just capital and efficiencies,

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Speaker 1: and they're using that borrowing to close that gap. So,

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Speaker 1: for instance, right now, are our federal government is borrowing

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Speaker 1: just about two trillion dollars a year, meaning they're above

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Speaker 1: and beyond what they have to borrow to pay down

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Speaker 1: past debt. So we're running two trillion dollar deficits at

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Speaker 1: a time that we're not even in a recession. So

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Speaker 1: the irresponsibility that's coming out of Washington is monumental. It's

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Speaker 1: absolutely incredible, and it's it's mind numbing for people like

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Speaker 1: you and me who have been in business, running businesses,

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Speaker 1: and you look at that, it's just it's not only

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Speaker 1: is it irresponsible, it's it's putting us on.

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Speaker 3: A path that's irreversible.

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Speaker 1: And so why is that, Well, because we're running these

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Speaker 1: deficits at a time that we're not even officially in

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Speaker 1: World War arguable, but we're not in hot conflict right

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Speaker 1: now somewhere, and so we're borrowing those two trillion dollars

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Speaker 1: from who.

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Speaker 3: So we just have to keep borrowing and borrowing and

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Speaker 3: borrowing and add to that national debt.

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Speaker 1: And so what happens, Well, we've seen the debt grow

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Speaker 1: from just when we talk about the debt spiral.

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Speaker 3: You and I talked about.

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Speaker 1: This almost almost two years ago on this and I

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Speaker 1: wrote a piece on it two years ago August about

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Speaker 1: how we are entering a debt spiral where we just

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Speaker 1: can't get out of it, and meaning the US government.

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Speaker 3: So what is that?

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Speaker 1: To frame it up, Well, the debt spiral means that

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Speaker 1: we have accumulated so much debt that it requires more

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Speaker 1: debt to pay down that old debt and eventually to

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Speaker 1: pay that interest on that debt.

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Speaker 3: And we're there.

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Speaker 1: So of those two trillion dollar deficits, we're running one

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Speaker 1: trillion dollars that we're spending a year is on interest

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Speaker 1: on our past debt. So we're bumping up against when

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Speaker 1: I wrote that piece, where we had thirty one point

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Speaker 1: four trillion dollars of debt, and now we're just below

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Speaker 1: thirty five trillion in just two years and not even.

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Speaker 1: And so we're now at the point where we're spending

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Speaker 1: a trillion dollars on interest alone on that debt, and

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Speaker 1: we're spending so much money that we can't close that gap.

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Speaker 1: So what do I mean by that?

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Speaker 3: Well, if the.

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Speaker 1: US government was a company on the New York Stock Exchange,

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Speaker 1: which it's not, I understand because we have the money printer,

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Speaker 1: but just put that aside for a second, we would

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Speaker 1: consider it a zombie company.

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Speaker 3: And why is that? Well, if you look at.

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Speaker 1: The national debt and how much we spend, so are

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Speaker 1: the amount of money we take in each year in revenues.

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Speaker 1: You know the in fact, I can pull it up here.

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Speaker 1: The CBO just updated their estimates for twenty twenty four,

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Speaker 1: so and their estimates are that we're going to take

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Speaker 1: in twenty eight point five trillion dollars in GDP. Okay,

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Speaker 1: so that's the national productivity. And off of that, we

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Speaker 1: have a tax base, as you will know, that is

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Speaker 1: going to be four point nine trillion dollars estimate. Okay,

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Speaker 1: so we're going to the US government has four point

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Speaker 1: nine trillion dollars of revenue. We of course the government

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Speaker 1: is not creating anything, they're just taking from our productivity.

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Speaker 1: But they're on the other side of that. The flip

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Speaker 1: side of that is they're spending six point nine trillion

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Speaker 1: dollars and there's your two trillion dollar deficit, which is

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Speaker 1: now seven percent of GDP. That's a bad number. Okay,

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Speaker 1: So why is it a zombie Why would it be considered.

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Speaker 3: A zombie company?

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Speaker 1: Well, the most important to frame up how to think

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Speaker 1: about those deficits. You have to think about all those

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Speaker 1: expenses that you may be able to cut in order

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Speaker 1: to fix it. But the issue here is that our

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Speaker 1: mandatory expenses, which are Social Security, Medicare, and Medicaid, add

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Speaker 1: up to about four point one trillion dollars. Remember these

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Speaker 1: are not numbers for me. This is from the Congressional

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Speaker 1: Budget Office that puts out this estimate every single year,

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Speaker 1: and they do that kind of as a wake up

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Speaker 1: call the Congress and say, hey, this is we need

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Speaker 1: to fix some of our policies here because we're we're

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Speaker 1: on a bad path. But anyway, so we're spending four

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Speaker 1: point one trillion. Remember remember we're taking four point nine,

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Speaker 1: so you've got eight hundred trillion dollars left. Well, our

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Speaker 1: defense spending is nine hundred and fifty billion this year

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Speaker 1: that we know of. It could be there, could have

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Speaker 1: a lot of other expenses tucked in other places.

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Speaker 2: And to put that number in relation, not to cut

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Speaker 2: you off, but the US spends more on its military

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Speaker 2: than the next ten nations combined. So it's not just

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Speaker 2: military spending. It's like our military spending is more than

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Speaker 2: the next ten nations all put together. So it's an astronomical,

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Speaker 2: astronomical number.

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Speaker 3: Right.

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Speaker 1: So now you've got so you've got four point one

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Speaker 1: plus nine hundred and fifty, you're already over five trillion

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Speaker 1: dollars of spending. Then you've got your the net interest

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Speaker 1: because the net interest on your debt. You've got your

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Speaker 1: debt that's over a trillion dollars of interest expenses. You

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Speaker 1: get some back from inter government agencies, let's call it

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Speaker 1: nine hundred billion dollars. Well, your total mandatory expenses now

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Speaker 1: are over six trillion dollars. And that doesn't even take

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Speaker 1: into account the disgustioning expenses. So your deficit's two trillion dollars.

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Speaker 1: So now you've got to borrow money. You have to

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Speaker 1: issue more debt to pay down debt that's maturing because

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Speaker 1: you don't have the money to pay it down, so

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Speaker 1: you're borrowing more, which means that when you're running these deficits,

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Speaker 1: mark this this is inflationary. This is money that they're

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Speaker 1: basically just printing and putting into the economy and continuing

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Speaker 1: to grind the economy on a nominal basis. And so

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Speaker 1: all we're watching inflation just continue to rise and so

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Speaker 1: and as that's occurring, the FED is raising interest rates,

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Speaker 1: which is making the interest payments on that past debt

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Speaker 1: more expensive, which means that they that the government has

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Speaker 1: to issue more debt, which means that they have to

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Speaker 1: pay more interest on more debt. And so you get

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Speaker 1: into what's called a debt spiral, and there's really no

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Speaker 1: way out. It's like, you know, if you're you're you're

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Speaker 1: trying to meet your expenses, you're using credit cards, and

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Speaker 1: sooner or later you those credit cards max out because

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Speaker 1: you're you're not.

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Speaker 3: Making enough money, you're borrowing it, but.

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Speaker 1: You're paying interest on that, and then sooner or later

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Speaker 1: you're going to have to take on another credit card

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Speaker 1: just to pay the interest on the last credit card.

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Speaker 1: And that's the debt spiral. And so we saw it

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Speaker 1: happen with Greece and a number of other nations in

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Speaker 1: the last twenty years, and that's where we're at.

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Speaker 2: So basically, the debt can't be paid down because of

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Speaker 2: the situation that you framed up. Another reason why, though,

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Speaker 2: is because of the nature of the monetary system in

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Speaker 2: nineteen seventy one, going from like maybe arguably before nine

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Speaker 2: seventy one, but going from like an equity based system,

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Speaker 2: a gold system, to a debt based system. So the

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Speaker 2: debt also has to grow from that perspective as well.

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Speaker 2: So we have sort of two reasons why it can't

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Speaker 2: go down. We're spiraling out of control. The deficit, the

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Speaker 2: amount of debt they're taking on is growing at an

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Speaker 2: alarming rate. I think it's about a trillion dollars per quarter.

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Speaker 1: Almost the last check, it's about a trillion dollars every

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Speaker 1: hundred days.

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Speaker 2: Yeah, which is just about a quarter. I mean, it's

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Speaker 2: just an insane amount. And that is what's causing all

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Speaker 2: this to happen. Okay, so that's the debt doom loop. Now,

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Speaker 2: there's a lot of people who have been calling for

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Speaker 2: this to all come to an end for a long time.

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Speaker 2: I'm Peter Schiff, Harry Dents written a number of books

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Speaker 2: about it. You know, we can go on and on

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Speaker 2: and on, but it seems like they never see, they

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Speaker 2: fail to take into account how many more tricks up

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Speaker 2: the sleeve that you know, these central bankers can come

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Speaker 2: up with. But at the same time, it does seem

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Speaker 2: like the walls are closing in the rock and the

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Speaker 2: hard place is getting closer and closer together. I mean,

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Speaker 2: how do you think about that? How do you project

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Speaker 2: that out?

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Speaker 3: Well, I mean you hear a lot of people. You

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Speaker 3: hear people say, well, why don't they just cut expenses? Right,

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Speaker 3: I mean, clearly, if we're.

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Speaker 1: Spending too much, just stop spending so much.

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Speaker 3: Well, you just heard.

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Speaker 2: Where are we going to cut Well, in twenty twenty,

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Speaker 2: we were spending about what four point six I think

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Speaker 2: it was four point six trillions. We've gone from four

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Speaker 2: point six to almost seven trillion in just a couple

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Speaker 2: of years. And like, the world wasn't catastrophic in twenty twenty, Like,

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Speaker 2: why couldn't we just go back to like spending in

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Speaker 2: twenty twenty.

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Speaker 1: There's a number of reasons, but a lot of it

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Speaker 1: has to do with when we had the lockdowns that

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Speaker 1: pulled the a string that caused disruptions in a lot

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Speaker 1: of areas that they didn't expect. And one of the

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Speaker 1: areas that it caused disruption is well, they printed so

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Speaker 1: much money because there's so much to dig into in

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Speaker 1: the treasury market. But just for suffice to say that

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Speaker 1: the treasury market got it was dysfunctional, and so the

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Speaker 1: whole reason we print money is to keep the treasure

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Speaker 1: market going right. So the Fed printed money, it expanded

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Speaker 1: the m to the money supply. That caused that, Plus

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Speaker 1: the problems with the supply chains caused inflation, and so

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Speaker 1: that caused the need to adjust some of the benefits

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Speaker 1: for retirees, so security, and that's a whole nother problem

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Speaker 1: that we can talk about, but so security that those

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Speaker 1: benefits were adjusted higher from the cost of living at

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Speaker 1: the same time that boomers were retiring en mass because

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Speaker 1: they were like, you know what, I don't need to

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Speaker 1: be in the workforce anymore. My house is worth so

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Speaker 1: much money. Now I've got these retirement benefits, I've got

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Speaker 1: my pension, I've got the Social Security and Medicare Medicaid.

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Speaker 3: I'm set. I'm going to retire. So now they're paying

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Speaker 3: out at a.

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Speaker 1: Much higher rate than they expected, and so this has

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Speaker 1: caused a massive gap in those in that line item. Yeah,

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Speaker 1: that exactly, So that line item jumped higher. So so

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Speaker 1: what do they do if they you heard what we said,

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Speaker 1: the mandatory expenses signed into legislation or defense or interest

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Speaker 1: on your debt, you're not going to You're not going

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Speaker 1: to default on your debt if you if.

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Speaker 3: You issue in your own currency.

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Speaker 1: But where are they going to cut? So that's not

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Speaker 1: really possible. And number one, there's there's really no incentive

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Speaker 1: to do it. We can talk about Republicans or Democrats

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Speaker 1: or which parties were that's spending, it doesn't matter. They're

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Speaker 1: all in the same game. They spend to get re elected.

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Speaker 1: It's just we hear Jeff Booth talk about it all

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Speaker 1: the time. If you want to, if you want to

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Speaker 1: find where the problem is, look at the incentives, and

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Speaker 1: the incentive.

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Speaker 3: Is to get re elected.

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Speaker 1: So if the incentive is to get re elected, the

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Speaker 1: incentives to then spend money, make sure you take care

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Speaker 1: of your constituents, those who are donating to your campaigns,

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Speaker 1: make regulations good for those companies and those constituents, and

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Speaker 1: then just work it around so you can get re elected.

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Speaker 1: And that all points to spending more money. So we

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Speaker 1: don't like right now, Mark, we don't even have a

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Speaker 1: debt ceiling.

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Speaker 3: We paused it.

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Speaker 1: There's no debt ceiling, so we could just keep spending

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Speaker 1: and Congress has no limit and that's not going to

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Speaker 1: come up again until January. So we go right through

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Speaker 1: this election just spending ad nauseum.

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Speaker 2: So in the last debt ceiling debate, Biden himself, when

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Speaker 2: he was still able to talk to someone coherently, had said,

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Speaker 2: we have to raise the debt because the US can't default.

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Speaker 2: The US is never defaulted, so we need to get

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Speaker 2: more debt to pay the existing debt. I mean, he

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Speaker 2: basically said it.

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Speaker 3: Right there.

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Speaker 2: But it's not I mean, it's it's certainly not a

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Speaker 2: political thing. That's a math thing, right, And so it's

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Speaker 2: like we owe the money, the money's got to be paid,

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Speaker 2: and we've got to print the money. Now, there's certainly

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Speaker 2: a lot of pork, as we call it, right, that's

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Speaker 2: that's certainly getting funded as well. But at the same time,

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Speaker 2: it's a math problem that we're in. And unless the

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Speaker 2: government wants the default, then this is the path that

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Speaker 2: we're on. And so when I say default, default to

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Speaker 2: the old people that are owed entitlements, right, lou Gramman

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Speaker 2: talks about you know, other nations they can't print dollars,

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Speaker 2: so they aren't a tough problem. But the US doesn't

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Speaker 2: owe dollars either. The USO's like medical services for example. Right,

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Speaker 2: Although we do know that the homeless, homeless population half

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Speaker 2: of the population are now baby boomers, so we do

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Speaker 2: know that those entitlements are being cut somewhat skeeping up,

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Speaker 2: they're not keeping up for sure, and so those entitlements,

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Speaker 2: those promises that were made to the VA, the veterans,

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Speaker 2: and to those old people, they're not being met, which

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Speaker 2: is why the homeless population is sort of being grown

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Speaker 2: from that. Okay, so that's sort of the that sort

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Speaker 2: of sums up the problem. Now, correct me if I'm wrong,

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Speaker 2: But I mean the US is the cleanest shirt in

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Speaker 2: the dirty laundry, so to speak. So we can basically

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Speaker 2: take this sort of problem and extrapolate it to.

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Speaker 3: The rest of the world.

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Speaker 2: I mean, Japan, the ECB, Europe, I mean, they're in

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Speaker 2: worse situations than the US.

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Speaker 1: Yeah, I mean we'll go into what you said when

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Speaker 1: Biden the last time you talked about the debt, uh,

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Speaker 1: the debt spiral. Well, just this last debate, he was

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Speaker 1: talking about how well he's got a solution for you know,

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Speaker 1: fixing social Security and his solutions to raise taxes, raise

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Speaker 1: taxes on the rich.

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Speaker 2: Oh, they don't pay their fair share.

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Speaker 1: Now of course, if you but even if you took

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Speaker 1: if you raise taxes on the on the seventy one

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Speaker 1: trillionaires we have in the United States or billionaires you

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Speaker 1: have in the United States, you know you would get

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Speaker 1: it like.

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Speaker 2: A that was like a Biden moment there, right, A thousand.

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Speaker 1: Trillions, a million trillionaires. So but if you raise tax

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Speaker 1: on our billionaires, the seventy one of them that last count,

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Speaker 1: you would be able to tax. What if you tax

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Speaker 1: them one hundred percent, you have five trillion dollars. The

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Speaker 1: problem is where we have a social security hold that's

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Speaker 1: one hundred and seventy two trillion dollars. What's so important

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Speaker 1: about that is that you're talking about unfunded liabilities on

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Speaker 1: top of debt. We're talking about something that's approaching a

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Speaker 1: quarter of a quarter of quadrillion dollars two hundred and

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Speaker 1: fifty trillion dollars of owing. So debt and unfunded liabilities

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Speaker 1: things that we owe in the future. So taxes, I mean,

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Speaker 1: that's clearly it's just not going to work to fix

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Speaker 1: this whole And also if you, as you well know,

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Speaker 1: the more you tax, the less you incentivize productivity, so

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Speaker 1: product research and development, investing into productive product lines, hiring people,

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Speaker 1: all that. So you wind up getting higher tax on

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Speaker 1: lower productivity and actually declining productivity.

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Speaker 3: So that's not good.

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Speaker 1: So, but just to make to make it clear that

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Speaker 1: taxes aren't going to work either, So what do you do?

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Speaker 1: You just issue more debt. But if you issue more debt,

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Speaker 1: then the only way you can keep that going, that

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Speaker 1: whole charade going, is by exporting your inflation on the world.

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Speaker 1: So all we're doing is we we are creating a

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Speaker 1: situation where we have no choice but to have high

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Speaker 1: inflation in order to have taxes on larger excuse me

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Speaker 1: nominal GDP to pay down past debt.

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Speaker 3: And so that's what we're doing. Excuse me.

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Speaker 2: So sounds sounds pretty bleik, James, sounds pretty bleak. So

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Speaker 2: what I'd like to do is, you know, people hear

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Speaker 2: from me all the time, and so I kind of

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Speaker 2: give my projection of what I think happens over the

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Speaker 2: rest of this decade, but I'd like for you to

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Speaker 2: kind of tell us what you think is the base case. Obviously,

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Speaker 2: anything is possible. Let's talk in probabilities. What do you

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Speaker 2: think is the most probable outcome over the next what

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Speaker 2: do we have, you know, six years at this point.

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Speaker 2: Then we're going to talk about, like I said, if

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Speaker 2: we're a business owner, like what does this mean for you?

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Speaker 2: How do you think about that? And then I want

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Speaker 2: to talk about the safety valve that we all have,

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Speaker 2: which is bitcoin and stuff that we see happening over there.

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Speaker 2: But let's just talk about what is your sort of

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Speaker 2: base case for how this continues for the rest of

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Speaker 2: the decade.

437
00:22:28,480 --> 00:22:30,600
Speaker 1: Well, I mean, look, we've got a lot of uncertainty

438
00:22:30,680 --> 00:22:34,000
Speaker 1: right now politically, so we're not You're watching people try

439
00:22:34,040 --> 00:22:36,040
Speaker 1: to sort of figure out in the markets who's going

440
00:22:36,080 --> 00:22:37,840
Speaker 1: to win, whether it's gonna be Trump or what's gonna buy.

441
00:22:37,960 --> 00:22:39,919
Speaker 2: But you said, regardless of the political party, it's more

442
00:22:39,960 --> 00:22:40,359
Speaker 2: of the same.

443
00:22:40,800 --> 00:22:44,080
Speaker 1: But you're watching Wall Street kind of position themselves. And

444
00:22:44,119 --> 00:22:49,040
Speaker 1: the reality is is that because of what we're talking about,

445
00:22:49,080 --> 00:22:51,840
Speaker 1: because of them, just the sheer amount of debt that

446
00:22:51,840 --> 00:22:55,760
Speaker 1: we have, it's so great and those liability are so

447
00:22:55,920 --> 00:22:59,879
Speaker 1: great that there is no choice but to have that inflation.

448
00:23:00,680 --> 00:23:03,119
Speaker 1: And so you can think about it in this way.

449
00:23:03,640 --> 00:23:05,280
Speaker 1: We were talking about it before the show, how the

450
00:23:05,320 --> 00:23:06,960
Speaker 1: sixty to forty portfolio.

451
00:23:06,480 --> 00:23:07,880
Speaker 3: Is kind of dead, and the.

452
00:23:07,840 --> 00:23:10,480
Speaker 1: Reason for that is that who wants to invest in

453
00:23:10,520 --> 00:23:14,560
Speaker 1: a thirty year treasury that they know is going to

454
00:23:14,600 --> 00:23:18,520
Speaker 1: be worth less on real terms the money they get

455
00:23:18,560 --> 00:23:22,320
Speaker 1: back from that thirty year treasury in thirty years than

456
00:23:22,320 --> 00:23:23,760
Speaker 1: when they put in, Like.

457
00:23:23,680 --> 00:23:26,040
Speaker 3: Who wants to do that? You're going to have.

458
00:23:26,600 --> 00:23:30,639
Speaker 1: So in the next five, six, seven, eight years, I

459
00:23:30,800 --> 00:23:33,320
Speaker 1: expect us to get into a period of very high inflation.

460
00:23:33,920 --> 00:23:37,040
Speaker 1: We could see a downturn we're starting to see now

461
00:23:37,400 --> 00:23:39,680
Speaker 1: data that's showing that the economy is kind of rolling

462
00:23:40,040 --> 00:23:44,680
Speaker 1: in a lot of areas. It's confusing because you've got

463
00:23:44,680 --> 00:23:49,159
Speaker 1: the government spending so much money that we've created a

464
00:23:49,200 --> 00:23:53,280
Speaker 1: situation where this fiscal dominance, and so that fiscal dominance

465
00:23:53,520 --> 00:23:56,719
Speaker 1: is the government is spending and spending and spending like

466
00:23:56,760 --> 00:24:00,840
Speaker 1: mad and it's creating pockets of expansion at the same

467
00:24:00,880 --> 00:24:05,040
Speaker 1: time that you've got pockets of contraction in private areas.

468
00:24:05,560 --> 00:24:08,119
Speaker 3: Uh So, any any.

469
00:24:08,080 --> 00:24:13,480
Speaker 1: Business that is that is beholden to or is affected

470
00:24:13,520 --> 00:24:17,040
Speaker 1: by interest rates, especially these high interest rates, they're starting

471
00:24:17,080 --> 00:24:17,800
Speaker 1: to feel the pinch.

472
00:24:18,440 --> 00:24:19,679
Speaker 3: The margins are compressing.

473
00:24:20,280 --> 00:24:22,240
Speaker 1: Uh they're having to pay more on debt when they

474
00:24:22,520 --> 00:24:24,760
Speaker 1: when they go out to get a new line of

475
00:24:24,800 --> 00:24:27,359
Speaker 1: credit or their line of credit resets and it's a

476
00:24:27,440 --> 00:24:29,680
Speaker 1: higher rate, they're starting to have to pay more interest

477
00:24:29,720 --> 00:24:33,119
Speaker 1: on that. You're you're not seeing as much hiring and

478
00:24:33,160 --> 00:24:36,600
Speaker 1: so the job numbers that the job claims, the unemployment

479
00:24:36,640 --> 00:24:39,280
Speaker 1: is ticking up, and so you're seeing this economy that

480
00:24:39,359 --> 00:24:43,560
Speaker 1: looks like it's it's turning over, especially because we got

481
00:24:43,640 --> 00:24:47,040
Speaker 1: numbers this morning in the services industry, really important part

482
00:24:47,119 --> 00:24:50,800
Speaker 1: of the US economy. And that that feels like it's

483
00:24:50,800 --> 00:24:54,239
Speaker 1: turning over, but we can't have that. We can't We

484
00:24:54,320 --> 00:24:58,840
Speaker 1: could have kind of a soft landing and continuation on.

485
00:24:59,440 --> 00:25:02,040
Speaker 1: That will happen if we keep spending money, we keep

486
00:25:02,040 --> 00:25:06,800
Speaker 1: issuing debt, and we keep creating more inflation. But the

487
00:25:06,880 --> 00:25:10,040
Speaker 1: reality is if we get into a deep recession, we're

488
00:25:10,080 --> 00:25:11,720
Speaker 1: going to have to print so much money it's going

489
00:25:11,800 --> 00:25:12,760
Speaker 1: to make your eyes bleed.

490
00:25:13,240 --> 00:25:15,399
Speaker 3: And so how much do we print.

491
00:25:15,160 --> 00:25:19,359
Speaker 2: In twenty twenty eleven trillion and.

492
00:25:19,680 --> 00:25:24,080
Speaker 1: The FED bought six trillion of that, So really, the

493
00:25:24,359 --> 00:25:28,639
Speaker 1: Fed we're going to have to print multiples of that

494
00:25:28,800 --> 00:25:32,080
Speaker 1: this time because just the sheer amount of debt.

495
00:25:32,240 --> 00:25:33,760
Speaker 3: So why does that matter?

496
00:25:34,359 --> 00:25:37,399
Speaker 1: What matters is I see a period where, whether or

497
00:25:37,440 --> 00:25:41,439
Speaker 1: not it's because it's blatantly obvious or they admit it,

498
00:25:42,400 --> 00:25:45,960
Speaker 1: we're going to have high inflation. And the reason is

499
00:25:46,080 --> 00:25:49,679
Speaker 1: that we have to keep printing money in order to

500
00:25:49,680 --> 00:25:54,200
Speaker 1: make sure that the treasury market remains functional. We've heard

501
00:25:54,760 --> 00:25:58,800
Speaker 1: we've heard Powell talk about it recently, not this last meeting,

502
00:25:58,880 --> 00:26:02,520
Speaker 1: but the meeting before where he was talking about where

503
00:26:02,600 --> 00:26:03,960
Speaker 1: does he feel comfortable.

504
00:26:03,600 --> 00:26:04,360
Speaker 3: With bank reserves?

505
00:26:04,800 --> 00:26:08,520
Speaker 1: And as bank reserves get down to ten percent, of GDP. Well,

506
00:26:08,560 --> 00:26:11,800
Speaker 1: then he starts getting nervous, and we're right about that

507
00:26:11,880 --> 00:26:16,520
Speaker 1: level right now. At well, actually, bank reserves are up

508
00:26:16,560 --> 00:26:20,320
Speaker 1: over three trillion. I apologize that's not quite right, but

509
00:26:20,359 --> 00:26:23,639
Speaker 1: we're getting towards that level. And when the reverse repo

510
00:26:24,119 --> 00:26:27,480
Speaker 1: where all the excess slashes from that, all that money printing,

511
00:26:27,520 --> 00:26:31,760
Speaker 1: where it's parked, when that's gone, then they're really watching

512
00:26:31,800 --> 00:26:36,560
Speaker 1: that number because when that treasury market gets dysfunctional, then

513
00:26:36,560 --> 00:26:38,160
Speaker 1: they're going to have to print money and make sure

514
00:26:38,160 --> 00:26:41,840
Speaker 1: that that it stays liquid. So we're seeing, Okay, this

515
00:26:41,920 --> 00:26:45,719
Speaker 1: all matters, because the big picture is we're seeing little

516
00:26:46,880 --> 00:26:51,400
Speaker 1: hints that they're getting ready or already injecting liquidity into

517
00:26:51,400 --> 00:26:54,359
Speaker 1: the market. So you saw and the money supply him

518
00:26:54,359 --> 00:26:57,359
Speaker 1: too is ticked back up in the last six or

519
00:26:57,400 --> 00:27:00,359
Speaker 1: eight weeks, right, and so how.

520
00:27:00,240 --> 00:27:01,040
Speaker 3: Is that happening?

521
00:27:01,520 --> 00:27:05,320
Speaker 1: Well, the central banks are finding ways to get money

522
00:27:05,400 --> 00:27:07,800
Speaker 1: into the system because they know that we can't have

523
00:27:07,880 --> 00:27:10,600
Speaker 1: this hard landing because they don't want to print another

524
00:27:11,080 --> 00:27:15,000
Speaker 1: ten twenty trillion dollars that would be that would make

525
00:27:15,000 --> 00:27:16,480
Speaker 1: inflation rip higher again.

526
00:27:16,920 --> 00:27:18,199
Speaker 3: But what's the choice?

527
00:27:18,800 --> 00:27:24,080
Speaker 1: Right, So we're seeing things like is the the the

528
00:27:24,080 --> 00:27:29,200
Speaker 1: international swaps and Derivatives Association come out with a letter

529
00:27:29,640 --> 00:27:35,600
Speaker 1: that advised that implored the central banks and other authorities

530
00:27:35,680 --> 00:27:41,080
Speaker 1: here to get rid of the limit of treasuries that

531
00:27:41,200 --> 00:27:44,600
Speaker 1: banks can own. Basically, what it said was remove them

532
00:27:44,640 --> 00:27:45,840
Speaker 1: from the risk calculations.

533
00:27:45,880 --> 00:27:46,840
Speaker 3: They could own as many.

534
00:27:46,680 --> 00:27:50,879
Speaker 1: As they want, arguing that treasuries are riskless. We know

535
00:27:50,960 --> 00:27:53,800
Speaker 1: they're not riskless. Yeah, but well why would they if

536
00:27:53,840 --> 00:27:56,320
Speaker 1: they do that? Well, that just creates the ability just

537
00:27:56,359 --> 00:27:58,879
Speaker 1: to keep liquidity going into the system. You don't have

538
00:27:58,920 --> 00:28:01,080
Speaker 1: to have those checks and balance of just how much

539
00:28:01,960 --> 00:28:05,840
Speaker 1: the how how much liquidity the banks have available for

540
00:28:06,040 --> 00:28:10,040
Speaker 1: their capital base. Right, So that's one thing, and then

541
00:28:10,080 --> 00:28:13,920
Speaker 1: you're watching Janet Yellen do something called this regular treasury buyback.

542
00:28:14,280 --> 00:28:19,000
Speaker 1: Is it really QY quantitative easing? No, but they're buying

543
00:28:19,320 --> 00:28:22,679
Speaker 1: off them, They're buying the off the run treasuries that

544
00:28:22,720 --> 00:28:24,880
Speaker 1: are not as liquid, just to make sure that there's

545
00:28:24,920 --> 00:28:27,800
Speaker 1: more liquidity. You know, there's more liquidity, there's hints of

546
00:28:27,800 --> 00:28:30,679
Speaker 1: more liquidity, more liquidity more. So I expect this to

547
00:28:30,720 --> 00:28:35,159
Speaker 1: continue and possibly accelerate, especially as we see you know,

548
00:28:35,240 --> 00:28:39,200
Speaker 1: some commercial real estate, not all commercial real estate is bad,

549
00:28:39,600 --> 00:28:43,440
Speaker 1: but there are pockets of of difficult spots, and we're

550
00:28:43,480 --> 00:28:46,640
Speaker 1: going to see some bank rescues or whatnot in the

551
00:28:46,680 --> 00:28:48,480
Speaker 1: next six to nine.

552
00:28:48,240 --> 00:28:50,240
Speaker 2: Months, which means more liquidity.

553
00:28:49,840 --> 00:28:53,160
Speaker 1: More liquidity and all points to what more more inflation,

554
00:28:53,400 --> 00:28:57,880
Speaker 1: which goes back to your, uh, your point of Okay,

555
00:28:57,920 --> 00:29:01,400
Speaker 1: what what can individuals do and what can and entrepreneurs

556
00:29:01,400 --> 00:29:03,960
Speaker 1: do to make sure that they're on the right side

557
00:29:03,960 --> 00:29:08,040
Speaker 1: of this, right So, and that's really the big question.

558
00:29:08,760 --> 00:29:13,240
Speaker 1: And so for me, I'm seeing that if if you're

559
00:29:13,240 --> 00:29:16,840
Speaker 1: an investor and you're investing in bonds, well, I mean,

560
00:29:16,880 --> 00:29:19,840
Speaker 1: God help you, right, I mean like they may be

561
00:29:19,920 --> 00:29:22,440
Speaker 1: a trade, but I would not be investing in bonds

562
00:29:22,480 --> 00:29:27,720
Speaker 1: long term personally. And if on the flip side, if

563
00:29:27,760 --> 00:29:31,400
Speaker 1: you're an entrepreneur, you know, and you're borrowing, if you

564
00:29:31,440 --> 00:29:34,959
Speaker 1: can borrow at a rate that's fixed and that meets

565
00:29:35,000 --> 00:29:39,440
Speaker 1: your requirement for your capital requirement, then that's an intelligent

566
00:29:39,440 --> 00:29:43,440
Speaker 1: thing to do for me. But what I wouldn't do

567
00:29:43,720 --> 00:29:48,440
Speaker 1: is I wouldn't be beholden to rates that could adjust

568
00:29:48,680 --> 00:29:51,920
Speaker 1: much higher, because that to me in the in the

569
00:29:51,960 --> 00:29:53,560
Speaker 1: near future could be a problem.

570
00:29:55,000 --> 00:29:57,440
Speaker 2: So to kind of recite this and sort of recap

571
00:29:57,480 --> 00:30:00,880
Speaker 2: it back because of the debt based montary system and

572
00:30:00,880 --> 00:30:02,200
Speaker 2: the debt dooom loop that we have that you set

573
00:30:02,240 --> 00:30:05,120
Speaker 2: up in the beginning. The system has to continue as

574
00:30:05,120 --> 00:30:06,800
Speaker 2: long as the governments to continue to pay the things

575
00:30:06,800 --> 00:30:08,440
Speaker 2: that they're obligated to pay, then they're gonna have to

576
00:30:08,440 --> 00:30:12,160
Speaker 2: continue to borrow and continue to print money. Of course,

577
00:30:12,920 --> 00:30:19,400
Speaker 2: well theoretically, philosophically, why would you default when you can

578
00:30:19,400 --> 00:30:22,800
Speaker 2: print money? Right, So there's there's number one, number two

579
00:30:23,080 --> 00:30:26,800
Speaker 2: more emperiically, we can see that pretty much every nation

580
00:30:27,360 --> 00:30:34,640
Speaker 2: right now today in the world does that. So you know, Lebanon, Turkey, Venezuela, Argentina, Peru.

581
00:30:34,720 --> 00:30:38,640
Speaker 2: I mean, go down the list. They're all printing and

582
00:30:38,880 --> 00:30:43,120
Speaker 2: using debt to offset this. So there is no historical

583
00:30:43,200 --> 00:30:46,240
Speaker 2: context for a nation just going, well, there's a good run, boys,

584
00:30:46,280 --> 00:30:48,560
Speaker 2: let's fold up shop like there's just no historical context,

585
00:30:48,560 --> 00:30:50,880
Speaker 2: and we see it happening in real time all around

586
00:30:50,920 --> 00:30:53,920
Speaker 2: the world where this is exactly what they do and

587
00:30:54,200 --> 00:30:56,800
Speaker 2: you just print, tell you can't print anymore. And I

588
00:30:56,800 --> 00:30:58,040
Speaker 2: didn't want to kind of go I'm not going to

589
00:30:58,080 --> 00:31:00,360
Speaker 2: go through my whole thesis, but you know, I think

590
00:31:00,440 --> 00:31:03,200
Speaker 2: things end more in a whimper than a bang. Everybody's

591
00:31:03,240 --> 00:31:05,760
Speaker 2: thinking that there's going to be this final days where

592
00:31:05,920 --> 00:31:07,640
Speaker 2: the system is going to crash and the dollar is

593
00:31:07,640 --> 00:31:10,560
Speaker 2: going to die and the FED losers. But it's a

594
00:31:10,600 --> 00:31:14,120
Speaker 2: whimper and we know that just because that's what Zimbabwe does,

595
00:31:14,160 --> 00:31:17,840
Speaker 2: and they obviously inflate a lot faster than in other countries.

596
00:31:17,880 --> 00:31:19,960
Speaker 2: But it's a wimper, not a bang, and so I

597
00:31:20,000 --> 00:31:22,360
Speaker 2: think it continues. So that's sort of my base case

598
00:31:22,360 --> 00:31:26,640
Speaker 2: as well. Now you sort of use like an Austrian

599
00:31:27,920 --> 00:31:30,920
Speaker 2: economics kind of term on inflation, it sounds like because

600
00:31:31,160 --> 00:31:34,200
Speaker 2: you're talking about more inflation ahead in terms of money

601
00:31:34,280 --> 00:31:37,560
Speaker 2: printing and not really consumer prices, and maybe you're using

602
00:31:37,600 --> 00:31:41,680
Speaker 2: those interchangeably. I recently talked about on a different video

603
00:31:41,760 --> 00:31:45,280
Speaker 2: how Ledg von Misis in nineteen fifty gave a talk

604
00:31:45,360 --> 00:31:48,080
Speaker 2: of how they were changing the definition of the word

605
00:31:48,120 --> 00:31:53,400
Speaker 2: inflation from monetary inflation to prices, and in nineteen fifty

606
00:31:53,400 --> 00:31:54,920
Speaker 2: he called them out on this and he said, you

607
00:31:54,960 --> 00:31:56,440
Speaker 2: know the reason why is because then they can lie

608
00:31:56,480 --> 00:31:58,600
Speaker 2: to you and hide the true inflation, which is the

609
00:31:58,680 --> 00:32:01,360
Speaker 2: money supply increasing. And so you sort of set up

610
00:32:01,360 --> 00:32:03,520
Speaker 2: why the money supply would increase and say there's more inflation,

611
00:32:03,760 --> 00:32:06,480
Speaker 2: there's more price inflation for a lot of other things

612
00:32:06,520 --> 00:32:09,960
Speaker 2: like having to re onshore near shore, you know, less

613
00:32:10,000 --> 00:32:13,480
Speaker 2: global cooperation and things like that. Okay, so but I

614
00:32:13,480 --> 00:32:15,480
Speaker 2: want to hit on that monetary inflation for a minute.

615
00:32:15,520 --> 00:32:18,640
Speaker 2: Because you talked about why bonds are bad you wouldn't

616
00:32:18,640 --> 00:32:21,360
Speaker 2: buy them, or why entrepreneurs or business owners should think

617
00:32:21,400 --> 00:32:25,120
Speaker 2: about fixing in debt. So if we think about and

618
00:32:25,160 --> 00:32:27,280
Speaker 2: this is where I think most people are completely caught

619
00:32:27,320 --> 00:32:30,200
Speaker 2: off sides by this. So they're looking at the government

620
00:32:30,360 --> 00:32:33,800
Speaker 2: given numbers, the CPI consumer price inflation, which is a

621
00:32:33,840 --> 00:32:37,040
Speaker 2: false number for any number of reasons we can talk about.

622
00:32:37,560 --> 00:32:40,120
Speaker 2: But that number today is in the threes.

623
00:32:41,000 --> 00:32:42,480
Speaker 3: Highly manipulated of course.

624
00:32:42,560 --> 00:32:46,360
Speaker 2: Right, So if you know my bond is paying me

625
00:32:46,440 --> 00:32:49,600
Speaker 2: five and it's costing me three, like all right, man,

626
00:32:49,640 --> 00:32:52,120
Speaker 2: that's a two percent spread, Like I'm doing pretty good.

627
00:32:52,640 --> 00:32:54,360
Speaker 2: Or if the S and P five hundred is making

628
00:32:54,400 --> 00:32:57,960
Speaker 2: me eight or ten percent and inflation's at three or four,

629
00:32:58,120 --> 00:32:59,240
Speaker 2: like I'm doing pretty good.

630
00:33:00,160 --> 00:33:03,760
Speaker 1: And if you're a consumer, go home and do the

631
00:33:03,800 --> 00:33:07,000
Speaker 1: work and add up all your expenses and compare them to.

632
00:33:07,000 --> 00:33:09,520
Speaker 3: Last year and the year before, right, and the year

633
00:33:09,560 --> 00:33:10,000
Speaker 3: before that.

634
00:33:10,120 --> 00:33:12,240
Speaker 1: It's a lot of work it's easier just to listen

635
00:33:12,320 --> 00:33:14,040
Speaker 1: to what the pundits tell you, right.

636
00:33:14,640 --> 00:33:16,880
Speaker 2: But so the problem why I think most people are

637
00:33:16,880 --> 00:33:20,360
Speaker 2: caught off sides by this is they see their paycheck

638
00:33:20,400 --> 00:33:22,000
Speaker 2: going into this index fund and the S and P

639
00:33:22,040 --> 00:33:24,240
Speaker 2: five hundred is going up at nine ten percent to

640
00:33:24,320 --> 00:33:27,080
Speaker 2: whatever it is. But and like I said, inflation's at

641
00:33:27,080 --> 00:33:29,840
Speaker 2: three four percent, like, hey, I'm doing pretty good. To

642
00:33:29,920 --> 00:33:31,440
Speaker 2: your point, if they would do the math, they'd find

643
00:33:31,480 --> 00:33:33,480
Speaker 2: out that it's not. But back to sort of that

644
00:33:33,600 --> 00:33:36,840
Speaker 2: monetary or that Austrian view of monetary inflation, which is

645
00:33:36,880 --> 00:33:40,920
Speaker 2: the money supply increasing the debasement rate. And so the

646
00:33:41,040 --> 00:33:44,160
Speaker 2: money supply since twenty nineteen through twenty twenty three has

647
00:33:44,200 --> 00:33:49,080
Speaker 2: been increasing in the US by ten percent. So that's

648
00:33:49,080 --> 00:33:50,280
Speaker 2: what we call the hurdle rate.

649
00:33:50,600 --> 00:33:53,920
Speaker 1: So and since since seventy one, it's it's about seven

650
00:33:53,960 --> 00:33:56,120
Speaker 1: point one percent on average, Like.

651
00:33:56,160 --> 00:33:58,360
Speaker 2: Yeah, but when you if you look at a chart

652
00:33:58,400 --> 00:34:01,960
Speaker 2: of you know, M two or FED balance sheet or whatever,

653
00:34:02,000 --> 00:34:05,240
Speaker 2: you can see that the trend line keeps getting steeper steeper, steeper,

654
00:34:05,240 --> 00:34:08,279
Speaker 2: steeper steeper. I think, you know, I don't want to

655
00:34:08,280 --> 00:34:09,600
Speaker 2: go into it. You and I've talked about it, but

656
00:34:10,239 --> 00:34:12,959
Speaker 2: really pretty much most of the financial data pre two

657
00:34:13,000 --> 00:34:17,200
Speaker 2: thousand and eight, doesn't you have to look at it

658
00:34:17,239 --> 00:34:19,160
Speaker 2: with an asterisk. We're in a different environment that we

659
00:34:19,200 --> 00:34:20,839
Speaker 2: are in today, so that trend line has changed. So

660
00:34:20,960 --> 00:34:23,279
Speaker 2: since twenty nineteen, we're at about ten percent. So we

661
00:34:23,320 --> 00:34:26,439
Speaker 2: have the monetary supply, the rate of debasement is moving

662
00:34:26,520 --> 00:34:29,360
Speaker 2: up ten percent, plus we have the inflation, plus we

663
00:34:29,400 --> 00:34:32,200
Speaker 2: probably have to adjust for risk. So I don't know,

664
00:34:32,239 --> 00:34:34,200
Speaker 2: does that bring the hurdle rate up to twelve or

665
00:34:34,239 --> 00:34:37,279
Speaker 2: fifteen percent? Could be, and so then we get four

666
00:34:37,320 --> 00:34:39,080
Speaker 2: or five percent on bonds. And how are you going

667
00:34:39,120 --> 00:34:40,799
Speaker 2: to get four five percent of bonds when we have

668
00:34:40,840 --> 00:34:42,640
Speaker 2: this ten twelve percent hurdle.

669
00:34:42,400 --> 00:34:45,359
Speaker 1: Rate right where you buy a bond at that's that's

670
00:34:45,440 --> 00:34:48,360
Speaker 1: yielding four and a half percent now. And yeah, you

671
00:34:48,400 --> 00:34:50,839
Speaker 1: might get a trade here between now and the time

672
00:34:50,920 --> 00:34:53,880
Speaker 1: that the Fed lowers rates and make a couple percent

673
00:34:53,920 --> 00:34:58,960
Speaker 1: off of that. Mean you could make you know, multiples

674
00:34:58,960 --> 00:35:03,239
Speaker 1: of that. But the problem is if we get into

675
00:35:03,239 --> 00:35:08,080
Speaker 1: a downturn and that money supply is expanded. Like you said,

676
00:35:08,360 --> 00:35:12,000
Speaker 1: that structural change happened when we printed for the first time,

677
00:35:12,360 --> 00:35:15,080
Speaker 1: So if you go back, it was really nineteen eighty

678
00:35:15,080 --> 00:35:17,880
Speaker 1: seven that when that crash, I was in high school,

679
00:35:18,280 --> 00:35:22,560
Speaker 1: but that the Black Monday occurred and green Span came

680
00:35:22,600 --> 00:35:25,760
Speaker 1: out and said, don't worry Wall Street, We've got your backs.

681
00:35:26,040 --> 00:35:27,960
Speaker 1: We're not going to let you collapse. We're not called

682
00:35:27,960 --> 00:35:29,560
Speaker 1: the banks collapse. We're going to make sure that the

683
00:35:29,760 --> 00:35:32,480
Speaker 1: market is okay. And that was just a signal to them,

684
00:35:32,560 --> 00:35:35,640
Speaker 1: but they didn't really do anything. Flash forward to nineteen

685
00:35:35,719 --> 00:35:38,560
Speaker 1: ninety eight, just eleven years later, and you had the

686
00:35:38,640 --> 00:35:42,040
Speaker 1: Long Term Capital Management Debacle. This is a firm that

687
00:35:42,120 --> 00:35:45,439
Speaker 1: was there was a hedge fund that was run by

688
00:35:45,840 --> 00:35:50,920
Speaker 1: two Nobel laureates and they were these geniuses and they

689
00:35:50,960 --> 00:35:54,479
Speaker 1: actually there's a book called When Genius Failed, great book

690
00:35:54,480 --> 00:35:59,520
Speaker 1: by Lowenstein about what happened there. But what occurred was

691
00:36:00,280 --> 00:36:02,000
Speaker 1: these guys had so much leverage.

692
00:36:02,360 --> 00:36:02,799
Speaker 3: They had a.

693
00:36:02,719 --> 00:36:06,480
Speaker 1: Billion dollars of investment of AUM in their hedge fund,

694
00:36:06,560 --> 00:36:08,600
Speaker 1: and they had about one hundred billion dollars that we

695
00:36:08,680 --> 00:36:11,359
Speaker 1: know of in trades, so they were at least levered

696
00:36:11,360 --> 00:36:15,560
Speaker 1: one hundred and one on these spreads that were they

697
00:36:15,560 --> 00:36:18,560
Speaker 1: were basically shorting volatility the way they were doing interest

698
00:36:18,800 --> 00:36:21,640
Speaker 1: interest rate arbitrage. But they had those trades levered weight

699
00:36:21,760 --> 00:36:23,840
Speaker 1: up way up. Well, the street got wind of it,

700
00:36:23,920 --> 00:36:25,880
Speaker 1: and you know what happens when the when the sharks

701
00:36:25,880 --> 00:36:28,840
Speaker 1: smell the blood, then they they blew up these trades

702
00:36:28,880 --> 00:36:29,200
Speaker 1: on them.

703
00:36:29,600 --> 00:36:31,000
Speaker 3: So this this fund, this.

704
00:36:31,040 --> 00:36:34,600
Speaker 1: Fund was going to collapse long term capital management and

705
00:36:34,680 --> 00:36:39,640
Speaker 1: so but Goldman had massive exposure to them. So Goldman

706
00:36:40,040 --> 00:36:44,040
Speaker 1: Goldman Sachs CEO went into the New York Fed and begged.

707
00:36:44,040 --> 00:36:47,279
Speaker 1: They're like, hey, we're going to collapse tomorrow unless you

708
00:36:47,320 --> 00:36:51,399
Speaker 1: rescue us. And so they didn't print money the first time.

709
00:36:51,840 --> 00:36:54,800
Speaker 1: The second time, the New York Fed led a bailout

710
00:36:55,000 --> 00:36:58,080
Speaker 1: with the other banks for Goldman Sachs basically made sure

711
00:36:58,160 --> 00:37:00,920
Speaker 1: they shored up their balance sheet and so they didn't

712
00:37:00,920 --> 00:37:04,480
Speaker 1: print money, but they assured that there was nothing that

713
00:37:04,480 --> 00:37:06,439
Speaker 1: there was no way they were going to collapse. Right

714
00:37:07,160 --> 00:37:10,360
Speaker 1: then you had the tech bubble and that kind of

715
00:37:10,440 --> 00:37:12,200
Speaker 1: that that deflated.

716
00:37:11,680 --> 00:37:12,160
Speaker 3: A lot of things.

717
00:37:12,239 --> 00:37:15,759
Speaker 1: It was a little bit healthy. And then you had

718
00:37:15,760 --> 00:37:18,400
Speaker 1: the housing crisis. So now you flash forward to nineteen

719
00:37:18,440 --> 00:37:20,759
Speaker 1: ninety eight, From nineteen ninety eight to two thousand and eight,

720
00:37:20,800 --> 00:37:23,120
Speaker 1: ten more years, so you see a pattern here, right,

721
00:37:23,280 --> 00:37:25,319
Speaker 1: ten more years, two thousand and eight, and we have

722
00:37:25,560 --> 00:37:30,400
Speaker 1: the housing crisis. Well, the housing crisis. Then when that happened,

723
00:37:30,440 --> 00:37:34,560
Speaker 1: it was so great and there was so much contagion

724
00:37:34,640 --> 00:37:37,920
Speaker 1: with those banks that the FED felt like they had

725
00:37:37,960 --> 00:37:40,560
Speaker 1: no choice and all the central banks, and so what

726
00:37:40,600 --> 00:37:44,160
Speaker 1: did they do. They printed all that money, which back

727
00:37:44,200 --> 00:37:48,440
Speaker 1: then a trillion dollars. And so they printed that money

728
00:37:48,520 --> 00:37:52,040
Speaker 1: and I don't remember exactly what the figure is, so

729
00:37:52,520 --> 00:37:54,279
Speaker 1: we may have to yank that from the show, so

730
00:37:54,360 --> 00:37:57,880
Speaker 1: we don't. I don't want to give people the wrong information.

731
00:37:58,000 --> 00:38:02,799
Speaker 1: But they print that money and that's the first time

732
00:38:02,840 --> 00:38:05,239
Speaker 1: they really printed money two thousand and eight, which is

733
00:38:05,280 --> 00:38:08,600
Speaker 1: what you're talking about, q QI, And that's where the

734
00:38:08,600 --> 00:38:13,040
Speaker 1: structure changed, right, So the structure changed when oh, the

735
00:38:13,080 --> 00:38:15,560
Speaker 1: FED put is here. They're going to save us, and

736
00:38:15,560 --> 00:38:19,880
Speaker 1: there are no consequences. CEO's got their bonuses and payouts.

737
00:38:20,160 --> 00:38:23,279
Speaker 1: Nobody went under. Well, they let a few go under.

738
00:38:23,280 --> 00:38:25,360
Speaker 1: They let Liman go under and bear Stearns go under,

739
00:38:25,840 --> 00:38:31,120
Speaker 1: but they it wasn't the the enmass slaughter of banks

740
00:38:31,160 --> 00:38:36,480
Speaker 1: that should have been. And so we created an expectation

741
00:38:36,920 --> 00:38:39,880
Speaker 1: from the market that the FED will be there. Flash

742
00:38:39,920 --> 00:38:43,359
Speaker 1: forward from two thousand and eight to twenty twenty, and

743
00:38:43,400 --> 00:38:46,200
Speaker 1: you've got the lockdowns and you've got the danger of

744
00:38:46,239 --> 00:38:51,680
Speaker 1: collapsing again, banks collapsing and treasury market freezing up. And

745
00:38:51,719 --> 00:38:55,200
Speaker 1: what do they do They print again, and you know,

746
00:38:55,440 --> 00:38:59,080
Speaker 1: multiples of the last time they printed. And so that's

747
00:38:59,200 --> 00:39:02,520
Speaker 1: kind of where we're at. And that's what you're talking about,

748
00:39:02,520 --> 00:39:06,960
Speaker 1: where that changeover. Now, what do we do because we're

749
00:39:07,000 --> 00:39:10,280
Speaker 1: so indebted? And this isn't just this isn't just the sovereigns.

750
00:39:10,800 --> 00:39:14,280
Speaker 1: This goes from sovereigns to the banks, to the companies

751
00:39:14,280 --> 00:39:18,920
Speaker 1: and corporations down to the individuals and consumers. Everybody's got

752
00:39:19,320 --> 00:39:22,320
Speaker 1: you know, not everybody, but by and large, the average

753
00:39:23,000 --> 00:39:26,280
Speaker 1: of indebtedness is at all time highs.

754
00:39:26,440 --> 00:39:31,879
Speaker 2: Yeah, so back to the hurdle rate. So people see

755
00:39:31,920 --> 00:39:33,560
Speaker 2: their s and P five hundred going up about eighty

756
00:39:33,600 --> 00:39:35,480
Speaker 2: nine percent, but they're losing money, so they have to

757
00:39:35,520 --> 00:39:38,080
Speaker 2: kind of understand this monetary inflation piece. And that's kind

758
00:39:38,080 --> 00:39:39,680
Speaker 2: of one reason why I think it's it's important to

759
00:39:39,680 --> 00:39:42,000
Speaker 2: focus on that, and that's the real number that you're

760
00:39:42,040 --> 00:39:44,600
Speaker 2: trying to beat. There's not a lot of places that

761
00:39:44,640 --> 00:39:50,000
Speaker 2: you can do that today. I'm not sure if you know,

762
00:39:50,040 --> 00:39:51,239
Speaker 2: I don't want to put you on the spot, but

763
00:39:51,320 --> 00:39:55,040
Speaker 2: like the definition of hyperinflation is I think fifty percent

764
00:39:55,120 --> 00:39:56,759
Speaker 2: inflation month over month over month.

765
00:39:56,800 --> 00:40:00,920
Speaker 3: Yeah, right, it's an economic economic that's the technical, technical definition.

766
00:40:00,960 --> 00:40:03,640
Speaker 2: I did an interview with Parker Lewis. It's on the channel.

767
00:40:03,760 --> 00:40:07,000
Speaker 2: Did it really good? He said, that's the technical definition.

768
00:40:07,080 --> 00:40:09,359
Speaker 2: He said, I would say that hyper inflation is when

769
00:40:09,400 --> 00:40:13,080
Speaker 2: you can really see the price changes in real time.

770
00:40:13,239 --> 00:40:15,040
Speaker 2: It's not like when I was a kid, this bottle

771
00:40:15,040 --> 00:40:17,120
Speaker 2: of water was five cents. It's like, no, last year,

772
00:40:17,200 --> 00:40:19,520
Speaker 2: this bottle was right. So he talks about it more

773
00:40:19,600 --> 00:40:22,279
Speaker 2: like that. Not a hard definition. I'm just curious if

774
00:40:22,280 --> 00:40:27,960
Speaker 2: you know, because I don't inflation month over month compared

775
00:40:28,000 --> 00:40:32,960
Speaker 2: to what so, Like if I'm in Argentina in hyper inflation,

776
00:40:33,120 --> 00:40:36,960
Speaker 2: so my currency is inflating. Argentine peso is inflating fifty

777
00:40:36,960 --> 00:40:38,840
Speaker 2: percent to the dollar.

778
00:40:39,560 --> 00:40:41,800
Speaker 3: Now it's the it's their inflation rate, it's inflation.

779
00:40:41,880 --> 00:40:46,600
Speaker 2: So whatever there, they're their own CPI calculation. Okay, So

780
00:40:47,200 --> 00:40:49,319
Speaker 2: the US could never have high inflation as long as

781
00:40:49,320 --> 00:40:50,800
Speaker 2: the US doesn't report high inflation.

782
00:40:51,080 --> 00:40:51,720
Speaker 3: That what you're saying.

783
00:40:52,040 --> 00:40:54,160
Speaker 2: Uh. The reason why I asked that is because I

784
00:40:54,200 --> 00:40:57,520
Speaker 2: saw Bilojie and uh. Another one of my good friends,

785
00:40:57,640 --> 00:41:00,840
Speaker 2: Brent Johnson mister Dollar Milkshake, kind of going back and

786
00:41:00,880 --> 00:41:04,280
Speaker 2: forth on Twitter, and of course Brent is the Dollar Bowl.

787
00:41:05,880 --> 00:41:07,960
Speaker 2: He's much more reasonable if you talked to him in person.

788
00:41:08,040 --> 00:41:11,719
Speaker 2: But you know, Bolagi said, well, the US dollar has

789
00:41:11,800 --> 00:41:15,400
Speaker 2: been in hyperinflation measured in bitcoin.

790
00:41:16,239 --> 00:41:18,920
Speaker 3: Yeah, that's that's absolutely.

791
00:41:18,560 --> 00:41:20,520
Speaker 2: And that's why I was curious measured against one. And

792
00:41:20,600 --> 00:41:22,440
Speaker 2: so the key piece I wanted to kind of transition

793
00:41:22,520 --> 00:41:25,279
Speaker 2: into is that we have to understand that we have

794
00:41:25,360 --> 00:41:28,879
Speaker 2: to measure these things in different ways, otherwise we don't

795
00:41:28,920 --> 00:41:31,480
Speaker 2: have a real number. So if you think you're making

796
00:41:31,520 --> 00:41:34,319
Speaker 2: five percent on the treasuries, and that's good because inflation's three,

797
00:41:34,680 --> 00:41:36,840
Speaker 2: or you think you're making eight percent in the index,

798
00:41:36,920 --> 00:41:39,960
Speaker 2: which is good because inflation's three, that the true number

799
00:41:40,000 --> 00:41:44,160
Speaker 2: is much higher. It's ten twelve percent at least. So

800
00:41:44,200 --> 00:41:46,239
Speaker 2: you have to think about how you're measuring these things.

801
00:41:46,239 --> 00:41:49,680
Speaker 2: And then if we think about the dollar, we also

802
00:41:49,719 --> 00:41:51,880
Speaker 2: have to think about it and measured against other things.

803
00:41:52,160 --> 00:41:54,360
Speaker 2: So if I'm looking at only in dollars, like my

804
00:41:54,480 --> 00:41:56,840
Speaker 2: house is worth, you know it was three hundred and

805
00:41:56,840 --> 00:41:58,600
Speaker 2: eighty thousand dollars a couple years ago. Now it's four

806
00:41:58,640 --> 00:42:01,560
Speaker 2: hundred and eighty thousand for like a median home. But it

807
00:42:01,640 --> 00:42:05,120
Speaker 2: went down in oil barrels per oil, or it went

808
00:42:05,239 --> 00:42:08,319
Speaker 2: down in ounces per ounces of gold, and it went

809
00:42:08,360 --> 00:42:10,960
Speaker 2: down in bitcoin terms as well. And if you think

810
00:42:11,000 --> 00:42:14,280
Speaker 2: about it again, back to the Bology's point, measured in bitcoin,

811
00:42:14,440 --> 00:42:16,960
Speaker 2: we are seeing hyperinflation in the dollar.

812
00:42:17,560 --> 00:42:20,759
Speaker 3: Yeah, because bitcoin is something can't be that has a

813
00:42:20,880 --> 00:42:22,560
Speaker 3: very very very.

814
00:42:22,320 --> 00:42:26,399
Speaker 1: Low inflation rate and it's going it's approaching zero, and

815
00:42:26,480 --> 00:42:31,920
Speaker 1: so the half life of it, so of the of

816
00:42:31,960 --> 00:42:36,520
Speaker 1: the bitcoin inflation, but just like you said, it's a

817
00:42:36,520 --> 00:42:40,759
Speaker 1: great way to measure just how quickly the dollar is expanding.

818
00:42:41,239 --> 00:42:44,880
Speaker 1: And if you look at bitcoin, it does follow the

819
00:42:44,920 --> 00:42:46,200
Speaker 1: expanse of the money.

820
00:42:45,920 --> 00:42:46,960
Speaker 3: Supply pretty well.

821
00:42:47,160 --> 00:42:49,760
Speaker 1: I mean, it's got it's definitely volatile, but the overall

822
00:42:49,800 --> 00:42:52,280
Speaker 1: trajectory is very similar.

823
00:42:52,719 --> 00:42:56,200
Speaker 2: And so per Michael Howell, who's a mister Global Liquidity,

824
00:42:56,440 --> 00:42:58,560
Speaker 2: had him on the show a few weeks ago, so

825
00:42:58,600 --> 00:43:01,240
Speaker 2: you should go check out that interview. But he says

826
00:43:01,280 --> 00:43:04,440
Speaker 2: that the S and P five hundred is ninety percent

827
00:43:04,520 --> 00:43:07,719
Speaker 2: correlated to S and P five hundred, and bitcoin is

828
00:43:07,840 --> 00:43:11,440
Speaker 2: about ninety percent core or I'm sorry, eighty percent correlated.

829
00:43:11,480 --> 00:43:14,720
Speaker 2: So it has an eight point nine to five time

830
00:43:14,920 --> 00:43:19,760
Speaker 2: sensitivity ratio. So for every ten percent increase in global liquidity,

831
00:43:19,800 --> 00:43:23,279
Speaker 2: bitcoin goes up by ninety percent. Gold has a one

832
00:43:23,320 --> 00:43:26,360
Speaker 2: point five time sensitivity, So every ten percent rise in

833
00:43:26,400 --> 00:43:29,319
Speaker 2: global liquidity, gold goes up by about fifteen percent.

834
00:43:29,560 --> 00:43:32,319
Speaker 1: Right, Well, and then but that also has to do

835
00:43:32,360 --> 00:43:34,440
Speaker 1: with the fact that bitcoin's in the middle of its

836
00:43:34,480 --> 00:43:38,360
Speaker 1: adoption phase, right, So that's also occurring.

837
00:43:38,760 --> 00:43:41,200
Speaker 2: So what does that mean that the sensitivity ratio goes

838
00:43:41,320 --> 00:43:43,200
Speaker 2: down as bitcoin gets bigger?

839
00:43:44,040 --> 00:43:47,320
Speaker 1: That I would expect that the that the beta to

840
00:43:48,400 --> 00:43:51,280
Speaker 1: risk assets would go would come down for sure.

841
00:43:51,960 --> 00:43:55,920
Speaker 2: Okay, so I agree with that, right, So as the

842
00:43:55,960 --> 00:43:59,680
Speaker 2: asset gets bigger, as the daily volume gets more, it's

843
00:43:59,719 --> 00:44:01,640
Speaker 2: harder for the price wings to move up and down.

844
00:44:01,760 --> 00:44:05,040
Speaker 2: So when there's you know, ten dollars of trading volume

845
00:44:05,080 --> 00:44:07,359
Speaker 2: per day and I buy eight dollars worth, I move

846
00:44:07,400 --> 00:44:10,360
Speaker 2: the market. When there's one hundred billion or where we

847
00:44:10,400 --> 00:44:12,359
Speaker 2: have hundreds of billions of dollars of trading volume today,

848
00:44:12,400 --> 00:44:14,400
Speaker 2: it's very hard to move the market when it's trillions

849
00:44:14,440 --> 00:44:16,600
Speaker 2: of dollars per day. It's impossible, right, So it's kind

850
00:44:16,640 --> 00:44:20,960
Speaker 2: of like that, But it's also the downside is dampened.

851
00:44:20,960 --> 00:44:23,399
Speaker 2: But the upside is dampened as well, so the sensitivity

852
00:44:23,480 --> 00:44:27,239
Speaker 2: is just dropping. I did this video and I was

853
00:44:27,280 --> 00:44:33,799
Speaker 2: talking about ways to project bitcoin's future valuation. And you

854
00:44:33,840 --> 00:44:38,320
Speaker 2: know most most of your old brothers on Wall Street

855
00:44:38,520 --> 00:44:41,560
Speaker 2: can't seem to value bitcoin because you know, there's no

856
00:44:41,600 --> 00:44:44,560
Speaker 2: intrinsic value, there's no cash flows, blah blah blah. And

857
00:44:44,600 --> 00:44:46,520
Speaker 2: I said, well, there's three ways that we could do it.

858
00:44:46,800 --> 00:44:51,200
Speaker 2: So number one we use like Jery and timmor from Fidelity.

859
00:44:51,440 --> 00:44:54,759
Speaker 2: He uses like Metcalf's law to sort of measure it.

860
00:44:55,160 --> 00:44:56,400
Speaker 2: The second way we can do it is like a

861
00:44:56,480 --> 00:45:00,560
Speaker 2: venture capital firm would do it, So what are the

862
00:45:00,560 --> 00:45:03,160
Speaker 2: markets we're disrupting? If we pull x amount of five

863
00:45:03,160 --> 00:45:05,200
Speaker 2: percent from each of those markets, how much would be worth?

864
00:45:05,680 --> 00:45:08,280
Speaker 2: And the third way would be based off of inflation.

865
00:45:09,040 --> 00:45:12,839
Speaker 2: So if we look at bitcoin moving on liquidity on

866
00:45:12,920 --> 00:45:15,800
Speaker 2: a sensitivity ratio of like a nine time sensitivity ratio,

867
00:45:16,360 --> 00:45:20,520
Speaker 2: then to you referenced earlier, like the CBO is projecting

868
00:45:20,880 --> 00:45:23,160
Speaker 2: how much they're going to print. So we sort of

869
00:45:23,200 --> 00:45:25,359
Speaker 2: have an idea which I'm guessing is undershooting the target,

870
00:45:25,440 --> 00:45:27,280
Speaker 2: but we have an idea of how much global equity

871
00:45:27,320 --> 00:45:29,520
Speaker 2: is going to increase and we can look at sort

872
00:45:29,560 --> 00:45:33,320
Speaker 2: of this way bitcoin moves to that increase of liquidity today.

873
00:45:34,239 --> 00:45:35,400
Speaker 2: Do you think that would be a good way to

874
00:45:35,400 --> 00:45:36,239
Speaker 2: sort of measure.

875
00:45:35,960 --> 00:45:38,600
Speaker 1: It as a starting point, for sure? But then you

876
00:45:38,680 --> 00:45:40,840
Speaker 1: also have to think about the fact that most people

877
00:45:40,840 --> 00:45:43,480
Speaker 1: don't really truly understand what bitcoin is. Yet we're in

878
00:45:43,520 --> 00:45:45,880
Speaker 1: our little bubble and we understand it. We talked with

879
00:45:45,920 --> 00:45:50,839
Speaker 1: people who understand it inherently. And the issue here is that,

880
00:45:51,239 --> 00:45:53,400
Speaker 1: you know, there's a lot of different ways you can

881
00:45:53,440 --> 00:45:56,040
Speaker 1: measure how many assets are in the world, but let's

882
00:45:56,080 --> 00:45:59,800
Speaker 1: just talk Let's just pretend that today there's seven hundred

883
00:46:00,000 --> 00:46:05,480
Speaker 1: million dollars of investable assets. Well, bitcoin at this point

884
00:46:05,680 --> 00:46:12,000
Speaker 1: is a fraction of that. It's it's exactly so and

885
00:46:12,000 --> 00:46:15,600
Speaker 1: and so it's not even a percent and of that.

886
00:46:16,719 --> 00:46:17,960
Speaker 3: So why is that important?

887
00:46:18,000 --> 00:46:21,279
Speaker 1: It's important because right now, as you said, bitcoin is

888
00:46:21,320 --> 00:46:22,760
Speaker 1: seen as a risk asset.

889
00:46:23,000 --> 00:46:24,560
Speaker 3: We talked before about how.

890
00:46:24,600 --> 00:46:27,080
Speaker 1: We're kind of in a gambler's economy like there we

891
00:46:27,160 --> 00:46:28,600
Speaker 1: have a lot of people out there who just feel

892
00:46:28,600 --> 00:46:32,279
Speaker 1: like they're they're getting behind and they're gambling to try

893
00:46:32,320 --> 00:46:35,600
Speaker 1: to catch back up or get ahead and taking a

894
00:46:35,640 --> 00:46:38,160
Speaker 1: lot of risk. And so bitcoin is seen that way

895
00:46:38,320 --> 00:46:40,360
Speaker 1: in a lot of ways. And as are the mean coins,

896
00:46:40,360 --> 00:46:42,160
Speaker 1: and we see the mean coins take off, it's because

897
00:46:42,160 --> 00:46:44,960
Speaker 1: people are just risking money. They're like, come on, I

898
00:46:45,000 --> 00:46:47,600
Speaker 1: hope that I can I can catch up to this inflation.

899
00:46:48,360 --> 00:46:54,239
Speaker 1: And so with the broad broadening and deepening understanding of bitcoin,

900
00:46:54,800 --> 00:46:57,080
Speaker 1: especially because now that we have the ETFs and you're

901
00:46:57,120 --> 00:47:01,000
Speaker 1: and you're seeing institutions dip in, dip into it, they're

902
00:47:01,040 --> 00:47:03,799
Speaker 1: dipping their toe in, and they're starting to understand it.

903
00:47:04,320 --> 00:47:08,520
Speaker 1: When institutions really do understand it and understand how bitcoin

904
00:47:08,600 --> 00:47:10,040
Speaker 1: is different than every other.

905
00:47:10,400 --> 00:47:11,319
Speaker 3: Of those.

906
00:47:12,719 --> 00:47:16,840
Speaker 1: The digital currencies, they'll understand how it can be a

907
00:47:16,840 --> 00:47:20,440
Speaker 1: true store value, how it's digital gold two or three

908
00:47:20,480 --> 00:47:24,640
Speaker 1: point zero for so many reasons, the immutability, the transfer,

909
00:47:24,840 --> 00:47:31,799
Speaker 1: the ease to create commerce with it, to move it.

910
00:47:31,840 --> 00:47:35,759
Speaker 1: You can move a trillion dollars a bitcoin within ten

911
00:47:35,800 --> 00:47:41,879
Speaker 1: minutes basically. So, but once they understand that and they

912
00:47:41,960 --> 00:47:44,880
Speaker 1: get to that true understanding of how bitcoin is different,

913
00:47:45,480 --> 00:47:50,239
Speaker 1: then they'll begin to not just allocate it allocate to

914
00:47:50,360 --> 00:47:53,879
Speaker 1: it in their investments as a risk asset, but they're

915
00:47:53,920 --> 00:47:56,560
Speaker 1: going to allocate to it as a risk off asset.

916
00:47:57,080 --> 00:48:00,120
Speaker 1: Like they'll start taking money not just from stock portfolio,

917
00:48:00,400 --> 00:48:04,040
Speaker 1: but from bond portfolios, and saying, why am I investing

918
00:48:04,360 --> 00:48:09,040
Speaker 1: in this long term treasury bond fund or vehicle when

919
00:48:09,560 --> 00:48:12,920
Speaker 1: I should be protecting my capital with this thing that

920
00:48:12,960 --> 00:48:19,799
Speaker 1: it's called bitcoin that will rise in price exponentially as

921
00:48:19,840 --> 00:48:24,080
Speaker 1: a dollar false in value exponentially. Why wouldn't I make

922
00:48:24,400 --> 00:48:28,919
Speaker 1: that investment instead of hoping that I get a real

923
00:48:29,000 --> 00:48:32,880
Speaker 1: rate of return, which is your hurdle rate again that

924
00:48:33,719 --> 00:48:36,600
Speaker 1: beats that rate of inflation or that expansion of the

925
00:48:36,600 --> 00:48:41,160
Speaker 1: money supply. And so the question is what is that?

926
00:48:41,960 --> 00:48:47,040
Speaker 1: What is that hurdle rate expansive money supply? If you

927
00:48:48,040 --> 00:48:50,640
Speaker 1: could argue that that's really what it is, and then

928
00:48:51,360 --> 00:48:56,000
Speaker 1: bitcoin the price will match both that expansion of the

929
00:48:56,000 --> 00:48:59,040
Speaker 1: money supply and that adoption as a way to protect

930
00:48:59,560 --> 00:49:04,080
Speaker 1: that money supply. And so you are me, We have

931
00:49:04,200 --> 00:49:10,520
Speaker 1: a lot more of our personal liquidity tied up with

932
00:49:10,560 --> 00:49:14,520
Speaker 1: bitcoin invested in bitcoin, invested protected by bitcoin.

933
00:49:14,560 --> 00:49:17,080
Speaker 3: Whereas saved in bitcoin saved in bitcoin.

934
00:49:17,160 --> 00:49:19,520
Speaker 1: Where there's a lot of investors out there who have

935
00:49:19,800 --> 00:49:22,480
Speaker 1: way more money than you and me that haven't even

936
00:49:22,480 --> 00:49:23,160
Speaker 1: thought about it.

937
00:49:23,640 --> 00:49:24,000
Speaker 3: And so.

938
00:49:25,640 --> 00:49:30,719
Speaker 1: The way that bitcoin price moves is not really directly

939
00:49:30,760 --> 00:49:31,799
Speaker 1: correlated to just the.

940
00:49:31,719 --> 00:49:32,680
Speaker 3: Amount of money comes in.

941
00:49:32,880 --> 00:49:35,440
Speaker 1: It has to do with the liquidity too, and so

942
00:49:36,080 --> 00:49:39,200
Speaker 1: there's friction getting in and out of this asset right now,

943
00:49:39,719 --> 00:49:41,920
Speaker 1: and so it's going to get to a point where

944
00:49:41,960 --> 00:49:44,359
Speaker 1: it doesn't have that friction, and that means it's going

945
00:49:44,400 --> 00:49:47,759
Speaker 1: to expand quite a bit more in price and an

946
00:49:47,800 --> 00:49:52,640
Speaker 1: asset value, which to me would be approaching the asset

947
00:49:52,719 --> 00:49:55,879
Speaker 1: value of gold. And that's where you're getting. Then you're

948
00:49:55,880 --> 00:49:58,560
Speaker 1: getting a lot, well thirteen trillion, yeah, twelve or thirty

949
00:49:58,760 --> 00:50:02,600
Speaker 1: years more now yeah, yeah, so yeah, okay.

950
00:50:03,400 --> 00:50:07,080
Speaker 2: Yeah, So people haven't caught on yet. They seem to

951
00:50:07,080 --> 00:50:08,919
Speaker 2: be kind of coming on one on one on one,

952
00:50:09,160 --> 00:50:12,120
Speaker 2: and you know, once everybody agrees with you, then the

953
00:50:12,120 --> 00:50:14,879
Speaker 2: alpha is gone. So the idea is to obviously get

954
00:50:14,920 --> 00:50:17,760
Speaker 2: in before everybody agrees with you on that. On that standpoint,

955
00:50:18,400 --> 00:50:22,600
Speaker 2: So then if to kind of recap this whole conversation,

956
00:50:23,000 --> 00:50:25,920
Speaker 2: the debt doom loop tells us, the debt based monitary

957
00:50:25,960 --> 00:50:27,960
Speaker 2: system tells us, and the debt doom loop tells us

958
00:50:27,960 --> 00:50:30,880
Speaker 2: that the monetary system has to continue to expand unless

959
00:50:30,880 --> 00:50:32,160
Speaker 2: the government says, like I said, pack it up.

960
00:50:32,160 --> 00:50:32,680
Speaker 3: It was a good run.

961
00:50:32,719 --> 00:50:34,840
Speaker 2: Let's shut it down. Otherwise it continues to expand. So

962
00:50:34,880 --> 00:50:37,359
Speaker 2: that's almost all but certain. There's no certaintieson in life,

963
00:50:37,360 --> 00:50:40,000
Speaker 2: but it's almost all but certain. We know that as

964
00:50:40,040 --> 00:50:43,560
Speaker 2: they print money, it's debasing, so prices are going up

965
00:50:43,600 --> 00:50:46,520
Speaker 2: as the rate of money is going or the value

966
00:50:46,520 --> 00:50:49,720
Speaker 2: of the money is going down. But not all assets

967
00:50:49,760 --> 00:50:51,800
Speaker 2: go up at the same rate. Some go up faster

968
00:50:51,880 --> 00:50:54,359
Speaker 2: than others, and so the S and P five hundred

969
00:50:54,440 --> 00:50:57,000
Speaker 2: is basically keeping up with it, and some assets like

970
00:50:57,040 --> 00:50:58,800
Speaker 2: gold go up a little bit faster, and some assets

971
00:50:58,800 --> 00:51:03,319
Speaker 2: like bitcoin go up way faster. So Bitcoin is benefiting

972
00:51:03,360 --> 00:51:06,760
Speaker 2: and during timmer from finality makes this case, not only

973
00:51:06,880 --> 00:51:10,399
Speaker 2: is it the network effects, but also the scarcity and

974
00:51:10,440 --> 00:51:13,799
Speaker 2: the inflation that are all three driving those And so

975
00:51:13,840 --> 00:51:16,359
Speaker 2: we know scarce SATs move up a much faster. So

976
00:51:16,920 --> 00:51:20,200
Speaker 2: then I guess what you're saying, if I'm paraphrasing, is

977
00:51:20,200 --> 00:51:22,239
Speaker 2: then bitcoin is sort of like this life raft that

978
00:51:22,280 --> 00:51:25,280
Speaker 2: you could go to protect yourself from the incoming tide

979
00:51:25,280 --> 00:51:27,600
Speaker 2: of the money printing liquidity that's coming into system.

980
00:51:27,760 --> 00:51:30,800
Speaker 1: I certainly see it that way, yeah, And I believe

981
00:51:30,840 --> 00:51:33,279
Speaker 1: that that more and more people as they as they

982
00:51:33,280 --> 00:51:37,400
Speaker 1: gain understanding, are going to as well, and so you know,

983
00:51:37,480 --> 00:51:42,360
Speaker 1: I feel like I got into got into understanding bitcoin late,

984
00:51:43,600 --> 00:51:48,680
Speaker 1: having just discovered it in twenty twenty, after my son

985
00:51:48,760 --> 00:51:51,879
Speaker 1: actually had said, hey, Dad, you should look at these

986
00:51:51,880 --> 00:51:56,359
Speaker 1: digital currencies or something here, and so, you know, being

987
00:51:56,360 --> 00:51:59,360
Speaker 1: an old Wall Street guy, I ignored it, just like

988
00:52:00,200 --> 00:52:02,200
Speaker 1: virtually every single one of my peers.

989
00:52:02,440 --> 00:52:05,080
Speaker 3: Had done and continues to do.

990
00:52:05,719 --> 00:52:10,399
Speaker 1: And so they're slowly coming around saying is there something

991
00:52:10,440 --> 00:52:12,320
Speaker 1: is this something we ought to be checking out? And

992
00:52:12,360 --> 00:52:14,440
Speaker 1: they're still doing from that perspective of hey, is there

993
00:52:14,440 --> 00:52:16,960
Speaker 1: a lot of money be made here? Instead of hey,

994
00:52:17,000 --> 00:52:20,200
Speaker 1: is this a place where we can safe card our capital.

995
00:52:20,719 --> 00:52:23,040
Speaker 1: It's a different mentality. It's going to take a while

996
00:52:23,080 --> 00:52:27,279
Speaker 1: to get there, but yeah, I believe so. And so

997
00:52:27,320 --> 00:52:30,719
Speaker 1: there's a whole lot more capital that's going to come

998
00:52:30,719 --> 00:52:33,280
Speaker 1: into the protocol, which means that it will be worth

999
00:52:33,400 --> 00:52:35,880
Speaker 1: a lot more in my opinion in the future.

1000
00:52:36,120 --> 00:52:39,480
Speaker 2: Yeah. One thing I've done is I talk about but

1001
00:52:39,520 --> 00:52:42,480
Speaker 2: I've shifted my mentality and I don't think about investing

1002
00:52:42,520 --> 00:52:45,880
Speaker 2: my money. I think about saving my money, so mostly bitcoin,

1003
00:52:45,960 --> 00:52:47,960
Speaker 2: mostly real estate, and I don't invest in real estate

1004
00:52:48,040 --> 00:52:50,840
Speaker 2: or invest in bitcoin. I save my money into those places.

1005
00:52:51,600 --> 00:52:53,520
Speaker 2: I'll do some speculative bets here and there, and some

1006
00:52:53,560 --> 00:52:56,360
Speaker 2: early round companies a little bit that might be investing

1007
00:52:56,520 --> 00:52:58,359
Speaker 2: or speculating whatever you want to call it. But yeah,

1008
00:52:58,400 --> 00:53:01,600
Speaker 2: real estate bitcoin, that's where I save it. So, James,

1009
00:53:01,600 --> 00:53:04,480
Speaker 2: you're the managing partner, one of the manague partners of

1010
00:53:04,480 --> 00:53:06,920
Speaker 2: the Bitcoin Opportunity Fund, and you're sort of taking this

1011
00:53:07,080 --> 00:53:10,080
Speaker 2: Wall Street knowledge and history and brought it into the

1012
00:53:10,120 --> 00:53:13,480
Speaker 2: Big One Opportunity Fund, which is closed right now, might

1013
00:53:13,480 --> 00:53:16,520
Speaker 2: be opening up again here in the near future. Tell

1014
00:53:16,600 --> 00:53:18,160
Speaker 2: us about what else you're working on and what people

1015
00:53:18,200 --> 00:53:19,759
Speaker 2: could be paying attention to that you're working on.

1016
00:53:20,040 --> 00:53:20,360
Speaker 3: Yeah.

1017
00:53:20,400 --> 00:53:24,120
Speaker 1: So, and you're a partner in the Bigcoin Opportunity Fund,

1018
00:53:24,800 --> 00:53:30,120
Speaker 1: and that I mean to us. David Foley and I

1019
00:53:30,280 --> 00:53:35,720
Speaker 1: are doing the day to day being the institutional.

1020
00:53:35,320 --> 00:53:36,960
Speaker 3: Investors for a long time.

1021
00:53:38,040 --> 00:53:43,000
Speaker 1: We see this as a way to not just help

1022
00:53:44,440 --> 00:53:48,279
Speaker 1: make money for investors and generate profits for them, but

1023
00:53:48,360 --> 00:53:51,880
Speaker 1: to help grow the ecosystem, and the bitcoin ecosystem. You

1024
00:53:51,920 --> 00:53:54,160
Speaker 1: think about bitcoin, it's just that base layer. There's so

1025
00:53:54,440 --> 00:53:57,239
Speaker 1: many other things that are going on in bitcoin, and

1026
00:53:57,680 --> 00:54:01,280
Speaker 1: the opportunities are in our mind are tremendous, and we're

1027
00:54:01,400 --> 00:54:04,200
Speaker 1: super excited about every single day we wake up and

1028
00:54:04,200 --> 00:54:06,440
Speaker 1: say what are we looking at to like, how are

1029
00:54:06,440 --> 00:54:10,960
Speaker 1: we thinking about? How we and we're inundated with opportunities

1030
00:54:11,040 --> 00:54:14,239
Speaker 1: and so but the best thing about is that we've

1031
00:54:14,239 --> 00:54:17,839
Speaker 1: got our hurdle rate, which is, hey, what's the risk

1032
00:54:17,920 --> 00:54:20,440
Speaker 1: reward of this opportunity versus what the risk reward of

1033
00:54:20,440 --> 00:54:23,560
Speaker 1: bitcoin is? And that's where we see everything. So being

1034
00:54:23,560 --> 00:54:27,400
Speaker 1: on the bitcoin standard for us makes it very simple

1035
00:54:27,440 --> 00:54:29,080
Speaker 1: for us to look at things that way. And so

1036
00:54:29,719 --> 00:54:33,239
Speaker 1: that's what higher bar, Yeah, very high bar. And you know,

1037
00:54:33,280 --> 00:54:36,799
Speaker 1: I write the Informationist newsletter which I put out every

1038
00:54:36,840 --> 00:54:40,560
Speaker 1: single week, and it just takes one complex topic on

1039
00:54:41,080 --> 00:54:44,560
Speaker 1: financial topic and sympathies it for people. And we talk

1040
00:54:44,600 --> 00:54:48,680
Speaker 1: about things like the Treasury, treasury auctions, the FED, inflation,

1041
00:54:48,840 --> 00:54:51,319
Speaker 1: how to look at inflation, how to understand it, how

1042
00:54:51,360 --> 00:54:54,640
Speaker 1: to understand the debt problem, how to understand the treasury problem,

1043
00:54:54,719 --> 00:54:57,000
Speaker 1: what's going on with social security? Those things, just making

1044
00:54:57,040 --> 00:55:01,000
Speaker 1: it simple and for anybody. And we have, like we

1045
00:55:01,000 --> 00:55:05,240
Speaker 1: were talking about, we have I have doctors, lawyers, firemen, nurses,

1046
00:55:05,680 --> 00:55:09,520
Speaker 1: We've got chemical engineers, we've got aeronautical engineers. We've got

1047
00:55:09,719 --> 00:55:13,680
Speaker 1: all kinds of people in there that they're intelligent people,

1048
00:55:13,800 --> 00:55:17,520
Speaker 1: but just may not have that experience and that knowledge

1049
00:55:17,560 --> 00:55:20,600
Speaker 1: that they should have been taught in school, but they aren't.

1050
00:55:20,960 --> 00:55:22,560
Speaker 1: And so that's what that's what I'm trying to do,

1051
00:55:22,719 --> 00:55:24,520
Speaker 1: is trying to give them that knowledge so they are

1052
00:55:24,640 --> 00:55:26,560
Speaker 1: armed with that to understand what to do in their

1053
00:55:26,600 --> 00:55:29,880
Speaker 1: own investing in their own portfolios.

1054
00:55:30,080 --> 00:55:33,160
Speaker 2: Yeah, all right, cool, Well we're gonna wrap it up.

1055
00:55:33,160 --> 00:55:35,080
Speaker 2: I'm gonna go ahead and we'll link to the informationist

1056
00:55:35,160 --> 00:55:36,520
Speaker 2: in the show notes. We'll link to the Big one

1057
00:55:36,560 --> 00:55:38,719
Speaker 2: Opportunity fund. It's closed right now, but put your name

1058
00:55:38,719 --> 00:55:40,279
Speaker 2: in the pot because we're going to open up second

1059
00:55:40,320 --> 00:55:44,319
Speaker 2: fund number two here pretty quickly. Any closing words, Oh,

1060
00:55:44,360 --> 00:55:46,600
Speaker 2: that's it. Good to be here and I'm looking forward

1061
00:55:46,600 --> 00:55:48,839
Speaker 2: to go hanging out in San Clemente Beach. All right,

1062
00:55:48,840 --> 00:55:51,080
Speaker 2: thanks Jam