Speaker 1: Everybody can feel that things have changed and are changing rapidly,
Speaker 1: especially after the COVID lockdowns. They have the sense that
Speaker 1: something is not the same as it used to be.
Speaker 1: The FIT is trying to fight inflation, yet it's not
Speaker 1: really working. It's coming down the inflation rate. And really
Speaker 1: what it all has to do with, and it all
Speaker 1: comes down to, is the manipulation of money.
Speaker 2: My bond is paying me five and it's costing me three, Like,
Speaker 2: all right, man, that's two percent spread, Like I'm doing
Speaker 2: pretty good. Or if the S and P five hundred
Speaker 2: is making me eight or ten percent and inflation is
Speaker 2: at three or four, like I'm doing pretty good.
Speaker 3: Right.
Speaker 1: But if you're a consumer, go home and do the
Speaker 1: work and add up all your expenses and compare them
Speaker 1: to last year and the year before and the year
Speaker 1: before that. It's a lot of work. It's easier just
Speaker 1: to listen to what the pundits tell you.
Speaker 2: And then if we think about the dollar, we also
Speaker 2: have to think about it and measured against other things.
Speaker 2: So if I'm looking at only in dollars, like my
Speaker 2: house is worth, you know it's three hundred and eighty
Speaker 2: thousand dollars. A couple years ago. Now it's four hundred
Speaker 2: and eighty thousand for like a media in US home.
Speaker 2: But it went down in oil barrels per oil, or
Speaker 2: it went down in ounces per ounces of gold, and
Speaker 2: it went down in bitcoin terms as well. And if
Speaker 2: you think about it again, back to the Bology's point,
Speaker 2: measured in bitcoin, we are seeing hyper inflation.
Speaker 1: And a dollar bitcoin is seen as a risk asset.
Speaker 1: We talked before about how we're kind of in a
Speaker 1: gambler's economy like there, we have a lot of people
Speaker 1: out there we just feel like they're getting behind and
Speaker 1: they're gambling to try to catch back up or get
Speaker 1: ahead and taking a lot of risk. And so bitcoin
Speaker 1: is seen that way in a lot of ways. And
Speaker 1: eyes are the mean coins, and we see the mean
Speaker 1: coins take off. It's because people are just risking money.
Speaker 1: They're like, come on, I hope that I can I
Speaker 1: can catch up the inflation.
Speaker 2: All right, So James, welcome back to the show.
Speaker 1: By the way, thank you for having me.
Speaker 2: Glad we can do this in person. I love doing
Speaker 2: it in person, so you know for the audience. You're
Speaker 2: my partner. We have the Bitcoin Opportunity Fund. You're a
Speaker 2: hedge fun guy, you write the newsletter The Informationist, which
Speaker 2: is amazing information on the macro space. But you're sort
Speaker 2: of known, or maybe in my mind, you talk a
Speaker 2: lot about like the debt doom loop that we're in.
Speaker 2: Sort of how not just the US government and the
Speaker 2: Federal Reserve, but really all the nations and central banks
Speaker 2: of the world are sort of in this proverbial rock
Speaker 2: in the hard place that keeps getting closer and closer
Speaker 2: and closer, right, And so we're in this like debt
Speaker 2: doom loop. I want to frame that up and what
Speaker 2: does that mean? How does that progress? Like over what
Speaker 2: time frame? But then I want to bring it down
Speaker 2: into like more practical terms, So like if I'm a
Speaker 2: business owner, like what does that mean to me? Right,
Speaker 2: if I'm an if I'm trying to manage money for
Speaker 2: my family or like make sure I don't go broke,
Speaker 2: what does that mean to me? So then like how
Speaker 2: do we think about measuring that looking at cycles and
Speaker 2: what do we do about that? So let's start up
Speaker 2: with the frame up the debt doom loop for us?
Speaker 1: Sure, Well, first of all, thank you for having me again, Mark.
Speaker 3: Always good to be here.
Speaker 1: I'm on vacation and even my son and the audience.
Speaker 2: Yeah, we got we have someone in the audience, all right, But.
Speaker 1: It's always good to have people on vacation in your hometown. Yeah,
Speaker 1: so I know that coming from Vegas. But the debt
Speaker 1: doom lop, well, you know, I mean, I do talk
Speaker 1: about this a lot, and the reason is because everybody
Speaker 1: can feel that things have changed and are changing rapidly,
Speaker 1: especially after the COVID lockdowns and uh, and they they
Speaker 1: have the sense that something is not the same as
Speaker 1: it used to be. And they you've seen the price
Speaker 1: of skyrocket, You've seen homes skyrocket and price and then
Speaker 1: get really I liquid, So they're not moving. Interest rates
Speaker 1: are up. The FED is trying to fight inflation, yet
Speaker 1: it's not really working. It's coming down the inflation rate,
Speaker 1: meaning prices are still going up and and it's confusing
Speaker 1: a lot of people.
Speaker 3: And really what it all has to do with, and it.
Speaker 1: All comes down to, which you and I talk about extensively,
Speaker 1: is the manipulation of money. And that manipulation of money
Speaker 1: has been necessary because we've gotten ourselves in this situation
Speaker 1: where and this has all developed central banks, like we're
Speaker 1: talking about, they've all gotten themselves in a situation where
Speaker 1: they're borrowing and borrowing and borrowing so much money that
Speaker 1: they wind up having to manipulate their interest rates and
Speaker 1: their currencies in order.
Speaker 3: To keep up with that borrowing.
Speaker 1: And just before the show, you were talking about how
Speaker 1: you know, debt is kind of stealing from the future,
Speaker 1: and I think about it much in a similar way.
Speaker 1: I think of it more of like it's borrowing from
Speaker 1: the future and you can use it properly. And you know,
Speaker 1: so if you're an individual and you want to have
Speaker 1: a business, but you don't, you know, you're kind of
Speaker 1: stuck in your job. You don't really have enough money.
Speaker 1: Maybe you've got you want to start a restaurant. It's
Speaker 1: going to cost you one hundred thousand dollars to start it,
Speaker 1: but you only have ten thousand dollars in the bank.
Speaker 1: And you're like, well, I can continue to work and
Speaker 1: grind away and keep putting money away, or I can
Speaker 1: use that ten thousand dollars as a leverage for a
Speaker 1: loan that I can then pull that money into the now,
Speaker 1: borrow it from a bank, and start the business right away.
Speaker 1: Start buying the materials I need, and the cookware and
Speaker 1: and the ovens, and all and hiring people, start paying salaries,
Speaker 1: and then you open up the restaurant and suddenly you're
Speaker 1: generating income right away, you're generating productivity. Well, that's borrowing
Speaker 1: from the future. And if you do it responsibly.
Speaker 3: Restaurants.
Speaker 1: I use this example because it's really easy for people
Speaker 1: to visualize not maybe not the best.
Speaker 2: Yeah, don't do the restaurant, but don't do the restaurant.
Speaker 1: But but if you do it responsibly, that's great. You
Speaker 1: you you've built a business, you're producing, You're you're adding
Speaker 1: productivity into the into the national GDP. Right, but we've
Speaker 1: gotten ourselves in a situation now. Mark that the entire nation,
Speaker 1: all of the western nations and developed nations, they're all
Speaker 1: using debt ad nauseum to paper up inefficiencies, whether it's
Speaker 1: it's energy and efficiencies or it's just capital and efficiencies,
Speaker 1: and they're using that borrowing to close that gap. So,
Speaker 1: for instance, right now, are our federal government is borrowing
Speaker 1: just about two trillion dollars a year, meaning they're above
Speaker 1: and beyond what they have to borrow to pay down
Speaker 1: past debt. So we're running two trillion dollar deficits at
Speaker 1: a time that we're not even in a recession. So
Speaker 1: the irresponsibility that's coming out of Washington is monumental. It's
Speaker 1: absolutely incredible, and it's it's mind numbing for people like
Speaker 1: you and me who have been in business, running businesses,
Speaker 1: and you look at that, it's just it's not only
Speaker 1: is it irresponsible, it's it's putting us on.
Speaker 3: A path that's irreversible.
Speaker 1: And so why is that, Well, because we're running these
Speaker 1: deficits at a time that we're not even officially in
Speaker 1: World War arguable, but we're not in hot conflict right
Speaker 1: now somewhere, and so we're borrowing those two trillion dollars
Speaker 1: from who.
Speaker 3: So we just have to keep borrowing and borrowing and
Speaker 3: borrowing and add to that national debt.
Speaker 1: And so what happens, Well, we've seen the debt grow
Speaker 1: from just when we talk about the debt spiral.
Speaker 3: You and I talked about.
Speaker 1: This almost almost two years ago on this and I
Speaker 1: wrote a piece on it two years ago August about
Speaker 1: how we are entering a debt spiral where we just
Speaker 1: can't get out of it, and meaning the US government.
Speaker 3: So what is that?
Speaker 1: To frame it up, Well, the debt spiral means that
Speaker 1: we have accumulated so much debt that it requires more
Speaker 1: debt to pay down that old debt and eventually to
Speaker 1: pay that interest on that debt.
Speaker 3: And we're there.
Speaker 1: So of those two trillion dollar deficits, we're running one
Speaker 1: trillion dollars that we're spending a year is on interest
Speaker 1: on our past debt. So we're bumping up against when
Speaker 1: I wrote that piece, where we had thirty one point
Speaker 1: four trillion dollars of debt, and now we're just below
Speaker 1: thirty five trillion in just two years and not even.
Speaker 1: And so we're now at the point where we're spending
Speaker 1: a trillion dollars on interest alone on that debt, and
Speaker 1: we're spending so much money that we can't close that gap.
Speaker 1: So what do I mean by that?
Speaker 3: Well, if the.
Speaker 1: US government was a company on the New York Stock Exchange,
Speaker 1: which it's not, I understand because we have the money printer,
Speaker 1: but just put that aside for a second, we would
Speaker 1: consider it a zombie company.
Speaker 3: And why is that? Well, if you look at.
Speaker 1: The national debt and how much we spend, so are
Speaker 1: the amount of money we take in each year in revenues.
Speaker 1: You know the in fact, I can pull it up here.
Speaker 1: The CBO just updated their estimates for twenty twenty four,
Speaker 1: so and their estimates are that we're going to take
Speaker 1: in twenty eight point five trillion dollars in GDP. Okay,
Speaker 1: so that's the national productivity. And off of that, we
Speaker 1: have a tax base, as you will know, that is
Speaker 1: going to be four point nine trillion dollars estimate. Okay,
Speaker 1: so we're going to the US government has four point
Speaker 1: nine trillion dollars of revenue. We of course the government
Speaker 1: is not creating anything, they're just taking from our productivity.
Speaker 1: But they're on the other side of that. The flip
Speaker 1: side of that is they're spending six point nine trillion
Speaker 1: dollars and there's your two trillion dollar deficit, which is
Speaker 1: now seven percent of GDP. That's a bad number. Okay,
Speaker 1: So why is it a zombie Why would it be considered.
Speaker 3: A zombie company?
Speaker 1: Well, the most important to frame up how to think
Speaker 1: about those deficits. You have to think about all those
Speaker 1: expenses that you may be able to cut in order
Speaker 1: to fix it. But the issue here is that our
Speaker 1: mandatory expenses, which are Social Security, Medicare, and Medicaid, add
Speaker 1: up to about four point one trillion dollars. Remember these
Speaker 1: are not numbers for me. This is from the Congressional
Speaker 1: Budget Office that puts out this estimate every single year,
Speaker 1: and they do that kind of as a wake up
Speaker 1: call the Congress and say, hey, this is we need
Speaker 1: to fix some of our policies here because we're we're
Speaker 1: on a bad path. But anyway, so we're spending four
Speaker 1: point one trillion. Remember remember we're taking four point nine,
Speaker 1: so you've got eight hundred trillion dollars left. Well, our
Speaker 1: defense spending is nine hundred and fifty billion this year
Speaker 1: that we know of. It could be there, could have
Speaker 1: a lot of other expenses tucked in other places.
Speaker 2: And to put that number in relation, not to cut
Speaker 2: you off, but the US spends more on its military
Speaker 2: than the next ten nations combined. So it's not just
Speaker 2: military spending. It's like our military spending is more than
Speaker 2: the next ten nations all put together. So it's an astronomical,
Speaker 2: astronomical number.
Speaker 3: Right.
Speaker 1: So now you've got so you've got four point one
Speaker 1: plus nine hundred and fifty, you're already over five trillion
Speaker 1: dollars of spending. Then you've got your the net interest
Speaker 1: because the net interest on your debt. You've got your
Speaker 1: debt that's over a trillion dollars of interest expenses. You
Speaker 1: get some back from inter government agencies, let's call it
Speaker 1: nine hundred billion dollars. Well, your total mandatory expenses now
Speaker 1: are over six trillion dollars. And that doesn't even take
Speaker 1: into account the disgustioning expenses. So your deficit's two trillion dollars.
Speaker 1: So now you've got to borrow money. You have to
Speaker 1: issue more debt to pay down debt that's maturing because
Speaker 1: you don't have the money to pay it down, so
Speaker 1: you're borrowing more, which means that when you're running these deficits,
Speaker 1: mark this this is inflationary. This is money that they're
Speaker 1: basically just printing and putting into the economy and continuing
Speaker 1: to grind the economy on a nominal basis. And so
Speaker 1: all we're watching inflation just continue to rise and so
Speaker 1: and as that's occurring, the FED is raising interest rates,
Speaker 1: which is making the interest payments on that past debt
Speaker 1: more expensive, which means that they that the government has
Speaker 1: to issue more debt, which means that they have to
Speaker 1: pay more interest on more debt. And so you get
Speaker 1: into what's called a debt spiral, and there's really no
Speaker 1: way out. It's like, you know, if you're you're you're
Speaker 1: trying to meet your expenses, you're using credit cards, and
Speaker 1: sooner or later you those credit cards max out because
Speaker 1: you're you're not.
Speaker 3: Making enough money, you're borrowing it, but.
Speaker 1: You're paying interest on that, and then sooner or later
Speaker 1: you're going to have to take on another credit card
Speaker 1: just to pay the interest on the last credit card.
Speaker 1: And that's the debt spiral. And so we saw it
Speaker 1: happen with Greece and a number of other nations in
Speaker 1: the last twenty years, and that's where we're at.
Speaker 2: So basically, the debt can't be paid down because of
Speaker 2: the situation that you framed up. Another reason why, though,
Speaker 2: is because of the nature of the monetary system in
Speaker 2: nineteen seventy one, going from like maybe arguably before nine
Speaker 2: seventy one, but going from like an equity based system,
Speaker 2: a gold system, to a debt based system. So the
Speaker 2: debt also has to grow from that perspective as well.
Speaker 2: So we have sort of two reasons why it can't
Speaker 2: go down. We're spiraling out of control. The deficit, the
Speaker 2: amount of debt they're taking on is growing at an
Speaker 2: alarming rate. I think it's about a trillion dollars per quarter.
Speaker 1: Almost the last check, it's about a trillion dollars every
Speaker 1: hundred days.
Speaker 2: Yeah, which is just about a quarter. I mean, it's
Speaker 2: just an insane amount. And that is what's causing all
Speaker 2: this to happen. Okay, so that's the debt doom loop. Now,
Speaker 2: there's a lot of people who have been calling for
Speaker 2: this to all come to an end for a long time.
Speaker 2: I'm Peter Schiff, Harry Dents written a number of books
Speaker 2: about it. You know, we can go on and on
Speaker 2: and on, but it seems like they never see, they
Speaker 2: fail to take into account how many more tricks up
Speaker 2: the sleeve that you know, these central bankers can come
Speaker 2: up with. But at the same time, it does seem
Speaker 2: like the walls are closing in the rock and the
Speaker 2: hard place is getting closer and closer together. I mean,
Speaker 2: how do you think about that? How do you project
Speaker 2: that out?
Speaker 3: Well, I mean you hear a lot of people. You
Speaker 3: hear people say, well, why don't they just cut expenses? Right,
Speaker 3: I mean, clearly, if we're.
Speaker 1: Spending too much, just stop spending so much.
Speaker 3: Well, you just heard.
Speaker 2: Where are we going to cut Well, in twenty twenty,
Speaker 2: we were spending about what four point six I think
Speaker 2: it was four point six trillions. We've gone from four
Speaker 2: point six to almost seven trillion in just a couple
Speaker 2: of years. And like, the world wasn't catastrophic in twenty twenty, Like,
Speaker 2: why couldn't we just go back to like spending in
Speaker 2: twenty twenty.
Speaker 1: There's a number of reasons, but a lot of it
Speaker 1: has to do with when we had the lockdowns that
Speaker 1: pulled the a string that caused disruptions in a lot
Speaker 1: of areas that they didn't expect. And one of the
Speaker 1: areas that it caused disruption is well, they printed so
Speaker 1: much money because there's so much to dig into in
Speaker 1: the treasury market. But just for suffice to say that
Speaker 1: the treasury market got it was dysfunctional, and so the
Speaker 1: whole reason we print money is to keep the treasure
Speaker 1: market going right. So the Fed printed money, it expanded
Speaker 1: the m to the money supply. That caused that, Plus
Speaker 1: the problems with the supply chains caused inflation, and so
Speaker 1: that caused the need to adjust some of the benefits
Speaker 1: for retirees, so security, and that's a whole nother problem
Speaker 1: that we can talk about, but so security that those
Speaker 1: benefits were adjusted higher from the cost of living at
Speaker 1: the same time that boomers were retiring en mass because
Speaker 1: they were like, you know what, I don't need to
Speaker 1: be in the workforce anymore. My house is worth so
Speaker 1: much money. Now I've got these retirement benefits, I've got
Speaker 1: my pension, I've got the Social Security and Medicare Medicaid.
Speaker 3: I'm set. I'm going to retire. So now they're paying
Speaker 3: out at a.
Speaker 1: Much higher rate than they expected, and so this has
Speaker 1: caused a massive gap in those in that line item. Yeah,
Speaker 1: that exactly, So that line item jumped higher. So so
Speaker 1: what do they do if they you heard what we said,
Speaker 1: the mandatory expenses signed into legislation or defense or interest
Speaker 1: on your debt, you're not going to You're not going
Speaker 1: to default on your debt if you if.
Speaker 3: You issue in your own currency.
Speaker 1: But where are they going to cut? So that's not
Speaker 1: really possible. And number one, there's there's really no incentive
Speaker 1: to do it. We can talk about Republicans or Democrats
Speaker 1: or which parties were that's spending, it doesn't matter. They're
Speaker 1: all in the same game. They spend to get re elected.
Speaker 1: It's just we hear Jeff Booth talk about it all
Speaker 1: the time. If you want to, if you want to
Speaker 1: find where the problem is, look at the incentives, and
Speaker 1: the incentive.
Speaker 3: Is to get re elected.
Speaker 1: So if the incentive is to get re elected, the
Speaker 1: incentives to then spend money, make sure you take care
Speaker 1: of your constituents, those who are donating to your campaigns,
Speaker 1: make regulations good for those companies and those constituents, and
Speaker 1: then just work it around so you can get re elected.
Speaker 1: And that all points to spending more money. So we
Speaker 1: don't like right now, Mark, we don't even have a
Speaker 1: debt ceiling.
Speaker 3: We paused it.
Speaker 1: There's no debt ceiling, so we could just keep spending
Speaker 1: and Congress has no limit and that's not going to
Speaker 1: come up again until January. So we go right through
Speaker 1: this election just spending ad nauseum.
Speaker 2: So in the last debt ceiling debate, Biden himself, when
Speaker 2: he was still able to talk to someone coherently, had said,
Speaker 2: we have to raise the debt because the US can't default.
Speaker 2: The US is never defaulted, so we need to get
Speaker 2: more debt to pay the existing debt. I mean, he
Speaker 2: basically said it.
Speaker 3: Right there.
Speaker 2: But it's not I mean, it's it's certainly not a
Speaker 2: political thing. That's a math thing, right, And so it's
Speaker 2: like we owe the money, the money's got to be paid,
Speaker 2: and we've got to print the money. Now, there's certainly
Speaker 2: a lot of pork, as we call it, right, that's
Speaker 2: that's certainly getting funded as well. But at the same time,
Speaker 2: it's a math problem that we're in. And unless the
Speaker 2: government wants the default, then this is the path that
Speaker 2: we're on. And so when I say default, default to
Speaker 2: the old people that are owed entitlements, right, lou Gramman
Speaker 2: talks about you know, other nations they can't print dollars,
Speaker 2: so they aren't a tough problem. But the US doesn't
Speaker 2: owe dollars either. The USO's like medical services for example. Right,
Speaker 2: Although we do know that the homeless, homeless population half
Speaker 2: of the population are now baby boomers, so we do
Speaker 2: know that those entitlements are being cut somewhat skeeping up,
Speaker 2: they're not keeping up for sure, and so those entitlements,
Speaker 2: those promises that were made to the VA, the veterans,
Speaker 2: and to those old people, they're not being met, which
Speaker 2: is why the homeless population is sort of being grown
Speaker 2: from that. Okay, so that's sort of the that sort
Speaker 2: of sums up the problem. Now, correct me if I'm wrong,
Speaker 2: But I mean the US is the cleanest shirt in
Speaker 2: the dirty laundry, so to speak. So we can basically
Speaker 2: take this sort of problem and extrapolate it to.
Speaker 3: The rest of the world.
Speaker 2: I mean, Japan, the ECB, Europe, I mean, they're in
Speaker 2: worse situations than the US.
Speaker 1: Yeah, I mean we'll go into what you said when
Speaker 1: Biden the last time you talked about the debt, uh,
Speaker 1: the debt spiral. Well, just this last debate, he was
Speaker 1: talking about how well he's got a solution for you know,
Speaker 1: fixing social Security and his solutions to raise taxes, raise
Speaker 1: taxes on the rich.
Speaker 2: Oh, they don't pay their fair share.
Speaker 1: Now of course, if you but even if you took
Speaker 1: if you raise taxes on the on the seventy one
Speaker 1: trillionaires we have in the United States or billionaires you
Speaker 1: have in the United States, you know you would get
Speaker 1: it like.
Speaker 2: A that was like a Biden moment there, right, A thousand.
Speaker 1: Trillions, a million trillionaires. So but if you raise tax
Speaker 1: on our billionaires, the seventy one of them that last count,
Speaker 1: you would be able to tax. What if you tax
Speaker 1: them one hundred percent, you have five trillion dollars. The
Speaker 1: problem is where we have a social security hold that's
Speaker 1: one hundred and seventy two trillion dollars. What's so important
Speaker 1: about that is that you're talking about unfunded liabilities on
Speaker 1: top of debt. We're talking about something that's approaching a
Speaker 1: quarter of a quarter of quadrillion dollars two hundred and
Speaker 1: fifty trillion dollars of owing. So debt and unfunded liabilities
Speaker 1: things that we owe in the future. So taxes, I mean,
Speaker 1: that's clearly it's just not going to work to fix
Speaker 1: this whole And also if you, as you well know,
Speaker 1: the more you tax, the less you incentivize productivity, so
Speaker 1: product research and development, investing into productive product lines, hiring people,
Speaker 1: all that. So you wind up getting higher tax on
Speaker 1: lower productivity and actually declining productivity.
Speaker 3: So that's not good.
Speaker 1: So, but just to make to make it clear that
Speaker 1: taxes aren't going to work either, So what do you do?
Speaker 1: You just issue more debt. But if you issue more debt,
Speaker 1: then the only way you can keep that going, that
Speaker 1: whole charade going, is by exporting your inflation on the world.
Speaker 1: So all we're doing is we we are creating a
Speaker 1: situation where we have no choice but to have high
Speaker 1: inflation in order to have taxes on larger excuse me
Speaker 1: nominal GDP to pay down past debt.
Speaker 3: And so that's what we're doing. Excuse me.
Speaker 2: So sounds sounds pretty bleik, James, sounds pretty bleak. So
Speaker 2: what I'd like to do is, you know, people hear
Speaker 2: from me all the time, and so I kind of
Speaker 2: give my projection of what I think happens over the
Speaker 2: rest of this decade, but I'd like for you to
Speaker 2: kind of tell us what you think is the base case. Obviously,
Speaker 2: anything is possible. Let's talk in probabilities. What do you
Speaker 2: think is the most probable outcome over the next what
Speaker 2: do we have, you know, six years at this point.
Speaker 2: Then we're going to talk about, like I said, if
Speaker 2: we're a business owner, like what does this mean for you?
Speaker 2: How do you think about that? And then I want
Speaker 2: to talk about the safety valve that we all have,
Speaker 2: which is bitcoin and stuff that we see happening over there.
Speaker 2: But let's just talk about what is your sort of
Speaker 2: base case for how this continues for the rest of
Speaker 2: the decade.
Speaker 1: Well, I mean, look, we've got a lot of uncertainty
Speaker 1: right now politically, so we're not You're watching people try
Speaker 1: to sort of figure out in the markets who's going
Speaker 1: to win, whether it's gonna be Trump or what's gonna buy.
Speaker 2: But you said, regardless of the political party, it's more
Speaker 2: of the same.
Speaker 1: But you're watching Wall Street kind of position themselves. And
Speaker 1: the reality is is that because of what we're talking about,
Speaker 1: because of them, just the sheer amount of debt that
Speaker 1: we have, it's so great and those liability are so
Speaker 1: great that there is no choice but to have that inflation.
Speaker 1: And so you can think about it in this way.
Speaker 1: We were talking about it before the show, how the
Speaker 1: sixty to forty portfolio.
Speaker 3: Is kind of dead, and the.
Speaker 1: Reason for that is that who wants to invest in
Speaker 1: a thirty year treasury that they know is going to
Speaker 1: be worth less on real terms the money they get
Speaker 1: back from that thirty year treasury in thirty years than
Speaker 1: when they put in, Like.
Speaker 3: Who wants to do that? You're going to have.
Speaker 1: So in the next five, six, seven, eight years, I
Speaker 1: expect us to get into a period of very high inflation.
Speaker 1: We could see a downturn we're starting to see now
Speaker 1: data that's showing that the economy is kind of rolling
Speaker 1: in a lot of areas. It's confusing because you've got
Speaker 1: the government spending so much money that we've created a
Speaker 1: situation where this fiscal dominance, and so that fiscal dominance
Speaker 1: is the government is spending and spending and spending like
Speaker 1: mad and it's creating pockets of expansion at the same
Speaker 1: time that you've got pockets of contraction in private areas.
Speaker 3: Uh So, any any.
Speaker 1: Business that is that is beholden to or is affected
Speaker 1: by interest rates, especially these high interest rates, they're starting
Speaker 1: to feel the pinch.
Speaker 3: The margins are compressing.
Speaker 1: Uh they're having to pay more on debt when they
Speaker 1: when they go out to get a new line of
Speaker 1: credit or their line of credit resets and it's a
Speaker 1: higher rate, they're starting to have to pay more interest
Speaker 1: on that. You're you're not seeing as much hiring and
Speaker 1: so the job numbers that the job claims, the unemployment
Speaker 1: is ticking up, and so you're seeing this economy that
Speaker 1: looks like it's it's turning over, especially because we got
Speaker 1: numbers this morning in the services industry, really important part
Speaker 1: of the US economy. And that that feels like it's
Speaker 1: turning over, but we can't have that. We can't We
Speaker 1: could have kind of a soft landing and continuation on.
Speaker 1: That will happen if we keep spending money, we keep
Speaker 1: issuing debt, and we keep creating more inflation. But the
Speaker 1: reality is if we get into a deep recession, we're
Speaker 1: going to have to print so much money it's going
Speaker 1: to make your eyes bleed.
Speaker 3: And so how much do we print.
Speaker 2: In twenty twenty eleven trillion and.
Speaker 1: The FED bought six trillion of that, So really, the
Speaker 1: Fed we're going to have to print multiples of that
Speaker 1: this time because just the sheer amount of debt.
Speaker 3: So why does that matter?
Speaker 1: What matters is I see a period where, whether or
Speaker 1: not it's because it's blatantly obvious or they admit it,
Speaker 1: we're going to have high inflation. And the reason is
Speaker 1: that we have to keep printing money in order to
Speaker 1: make sure that the treasury market remains functional. We've heard
Speaker 1: we've heard Powell talk about it recently, not this last meeting,
Speaker 1: but the meeting before where he was talking about where
Speaker 1: does he feel comfortable.
Speaker 3: With bank reserves?
Speaker 1: And as bank reserves get down to ten percent, of GDP. Well,
Speaker 1: then he starts getting nervous, and we're right about that
Speaker 1: level right now. At well, actually, bank reserves are up
Speaker 1: over three trillion. I apologize that's not quite right, but
Speaker 1: we're getting towards that level. And when the reverse repo
Speaker 1: where all the excess slashes from that, all that money printing,
Speaker 1: where it's parked, when that's gone, then they're really watching
Speaker 1: that number because when that treasury market gets dysfunctional, then
Speaker 1: they're going to have to print money and make sure
Speaker 1: that that it stays liquid. So we're seeing, Okay, this
Speaker 1: all matters, because the big picture is we're seeing little
Speaker 1: hints that they're getting ready or already injecting liquidity into
Speaker 1: the market. So you saw and the money supply him
Speaker 1: too is ticked back up in the last six or
Speaker 1: eight weeks, right, and so how.
Speaker 3: Is that happening?
Speaker 1: Well, the central banks are finding ways to get money
Speaker 1: into the system because they know that we can't have
Speaker 1: this hard landing because they don't want to print another
Speaker 1: ten twenty trillion dollars that would be that would make
Speaker 1: inflation rip higher again.
Speaker 3: But what's the choice?
Speaker 1: Right, So we're seeing things like is the the the
Speaker 1: international swaps and Derivatives Association come out with a letter
Speaker 1: that advised that implored the central banks and other authorities
Speaker 1: here to get rid of the limit of treasuries that
Speaker 1: banks can own. Basically, what it said was remove them
Speaker 1: from the risk calculations.
Speaker 3: They could own as many.
Speaker 1: As they want, arguing that treasuries are riskless. We know
Speaker 1: they're not riskless. Yeah, but well why would they if
Speaker 1: they do that? Well, that just creates the ability just
Speaker 1: to keep liquidity going into the system. You don't have
Speaker 1: to have those checks and balance of just how much
Speaker 1: the how how much liquidity the banks have available for
Speaker 1: their capital base. Right, So that's one thing, and then
Speaker 1: you're watching Janet Yellen do something called this regular treasury buyback.
Speaker 1: Is it really QY quantitative easing? No, but they're buying
Speaker 1: off them, They're buying the off the run treasuries that
Speaker 1: are not as liquid, just to make sure that there's
Speaker 1: more liquidity. You know, there's more liquidity, there's hints of
Speaker 1: more liquidity, more liquidity more. So I expect this to
Speaker 1: continue and possibly accelerate, especially as we see you know,
Speaker 1: some commercial real estate, not all commercial real estate is bad,
Speaker 1: but there are pockets of of difficult spots, and we're
Speaker 1: going to see some bank rescues or whatnot in the
Speaker 1: next six to nine.
Speaker 2: Months, which means more liquidity.
Speaker 1: More liquidity and all points to what more more inflation,
Speaker 1: which goes back to your, uh, your point of Okay,
Speaker 1: what what can individuals do and what can and entrepreneurs
Speaker 1: do to make sure that they're on the right side
Speaker 1: of this, right So, and that's really the big question.
Speaker 1: And so for me, I'm seeing that if if you're
Speaker 1: an investor and you're investing in bonds, well, I mean,
Speaker 1: God help you, right, I mean like they may be
Speaker 1: a trade, but I would not be investing in bonds
Speaker 1: long term personally. And if on the flip side, if
Speaker 1: you're an entrepreneur, you know, and you're borrowing, if you
Speaker 1: can borrow at a rate that's fixed and that meets
Speaker 1: your requirement for your capital requirement, then that's an intelligent
Speaker 1: thing to do for me. But what I wouldn't do
Speaker 1: is I wouldn't be beholden to rates that could adjust
Speaker 1: much higher, because that to me in the in the
Speaker 1: near future could be a problem.
Speaker 2: So to kind of recite this and sort of recap
Speaker 2: it back because of the debt based montary system and
Speaker 2: the debt dooom loop that we have that you set
Speaker 2: up in the beginning. The system has to continue as
Speaker 2: long as the governments to continue to pay the things
Speaker 2: that they're obligated to pay, then they're gonna have to
Speaker 2: continue to borrow and continue to print money. Of course,
Speaker 2: well theoretically, philosophically, why would you default when you can
Speaker 2: print money? Right, So there's there's number one, number two
Speaker 2: more emperiically, we can see that pretty much every nation
Speaker 2: right now today in the world does that. So you know, Lebanon, Turkey, Venezuela, Argentina, Peru.
Speaker 2: I mean, go down the list. They're all printing and
Speaker 2: using debt to offset this. So there is no historical
Speaker 2: context for a nation just going, well, there's a good run, boys,
Speaker 2: let's fold up shop like there's just no historical context,
Speaker 2: and we see it happening in real time all around
Speaker 2: the world where this is exactly what they do and
Speaker 2: you just print, tell you can't print anymore. And I
Speaker 2: didn't want to kind of go I'm not going to
Speaker 2: go through my whole thesis, but you know, I think
Speaker 2: things end more in a whimper than a bang. Everybody's
Speaker 2: thinking that there's going to be this final days where
Speaker 2: the system is going to crash and the dollar is
Speaker 2: going to die and the FED losers. But it's a
Speaker 2: whimper and we know that just because that's what Zimbabwe does,
Speaker 2: and they obviously inflate a lot faster than in other countries.
Speaker 2: But it's a wimper, not a bang, and so I
Speaker 2: think it continues. So that's sort of my base case
Speaker 2: as well. Now you sort of use like an Austrian
Speaker 2: economics kind of term on inflation, it sounds like because
Speaker 2: you're talking about more inflation ahead in terms of money
Speaker 2: printing and not really consumer prices, and maybe you're using
Speaker 2: those interchangeably. I recently talked about on a different video
Speaker 2: how Ledg von Misis in nineteen fifty gave a talk
Speaker 2: of how they were changing the definition of the word
Speaker 2: inflation from monetary inflation to prices, and in nineteen fifty
Speaker 2: he called them out on this and he said, you
Speaker 2: know the reason why is because then they can lie
Speaker 2: to you and hide the true inflation, which is the
Speaker 2: money supply increasing. And so you sort of set up
Speaker 2: why the money supply would increase and say there's more inflation,
Speaker 2: there's more price inflation for a lot of other things
Speaker 2: like having to re onshore near shore, you know, less
Speaker 2: global cooperation and things like that. Okay, so but I
Speaker 2: want to hit on that monetary inflation for a minute.
Speaker 2: Because you talked about why bonds are bad you wouldn't
Speaker 2: buy them, or why entrepreneurs or business owners should think
Speaker 2: about fixing in debt. So if we think about and
Speaker 2: this is where I think most people are completely caught
Speaker 2: off sides by this. So they're looking at the government
Speaker 2: given numbers, the CPI consumer price inflation, which is a
Speaker 2: false number for any number of reasons we can talk about.
Speaker 2: But that number today is in the threes.
Speaker 3: Highly manipulated of course.
Speaker 2: Right, So if you know my bond is paying me
Speaker 2: five and it's costing me three, like all right, man,
Speaker 2: that's a two percent spread, Like I'm doing pretty good.
Speaker 2: Or if the S and P five hundred is making
Speaker 2: me eight or ten percent and inflation's at three or four,
Speaker 2: like I'm doing pretty good.
Speaker 1: And if you're a consumer, go home and do the
Speaker 1: work and add up all your expenses and compare them to.
Speaker 3: Last year and the year before, right, and the year
Speaker 3: before that.
Speaker 1: It's a lot of work it's easier just to listen
Speaker 1: to what the pundits tell you, right.
Speaker 2: But so the problem why I think most people are
Speaker 2: caught off sides by this is they see their paycheck
Speaker 2: going into this index fund and the S and P
Speaker 2: five hundred is going up at nine ten percent to
Speaker 2: whatever it is. But and like I said, inflation's at
Speaker 2: three four percent, like, hey, I'm doing pretty good. To
Speaker 2: your point, if they would do the math, they'd find
Speaker 2: out that it's not. But back to sort of that
Speaker 2: monetary or that Austrian view of monetary inflation, which is
Speaker 2: the money supply increasing the debasement rate. And so the
Speaker 2: money supply since twenty nineteen through twenty twenty three has
Speaker 2: been increasing in the US by ten percent. So that's
Speaker 2: what we call the hurdle rate.
Speaker 1: So and since since seventy one, it's it's about seven
Speaker 1: point one percent on average, Like.
Speaker 2: Yeah, but when you if you look at a chart
Speaker 2: of you know, M two or FED balance sheet or whatever,
Speaker 2: you can see that the trend line keeps getting steeper steeper, steeper,
Speaker 2: steeper steeper. I think, you know, I don't want to
Speaker 2: go into it. You and I've talked about it, but
Speaker 2: really pretty much most of the financial data pre two
Speaker 2: thousand and eight, doesn't you have to look at it
Speaker 2: with an asterisk. We're in a different environment that we
Speaker 2: are in today, so that trend line has changed. So
Speaker 2: since twenty nineteen, we're at about ten percent. So we
Speaker 2: have the monetary supply, the rate of debasement is moving
Speaker 2: up ten percent, plus we have the inflation, plus we
Speaker 2: probably have to adjust for risk. So I don't know,
Speaker 2: does that bring the hurdle rate up to twelve or
Speaker 2: fifteen percent? Could be, and so then we get four
Speaker 2: or five percent on bonds. And how are you going
Speaker 2: to get four five percent of bonds when we have
Speaker 2: this ten twelve percent hurdle.
Speaker 1: Rate right where you buy a bond at that's that's
Speaker 1: yielding four and a half percent now. And yeah, you
Speaker 1: might get a trade here between now and the time
Speaker 1: that the Fed lowers rates and make a couple percent
Speaker 1: off of that. Mean you could make you know, multiples
Speaker 1: of that. But the problem is if we get into
Speaker 1: a downturn and that money supply is expanded. Like you said,
Speaker 1: that structural change happened when we printed for the first time,
Speaker 1: So if you go back, it was really nineteen eighty
Speaker 1: seven that when that crash, I was in high school,
Speaker 1: but that the Black Monday occurred and green Span came
Speaker 1: out and said, don't worry Wall Street, We've got your backs.
Speaker 1: We're not going to let you collapse. We're not called
Speaker 1: the banks collapse. We're going to make sure that the
Speaker 1: market is okay. And that was just a signal to them,
Speaker 1: but they didn't really do anything. Flash forward to nineteen
Speaker 1: ninety eight, just eleven years later, and you had the
Speaker 1: Long Term Capital Management Debacle. This is a firm that
Speaker 1: was there was a hedge fund that was run by
Speaker 1: two Nobel laureates and they were these geniuses and they
Speaker 1: actually there's a book called When Genius Failed, great book
Speaker 1: by Lowenstein about what happened there. But what occurred was
Speaker 1: these guys had so much leverage.
Speaker 3: They had a.
Speaker 1: Billion dollars of investment of AUM in their hedge fund,
Speaker 1: and they had about one hundred billion dollars that we
Speaker 1: know of in trades, so they were at least levered
Speaker 1: one hundred and one on these spreads that were they
Speaker 1: were basically shorting volatility the way they were doing interest
Speaker 1: interest rate arbitrage. But they had those trades levered weight
Speaker 1: up way up. Well, the street got wind of it,
Speaker 1: and you know what happens when the when the sharks
Speaker 1: smell the blood, then they they blew up these trades
Speaker 1: on them.
Speaker 3: So this this fund, this.
Speaker 1: Fund was going to collapse long term capital management and
Speaker 1: so but Goldman had massive exposure to them. So Goldman
Speaker 1: Goldman Sachs CEO went into the New York Fed and begged.
Speaker 1: They're like, hey, we're going to collapse tomorrow unless you
Speaker 1: rescue us. And so they didn't print money the first time.
Speaker 1: The second time, the New York Fed led a bailout
Speaker 1: with the other banks for Goldman Sachs basically made sure
Speaker 1: they shored up their balance sheet and so they didn't
Speaker 1: print money, but they assured that there was nothing that
Speaker 1: there was no way they were going to collapse. Right
Speaker 1: then you had the tech bubble and that kind of
Speaker 1: that that deflated.
Speaker 3: A lot of things.
Speaker 1: It was a little bit healthy. And then you had
Speaker 1: the housing crisis. So now you flash forward to nineteen
Speaker 1: ninety eight, From nineteen ninety eight to two thousand and eight,
Speaker 1: ten more years, so you see a pattern here, right,
Speaker 1: ten more years, two thousand and eight, and we have
Speaker 1: the housing crisis. Well, the housing crisis. Then when that happened,
Speaker 1: it was so great and there was so much contagion
Speaker 1: with those banks that the FED felt like they had
Speaker 1: no choice and all the central banks, and so what
Speaker 1: did they do. They printed all that money, which back
Speaker 1: then a trillion dollars. And so they printed that money
Speaker 1: and I don't remember exactly what the figure is, so
Speaker 1: we may have to yank that from the show, so
Speaker 1: we don't. I don't want to give people the wrong information.
Speaker 1: But they print that money and that's the first time
Speaker 1: they really printed money two thousand and eight, which is
Speaker 1: what you're talking about, q QI, And that's where the
Speaker 1: structure changed, right, So the structure changed when oh, the
Speaker 1: FED put is here. They're going to save us, and
Speaker 1: there are no consequences. CEO's got their bonuses and payouts.
Speaker 1: Nobody went under. Well, they let a few go under.
Speaker 1: They let Liman go under and bear Stearns go under,
Speaker 1: but they it wasn't the the enmass slaughter of banks
Speaker 1: that should have been. And so we created an expectation
Speaker 1: from the market that the FED will be there. Flash
Speaker 1: forward from two thousand and eight to twenty twenty, and
Speaker 1: you've got the lockdowns and you've got the danger of
Speaker 1: collapsing again, banks collapsing and treasury market freezing up. And
Speaker 1: what do they do They print again, and you know,
Speaker 1: multiples of the last time they printed. And so that's
Speaker 1: kind of where we're at. And that's what you're talking about,
Speaker 1: where that changeover. Now, what do we do because we're
Speaker 1: so indebted? And this isn't just this isn't just the sovereigns.
Speaker 1: This goes from sovereigns to the banks, to the companies
Speaker 1: and corporations down to the individuals and consumers. Everybody's got
Speaker 1: you know, not everybody, but by and large, the average
Speaker 1: of indebtedness is at all time highs.
Speaker 2: Yeah, so back to the hurdle rate. So people see
Speaker 2: their s and P five hundred going up about eighty
Speaker 2: nine percent, but they're losing money, so they have to
Speaker 2: kind of understand this monetary inflation piece. And that's kind
Speaker 2: of one reason why I think it's it's important to
Speaker 2: focus on that, and that's the real number that you're
Speaker 2: trying to beat. There's not a lot of places that
Speaker 2: you can do that today. I'm not sure if you know,
Speaker 2: I don't want to put you on the spot, but
Speaker 2: like the definition of hyperinflation is I think fifty percent
Speaker 2: inflation month over month over month.
Speaker 3: Yeah, right, it's an economic economic that's the technical, technical definition.
Speaker 2: I did an interview with Parker Lewis. It's on the channel.
Speaker 2: Did it really good? He said, that's the technical definition.
Speaker 2: He said, I would say that hyper inflation is when
Speaker 2: you can really see the price changes in real time.
Speaker 2: It's not like when I was a kid, this bottle
Speaker 2: of water was five cents. It's like, no, last year,
Speaker 2: this bottle was right. So he talks about it more
Speaker 2: like that. Not a hard definition. I'm just curious if
Speaker 2: you know, because I don't inflation month over month compared
Speaker 2: to what so, Like if I'm in Argentina in hyper inflation,
Speaker 2: so my currency is inflating. Argentine peso is inflating fifty
Speaker 2: percent to the dollar.
Speaker 3: Now it's the it's their inflation rate, it's inflation.
Speaker 2: So whatever there, they're their own CPI calculation. Okay, So
Speaker 2: the US could never have high inflation as long as
Speaker 2: the US doesn't report high inflation.
Speaker 3: That what you're saying.
Speaker 2: Uh. The reason why I asked that is because I
Speaker 2: saw Bilojie and uh. Another one of my good friends,
Speaker 2: Brent Johnson mister Dollar Milkshake, kind of going back and
Speaker 2: forth on Twitter, and of course Brent is the Dollar Bowl.
Speaker 2: He's much more reasonable if you talked to him in person.
Speaker 2: But you know, Bolagi said, well, the US dollar has
Speaker 2: been in hyperinflation measured in bitcoin.
Speaker 3: Yeah, that's that's absolutely.
Speaker 2: And that's why I was curious measured against one. And
Speaker 2: so the key piece I wanted to kind of transition
Speaker 2: into is that we have to understand that we have
Speaker 2: to measure these things in different ways, otherwise we don't
Speaker 2: have a real number. So if you think you're making
Speaker 2: five percent on the treasuries, and that's good because inflation's three,
Speaker 2: or you think you're making eight percent in the index,
Speaker 2: which is good because inflation's three, that the true number
Speaker 2: is much higher. It's ten twelve percent at least. So
Speaker 2: you have to think about how you're measuring these things.
Speaker 2: And then if we think about the dollar, we also
Speaker 2: have to think about it and measured against other things.
Speaker 2: So if I'm looking at only in dollars, like my
Speaker 2: house is worth, you know it was three hundred and
Speaker 2: eighty thousand dollars a couple years ago. Now it's four
Speaker 2: hundred and eighty thousand for like a median home. But it
Speaker 2: went down in oil barrels per oil, or it went
Speaker 2: down in ounces per ounces of gold, and it went
Speaker 2: down in bitcoin terms as well. And if you think
Speaker 2: about it again, back to the Bology's point, measured in bitcoin,
Speaker 2: we are seeing hyperinflation in the dollar.
Speaker 3: Yeah, because bitcoin is something can't be that has a
Speaker 3: very very very.
Speaker 1: Low inflation rate and it's going it's approaching zero, and
Speaker 1: so the half life of it, so of the of
Speaker 1: the bitcoin inflation, but just like you said, it's a
Speaker 1: great way to measure just how quickly the dollar is expanding.
Speaker 1: And if you look at bitcoin, it does follow the
Speaker 1: expanse of the money.
Speaker 3: Supply pretty well.
Speaker 1: I mean, it's got it's definitely volatile, but the overall
Speaker 1: trajectory is very similar.
Speaker 2: And so per Michael Howell, who's a mister Global Liquidity,
Speaker 2: had him on the show a few weeks ago, so
Speaker 2: you should go check out that interview. But he says
Speaker 2: that the S and P five hundred is ninety percent
Speaker 2: correlated to S and P five hundred, and bitcoin is
Speaker 2: about ninety percent core or I'm sorry, eighty percent correlated.
Speaker 2: So it has an eight point nine to five time
Speaker 2: sensitivity ratio. So for every ten percent increase in global liquidity,
Speaker 2: bitcoin goes up by ninety percent. Gold has a one
Speaker 2: point five time sensitivity, So every ten percent rise in
Speaker 2: global liquidity, gold goes up by about fifteen percent.
Speaker 1: Right, Well, and then but that also has to do
Speaker 1: with the fact that bitcoin's in the middle of its
Speaker 1: adoption phase, right, So that's also occurring.
Speaker 2: So what does that mean that the sensitivity ratio goes
Speaker 2: down as bitcoin gets bigger?
Speaker 1: That I would expect that the that the beta to
Speaker 1: risk assets would go would come down for sure.
Speaker 2: Okay, so I agree with that, right, So as the
Speaker 2: asset gets bigger, as the daily volume gets more, it's
Speaker 2: harder for the price wings to move up and down.
Speaker 2: So when there's you know, ten dollars of trading volume
Speaker 2: per day and I buy eight dollars worth, I move
Speaker 2: the market. When there's one hundred billion or where we
Speaker 2: have hundreds of billions of dollars of trading volume today,
Speaker 2: it's very hard to move the market when it's trillions
Speaker 2: of dollars per day. It's impossible, right, So it's kind
Speaker 2: of like that, But it's also the downside is dampened.
Speaker 2: But the upside is dampened as well, so the sensitivity
Speaker 2: is just dropping. I did this video and I was
Speaker 2: talking about ways to project bitcoin's future valuation. And you
Speaker 2: know most most of your old brothers on Wall Street
Speaker 2: can't seem to value bitcoin because you know, there's no
Speaker 2: intrinsic value, there's no cash flows, blah blah blah. And
Speaker 2: I said, well, there's three ways that we could do it.
Speaker 2: So number one we use like Jery and timmor from Fidelity.
Speaker 2: He uses like Metcalf's law to sort of measure it.
Speaker 2: The second way we can do it is like a
Speaker 2: venture capital firm would do it, So what are the
Speaker 2: markets we're disrupting? If we pull x amount of five
Speaker 2: percent from each of those markets, how much would be worth?
Speaker 2: And the third way would be based off of inflation.
Speaker 2: So if we look at bitcoin moving on liquidity on
Speaker 2: a sensitivity ratio of like a nine time sensitivity ratio,
Speaker 2: then to you referenced earlier, like the CBO is projecting
Speaker 2: how much they're going to print. So we sort of
Speaker 2: have an idea which I'm guessing is undershooting the target,
Speaker 2: but we have an idea of how much global equity
Speaker 2: is going to increase and we can look at sort
Speaker 2: of this way bitcoin moves to that increase of liquidity today.
Speaker 2: Do you think that would be a good way to
Speaker 2: sort of measure.
Speaker 1: It as a starting point, for sure? But then you
Speaker 1: also have to think about the fact that most people
Speaker 1: don't really truly understand what bitcoin is. Yet we're in
Speaker 1: our little bubble and we understand it. We talked with
Speaker 1: people who understand it inherently. And the issue here is that,
Speaker 1: you know, there's a lot of different ways you can
Speaker 1: measure how many assets are in the world, but let's
Speaker 1: just talk Let's just pretend that today there's seven hundred
Speaker 1: million dollars of investable assets. Well, bitcoin at this point
Speaker 1: is a fraction of that. It's it's exactly so and
Speaker 1: and so it's not even a percent and of that.
Speaker 3: So why is that important?
Speaker 1: It's important because right now, as you said, bitcoin is
Speaker 1: seen as a risk asset.
Speaker 3: We talked before about how.
Speaker 1: We're kind of in a gambler's economy like there we
Speaker 1: have a lot of people out there who just feel
Speaker 1: like they're they're getting behind and they're gambling to try
Speaker 1: to catch back up or get ahead and taking a
Speaker 1: lot of risk. And so bitcoin is seen that way
Speaker 1: in a lot of ways. And as are the mean coins,
Speaker 1: and we see the mean coins take off, it's because
Speaker 1: people are just risking money. They're like, come on, I
Speaker 1: hope that I can I can catch up to this inflation.
Speaker 1: And so with the broad broadening and deepening understanding of bitcoin,
Speaker 1: especially because now that we have the ETFs and you're
Speaker 1: and you're seeing institutions dip in, dip into it, they're
Speaker 1: dipping their toe in, and they're starting to understand it.
Speaker 1: When institutions really do understand it and understand how bitcoin
Speaker 1: is different than every other.
Speaker 3: Of those.
Speaker 1: The digital currencies, they'll understand how it can be a
Speaker 1: true store value, how it's digital gold two or three
Speaker 1: point zero for so many reasons, the immutability, the transfer,
Speaker 1: the ease to create commerce with it, to move it.
Speaker 1: You can move a trillion dollars a bitcoin within ten
Speaker 1: minutes basically. So, but once they understand that and they
Speaker 1: get to that true understanding of how bitcoin is different,
Speaker 1: then they'll begin to not just allocate it allocate to
Speaker 1: it in their investments as a risk asset, but they're
Speaker 1: going to allocate to it as a risk off asset.
Speaker 1: Like they'll start taking money not just from stock portfolio,
Speaker 1: but from bond portfolios, and saying, why am I investing
Speaker 1: in this long term treasury bond fund or vehicle when
Speaker 1: I should be protecting my capital with this thing that
Speaker 1: it's called bitcoin that will rise in price exponentially as
Speaker 1: a dollar false in value exponentially. Why wouldn't I make
Speaker 1: that investment instead of hoping that I get a real
Speaker 1: rate of return, which is your hurdle rate again that
Speaker 1: beats that rate of inflation or that expansion of the
Speaker 1: money supply. And so the question is what is that?
Speaker 1: What is that hurdle rate expansive money supply? If you
Speaker 1: could argue that that's really what it is, and then
Speaker 1: bitcoin the price will match both that expansion of the
Speaker 1: money supply and that adoption as a way to protect
Speaker 1: that money supply. And so you are me, We have
Speaker 1: a lot more of our personal liquidity tied up with
Speaker 1: bitcoin invested in bitcoin, invested protected by bitcoin.
Speaker 3: Whereas saved in bitcoin saved in bitcoin.
Speaker 1: Where there's a lot of investors out there who have
Speaker 1: way more money than you and me that haven't even
Speaker 1: thought about it.
Speaker 3: And so.
Speaker 1: The way that bitcoin price moves is not really directly
Speaker 1: correlated to just the.
Speaker 3: Amount of money comes in.
Speaker 1: It has to do with the liquidity too, and so
Speaker 1: there's friction getting in and out of this asset right now,
Speaker 1: and so it's going to get to a point where
Speaker 1: it doesn't have that friction, and that means it's going
Speaker 1: to expand quite a bit more in price and an
Speaker 1: asset value, which to me would be approaching the asset
Speaker 1: value of gold. And that's where you're getting. Then you're
Speaker 1: getting a lot, well thirteen trillion, yeah, twelve or thirty
Speaker 1: years more now yeah, yeah, so yeah, okay.
Speaker 2: Yeah, So people haven't caught on yet. They seem to
Speaker 2: be kind of coming on one on one on one,
Speaker 2: and you know, once everybody agrees with you, then the
Speaker 2: alpha is gone. So the idea is to obviously get
Speaker 2: in before everybody agrees with you on that. On that standpoint,
Speaker 2: So then if to kind of recap this whole conversation,
Speaker 2: the debt doom loop tells us, the debt based monitary
Speaker 2: system tells us, and the debt doom loop tells us
Speaker 2: that the monetary system has to continue to expand unless
Speaker 2: the government says, like I said, pack it up.
Speaker 3: It was a good run.
Speaker 2: Let's shut it down. Otherwise it continues to expand. So
Speaker 2: that's almost all but certain. There's no certaintieson in life,
Speaker 2: but it's almost all but certain. We know that as
Speaker 2: they print money, it's debasing, so prices are going up
Speaker 2: as the rate of money is going or the value
Speaker 2: of the money is going down. But not all assets
Speaker 2: go up at the same rate. Some go up faster
Speaker 2: than others, and so the S and P five hundred
Speaker 2: is basically keeping up with it, and some assets like
Speaker 2: gold go up a little bit faster, and some assets
Speaker 2: like bitcoin go up way faster. So Bitcoin is benefiting
Speaker 2: and during timmer from finality makes this case, not only
Speaker 2: is it the network effects, but also the scarcity and
Speaker 2: the inflation that are all three driving those And so
Speaker 2: we know scarce SATs move up a much faster. So
Speaker 2: then I guess what you're saying, if I'm paraphrasing, is
Speaker 2: then bitcoin is sort of like this life raft that
Speaker 2: you could go to protect yourself from the incoming tide
Speaker 2: of the money printing liquidity that's coming into system.
Speaker 1: I certainly see it that way, yeah, And I believe
Speaker 1: that that more and more people as they as they
Speaker 1: gain understanding, are going to as well, and so you know,
Speaker 1: I feel like I got into got into understanding bitcoin late,
Speaker 1: having just discovered it in twenty twenty, after my son
Speaker 1: actually had said, hey, Dad, you should look at these
Speaker 1: digital currencies or something here, and so, you know, being
Speaker 1: an old Wall Street guy, I ignored it, just like
Speaker 1: virtually every single one of my peers.
Speaker 3: Had done and continues to do.
Speaker 1: And so they're slowly coming around saying is there something
Speaker 1: is this something we ought to be checking out? And
Speaker 1: they're still doing from that perspective of hey, is there
Speaker 1: a lot of money be made here? Instead of hey,
Speaker 1: is this a place where we can safe card our capital.
Speaker 1: It's a different mentality. It's going to take a while
Speaker 1: to get there, but yeah, I believe so. And so
Speaker 1: there's a whole lot more capital that's going to come
Speaker 1: into the protocol, which means that it will be worth
Speaker 1: a lot more in my opinion in the future.
Speaker 2: Yeah. One thing I've done is I talk about but
Speaker 2: I've shifted my mentality and I don't think about investing
Speaker 2: my money. I think about saving my money, so mostly bitcoin,
Speaker 2: mostly real estate, and I don't invest in real estate
Speaker 2: or invest in bitcoin. I save my money into those places.
Speaker 2: I'll do some speculative bets here and there, and some
Speaker 2: early round companies a little bit that might be investing
Speaker 2: or speculating whatever you want to call it. But yeah,
Speaker 2: real estate bitcoin, that's where I save it. So, James,
Speaker 2: you're the managing partner, one of the manague partners of
Speaker 2: the Bitcoin Opportunity Fund, and you're sort of taking this
Speaker 2: Wall Street knowledge and history and brought it into the
Speaker 2: Big One Opportunity Fund, which is closed right now, might
Speaker 2: be opening up again here in the near future. Tell
Speaker 2: us about what else you're working on and what people
Speaker 2: could be paying attention to that you're working on.
Speaker 3: Yeah.
Speaker 1: So, and you're a partner in the Bigcoin Opportunity Fund,
Speaker 1: and that I mean to us. David Foley and I
Speaker 1: are doing the day to day being the institutional.
Speaker 3: Investors for a long time.
Speaker 1: We see this as a way to not just help
Speaker 1: make money for investors and generate profits for them, but
Speaker 1: to help grow the ecosystem, and the bitcoin ecosystem. You
Speaker 1: think about bitcoin, it's just that base layer. There's so
Speaker 1: many other things that are going on in bitcoin, and
Speaker 1: the opportunities are in our mind are tremendous, and we're
Speaker 1: super excited about every single day we wake up and
Speaker 1: say what are we looking at to like, how are
Speaker 1: we thinking about? How we and we're inundated with opportunities
Speaker 1: and so but the best thing about is that we've
Speaker 1: got our hurdle rate, which is, hey, what's the risk
Speaker 1: reward of this opportunity versus what the risk reward of
Speaker 1: bitcoin is? And that's where we see everything. So being
Speaker 1: on the bitcoin standard for us makes it very simple
Speaker 1: for us to look at things that way. And so
Speaker 1: that's what higher bar, Yeah, very high bar. And you know,
Speaker 1: I write the Informationist newsletter which I put out every
Speaker 1: single week, and it just takes one complex topic on
Speaker 1: financial topic and sympathies it for people. And we talk
Speaker 1: about things like the Treasury, treasury auctions, the FED, inflation,
Speaker 1: how to look at inflation, how to understand it, how
Speaker 1: to understand the debt problem, how to understand the treasury problem,
Speaker 1: what's going on with social security? Those things, just making
Speaker 1: it simple and for anybody. And we have, like we
Speaker 1: were talking about, we have I have doctors, lawyers, firemen, nurses,
Speaker 1: We've got chemical engineers, we've got aeronautical engineers. We've got
Speaker 1: all kinds of people in there that they're intelligent people,
Speaker 1: but just may not have that experience and that knowledge
Speaker 1: that they should have been taught in school, but they aren't.
Speaker 1: And so that's what that's what I'm trying to do,
Speaker 1: is trying to give them that knowledge so they are
Speaker 1: armed with that to understand what to do in their
Speaker 1: own investing in their own portfolios.
Speaker 2: Yeah, all right, cool, Well we're gonna wrap it up.
Speaker 2: I'm gonna go ahead and we'll link to the informationist
Speaker 2: in the show notes. We'll link to the Big one
Speaker 2: Opportunity fund. It's closed right now, but put your name
Speaker 2: in the pot because we're going to open up second
Speaker 2: fund number two here pretty quickly. Any closing words, Oh,
Speaker 2: that's it. Good to be here and I'm looking forward
Speaker 2: to go hanging out in San Clemente Beach. All right,
Speaker 2: thanks Jam