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Speaker 1: If you want to know where asset prices are going,

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Speaker 1: if you want to know where bitcoin and crypto goes, gold,

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Speaker 1: real estate, and any other stocks or commodities, then you

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Speaker 1: have to understand one single thing, and this is global liquidity.

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Speaker 1: And so I am having the master of global liquidity on.

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Speaker 1: I'm talking about doctor Michael J. Howell. He's worked in

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Speaker 1: finance for over thirty years. He was the former research

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Speaker 1: director at Solomon Brothers, and during that time he developed

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Speaker 1: the concept of global liquidity. This is a lot more

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Speaker 1: than just m two. He's focused on analyzing liquidity trends

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Speaker 1: and capital flow data, which I believe is the most

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Speaker 1: important thing to watch in financial markets. He's also the

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Speaker 1: author of multiple books about this, including Investing in Emerging

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Speaker 1: Markets and more recently Capital Wars. Again, like I said,

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Speaker 1: if you want to know where asset prices are going, bitcoin, crypto,

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Speaker 1: real estate, it doesn't matter. You have to understand this

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Speaker 1: one thing, global liquity. So let's go ahead and jump

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Speaker 1: right in, all right. Michael Howe the author of the

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Speaker 1: book The Capital Wars and someone who has been studying

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Speaker 1: liquidity global equity for a long time. Something that I've

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Speaker 1: been talking about for the last year. I'm super excited

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Speaker 1: join have you joined me today? So thank you for

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Speaker 1: taking the time. You know, I've been subscribed here to

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Speaker 1: your substack, been reading your articles obviously your book as well,

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Speaker 1: but just for the audience, just quite and give us

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Speaker 1: a little bit of a background. And why have you

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Speaker 1: been studying liquidity cycles for so long? And and how

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Speaker 1: long has that been? Well?

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Speaker 2: Hi, Mark, Yeah, it's a great privilege to be here.

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Speaker 2: Thank you for the invertation. It kind of goes back.

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Speaker 2: I mean, my studies of liquidity and why it's an

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Speaker 2: interesting subject go back to probably well at least twenty

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Speaker 2: five years, probably a tad more. Actually, when I worked

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Speaker 2: for the US investment bank Salomon Brothers. Salomon Brothers was

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Speaker 2: the world's biggest trader in terms of world fixed income

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Speaker 2: markets for X markets, et cetera. And to understand trading,

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Speaker 2: you had to understand where the money was flowing, and

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Speaker 2: that was really the critical thing. If you can understand

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Speaker 2: these capital flows and where they were shifting, you had

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Speaker 2: a pretty good insight. It was actually insight their information.

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Speaker 2: In many ways, you had great insight into understanding the

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Speaker 2: direction of macro markets. And so what I did was

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Speaker 2: while I was there to basically put in a framework

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Speaker 2: that allowed us to monitor flows of money around the world,

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Speaker 2: understand what central banks were doing, etc. And the whole

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Speaker 2: concept of global liquidity really grew out of that. And

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Speaker 2: global liquidity is very simply flows of money through international

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Speaker 2: financial markets. It's as straightforward as that. That's what moves

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Speaker 2: the world.

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Speaker 1: Yeah, I read I read about Stanley Druckenmiller and how

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Speaker 1: he when he first started his career, you know, his

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Speaker 1: the person that he was working under, said or he

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Speaker 1: brought all his research to him and you know, here's

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Speaker 1: here's what's going on in the economy, and here's whats

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Speaker 1: going on with the company, and here's their price to

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Speaker 1: earnings and all these different things. And they said, no, no, no, no, no,

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Speaker 1: take take all that and come back when you know

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Speaker 1: what moves markets. And he said, or moves asset prices.

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Speaker 1: And he says, what do you mean? This is this

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Speaker 1: is what I learned. And he said no, no, no, that's it.

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Speaker 1: And so Stanley Drucker Miller came back and said, no,

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Speaker 1: what moves markets isquidity, which is exactly what you're saying.

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Speaker 1: So you said, simply, it's the flows of money through

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Speaker 1: the financial system, But it's a little bit more complex

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Speaker 1: than that. I think most people, well at least in

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Speaker 1: my sort of sphere, are very US centric, and so

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Speaker 1: they think of just like US M two and I

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Speaker 1: think that's a little bit oversimplified for liquidity. So is

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Speaker 1: it just like excess bank reserves? Is it money on

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Speaker 1: the sideline that's ready to trade these assets or how

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Speaker 1: would you define global liquidity?

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Speaker 2: Well, I think you as you rightly say, one has

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Speaker 2: to be more granular, and look at some of the components,

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Speaker 2: and some of the things you cite are important someone less.

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Speaker 2: So you talk about M two, which is sort of

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Speaker 2: a traditional measure of the supply of money. Now we're

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Speaker 2: looking at money in a general sensor, generic sense, obviously,

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Speaker 2: but we're not looking at an M two aggregate. And

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Speaker 2: the reason being is that M two measures effectively retail

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Speaker 2: deposits in high street banks. Now, if you believe that

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Speaker 2: that's the only important thing in the world, then I'll

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Speaker 2: come uly and you drop the global liquidity idea. But

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Speaker 2: actually banks, high street banks have been eclipsed a long

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Speaker 2: time ago. What you've got now, you've got international markets,

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Speaker 2: you've got wholesale markets, you've got repo markets. You've got

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Speaker 2: what the Federal Reserve is doing through QE. You've got

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Speaker 2: extraneous things like I mean, just think the Swiss National

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Speaker 2: Bank is a major investor directly in the US equity market.

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Speaker 2: It's a big holder of techtocs. I mean, all these

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Speaker 2: things are sort of, you know, unusual factors, but they're

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Speaker 2: liquidity driven factors that come in and move asset prices.

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Speaker 2: And one's got to have a pretty broader, eclectic view

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Speaker 2: of what matters. And what we're looking at is to

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Speaker 2: give you a sort of stricter definition, we look at

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Speaker 2: the interventions and central banks around the world. We would say,

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Speaker 2: as a caveat this is not just about looking at

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Speaker 2: the size of balance sheet.

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Speaker 3: You've got to look at the active components within the

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Speaker 3: balance sheet.

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Speaker 2: Not all the elements on the balance sheet create liquidity markets,

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Speaker 2: for example, and the Federal Reserve is a great example

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Speaker 2: of that. We also look at what the banks are

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Speaker 2: doing in terms of bank credit. We look at shadow

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Speaker 2: bank credit. Shadow banks have been an important element in

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Speaker 2: the whole equation about global liquidity, particularly in the last

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Speaker 2: twenty years. That's a key factor. And then we look

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Speaker 2: at repo markets, wholesale market activity, we also look across

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Speaker 2: border flows. They're also a critical element I mentioned in

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Speaker 2: the Swiss National Bank in the US. But looking at

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Speaker 2: the other side, look at US investors and emerging markets.

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Speaker 2: They often control the pace of many of these markets

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Speaker 2: with their capital outflows.

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Speaker 1: Yeah, so it's pretty complex. There's a lot of things

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Speaker 1: that go on. And being in a debt based monetary

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Speaker 1: system and money is created through debt issuance, then a

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Speaker 1: lot of what you have to look at, I would imagine,

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Speaker 1: is sort of the bank's willingness to lend, like how

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Speaker 1: tight are there lending markets? Maybe the SLUZE reports things

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Speaker 1: like that, Yeah, exactly, I.

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Speaker 2: Mean I think the thing is is that I mean,

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Speaker 2: the SLUS report, as you mentioned, is a pretty good

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Speaker 2: heads up. I mean, unfortunately, it tends to be a

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Speaker 2: bit of a lagging indicator. So we're looking earlier in

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Speaker 2: the pipeline as to what is actually going on to

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Speaker 2: actually see the sources of that liquidity coming into the banks.

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Speaker 2: So the banks are operating that banks will sort of

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Speaker 2: change their view when they've got more opportunity to actually

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Speaker 2: raise capital in markets themselves. So it may be that

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Speaker 2: very short term money markets become liquid and the banks

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Speaker 2: will respond to through the SLEWS or the Senior Loan Office.

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Speaker 2: That's survey for example. In terms of you know, what

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Speaker 2: is sort of critical to understand in terms of what

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Speaker 2: the things that the main things that we look at.

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Speaker 2: We look at what the Federal Reserve is doing. I

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Speaker 2: mean that clearly goes without saying it's the most important

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Speaker 2: central bank worldwide. We've got to understand the Federal Reserve.

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Speaker 2: We also look at the People's Bank of China. The

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Speaker 2: People's Bank of China is bigger in some ways than

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Speaker 2: the Fair It has more more reach, if you like,

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Speaker 2: through the Chinese financial system. It tries to keep the

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Speaker 2: Chinese Chinese financial system and relatively tight rain for example,

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Speaker 2: It's very important for understanding the temper of the world

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Speaker 2: economy because China has such a big economic footprint, particularly

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Speaker 2: in the Asian region.

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Speaker 3: And then we also look at the pool of collateral.

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Speaker 2: And the reason for emphasizing collateral is that ever since

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Speaker 2: the global financial crisis in two thousand and eight, most

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Speaker 2: lending in the world, particularly wholesale lending, is backed by collateral.

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Speaker 2: It's like, you know, taking the analogy of the whole

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Speaker 2: mortgage and saying, well, okay, let's just extend that idea.

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Speaker 2: Everyone who borrows now has some collateral, not necessarily a

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Speaker 2: real estate residential real estate, but it could be a

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Speaker 2: treasury bond, or it could be an equity, something which

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Speaker 2: is actually put up against the loan for security and

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Speaker 2: collapse with the collateral base of the system is increasingly important.

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Speaker 2: So these are the factors that we mainly watch. Federal Reserve,

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Speaker 2: People's Bank of China, and the pool of collateral. Those

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Speaker 2: are key things. But I would go on to say

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Speaker 2: is that one of the things we've got to recognize

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Speaker 2: now is the whole nature of the financial system has changed.

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Speaker 2: We characterize it really by saying that, you know, if

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Speaker 2: you go back and pick up an economics or a

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Speaker 2: finance textbook, it will tell you that interest rates are

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Speaker 2: all important.

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Speaker 3: I mean, of course, you know.

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Speaker 2: Every you know, almost every day in the journal or

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Speaker 2: in the financial time, you find people dancing on the

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Speaker 2: head of a pin about what the Fed is going

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Speaker 2: to do in terms of setting FED funds next next

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Speaker 2: month or next FOBC meeting.

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Speaker 3: Generally, in argue, that doesn't really matter very much.

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Speaker 2: We're not in a world now where interest rates are

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Speaker 2: really ruining the tempo of the business cycle. We're much

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Speaker 2: more rather than being in a new financing world, we're

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Speaker 2: in a refinancing world. When your point about debt is

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Speaker 2: extremely important because in a world of debt, you've got

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Speaker 2: to refinance that debt. With something like three hundred and

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Speaker 2: fifty trillion dollars of debt worldwide, with an average maturity

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Speaker 2: of that debt of about five years, the system is

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Speaker 2: basically refinancing or needs to refinance about seventy trillion dollars

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Speaker 2: every year. That's an eyewatering amount and actually quite demanding

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Speaker 2: on the financial system.

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Speaker 3: This not interest rates.

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Speaker 2: The matter in that case is actually the capacity of

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Speaker 2: the financial system to roll the debt, and that really

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Speaker 2: is a liquidity feature.

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Speaker 3: So that's why global aqudity is all important. And I

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Speaker 3: go on to.

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Speaker 2: Say, as a sort of as an end NOE, all

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Speaker 2: this is that if you look back, every financial crisis

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Speaker 2: that I can think of in the last twenty or

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Speaker 2: thirty years has fundamentally been a refinancing crisis. It's been

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Speaker 2: a time when debt gets out of step with liquidity.

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Speaker 1: Now you talked about the interventions of the central banks

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Speaker 1: around the world has changed, and it looks like it

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Speaker 1: really changed around two thousand and eight with the introduction

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Speaker 1: of Q at least in the United States, and then

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Speaker 1: the sort of ever increasing willingness to intervene in markets,

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Speaker 1: as we saw obviously through twenty nineteen, twenty twenty and

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Speaker 1: so forth. Even you know the bank collapse bear Stearns

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Speaker 1: went bankrupt in two thousand and seven, it took seven

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Speaker 1: months to get a fed bell out. In twenty twenty

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Speaker 1: three when the bank's collass we got one in six days.

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Speaker 1: So we see like the willingness to intervene has changed.

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Speaker 1: But if we go back to these refinancing cycles that

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Speaker 1: you talk about, it's almost like I've seen like a

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Speaker 1: YouTube video where you put all these metronomes for keeping

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Speaker 1: time and they're all on different beats, but after a

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Speaker 1: period of time, they all get on the same beat.

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Speaker 1: I don't know if you've ever seen that before, And

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Speaker 1: it's almost like this refinancing cycle has been syncd up

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Speaker 1: maybe since two thousand and eight when the whole world

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Speaker 1: went to zero, interest rates got refinanced, and now we're

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Speaker 1: sort of in this like four year refinancing cycle, which

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Speaker 1: also seems to align with the presidential cycle. And also

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Speaker 1: you talk about bitcoin as well, and it also coincides

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Speaker 1: with the bitcoin having cycle. And so I guess my

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Speaker 1: question to you is, does it seem like we're now

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Speaker 1: in this rhythm of refinancing that seems to be about

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Speaker 1: every four years? First? And then do you think it's

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Speaker 1: because of those interventions that happened in two thousand and eight.

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Speaker 2: Yeah, I think you've absolutely nailed it. I mean, I

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Speaker 2: think the key point here is that if you go

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Speaker 2: back historically, the business cycle was typically eight to nine

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Speaker 2: years in length, and that was really driven.

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Speaker 3: By the Kapex cycle, and all was how.

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Speaker 2: Businesses will actually invest in new capital, plant, on equipment,

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Speaker 2: et cetera. And that tends to be an eighteen nine

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Speaker 2: years sign what's happened in the intervening in the intervening

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Speaker 2: years in the last maybe the last twenty years, is

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Speaker 2: that business cycle length the sort of concerting and smaller.

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Speaker 2: So it's sort of shrunk into a period of nearer

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Speaker 2: sort of four to five years, and that basically reflects

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Speaker 2: this debt refinancing cycle. And as you correctly spot, what

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Speaker 2: you're getting is everything is moving in that harmony. Now

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Speaker 2: you've got bitcoin, you've got central bank interventions, you've got

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Speaker 2: the presidential cycle, all these things seem to be in

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Speaker 2: a sort of four year window. Interestingly enough, now it's

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Speaker 2: kind of difficult to cause and effect over that. But

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Speaker 2: I think debt is a critical factor, and I think

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Speaker 2: that if you look at the interventions of the central banks,

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Speaker 2: they're increasingly coming in with alacrity, of course, to try

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Speaker 2: and smooth the system if there are any hiccups in

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Speaker 2: depth refinancing, and they move much faster as we've identified.

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Speaker 2: So in two thousand and seven, it took a long

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Speaker 2: time before the FED really showed its hand. But if

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Speaker 2: you look at what happened in the COVID crisis, or

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Speaker 2: look at what happened in the REPO crisis in twenty nineteen,

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Speaker 2: the FED was moving very quickly. And I think that

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Speaker 2: you can even see in the shorter term instances where

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Speaker 2: you get wobbles in markets such as SVB that crisis,

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Speaker 2: the FED is there almost immediately. And I think what

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Speaker 2: this is really telling us is that the primary goal

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Speaker 2: of the monetary authority in the US and maybe in

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Speaker 2: every country now is to preserve the integrity of the

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Speaker 2: sovereign debt markets. This is absolutely critical with so much

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Speaker 2: debt and so much public DEBTA run they need functioning

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Speaker 2: markets and a very good heads up.

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Speaker 3: To that, if people can remember.

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Speaker 2: The instance is to go back to Britain and the

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Speaker 2: so called lizt Trust moment, when an incoming British Prime

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Speaker 2: minister sort of screwed the markets badly by outrage of statements.

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Speaker 2: It ruffled the market's feathers significantly, and what you got

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Speaker 2: was a huge seller in the British sovereign debt market.

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Speaker 2: And that was a wake up call to central banks

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Speaker 2: and finance ministers everywhere to say, look, we simply cannot

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Speaker 2: allow us to happen. Had this happened in the US

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Speaker 2: treasury market, the core, you know, it will be in

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Speaker 2: penury now, the system would have collapsed, threatened to collapse.

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Speaker 1: So I want to talk about their capacity to intervene.

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Speaker 1: But just sticking with this four year cycle, so you

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Speaker 1: do see it sort of on this four year cycle.

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Speaker 1: As you said, the business cycle has sort of gone

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Speaker 1: from about an eight year cycle down to about a

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Speaker 1: four year cycle. And it seems like the metronomes on

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Speaker 1: time and it does seem to coincide with these things.

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Speaker 1: And so then if we're in as you said, we're

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Speaker 1: sort of in this basically what would you say, a refinancing cycle.

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Speaker 1: So now all this debt gets kicked down the road,

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Speaker 1: and in order to refinance the debt, we need more

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Speaker 1: debt to refinance it. And it's almost like every four

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Speaker 1: years we sort of see maybe this I think maybe

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Speaker 1: you framed it up as liquidity air pocket where maybe

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Speaker 1: there's not quite enough debt to like roll it over

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Speaker 1: until then the central banks sort of intervene and inject

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Speaker 1: this new liquidity to kick that can back over, which

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Speaker 1: sort of resets it like another four years.

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Speaker 2: I think that's absolutely right. I mean, what you're getting

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Speaker 2: is exactly that kicking the can down the road. I mean,

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Speaker 2: it's it's almost impossible for any administration, whatever the stripe,

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Speaker 2: to actually change the outlays that the Treasury is undertaking

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Speaker 2: because most of those outlays are sort of their non

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Speaker 2: discretionary spending. They're things which are mandatory like Social Security, medicare,

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Speaker 2: ultimately defense, these bills have to be paid, come whatever,

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Speaker 2: and it's very difficult to actually offer any cutbacks in spending.

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Speaker 2: And they can tweak around with discretionary spending, but it's

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Speaker 2: such a small item of the budget now it's pretty

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Speaker 2: much irrelevant. And then you've got on the other side, taxes.

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Speaker 2: Taxes are clearly an unpopular area. But will any administration,

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Speaker 2: particularly marginal administration where you've got, you know, you're scrambling

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Speaker 2: for votes, put their hand up and say, look we're

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Speaker 2: going to raise taxes.

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Speaker 3: I mean, nobody's going to do that.

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Speaker 2: So what you've got is this funding dilemma, which really

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Speaker 2: comes back to the fact that the real strength of

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Speaker 2: economies comes back to whether they've got, you know, a

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Speaker 2: reserve asset. So the US dollar is in a prime

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Speaker 2: situation because the US is a pristine borower internationally at

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Speaker 2: least until it's normal, and that makes funding the US

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Speaker 2: deficit a lot easier than if you had to fund

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Speaker 2: maybe the British deficit, or a deficity in an African

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Speaker 2: country or a smaller Asian country.

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Speaker 3: These are a lot more problematic.

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Speaker 2: And so what you need is that integrity of the markets,

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Speaker 2: and that's why the Treasury and the Federal Reserve, in

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Speaker 2: my view, are so putting such a high priority and

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Speaker 2: maintaining the stability of US debp markets.

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Speaker 1: You mentioned like the PBOC, if you watch other central

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Speaker 1: banks like the PBOC, but if sort of in two

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Speaker 1: thousand and eight, all these interest rates got it reset down.

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Speaker 1: Then even though we have different countries, different central banks

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Speaker 1: with different priorities, they all sort of got SYNCD onto

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Speaker 1: that cycle. And then furthermore, with PBOC, for example, they're

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Speaker 1: currently printing or injecting hundreds of billions of dollars into

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Speaker 1: the real estate markets to prop that up currently right now.

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Speaker 1: And so that's just global liquidity. And then a lot

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Speaker 1: of global equity can go into global assets like commodities

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Speaker 1: or bitcoin, or even potentially back into the United States.

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Speaker 1: Is that sort of the way that you look at

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Speaker 1: this global equity exactly?

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Speaker 3: I mean a lot of this is fungible.

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Speaker 2: I mean, it would already depend I mean in China,

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Speaker 2: they've made announcements that they're going to basically issue debt

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Speaker 2: for refer real estate, I mean the real estate support.

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Speaker 2: I mean, the question is who buys the debt. That's

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Speaker 2: really the critical thing with every financial system, you know,

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Speaker 2: whatever the nationality, what really matters is whether the debt

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Speaker 2: is brought by a credit provider or whether it's.

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Speaker 3: Brought by private saver.

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Speaker 2: If it is brought by a private saver, it's just

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Speaker 2: basically switching money from one pot to another.

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Speaker 3: So there's no net effect.

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Speaker 2: If you're giving or if it's the credit provider like

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Speaker 2: a bank, who is buying the debt, then what you're

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Speaker 2: doing is monetizing the debt. In other words, that's what

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Speaker 2: textbooks will tell you was a bad thing, because you're

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Speaker 2: creating a lot of excess liquidity. And my view is

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Speaker 2: that that's what the gold market and that's what bitcoin

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Speaker 2: and currently telling right now is there is concern about monetization.

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Speaker 2: Now if you look at what Janet's been doing in

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Speaker 2: a treasure executor, Janet Yellen's been doing basically, I think

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Speaker 2: she's been very astute in managing the.

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Speaker 3: Supply of coupon debt in the US.

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Speaker 2: And what she's done is created given the fact that

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Speaker 2: we know that there's got to be a lot of

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Speaker 2: demands on the coupon market, given the fact the deficit

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Speaker 2: is two trillion a year or running at that sort

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Speaker 2: of clip, there's got to be a lot of coupon issuance.

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Speaker 2: And otherwise, anything which is of a maturity of more

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Speaker 2: than about a year, So anything any Treasury security that

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Speaker 2: plays a coupon is deemed to be coupon debt, and

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Speaker 2: the Treasury normally has a preference for sort of issuing

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Speaker 2: debt around about seven years or there or thereabouts. But

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Speaker 2: what she's done is very carefully avoided the longer end

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Speaker 2: of the market for issuance, focused on the shorter end,

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Speaker 2: and in particular use bill finance as a plug for

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Speaker 2: any swings in the deficit. Now, that's actually pretty astute management,

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Speaker 2: at least in the short term. I mean, she'll be

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Speaker 2: caught out in the long term almost unquestionably, But in

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Speaker 2: the short term it's helped the treasury market, and it's

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Speaker 2: probably meant that yields are actually lower at the longer

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Speaker 2: end now than they should really be by rights, so

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Speaker 2: the yield curve is flatter than it would be it

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Speaker 2: should be steeper right now. But generally speaking, there's been

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Speaker 2: quite quite a you know, quite a clever move by

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Speaker 2: the Treasury and actually how they've how they run things.

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Speaker 3: In the US.

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Speaker 1: But the problem's sorry ahead, go ahead, tell me what

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Speaker 1: the problem.

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Speaker 2: The problem is, quite simply is that what's happening is

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Speaker 2: that if you're assuing so much short dating coupon debt,

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Speaker 2: you know words at the front end of the market

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Speaker 2: one two year dead and you're assuming a lot of bills,

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Speaker 2: it's the banks who tend to light that error of

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Speaker 2: the market. They buy those treasury securities and that is

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Speaker 2: pure monetization. So you're actually feeding, you know, the wolf

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Speaker 2: who is creating the monetization or if that anamitude works,

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Speaker 2: but effectively, that's.

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Speaker 3: What's going on. So America now is is, you know.

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Speaker 2: Doing what Milton Friedman has been counseling against for decades

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Speaker 2: and decades and decades.

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Speaker 3: It's effectively printing.

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Speaker 1: Money right by issuing the short term bills. I mean

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Speaker 1: it's basically injecting money directly into the economy. I mean

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Speaker 1: we consider in the US, if I had one hundred

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Speaker 1: dollars note, it's one hundred dollars bill. I mean she's

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Speaker 1: basically issuing so that's a that's a that's a bill,

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Speaker 1: that's a note with the zero day you know, coupon

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Speaker 1: if you will, right, and she's basically issuing the same

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Speaker 1: thing into the market, which is just short term cash. Now,

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Speaker 1: you said that it's brilliant for her to do that. Now,

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Speaker 1: I guess in an MMT lens, maybe not from an

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Speaker 1: Austrian lens, but it's keeping the system alive, if you will.

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Speaker 1: But you said that she'll probably be caught out a

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Speaker 1: called out in the long term. So what does that mean?

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Speaker 2: Well, I'm thinking, I mean, there's a rule thumb, there's

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Speaker 2: no hard and fast rule here that the Treasury tends

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Speaker 2: to fund the deficit about eighty percent with coupon and

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Speaker 2: about twenty percent with bills. Now, that's, as I say,

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Speaker 2: not a not set in stone, but that's really been

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Speaker 2: the benchmark many people have looked at. And what Gianik

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Speaker 2: did about where we now nine twelve months ago is

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Speaker 2: actually flipped that round. So it was almost eighty percent

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Speaker 2: bills and twenty percent coupon. So there was a very

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Speaker 2: significant shift. There was a huge amount of bill finance

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Speaker 2: going through the system, and that's actually ebbed down a bit.

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Speaker 2: But generally speaking, looks as if the trending bills is

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Speaker 2: going to be higher than we saw before, and that

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Speaker 2: might be a concern, but there's a lot of there's

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Speaker 2: a lot of opportunistic moves going on. But the fact

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Speaker 2: that she starved the market temporarily of coupons supply was

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Speaker 2: something that I think, in my view, has actually kept

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Speaker 2: yields lower than they would otherwise be. I mean, I

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Speaker 2: think the US ten years should be over five percent now,

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Speaker 2: given everything else that's going on, the inflation backdrop, the economy,

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Speaker 2: et cetera, et cetera. But you know, they're moving in

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Speaker 2: that direction, but they're not there yet. They're being held back.

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Speaker 1: Now. You had talked about earlier about basically we have

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Speaker 1: this pool of collateral which is the base of the system,

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Speaker 1: and how important that is. And so in this debt

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Speaker 1: based monetary system, it seems like because money is created

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Speaker 1: through debt issuance, if I go to if I go

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Speaker 1: get credit, then the dollars are created into existence, which

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Speaker 1: means the dollars of the liability against the debt, which

435
00:21:06,000 --> 00:21:09,600
Speaker 1: then the debt becomes the asset itself. And then that

436
00:21:09,680 --> 00:21:12,359
Speaker 1: debt is the asset or the collateral the base of

437
00:21:12,359 --> 00:21:15,760
Speaker 1: the system, which then collateralizes other debt. So that's sort

438
00:21:15,800 --> 00:21:17,920
Speaker 1: of this Ponzi scheme, if you will, right, So then

439
00:21:18,359 --> 00:21:21,560
Speaker 1: debt is collateralizing more debt, collateralizing more debt, which is

440
00:21:21,560 --> 00:21:23,560
Speaker 1: part of the reason why they can't allow any of

441
00:21:23,560 --> 00:21:26,080
Speaker 1: this collateral to sort of lose value, because then it

442
00:21:26,119 --> 00:21:29,160
Speaker 1: will unwind the entire base of the system. Is that

443
00:21:29,320 --> 00:21:30,840
Speaker 1: the way? Is that a good way to say that?

444
00:21:31,359 --> 00:21:32,119
Speaker 3: Correct? Yeah?

445
00:21:32,520 --> 00:21:35,120
Speaker 2: I think it was actually if my history is correct,

446
00:21:35,359 --> 00:21:38,199
Speaker 2: it was Alexander Hamilton who first made that observation that

447
00:21:38,280 --> 00:21:40,720
Speaker 2: the stability of the US financial system depending on a

448
00:21:40,760 --> 00:21:44,480
Speaker 2: solid government bond market, and that's what has transpired pretty

449
00:21:44,520 --> 00:21:47,600
Speaker 2: much ever since. So if you get that system being challenged,

450
00:21:47,640 --> 00:21:48,880
Speaker 2: then there is an issue.

451
00:21:49,160 --> 00:21:49,400
Speaker 1: Now.

452
00:21:49,600 --> 00:21:52,679
Speaker 2: I think the challenge that well, we all face, not

453
00:21:52,760 --> 00:21:55,639
Speaker 2: just America, because the dollar is the global financial asset.

454
00:21:55,640 --> 00:21:57,600
Speaker 2: But what we all face is the fact that at

455
00:21:57,640 --> 00:22:01,679
Speaker 2: the moment, something like eighty percent of the world savings

456
00:22:02,320 --> 00:22:05,080
Speaker 2: surplus savings go into US financial assets. I mean, and

457
00:22:05,080 --> 00:22:07,840
Speaker 2: I'm watering a large amount, but if you look up

458
00:22:07,960 --> 00:22:12,440
Speaker 2: to counter that, US government outlayers are up forty percent.

459
00:22:12,160 --> 00:22:13,360
Speaker 3: Since the COVID crisis.

460
00:22:13,840 --> 00:22:17,360
Speaker 2: Now, the second number, the forty percent, is telling us

461
00:22:17,720 --> 00:22:21,200
Speaker 2: that the fiscal situation, the budget is running out of control,

462
00:22:21,440 --> 00:22:23,960
Speaker 2: and that is likely to undermine the integrity of the

463
00:22:24,480 --> 00:22:27,600
Speaker 2: treasury market in the longer term. That's the concern. Now, that,

464
00:22:27,800 --> 00:22:30,840
Speaker 2: in my mind, is why you've got these jumps going

465
00:22:30,880 --> 00:22:33,280
Speaker 2: on in the gold price and in bitcoin. And I

466
00:22:33,400 --> 00:22:37,280
Speaker 2: just think of bitcoin because it acts very much like this.

467
00:22:37,560 --> 00:22:40,399
Speaker 2: It's moving rather like exponential gold. It's moving at a

468
00:22:40,480 --> 00:22:42,919
Speaker 2: much faster place than gold, but it's moving in the

469
00:22:42,920 --> 00:22:43,480
Speaker 2: same direction.

470
00:22:44,160 --> 00:22:44,400
Speaker 3: Now.

471
00:22:44,880 --> 00:22:47,840
Speaker 1: Bitcoin is one of my main topics. I'll be speaking

472
00:22:47,880 --> 00:22:50,960
Speaker 1: at the Bitcoin conference here in Nashville coming up in

473
00:22:51,320 --> 00:22:54,040
Speaker 1: two months, So if anybody in the audiences listening wants

474
00:22:54,040 --> 00:22:56,800
Speaker 1: to come see me in Nashville, use codemark Moss to

475
00:22:56,840 --> 00:22:59,160
Speaker 1: save ten percent on your tickets and come join me there.

476
00:22:59,240 --> 00:23:01,200
Speaker 1: So I want to definitely about bitcoin with you, Michael,

477
00:23:01,680 --> 00:23:04,000
Speaker 1: but kind of going back to this sort of cycle

478
00:23:04,000 --> 00:23:07,040
Speaker 1: that we're in. So we're printing money to continue to

479
00:23:07,119 --> 00:23:08,879
Speaker 1: kick the can down the road. We have to continue

480
00:23:08,880 --> 00:23:12,439
Speaker 1: to issue more debt to refinance the existing debt, and

481
00:23:12,480 --> 00:23:15,760
Speaker 1: basically this is debasement, right, So they're debasing the currency.

482
00:23:15,800 --> 00:23:18,840
Speaker 1: So acts at prices are going up because the value

483
00:23:18,880 --> 00:23:20,600
Speaker 1: the purchasing power of those dollars are going down. So

484
00:23:20,640 --> 00:23:23,760
Speaker 1: if you think about it in those lens, then trying

485
00:23:23,800 --> 00:23:26,960
Speaker 1: to understand the financial market. So if you think about

486
00:23:26,960 --> 00:23:29,560
Speaker 1: the financial market looking at the stock index s and

487
00:23:29,600 --> 00:23:34,639
Speaker 1: P five hundred, or let's use the NASDAC, then it

488
00:23:34,760 --> 00:23:37,880
Speaker 1: almost seems like the price of those assets is moving up,

489
00:23:38,040 --> 00:23:41,159
Speaker 1: not because as I started out talking about Stanley Drugammeller,

490
00:23:41,400 --> 00:23:44,000
Speaker 1: not because of what's happening in the economy, not because

491
00:23:44,040 --> 00:23:47,719
Speaker 1: of their earnings or their profitability or any of those things,

492
00:23:47,960 --> 00:23:50,920
Speaker 1: but really it's moving up as a function or an

493
00:23:50,920 --> 00:23:54,400
Speaker 1: inversion of the debasement. That's the way that it looks

494
00:23:54,440 --> 00:23:57,040
Speaker 1: like to me. So fundamentals are out and we just

495
00:23:57,080 --> 00:24:00,520
Speaker 1: look at the debasement or the liquidity moving the asset

496
00:24:00,600 --> 00:24:04,280
Speaker 1: prices up. And so one tell me if that's correct.

497
00:24:04,320 --> 00:24:07,119
Speaker 1: And then then observation number two, which I want to

498
00:24:07,119 --> 00:24:10,000
Speaker 1: get into, when it looks like different assets move at

499
00:24:10,040 --> 00:24:12,600
Speaker 1: different rates. So in your research, you know, on your substack,

500
00:24:12,640 --> 00:24:14,359
Speaker 1: which we'll link in the notes down below for everybody,

501
00:24:14,400 --> 00:24:17,200
Speaker 1: they should definitely check it out. You can show that

502
00:24:17,280 --> 00:24:21,600
Speaker 1: gold moves on liquidity, but bitcoin moves many times more

503
00:24:21,760 --> 00:24:24,800
Speaker 1: on liquidity. So I guess question number one do we

504
00:24:24,920 --> 00:24:27,760
Speaker 1: do we look at fundamentals out and now looking at

505
00:24:27,800 --> 00:24:30,000
Speaker 1: the basement or liquidity moving asset prices up like that?

506
00:24:30,040 --> 00:24:33,160
Speaker 1: And then two, why are different assets moving at different

507
00:24:33,160 --> 00:24:33,880
Speaker 1: prices like that?

508
00:24:34,520 --> 00:24:36,600
Speaker 3: Well, I think that your observation is correct.

509
00:24:37,160 --> 00:24:40,160
Speaker 2: Basically there is an underlying force, and the underlying forces

510
00:24:40,359 --> 00:24:43,879
Speaker 2: is the flow of liquidity and markets. My view is

511
00:24:43,920 --> 00:24:46,600
Speaker 2: that it's it's global, it's a global liquidity dimension. It's

512
00:24:46,600 --> 00:24:48,840
Speaker 2: not just a US centric one. You've got to look

513
00:24:48,840 --> 00:24:52,080
Speaker 2: into it. You've got to check whateverything is everything is

514
00:24:52,119 --> 00:24:53,040
Speaker 2: going on globally.

515
00:24:53,520 --> 00:24:55,800
Speaker 1: Yeah, and just just to interject, I mean you already said,

516
00:24:55,800 --> 00:24:58,239
Speaker 1: like the Switzer Switz Bank is already interjecting money into

517
00:24:58,280 --> 00:25:00,280
Speaker 1: the US markets, and so is the PBOC, and so

518
00:25:00,400 --> 00:25:02,120
Speaker 1: is every other market in the world. It's like George

519
00:25:02,160 --> 00:25:04,719
Speaker 1: soros imperial circle, So like all that money just sort

520
00:25:04,760 --> 00:25:07,600
Speaker 1: of comes into these global assets, right exactly.

521
00:25:07,640 --> 00:25:09,040
Speaker 3: Yeah, I mean you can actually go back.

522
00:25:09,040 --> 00:25:13,240
Speaker 2: I mean, George Soros's imperial circle is a very interesting thesis.

523
00:25:13,960 --> 00:25:16,879
Speaker 2: It's almost exactly the same as the as maybe the

524
00:25:16,920 --> 00:25:22,680
Speaker 2: more popular and probably maybe more transparent milkshakee theory that

525
00:25:23,600 --> 00:25:27,720
Speaker 2: Bread articulated many times, which I think is a very

526
00:25:27,760 --> 00:25:30,880
Speaker 2: neat way of looking at it. And basically that we're

527
00:25:30,920 --> 00:25:33,560
Speaker 2: in that frame. So you've got to look at a

528
00:25:33,600 --> 00:25:35,720
Speaker 2: global money and you've you've got to accept the fact

529
00:25:35,760 --> 00:25:38,879
Speaker 2: that liquidity is fungible worldwide. But there are these dominant trends,

530
00:25:39,240 --> 00:25:41,800
Speaker 2: and it's very clear that you've got certain trends which

531
00:25:41,840 --> 00:25:44,480
Speaker 2: are stronger than others. You've got to you've got to

532
00:25:44,800 --> 00:25:46,920
Speaker 2: you've got a gold and a bitcoin trend. Those look

533
00:25:46,920 --> 00:25:49,679
Speaker 2: pretty well established. You've also got a US tech trend.

534
00:25:49,920 --> 00:25:52,359
Speaker 2: That's another one that looks pretty well established. But what's

535
00:25:52,400 --> 00:25:55,080
Speaker 2: going what's going on behind that is that liquidity is

536
00:25:55,080 --> 00:25:58,639
Speaker 2: a major feature driving them now. It so happens that

537
00:25:58,680 --> 00:26:01,879
Speaker 2: these falling with the catchup without being too wonkish of

538
00:26:01,920 --> 00:26:05,600
Speaker 2: being long duration assets. And basically, if you've got a

539
00:26:05,600 --> 00:26:09,080
Speaker 2: long duration asset, it tends to be very sensitive to liquidity,

540
00:26:09,960 --> 00:26:11,760
Speaker 2: and a long duration asset is something that has a

541
00:26:11,800 --> 00:26:13,600
Speaker 2: long term payback if you think about it.

542
00:26:14,000 --> 00:26:15,280
Speaker 3: Now, you've got.

543
00:26:15,160 --> 00:26:18,200
Speaker 2: Other assets which fall somewhat beneath that. You've got things

544
00:26:18,240 --> 00:26:21,480
Speaker 2: which are more cyclical, maybe things that are more connected

545
00:26:21,480 --> 00:26:25,120
Speaker 2: with the business cycle. I would maybe counter what I've

546
00:26:25,200 --> 00:26:28,080
Speaker 2: just said by saying that liquidity is not the only factor.

547
00:26:28,320 --> 00:26:30,240
Speaker 2: You've got to also take into account of the business

548
00:26:30,240 --> 00:26:34,639
Speaker 2: cycle itself, because that will actually change sentiment or investors

549
00:26:35,280 --> 00:26:38,600
Speaker 2: feeling feeling towards the markets. If you get a recession there,

550
00:26:39,280 --> 00:26:42,360
Speaker 2: they're less likely to invest in even in these trends.

551
00:26:42,520 --> 00:26:44,840
Speaker 2: They'll be disrupted. They want to go for safer assets

552
00:26:44,840 --> 00:26:49,040
Speaker 2: in that environment. But generally speaking, you've got the underlying

553
00:26:49,080 --> 00:26:51,760
Speaker 2: trend which is being driven by liquidity, and maybe the

554
00:26:51,840 --> 00:26:56,080
Speaker 2: cycle a cycle of investment sentiment, which is more akin

555
00:26:56,200 --> 00:26:59,280
Speaker 2: to maybe the swings in a traditional business cycle. So

556
00:26:59,280 --> 00:27:02,760
Speaker 2: i'd look at that in terms of the sensitivity of assets. Again,

557
00:27:02,800 --> 00:27:05,760
Speaker 2: you were correct. We did an analysis and this was

558
00:27:06,000 --> 00:27:09,080
Speaker 2: you know, I drew up immediately what you might say

559
00:27:09,080 --> 00:27:11,399
Speaker 2: as a health warning or a wealth warning here, because

560
00:27:11,400 --> 00:27:13,200
Speaker 2: this is based on historic analysis.

561
00:27:13,440 --> 00:27:14,640
Speaker 3: But if you look at.

562
00:27:14,560 --> 00:27:17,719
Speaker 2: Data, what the data shows is that every ten percent

563
00:27:17,840 --> 00:27:21,240
Speaker 2: increase in liquidity, you tend to get a fifteen percent

564
00:27:21,359 --> 00:27:23,800
Speaker 2: increase in the gold bullion price. Now that's over the

565
00:27:24,359 --> 00:27:27,760
Speaker 2: medium term, and that's what seems to have transpired. If

566
00:27:27,800 --> 00:27:31,080
Speaker 2: you look at bitcoin. The answer, and this is what

567
00:27:31,200 --> 00:27:34,200
Speaker 2: I say is a caveat, it's really in the period

568
00:27:34,760 --> 00:27:37,520
Speaker 2: of the last ten years, bitcoin has actually had a

569
00:27:37,560 --> 00:27:40,159
Speaker 2: multiplier about five times. In other words, it goes up

570
00:27:40,200 --> 00:27:43,800
Speaker 2: fifty percent for every ten percent increase in liquidity.

571
00:27:43,920 --> 00:27:44,920
Speaker 3: Now that will not be.

572
00:27:45,720 --> 00:27:48,040
Speaker 2: What it's what's going to happen going forward, but it

573
00:27:48,119 --> 00:27:50,479
Speaker 2: still may be a high number. And that's the thing

574
00:27:50,520 --> 00:27:51,439
Speaker 2: I think you've got to remember.

575
00:27:51,720 --> 00:27:54,119
Speaker 1: Why will that not be what it Why would that

576
00:27:54,200 --> 00:27:56,000
Speaker 1: not be moving forward?

577
00:27:56,119 --> 00:27:57,639
Speaker 2: Well, because I think what you've got is you've got

578
00:27:57,640 --> 00:28:00,239
Speaker 2: an adoption effect. So in other words, in the very

579
00:28:00,240 --> 00:28:04,000
Speaker 2: early stages, bitcoin was a comparably in liquid asset. Now

580
00:28:04,000 --> 00:28:06,320
Speaker 2: it's a more liquid asset, and I'm talking about liquid

581
00:28:06,320 --> 00:28:09,399
Speaker 2: being here at market depth. And the fact is that

582
00:28:09,440 --> 00:28:11,919
Speaker 2: you've had a lot of investors who are already there.

583
00:28:12,160 --> 00:28:14,960
Speaker 2: You may have others who will come in. But I

584
00:28:15,000 --> 00:28:19,159
Speaker 2: think that this sensitivity, once the market becomes more institutionalized,

585
00:28:19,400 --> 00:28:24,600
Speaker 2: the sensitivity of the market to short moves in global liquidity,

586
00:28:24,680 --> 00:28:27,120
Speaker 2: in short term moves will be less or I would

587
00:28:27,160 --> 00:28:28,120
Speaker 2: imagine it would be less.

588
00:28:28,119 --> 00:28:28,960
Speaker 3: I mean, never say never.

589
00:28:29,040 --> 00:28:32,040
Speaker 2: Of course, it may be that that's actually a robust figure,

590
00:28:32,520 --> 00:28:36,159
Speaker 2: the fifty percent, but I would counselor that it probably isn't.

591
00:28:36,520 --> 00:28:38,560
Speaker 1: And that's because as the as the market cap of

592
00:28:38,560 --> 00:28:41,920
Speaker 1: bitcoin gets bigger than the asset itself becomes more liquid

593
00:28:42,120 --> 00:28:43,840
Speaker 1: as far as the daily trading volume, I mean, I

594
00:28:43,880 --> 00:28:45,960
Speaker 1: can get more in and more out, and so as

595
00:28:46,000 --> 00:28:49,120
Speaker 1: it becomes a more heavily traded asset, then it's a

596
00:28:49,160 --> 00:28:51,520
Speaker 1: lot harder to move. That's why the sensitivity goes down.

597
00:28:52,040 --> 00:28:56,680
Speaker 3: Yeah, yeah, exactly right, exactly right. So that's correct. But

598
00:28:56,720 --> 00:28:58,520
Speaker 3: then you see, if you go back, I mean, you

599
00:28:58,640 --> 00:28:59,920
Speaker 3: keep drawing the or dry.

600
00:29:00,120 --> 00:29:03,640
Speaker 2: The example of Stan Drockamiller, I mean Stan Drockermiller learned

601
00:29:03,640 --> 00:29:05,560
Speaker 2: a lot of what he was doing in global investing

602
00:29:05,600 --> 00:29:07,800
Speaker 2: by looking at Japan in the nineteen eighties, and that's

603
00:29:07,840 --> 00:29:10,760
Speaker 2: what I remember him, and he was he was then,

604
00:29:11,320 --> 00:29:13,800
Speaker 2: you know, very clued in to what was happening to

605
00:29:13,840 --> 00:29:16,800
Speaker 2: liquidity in the Japanese market, and liquidity was a key,

606
00:29:16,880 --> 00:29:19,520
Speaker 2: key factor driving the nicky higher and higher and hire.

607
00:29:19,960 --> 00:29:21,120
Speaker 3: It wasn't about valuation.

608
00:29:21,480 --> 00:29:23,600
Speaker 2: A lot of the traditional value investors piled out of

609
00:29:23,680 --> 00:29:26,280
Speaker 2: Japan in nineteen eighty four, but the market kept rising

610
00:29:26,320 --> 00:29:28,200
Speaker 2: for another six years or seven years.

611
00:29:29,400 --> 00:29:32,400
Speaker 1: Well couldn't you say the same about Turkey's stock market

612
00:29:32,440 --> 00:29:35,880
Speaker 1: or Zimbabwe's stock market as well? All those asset prices

613
00:29:35,880 --> 00:29:37,880
Speaker 1: in the stock market are making new all time highs

614
00:29:38,120 --> 00:29:38,960
Speaker 1: in normal.

615
00:29:38,720 --> 00:29:41,880
Speaker 3: Attack exactly exactly. And I draw the analogy.

616
00:29:41,920 --> 00:29:44,920
Speaker 2: And I'm not suggesting this is maybe a fair analogy,

617
00:29:44,960 --> 00:29:48,520
Speaker 2: but it's a point to ponder. This is an example

618
00:29:48,560 --> 00:29:50,400
Speaker 2: I give with people to say that, you know, don't

619
00:29:50,440 --> 00:29:54,640
Speaker 2: invest in bitcoin or all coins or whatever, because they're

620
00:29:54,680 --> 00:29:58,080
Speaker 2: basically you know, the their empty assets or whatever, or

621
00:29:58,080 --> 00:30:01,280
Speaker 2: their fictition's assets. My example is to go back to

622
00:30:01,360 --> 00:30:04,480
Speaker 2: Germany in nineteen twenty three with a hyperinflation. Now in

623
00:30:04,560 --> 00:30:07,600
Speaker 2: nineteen twenty three, just before Germany saw this massive inflation

624
00:30:08,040 --> 00:30:10,600
Speaker 2: as the government the game was printing loads of money.

625
00:30:10,800 --> 00:30:12,680
Speaker 2: And I'm stressed the fact we're not going to get

626
00:30:12,720 --> 00:30:15,280
Speaker 2: hyper inflation in the US. But the direction is important.

627
00:30:15,320 --> 00:30:20,360
Speaker 2: I think in that case, many older generations invested their

628
00:30:20,400 --> 00:30:23,400
Speaker 2: wealth in government bonds because that was the world they knew,

629
00:30:23,480 --> 00:30:26,200
Speaker 2: They depended on the government, They thought the government was reliable.

630
00:30:26,440 --> 00:30:29,520
Speaker 2: They kept their money in bonds. That's what they'd always done,

631
00:30:29,560 --> 00:30:32,480
Speaker 2: that's what their parents and grandparents had done, and they

632
00:30:32,520 --> 00:30:36,840
Speaker 2: got wiped out. The younger generations instead did.

633
00:30:36,720 --> 00:30:37,640
Speaker 3: Not invest in bonds.

634
00:30:37,640 --> 00:30:41,520
Speaker 2: They they've invested in the stock market and they basically

635
00:30:41,600 --> 00:30:43,920
Speaker 2: kept their wealth. And what you saw in Germany in

636
00:30:43,960 --> 00:30:47,440
Speaker 2: the nineteen thirty I say, in nineteen twenties, well, obviously

637
00:30:48,000 --> 00:30:51,280
Speaker 2: you know unfortunate consequences is there was a massive wealth

638
00:30:51,360 --> 00:30:55,000
Speaker 2: distribution shift from the older generations to the younger generations.

639
00:30:55,200 --> 00:30:57,800
Speaker 2: And I've got no evidence for this, but I would imagine,

640
00:30:57,920 --> 00:31:00,640
Speaker 2: I would strongly believe that through that period the older

641
00:31:00,680 --> 00:31:05,160
Speaker 2: generations were schooling their children, say you're absolutely mad to

642
00:31:05,280 --> 00:31:07,640
Speaker 2: invest in stocks. Here you know, why don't you fall

643
00:31:07,680 --> 00:31:09,880
Speaker 2: back on the reliability of government bonds because.

644
00:31:09,640 --> 00:31:10,440
Speaker 3: They've always worked.

645
00:31:10,840 --> 00:31:12,920
Speaker 2: You know, what are these pieces of paper you're trading

646
00:31:12,960 --> 00:31:16,480
Speaker 2: for company securities? I mean, they're completely worthless, but actually

647
00:31:16,520 --> 00:31:19,200
Speaker 2: we know that they weren't. And isn't that exactly the

648
00:31:19,200 --> 00:31:22,240
Speaker 2: same argument that the older generations are saying to the

649
00:31:22,240 --> 00:31:25,719
Speaker 2: younger generations now about bitcoin and all coins. You know,

650
00:31:25,840 --> 00:31:29,840
Speaker 2: the younger generations basically gravitating these instruments because they're probably

651
00:31:30,280 --> 00:31:33,320
Speaker 2: very good monetary inflation, the hedges, and they understand them.

652
00:31:33,640 --> 00:31:36,560
Speaker 1: Yeah, I mean, there's certainly that we can dig into that.

653
00:31:36,680 --> 00:31:41,200
Speaker 1: There's also that in times of high inflation, hyperinflation, however,

654
00:31:41,240 --> 00:31:45,240
Speaker 1: you wanted to find that what happens is it turns

655
00:31:45,240 --> 00:31:48,960
Speaker 1: into a culture of gambling, right. John Mayner Kean said

656
00:31:48,960 --> 00:31:50,840
Speaker 1: that that Vladimir Lennan told them that the best way

657
00:31:50,880 --> 00:31:53,880
Speaker 1: to destroy capitalism was to debouch the currency through inflation.

658
00:31:53,920 --> 00:31:56,840
Speaker 1: They could arbitrary steel wealth until all relation is lost,

659
00:31:57,040 --> 00:31:58,800
Speaker 1: and the best way to get rich was gambling and

660
00:31:58,840 --> 00:32:01,680
Speaker 1: theft and so of what we see when societies start

661
00:32:01,720 --> 00:32:04,720
Speaker 1: breaking down. And so was it just two weeks ago,

662
00:32:05,160 --> 00:32:08,160
Speaker 1: Game Stop was back back in the news. Everybody's you know,

663
00:32:08,440 --> 00:32:11,240
Speaker 1: Yolo into game Stop, and so not that there's really

664
00:32:11,320 --> 00:32:15,000
Speaker 1: any valuation there. I think in hyper in Germany maybe

665
00:32:15,040 --> 00:32:20,000
Speaker 1: they were buying notes of equities of maybe productive companies.

666
00:32:20,280 --> 00:32:21,800
Speaker 1: So it's a little bit different, I think than buying

667
00:32:21,800 --> 00:32:24,040
Speaker 1: game Stop or you know, some some all coins, meme

668
00:32:24,080 --> 00:32:28,200
Speaker 1: stocks or whatever. But certainly to the point that you're making.

669
00:32:28,240 --> 00:32:30,520
Speaker 1: I mean Bitcoin, obviously, I'm a big believer in Bitcoin

670
00:32:31,360 --> 00:32:35,520
Speaker 1: is a new alternative asset. Do you think so? Bitcoin

671
00:32:35,600 --> 00:32:37,240
Speaker 1: is the first time we've seen an asset that has

672
00:32:38,440 --> 00:32:41,840
Speaker 1: true scarcity, so fixed supply of twenty one million, and

673
00:32:41,920 --> 00:32:43,480
Speaker 1: do you think that has something to do with it?

674
00:32:43,520 --> 00:32:46,840
Speaker 1: I mean, if you look at whether it's real estate

675
00:32:47,120 --> 00:32:49,760
Speaker 1: or art, it's always the scarce assets that move many

676
00:32:49,840 --> 00:32:53,680
Speaker 1: multiples higher than the existing assets, right, And so in

677
00:32:53,680 --> 00:32:56,440
Speaker 1: this type of environment where we're seeing unlimited money printing

678
00:32:56,600 --> 00:32:59,360
Speaker 1: against the face of an asset that has a fixed supply,

679
00:33:00,120 --> 00:33:01,800
Speaker 1: I mean, how does that interact?

680
00:33:02,440 --> 00:33:04,360
Speaker 3: Well, I think you're absolutely right. I mean, this is it?

681
00:33:04,400 --> 00:33:05,880
Speaker 3: What is it? I mean, you'd know better than me.

682
00:33:06,040 --> 00:33:08,360
Speaker 3: What is the living twenty one million bitcoin? I think

683
00:33:08,440 --> 00:33:09,200
Speaker 3: is it? Yeah?

684
00:33:09,240 --> 00:33:12,480
Speaker 1: Twenty one million bitcoin is the is the max supply?

685
00:33:12,560 --> 00:33:14,840
Speaker 1: It's the first time that we've seen an asset that

686
00:33:14,920 --> 00:33:18,880
Speaker 1: has true scarcity, a digital asset with true scarcity. Obviously,

687
00:33:18,880 --> 00:33:20,840
Speaker 1: like a Mona Lisa. There's one Mona Lisa, so it's

688
00:33:20,840 --> 00:33:22,800
Speaker 1: true scarcity as well. But the first time we've seen

689
00:33:22,800 --> 00:33:27,680
Speaker 1: a digital asset with true scarcity, and so it's hard

690
00:33:27,680 --> 00:33:30,280
Speaker 1: to imagine where that goes. But I think we're seeing that.

691
00:33:30,440 --> 00:33:31,239
Speaker 3: Yeah, I think that's right.

692
00:33:31,280 --> 00:33:33,160
Speaker 2: I mean, the only question one's got a raise. I mean,

693
00:33:33,440 --> 00:33:36,680
Speaker 2: you know, there have been other examples of scarce assets

694
00:33:36,680 --> 00:33:39,320
Speaker 2: primary real estate, mona lisas or whatever, but their price

695
00:33:39,360 --> 00:33:42,040
Speaker 2: goes up. I mean, that's what we know they hold

696
00:33:42,080 --> 00:33:45,840
Speaker 2: their value. Bitcoin is an example that certainly should do.

697
00:33:46,120 --> 00:33:48,400
Speaker 2: I think the question that you know I've posed many

698
00:33:48,400 --> 00:33:50,440
Speaker 2: times in the last few years is, I mean, is

699
00:33:50,480 --> 00:33:52,400
Speaker 2: there a chance that you get some of the equivalent

700
00:33:52,440 --> 00:33:54,840
Speaker 2: to the Gold Act in the US and ninety thirty

701
00:33:54,840 --> 00:33:57,520
Speaker 2: four where the Gold Act basically made it illegal for

702
00:33:57,600 --> 00:34:01,680
Speaker 2: private individuals to hold gold. The penalty of I think

703
00:34:01,680 --> 00:34:04,120
Speaker 2: it was a seventy year jail center. Its a really

704
00:34:04,200 --> 00:34:07,880
Speaker 2: hefty US dollar normal fine at the time, So that

705
00:34:08,000 --> 00:34:08,880
Speaker 2: focused the attention.

706
00:34:09,239 --> 00:34:11,680
Speaker 3: Now, could the administration do something similar?

707
00:34:12,040 --> 00:34:14,359
Speaker 2: I would doubt that now I think the I think

708
00:34:14,360 --> 00:34:16,920
Speaker 2: that you know, the horse has bolted. So I think

709
00:34:16,960 --> 00:34:20,719
Speaker 2: it's very very difficult. Big coins a global asset, it's

710
00:34:20,760 --> 00:34:22,960
Speaker 2: not under the control of the US administration, and how

711
00:34:23,000 --> 00:34:25,600
Speaker 2: much they made late like that, and I believe I'm

712
00:34:25,600 --> 00:34:28,200
Speaker 2: correct in saying that Trump, you know, over the weekend,

713
00:34:28,239 --> 00:34:31,360
Speaker 2: actually endorsed the whole idea would never be any constraints

714
00:34:31,360 --> 00:34:32,080
Speaker 2: on nacrypto.

715
00:34:32,480 --> 00:34:34,440
Speaker 1: Yeah, so just to catch you up on that, I

716
00:34:34,440 --> 00:34:37,279
Speaker 1: mean that has been the number one uh sort of

717
00:34:38,400 --> 00:34:39,960
Speaker 1: people who don't believe in bit when that's of their

718
00:34:40,000 --> 00:34:42,080
Speaker 1: number one attack vector is like, but the governments will

719
00:34:42,120 --> 00:34:44,680
Speaker 1: make it illegal and obviously there's good reason for that

720
00:34:44,719 --> 00:34:46,720
Speaker 1: with Acts sixty one h two where they made called illegal.

721
00:34:46,760 --> 00:34:50,279
Speaker 1: To your point, but yes, not only did Trump endorse it,

722
00:34:50,440 --> 00:34:55,040
Speaker 1: but we had other leading candidates Vivi Gramaswami, he was

723
00:34:55,080 --> 00:34:57,880
Speaker 1: out endorsing it. RFK Junior has been out endorsing it

724
00:34:58,480 --> 00:35:01,920
Speaker 1: and receiving a campaign cont in that. But more importantly,

725
00:35:02,080 --> 00:35:07,839
Speaker 1: last week the House passed a bill that basically, so

726
00:35:07,960 --> 00:35:09,760
Speaker 1: we have a couple things going on. We have multiple

727
00:35:09,800 --> 00:35:13,160
Speaker 1: states that are breaking apart from federal government. And so

728
00:35:13,280 --> 00:35:18,440
Speaker 1: now Montana, Oklahoma was the latest one that basically passed

729
00:35:18,480 --> 00:35:22,200
Speaker 1: a law. The state passed a law to protect people's

730
00:35:22,239 --> 00:35:26,880
Speaker 1: right to own bitcoin, custody bitcoin. And so the states

731
00:35:26,920 --> 00:35:30,000
Speaker 1: are now moving in advance of the federal government. But

732
00:35:30,000 --> 00:35:32,799
Speaker 1: then the federal government, the House passed a bill that

733
00:35:32,960 --> 00:35:37,680
Speaker 1: also guarantees citizens' rights to own bitcoin self custody bitcoin.

734
00:35:38,040 --> 00:35:39,400
Speaker 1: And so to your point, I mean, could that be

735
00:35:39,480 --> 00:35:42,360
Speaker 1: overturned and you know whatever, Sure, I mean, everything's a possibility,

736
00:35:42,680 --> 00:35:45,520
Speaker 1: but as it looks right now, they have gone above

737
00:35:45,560 --> 00:35:47,840
Speaker 1: and beyond and actually put sort of what the Constitution

738
00:35:47,920 --> 00:35:50,640
Speaker 1: does is guarantee those rights. And so that's a pretty

739
00:35:50,640 --> 00:35:52,799
Speaker 1: big deal. And to the point that you made, yes,

740
00:35:52,840 --> 00:35:54,680
Speaker 1: I mean, even if the US said, hey, we'll kill

741
00:35:54,680 --> 00:35:56,640
Speaker 1: you on site if you have it doesn't stop the

742
00:35:56,719 --> 00:35:59,000
Speaker 1: rest of the world from moving in advance of that.

743
00:36:00,200 --> 00:36:03,080
Speaker 1: So I think to your point, the house the horse

744
00:36:03,120 --> 00:36:04,920
Speaker 1: has bolted the horses out of the bar, and it's

745
00:36:04,920 --> 00:36:09,000
Speaker 1: too late to close those doors. So kind of if

746
00:36:09,040 --> 00:36:11,319
Speaker 1: we look at this lens then and we have this

747
00:36:11,400 --> 00:36:14,800
Speaker 1: tech trend as you called it, So there's certainly AI's

748
00:36:14,880 --> 00:36:17,200
Speaker 1: that's sort of driving markets like Nvidia, you know, it's

749
00:36:17,239 --> 00:36:20,640
Speaker 1: catching that. I think copper is even this old metal

750
00:36:20,640 --> 00:36:22,359
Speaker 1: that's starting to sort of move on this tech trend,

751
00:36:22,400 --> 00:36:26,399
Speaker 1: if you will. Maybe that's the energy transition, you know,

752
00:36:26,600 --> 00:36:29,399
Speaker 1: as well as the AI right, massive data centers, things

753
00:36:29,440 --> 00:36:32,840
Speaker 1: like that. I've mapped out about every fifty years, we

754
00:36:32,880 --> 00:36:35,560
Speaker 1: have these condroit and waves, these K waves, and every

755
00:36:35,600 --> 00:36:39,480
Speaker 1: fifty years there's like this technological revolution that happens, and

756
00:36:39,600 --> 00:36:42,160
Speaker 1: each one of those seems to drive financial markets. So

757
00:36:42,200 --> 00:36:44,880
Speaker 1: with had the industrial revolution, we had steam engines, railways,

758
00:36:44,960 --> 00:36:49,360
Speaker 1: we had steel electricity heavy equipment, we had oil automobiles

759
00:36:50,200 --> 00:36:55,680
Speaker 1: mass production ninety seventy one. We had microprocessors which brought telecommunications,

760
00:36:55,719 --> 00:36:59,640
Speaker 1: personal computers, Internet, and now we have this like next

761
00:36:59,680 --> 00:37:03,120
Speaker 1: tech boom, and each one of those dry drove financial markets.

762
00:37:03,120 --> 00:37:05,319
Speaker 1: So back to that trend. So we have this tech trend,

763
00:37:05,440 --> 00:37:07,960
Speaker 1: which is why I referenced the NASDAK not the S

764
00:37:08,000 --> 00:37:10,120
Speaker 1: and P five hundred, so sort of got this Nasdaq

765
00:37:10,200 --> 00:37:13,719
Speaker 1: and obviously bitcoin crypto overall is sort of driving that.

766
00:37:15,000 --> 00:37:17,240
Speaker 1: And then if we look at we have these global

767
00:37:17,239 --> 00:37:21,320
Speaker 1: liquidity cycles that seem to be happening globally every four years,

768
00:37:21,600 --> 00:37:23,840
Speaker 1: and these these tech So we have the tech trend,

769
00:37:24,080 --> 00:37:26,440
Speaker 1: we have the NASDAK represented sort of moving off of

770
00:37:26,520 --> 00:37:30,440
Speaker 1: debasement and based off of sort of the way you

771
00:37:30,520 --> 00:37:32,920
Speaker 1: framed it up. And I want to get deep into this.

772
00:37:32,920 --> 00:37:35,200
Speaker 1: This the pool of collateral, the base of the system

773
00:37:35,280 --> 00:37:37,000
Speaker 1: is so important we can't let it collapse. So we're

774
00:37:37,040 --> 00:37:39,160
Speaker 1: going to have to keep kicking the can down the road.

775
00:37:39,320 --> 00:37:41,080
Speaker 1: So we're going to have to keep debasing, and it's

776
00:37:41,120 --> 00:37:43,600
Speaker 1: going to keep pushing prices up higher. And then that's

777
00:37:43,600 --> 00:37:49,040
Speaker 1: in the backdrop of this tech crypto AI boom. Do

778
00:37:49,080 --> 00:37:52,200
Speaker 1: you think it makes sense to sort of be a

779
00:37:52,239 --> 00:37:55,239
Speaker 1: warm buffet and be more concentrated in your bets, put

780
00:37:55,239 --> 00:37:56,960
Speaker 1: your eggs in one basket and watch the hell out

781
00:37:57,000 --> 00:38:00,520
Speaker 1: of that basket, as I think he said, instead of

782
00:38:00,520 --> 00:38:03,560
Speaker 1: this diversified thing. It's like, no, Like, we can pretty

783
00:38:03,560 --> 00:38:06,160
Speaker 1: clearly see that these are trends that are going to happen.

784
00:38:06,200 --> 00:38:09,440
Speaker 1: They have to continue happening, at least the base cases

785
00:38:09,480 --> 00:38:11,200
Speaker 1: that they'll continue to happen. And we can see what's

786
00:38:11,200 --> 00:38:13,360
Speaker 1: happening with with the tech stocks and bitcoin, and so

787
00:38:13,400 --> 00:38:15,839
Speaker 1: maybe it's time to sort of focus more on that

788
00:38:16,560 --> 00:38:16,719
Speaker 1: or no.

789
00:38:17,640 --> 00:38:20,040
Speaker 2: Well, I think it comes down to I think it's

790
00:38:20,040 --> 00:38:22,560
Speaker 2: a very interesting debate. I think it comes down basically

791
00:38:22,600 --> 00:38:26,560
Speaker 2: to what. So, first of all, your time horizon, so

792
00:38:27,440 --> 00:38:29,640
Speaker 2: you know, if you've if you've got if you're a

793
00:38:29,680 --> 00:38:32,319
Speaker 2: young a young guy who can you know is going

794
00:38:32,400 --> 00:38:34,640
Speaker 2: to be saving or working for the next forty years,

795
00:38:34,920 --> 00:38:36,920
Speaker 2: then you can take a long term view and maybe

796
00:38:36,920 --> 00:38:39,560
Speaker 2: short term volatility doesn't matter too much in that regard.

797
00:38:40,280 --> 00:38:43,440
Speaker 2: You're right also to say that the most successful investors

798
00:38:44,000 --> 00:38:46,239
Speaker 2: did not diversify or do not diversify.

799
00:38:46,280 --> 00:38:47,120
Speaker 3: They concentrate.

800
00:38:48,040 --> 00:38:53,080
Speaker 2: However, what they face is en route is significant volatility. Caines,

801
00:38:53,080 --> 00:38:55,919
Speaker 2: who you cited earlier, was actually also somebody who didn't

802
00:38:55,960 --> 00:39:01,239
Speaker 2: believe in diversification. He believed, in his phrase, was I

803
00:39:01,360 --> 00:39:03,520
Speaker 2: put to all my eggs in one basket, and I

804
00:39:03,560 --> 00:39:07,319
Speaker 2: watched the basket very closely. And you know that's and

805
00:39:07,360 --> 00:39:09,480
Speaker 2: that's you know something I think one's got to think about.

806
00:39:09,719 --> 00:39:12,279
Speaker 2: If you believe that these are the these are the

807
00:39:12,320 --> 00:39:15,160
Speaker 2: safe assets of the future, then I would definitely got

808
00:39:15,200 --> 00:39:18,239
Speaker 2: to go along with that. And you know, I happen

809
00:39:18,320 --> 00:39:21,560
Speaker 2: to believe strongly that these these are important. I'm not

810
00:39:21,560 --> 00:39:23,960
Speaker 2: going to say I've got all of my investments in

811
00:39:24,640 --> 00:39:27,759
Speaker 2: bitcoin or in associated vehicles, but I think you know,

812
00:39:27,760 --> 00:39:30,239
Speaker 2: I've got substantial amounts because I think that the real

813
00:39:30,280 --> 00:39:33,400
Speaker 2: thread out there is monetary inflation, and where we are today,

814
00:39:33,520 --> 00:39:35,839
Speaker 2: which is very different to where we've been at any

815
00:39:35,840 --> 00:39:38,000
Speaker 2: time in my investment career over the last you know,

816
00:39:38,120 --> 00:39:41,640
Speaker 2: thirty forty years, is that governments are really in a

817
00:39:41,680 --> 00:39:44,480
Speaker 2: situation where they can't really do very much. All they

818
00:39:44,560 --> 00:39:46,200
Speaker 2: can do is, we keep saying, is to kick the

819
00:39:46,239 --> 00:39:49,040
Speaker 2: can down the road. Now you think of the alternatives

820
00:39:49,040 --> 00:39:53,960
Speaker 2: to that. The alternatives would require a revolution in demographics,

821
00:39:54,000 --> 00:39:57,000
Speaker 2: which we're clearly not going to get. It would require

822
00:39:57,800 --> 00:40:00,919
Speaker 2: the ability of the government to hike interest it significantly

823
00:40:00,960 --> 00:40:03,600
Speaker 2: to discipline the markets. But they can't really do that

824
00:40:03,640 --> 00:40:07,480
Speaker 2: because if they do that, the debt interest builds skyrockets,

825
00:40:07,760 --> 00:40:09,879
Speaker 2: and then you get it, you get an even worse

826
00:40:09,920 --> 00:40:13,719
Speaker 2: situation with debt growing exponentially. And they probably don't want

827
00:40:13,719 --> 00:40:16,319
Speaker 2: to cut interest rates too much either on the other side,

828
00:40:16,320 --> 00:40:18,640
Speaker 2: because the incentivize people to take up too much debt,

829
00:40:18,880 --> 00:40:21,640
Speaker 2: so they're really stuck. And you know, there's an old

830
00:40:21,719 --> 00:40:23,720
Speaker 2: saying in Ireland that if you want to travel to Dublin,

831
00:40:23,760 --> 00:40:27,000
Speaker 2: don't start from here, and that's where we are, unfortunately.

832
00:40:27,239 --> 00:40:29,440
Speaker 2: So I think the fact is that what you what

833
00:40:29,440 --> 00:40:31,680
Speaker 2: you're going to see over the next few years is

834
00:40:31,760 --> 00:40:35,239
Speaker 2: government's increasingly kicking the can down the road, and it's

835
00:40:35,280 --> 00:40:38,600
Speaker 2: those that have got maybe the bigger boots on, like

836
00:40:38,640 --> 00:40:40,920
Speaker 2: the US, which is going to succeed rather more than

837
00:40:40,920 --> 00:40:42,960
Speaker 2: some of these smaller countries who haven't got the same

838
00:40:43,000 --> 00:40:45,719
Speaker 2: resources or haven't got an international currency at the dollar.

839
00:40:47,239 --> 00:40:49,480
Speaker 1: Yeah, so you said that the US is a pristine

840
00:40:49,520 --> 00:40:52,759
Speaker 1: borrow and tell it's not. So, I think to the

841
00:40:52,760 --> 00:40:55,439
Speaker 1: point that you're making, I mean, that's obviously I agree,

842
00:40:55,440 --> 00:40:57,040
Speaker 1: and I'm also trying to make that same point. And

843
00:40:57,080 --> 00:41:00,000
Speaker 1: if we look at ancient history as well as current history,

844
00:41:00,280 --> 00:41:02,120
Speaker 1: that's what it tells us. So it's going back to

845
00:41:02,120 --> 00:41:05,640
Speaker 1: Turkey and Zimbabwe I referenced earlier, or Venezuela, Argentina, name

846
00:41:05,680 --> 00:41:09,360
Speaker 1: your country. What we see is they're all going to

847
00:41:09,480 --> 00:41:12,440
Speaker 1: print until the printer doesn't work anymore. None of them

848
00:41:12,520 --> 00:41:14,600
Speaker 1: just say, well, fold up shop, just shut it down.

849
00:41:14,840 --> 00:41:16,759
Speaker 1: Like they all just go and tell it doesn't work.

850
00:41:16,800 --> 00:41:19,880
Speaker 1: And so it's like the law of diminishing returns, and

851
00:41:19,960 --> 00:41:21,839
Speaker 1: so that sort of seems to be the way it's

852
00:41:21,880 --> 00:41:23,400
Speaker 1: going to continue to go. They're just going to keep

853
00:41:23,520 --> 00:41:26,279
Speaker 1: kicking the can until the can doesn't kick anymore. But

854
00:41:26,320 --> 00:41:28,400
Speaker 1: you said the US is a pristine bar until it's not.

855
00:41:31,160 --> 00:41:35,080
Speaker 1: What we're seeing is, obviously with the rise of the bricks,

856
00:41:35,120 --> 00:41:38,319
Speaker 1: sort of the decentralization or maybe deglobalization of the world,

857
00:41:38,360 --> 00:41:41,760
Speaker 1: if you call it that. You know, China and Russia

858
00:41:41,800 --> 00:41:45,080
Speaker 1: have both been openly claiming to be de dollarizing since

859
00:41:45,120 --> 00:41:48,480
Speaker 1: what twenty fourteen, about a decade now, And what we're

860
00:41:48,520 --> 00:41:51,520
Speaker 1: seeing is even now, like in Saudi Arabia with the oil,

861
00:41:52,040 --> 00:41:55,520
Speaker 1: is like the surpluses are not being recycled back into

862
00:41:55,560 --> 00:41:58,759
Speaker 1: dollars or treasuries now, they're being recycled into gold. And

863
00:41:58,840 --> 00:42:01,200
Speaker 1: maybe that's part of the reason Golled is also catching

864
00:42:01,280 --> 00:42:04,239
Speaker 1: such a bid right now. And I'm just curious what

865
00:42:04,280 --> 00:42:07,200
Speaker 1: you think about that dynamic. And if that's the US

866
00:42:07,280 --> 00:42:09,439
Speaker 1: as a Christine Biro until it's not, does that sort

867
00:42:09,480 --> 00:42:13,120
Speaker 1: of shorten the runway that they might have as countries

868
00:42:13,120 --> 00:42:15,120
Speaker 1: starts sort of recycling into other assets.

869
00:42:16,360 --> 00:42:18,400
Speaker 2: Yeah, I think this is a this is a key area,

870
00:42:18,440 --> 00:42:20,239
Speaker 2: and I'm not sure I've got the answers, but I

871
00:42:20,239 --> 00:42:22,400
Speaker 2: think I can, you know, I can pose post some

872
00:42:22,520 --> 00:42:25,400
Speaker 2: questions here. I think the you know, the interesting point

873
00:42:25,440 --> 00:42:30,320
Speaker 2: and the interesting maybe opposite correlation that one sees is

874
00:42:30,400 --> 00:42:34,320
Speaker 2: that whenever the Chinese current account, SERPENTUS or trade surplus rises,

875
00:42:34,360 --> 00:42:37,120
Speaker 2: the dollar goes up. And we shouldn't be seeing that

876
00:42:37,160 --> 00:42:40,000
Speaker 2: should be the other way around. So what's happening is

877
00:42:40,040 --> 00:42:43,040
Speaker 2: there's yet another price in the international financial system that's

878
00:42:43,040 --> 00:42:46,640
Speaker 2: not working properly. It's working perversely. Now why is that

879
00:42:46,719 --> 00:42:48,520
Speaker 2: the case? And I think there's you know, a number

880
00:42:48,560 --> 00:42:50,840
Speaker 2: of reasons why you may be seeing that. One could

881
00:42:50,840 --> 00:42:53,560
Speaker 2: be that, in actual fact, China is a dollar rised economy.

882
00:42:53,640 --> 00:42:56,319
Speaker 2: So it's a little bit like saying, I don't want

883
00:42:56,320 --> 00:42:58,000
Speaker 2: to push this an energy too far. Is it a

884
00:42:58,040 --> 00:43:00,839
Speaker 2: little bit like the state of California? Okay, So what

885
00:43:00,840 --> 00:43:04,160
Speaker 2: you've got is a dollar rised economy. If California was

886
00:43:04,239 --> 00:43:06,319
Speaker 2: hugely successful, what would that mean for the value of

887
00:43:06,320 --> 00:43:09,520
Speaker 2: the dollar? Well, difficult to say, is the short answer.

888
00:43:09,640 --> 00:43:11,560
Speaker 2: And I think that's the case with China. China is

889
00:43:11,600 --> 00:43:15,759
Speaker 2: pricing everything in dollars. Then, you know what, it's not

890
00:43:15,840 --> 00:43:19,240
Speaker 2: necessarily telling us anything about the demand for you are Chinese?

891
00:43:19,280 --> 00:43:22,440
Speaker 2: You are because it's basically sitting on dollars. Now, you

892
00:43:22,480 --> 00:43:25,040
Speaker 2: could argue against me and say, well, of course China

893
00:43:25,200 --> 00:43:27,879
Speaker 2: is now pricing on a lot of its goods or

894
00:43:27,880 --> 00:43:30,799
Speaker 2: oil in particular from Saudi Arabia in Chinese you are,

895
00:43:31,280 --> 00:43:34,160
Speaker 2: and therefore it's getting paid in Chinese you are. But

896
00:43:34,400 --> 00:43:37,000
Speaker 2: the or sorry, Saudi Arabia is getting paid in Chinese

897
00:43:37,000 --> 00:43:39,200
Speaker 2: you aren't. But the key thing is that Saudi Arabia

898
00:43:39,239 --> 00:43:42,240
Speaker 2: is not keeping money in Chinese you are. It's shifting

899
00:43:42,280 --> 00:43:44,600
Speaker 2: into gold or it's probably plying it back into dollars.

900
00:43:45,080 --> 00:43:48,360
Speaker 2: And the critical day is when the sound is decided

901
00:43:48,360 --> 00:43:50,440
Speaker 2: they want to save in you are. That day has

902
00:43:50,480 --> 00:43:52,120
Speaker 2: not come yet, and I think it's going to be

903
00:43:52,160 --> 00:43:54,719
Speaker 2: an awful long way off. And I would venture that

904
00:43:54,840 --> 00:43:56,560
Speaker 2: simply because if you look at what's happening in the

905
00:43:56,640 --> 00:43:58,279
Speaker 2: Chinese markets, and this is the.

906
00:43:58,200 --> 00:44:00,440
Speaker 3: Big problem that China is God is.

907
00:44:00,480 --> 00:44:03,640
Speaker 2: Of course they've got capital controls, and what you're looking

908
00:44:03,680 --> 00:44:06,120
Speaker 2: at is a situation where the U are looks to

909
00:44:06,160 --> 00:44:09,919
Speaker 2: me to be a fundamentally recurrency, even despite the fact

910
00:44:09,960 --> 00:44:12,120
Speaker 2: that there's a swapping great trade surplus.

911
00:44:12,360 --> 00:44:14,160
Speaker 3: Capital wants to leave. Now.

912
00:44:14,200 --> 00:44:18,600
Speaker 2: I would venture that if capital controls disappeared in China,

913
00:44:18,840 --> 00:44:21,720
Speaker 2: you would see a wave of money leaving the Chinese

914
00:44:21,719 --> 00:44:25,320
Speaker 2: you are and going into international diversification in international assets.

915
00:44:25,520 --> 00:44:28,120
Speaker 2: It may well go into things like gold in much

916
00:44:28,160 --> 00:44:30,720
Speaker 2: bigger size if it could. It may well go into

917
00:44:31,160 --> 00:44:34,000
Speaker 2: things like bitcoin if it could. So these are interesting

918
00:44:34,360 --> 00:44:38,000
Speaker 2: things to speculate upon. Chinese savers have got a lot

919
00:44:38,040 --> 00:44:40,960
Speaker 2: of money, and the bottom line to this is I

920
00:44:40,960 --> 00:44:43,160
Speaker 2: didn't think they can get off the dollar hook very

921
00:44:43,160 --> 00:44:45,560
Speaker 2: easily at all. And one of the reasons I think

922
00:44:45,560 --> 00:44:49,560
Speaker 2: the dollar goes up when the Chinese surplus expands is

923
00:44:49,600 --> 00:44:53,439
Speaker 2: simply because increasingly the Chinese are not depositing their money

924
00:44:53,440 --> 00:44:56,799
Speaker 2: in US banks. They're depositing it in fringe banks in

925
00:44:56,840 --> 00:44:59,000
Speaker 2: other words, in the Middle East or in Asia, and

926
00:44:59,040 --> 00:45:01,759
Speaker 2: the recycling abilities of these banks to actually push it

927
00:45:01,800 --> 00:45:04,360
Speaker 2: back into the system, is actually more challenged than a

928
00:45:04,400 --> 00:45:08,160
Speaker 2: conventional US bank. So you've actually lost the elasticity of

929
00:45:08,200 --> 00:45:11,240
Speaker 2: supply in terms of the recycling of dollars, which explains

930
00:45:11,280 --> 00:45:13,200
Speaker 2: what the dollar is a lot furtherer than people think.

931
00:45:13,560 --> 00:45:13,680
Speaker 1: Now.

932
00:45:13,719 --> 00:45:16,320
Speaker 2: I think that could go on, but that doesn't detract

933
00:45:16,320 --> 00:45:19,000
Speaker 2: from the fact that I think the goal outperforms the dollar,

934
00:45:19,160 --> 00:45:22,120
Speaker 2: and I think that bitcoin outperforms the dollar. But I

935
00:45:22,120 --> 00:45:25,880
Speaker 2: still would maintain that the paper dollar is still, you know,

936
00:45:26,080 --> 00:45:29,120
Speaker 2: significantly better than maybe the euro or the British pound

937
00:45:29,239 --> 00:45:30,719
Speaker 2: or the Japanese end.

938
00:45:31,480 --> 00:45:34,160
Speaker 1: Yeah, so that's the you know, back to all these examples,

939
00:45:34,160 --> 00:45:36,080
Speaker 1: but like the dollar milkshake theory, where it sort of

940
00:45:36,120 --> 00:45:39,360
Speaker 1: becomes the last, the strongest lasting currency, as a lot

941
00:45:39,360 --> 00:45:41,560
Speaker 1: of people say, it's the cleanest shirt in the dirty laundry,

942
00:45:41,560 --> 00:45:44,680
Speaker 1: so to speak. But it's totally possible. And what I

943
00:45:44,719 --> 00:45:48,000
Speaker 1: see is that the dollar gains strength against other currencies,

944
00:45:48,040 --> 00:45:54,399
Speaker 1: but it loses against herd assets, so it's losing against commodities. Yeah,

945
00:45:54,480 --> 00:45:58,160
Speaker 1: so in that example that you gave there, so basically

946
00:45:58,320 --> 00:46:00,640
Speaker 1: China is still working in dollars, but because some of

947
00:46:00,680 --> 00:46:03,520
Speaker 1: these banks that they're putting their dollars into, it's not

948
00:46:03,560 --> 00:46:05,560
Speaker 1: as easy to get them back into the global system,

949
00:46:05,640 --> 00:46:08,960
Speaker 1: so thereby it's lowering the amount of circulating dollars. The

950
00:46:09,040 --> 00:46:11,320
Speaker 1: big problem is that most of the debt around the

951
00:46:11,360 --> 00:46:16,200
Speaker 1: world is denominated in dollars, So if the amount of

952
00:46:16,200 --> 00:46:18,800
Speaker 1: circuiting dollars go down, it makes it harder to repay

953
00:46:18,800 --> 00:46:20,759
Speaker 1: that debt, which makes the value of those go up.

954
00:46:23,760 --> 00:46:26,320
Speaker 1: I guess, and this is now this is going way outside,

955
00:46:26,360 --> 00:46:29,080
Speaker 1: but maybe there's something to think about in light of

956
00:46:29,120 --> 00:46:31,840
Speaker 1: where we're at with Russia, Ukraine and so forth. And

957
00:46:31,880 --> 00:46:34,680
Speaker 1: now China and Russia have now sort of stepped up

958
00:46:34,680 --> 00:46:40,719
Speaker 1: their military cooperation. But I think maybe the Biden administration

959
00:46:40,960 --> 00:46:42,680
Speaker 1: is what we'd say in the US, has jumped the shark,

960
00:46:42,760 --> 00:46:46,160
Speaker 1: so to speak, by seizing Russia's assets and now saying

961
00:46:46,160 --> 00:46:49,960
Speaker 1: they have to pay for war damages. And now Russia

962
00:46:50,000 --> 00:46:51,480
Speaker 1: is like, tip for tat, well we'll just take back

963
00:46:51,600 --> 00:46:55,120
Speaker 1: US assets. And so it wouldn't be that far of

964
00:46:55,120 --> 00:46:57,839
Speaker 1: a stretch of imagination to think that some of these

965
00:46:57,880 --> 00:46:59,680
Speaker 1: nations might just say, well, we're just not going to

966
00:46:59,680 --> 00:47:00,520
Speaker 1: pay that debt back.

967
00:47:01,400 --> 00:47:03,400
Speaker 2: Yeah, I think that's I mean, you know, people do

968
00:47:03,480 --> 00:47:06,920
Speaker 2: strange things when they have their wealth threatened. You know,

969
00:47:06,960 --> 00:47:10,360
Speaker 2: we saw that in nineteen what was it, nineteen forty

970
00:47:10,360 --> 00:47:14,400
Speaker 2: one with Japan, when the US froze Japanese bank accounts

971
00:47:14,440 --> 00:47:18,080
Speaker 2: in the US to stop Japan buying oil in dollars,

972
00:47:18,200 --> 00:47:20,279
Speaker 2: and that was something that actually led to, you know,

973
00:47:20,320 --> 00:47:23,600
Speaker 2: obviously the beginnings of World War two or American American

974
00:47:23,640 --> 00:47:25,000
Speaker 2: parts aspecially in World War Two.

975
00:47:25,239 --> 00:47:26,960
Speaker 3: So a lot of these things can actually have very

976
00:47:27,080 --> 00:47:28,359
Speaker 3: very very big consequences.

977
00:47:29,200 --> 00:47:32,000
Speaker 1: Okay, so we'll kind of wrap this thing up It's

978
00:47:32,040 --> 00:47:34,839
Speaker 1: been a great conversation. I appreciate you taking the time.

979
00:47:34,880 --> 00:47:38,239
Speaker 1: But let's just kind of if we recap this. The

980
00:47:38,280 --> 00:47:41,040
Speaker 1: world got put into these Well, one, we've seen central

981
00:47:41,080 --> 00:47:43,680
Speaker 1: banks of the world sort of change the way they

982
00:47:43,719 --> 00:47:46,879
Speaker 1: intervene in markets and being much more willing to intervene.

983
00:47:47,640 --> 00:47:49,719
Speaker 1: The time tables of how they intervened markets has been

984
00:47:49,719 --> 00:47:51,960
Speaker 1: stepped up, and now I mean they don't even intervene.

985
00:47:51,960 --> 00:47:55,759
Speaker 1: They already have icon credit cards, but swap lines set

986
00:47:55,840 --> 00:47:58,000
Speaker 1: up and things like that. We see these four year

987
00:47:58,040 --> 00:48:03,400
Speaker 1: cycles or these liquidity cycles sort of moving and sync. Potentially,

988
00:48:04,719 --> 00:48:07,920
Speaker 1: we have this massive base of collateral that's super important,

989
00:48:07,920 --> 00:48:09,680
Speaker 1: so they can't let that dip. So that's one reason

990
00:48:09,680 --> 00:48:13,120
Speaker 1: why that that wheel has to continue turning that the

991
00:48:13,200 --> 00:48:17,160
Speaker 1: basement is moving, asset price is higher, and we have

992
00:48:17,280 --> 00:48:20,279
Speaker 1: the tech trend on top of that. Some assets are

993
00:48:20,280 --> 00:48:23,399
Speaker 1: more sensitive than others, tech assets, bitcoin, ethereum, as you've

994
00:48:23,400 --> 00:48:27,400
Speaker 1: pointed out in your research, and there doesn't seem to

995
00:48:27,440 --> 00:48:30,280
Speaker 1: be any way to stop this train from just continuing

996
00:48:30,320 --> 00:48:33,520
Speaker 1: down this path until something happens and we don't know

997
00:48:33,520 --> 00:48:35,759
Speaker 1: what that is. Does that kind of frame this up?

998
00:48:36,400 --> 00:48:38,000
Speaker 3: I think I think that's correct, But I think that,

999
00:48:38,080 --> 00:48:40,359
Speaker 3: you know, one of the things I think to think

1000
00:48:40,400 --> 00:48:42,440
Speaker 3: about here is to say that you know, if you

1001
00:48:42,520 --> 00:48:43,920
Speaker 3: if you go back to listen to what a lot

1002
00:48:43,960 --> 00:48:46,880
Speaker 3: of economists would argue, They say that these levels of

1003
00:48:46,960 --> 00:48:49,839
Speaker 3: debt to GDP or public debt to GDP that we're

1004
00:48:49,840 --> 00:48:52,440
Speaker 3: looking at perspectively whatever it may be, one hundred and

1005
00:48:52,480 --> 00:48:58,160
Speaker 3: fifty GDP are unsustainable. That's wrong. History shows its sustainable.

1006
00:48:58,320 --> 00:48:59,080
Speaker 3: That's the worry.

1007
00:49:00,040 --> 00:49:03,160
Speaker 1: How does history? How does how does history show? Everyone

1008
00:49:03,160 --> 00:49:06,120
Speaker 1: says the report from Hereschman Capital that every nation that's

1009
00:49:06,160 --> 00:49:08,040
Speaker 1: ever gone over one hundred andy percent failed. The only

1010
00:49:08,080 --> 00:49:11,280
Speaker 1: one that's ever survived was Japan or Japan?

1011
00:49:11,360 --> 00:49:12,280
Speaker 3: Has Britain?

1012
00:49:12,280 --> 00:49:15,600
Speaker 2: Did Britain survived through the nineteen forties and fifties, Well,

1013
00:49:15,640 --> 00:49:17,759
Speaker 2: I think public debt to GDP hitting two hundred and

1014
00:49:17,800 --> 00:49:22,439
Speaker 2: fifty percent, so way way above where US levels are now. Now,

1015
00:49:22,480 --> 00:49:25,960
Speaker 2: did that mean that the British economy was a roaring success. No, Rather,

1016
00:49:26,040 --> 00:49:29,279
Speaker 2: the country what you saw was basically decades of stagflation.

1017
00:49:29,760 --> 00:49:32,400
Speaker 2: And I would argue that British economy has never recovered

1018
00:49:32,400 --> 00:49:37,360
Speaker 2: from that from that episode. So one of the costs

1019
00:49:36,880 --> 00:49:40,719
Speaker 2: of taking on large amounts of unproductive public debt and

1020
00:49:40,760 --> 00:49:43,600
Speaker 2: paying for it with funny money is you actually destroy

1021
00:49:43,680 --> 00:49:47,120
Speaker 2: your economic system. You get very slow growth, and that

1022
00:49:47,200 --> 00:49:49,239
Speaker 2: may be a cost of that. But it doesn't mean

1023
00:49:49,239 --> 00:49:52,760
Speaker 2: to say that it's unsustainable. It's fully sustainable because basically

1024
00:49:52,800 --> 00:49:55,680
Speaker 2: the government is that is the debtor, and the government

1025
00:49:55,719 --> 00:49:57,840
Speaker 2: can always print money itself, and that's pretty much what

1026
00:49:57,880 --> 00:50:00,440
Speaker 2: it's doing. So the problem comes if you've got a

1027
00:50:00,480 --> 00:50:03,000
Speaker 2: foreign if you're borrowing in foreign currency, and you don't

1028
00:50:03,560 --> 00:50:06,040
Speaker 2: have the ability to do that. So I think what

1029
00:50:06,080 --> 00:50:07,759
Speaker 2: you're looking at, and this is one of the things

1030
00:50:07,760 --> 00:50:10,080
Speaker 2: that I think you've you know, you've you've articulated very

1031
00:50:10,080 --> 00:50:12,480
Speaker 2: well in terms of your observations, is that what you're

1032
00:50:12,480 --> 00:50:14,520
Speaker 2: looking at is a lot of debt machines around the

1033
00:50:14,560 --> 00:50:17,640
Speaker 2: world now where these governments, be at the Eurozone or

1034
00:50:17,719 --> 00:50:20,320
Speaker 2: be at the US, which are just creating debt and

1035
00:50:20,360 --> 00:50:23,640
Speaker 2: they're basically funding it themselves. And that's the that's the

1036
00:50:23,680 --> 00:50:26,080
Speaker 2: world we're in, and therefore that is what I call

1037
00:50:26,160 --> 00:50:30,040
Speaker 2: monetary inflation. And you want a protection against monetary inflation.

1038
00:50:30,400 --> 00:50:34,919
Speaker 2: The obvious one is gold equities are not bad, prime

1039
00:50:35,040 --> 00:50:37,479
Speaker 2: real estate is not bad. But what has come through

1040
00:50:37,560 --> 00:50:42,360
Speaker 2: to shine, you know, excues the pun is basically bitcoin

1041
00:50:42,400 --> 00:50:45,239
Speaker 2: in the last five years, and that shows that it's

1042
00:50:45,280 --> 00:50:50,480
Speaker 2: performing my exponential gold and why shouldn't it continue because,

1043
00:50:50,480 --> 00:50:52,719
Speaker 2: as we rightly point out here, it's got it's the

1044
00:50:52,719 --> 00:50:55,000
Speaker 2: only asset we can think of there's got a limited supply.

1045
00:50:55,880 --> 00:50:59,680
Speaker 1: Why do you this is this is going out on

1046
00:50:59,239 --> 00:51:03,319
Speaker 1: a kind of stretching this question here. Why do you

1047
00:51:03,360 --> 00:51:07,319
Speaker 1: think an analyst like Peter Schiff, who seemingly knows so

1048
00:51:07,400 --> 00:51:10,000
Speaker 1: much about you know, ostering economics and understands this so well,

1049
00:51:10,640 --> 00:51:12,600
Speaker 1: just cannot see any value in bitcoin?

1050
00:51:15,000 --> 00:51:16,959
Speaker 2: Well, I don't know, really, I find that I find

1051
00:51:16,960 --> 00:51:20,000
Speaker 2: that hard to believe. I mean, the question is is

1052
00:51:20,120 --> 00:51:23,560
Speaker 2: what is intrinsic value anyway? And that it's always a

1053
00:51:23,600 --> 00:51:27,879
Speaker 2: philosophical point, but you know, something is worth, something has

1054
00:51:27,880 --> 00:51:31,000
Speaker 2: a value if somebody else thinks it does. And if

1055
00:51:31,120 --> 00:51:35,200
Speaker 2: people believe that bitcoin is a store of value, then

1056
00:51:35,320 --> 00:51:37,479
Speaker 2: it is a store of value by definition because people

1057
00:51:37,480 --> 00:51:40,560
Speaker 2: will accept it. So that's one of the criterion of money.

1058
00:51:41,040 --> 00:51:43,600
Speaker 2: So I think that's true. I mean, you know, we

1059
00:51:43,600 --> 00:51:45,960
Speaker 2: can debate long and hard about whether you know, is

1060
00:51:45,960 --> 00:51:48,480
Speaker 2: a paper dollar got.

1061
00:51:48,320 --> 00:51:49,040
Speaker 3: Any value in it?

1062
00:51:49,040 --> 00:51:51,200
Speaker 2: Because there's there's no intrinsic value in that there's a

1063
00:51:51,200 --> 00:51:54,239
Speaker 2: promise to pay, and I suppose with bitcoin there is

1064
00:51:54,280 --> 00:51:55,800
Speaker 2: an implicit promise to play.

1065
00:51:55,600 --> 00:51:58,440
Speaker 3: In there or redeemedly the token.

1066
00:51:59,200 --> 00:52:02,200
Speaker 2: So I find it's very typical at all while the people,

1067
00:52:02,280 --> 00:52:04,200
Speaker 2: you know, while the people are saying what they're.

1068
00:52:04,000 --> 00:52:07,520
Speaker 1: Saying, Yeah, I agree, I mean it all value is subjective,

1069
00:52:08,040 --> 00:52:11,200
Speaker 1: and but but then you have to recognize that then

1070
00:52:11,880 --> 00:52:14,160
Speaker 1: to the point of intrinsic value, then that means there's

1071
00:52:14,200 --> 00:52:16,799
Speaker 1: some utility in that value. And I think maybe that's

1072
00:52:16,800 --> 00:52:19,160
Speaker 1: the argument he makes. But it's like, how else can

1073
00:52:19,200 --> 00:52:23,279
Speaker 1: you send money peer to peer digitally censorship resistant? Right,

1074
00:52:23,320 --> 00:52:25,560
Speaker 1: And so there's a lot of utility there that's not there.

1075
00:52:25,600 --> 00:52:30,560
Speaker 1: But well, Michael, we've we've kind of run the course

1076
00:52:30,600 --> 00:52:32,680
Speaker 1: on the on the time here. I really appreciate you

1077
00:52:32,960 --> 00:52:36,920
Speaker 1: taking the time. I subscribe to your substack. It's great information.

1078
00:52:36,960 --> 00:52:38,440
Speaker 1: I'm going to link to that down below for everybody

1079
00:52:38,440 --> 00:52:41,520
Speaker 1: that's listening. The Capital War's book If you really understand

1080
00:52:41,719 --> 00:52:44,359
Speaker 1: global liquidity, which I think you should, is what I've

1081
00:52:44,400 --> 00:52:46,520
Speaker 1: been paying attention to. Check out that book. We'll link

1082
00:52:46,520 --> 00:52:48,080
Speaker 1: to that down below. Anything else you want to point

1083
00:52:48,080 --> 00:52:51,040
Speaker 1: out while we're here, Michael, I didn't think so.

1084
00:52:51,080 --> 00:52:52,680
Speaker 2: I think that you know what, what you've got to

1085
00:52:52,760 --> 00:52:55,600
Speaker 2: watch is the three things that I've probably mentioned. You've

1086
00:52:55,600 --> 00:52:57,239
Speaker 2: got to watch what the FED is doing. You can

1087
00:52:57,239 --> 00:53:00,680
Speaker 2: look at that every Thursday, four thirty pm some time

1088
00:53:01,360 --> 00:53:04,640
Speaker 2: with the H four point one release. That's worth looking at.

1089
00:53:04,719 --> 00:53:06,600
Speaker 2: Look at the People's Bank of China what it does

1090
00:53:06,600 --> 00:53:09,840
Speaker 2: in the markets, and also check out what's happening to

1091
00:53:10,000 --> 00:53:12,480
Speaker 2: the value of collateral, of which the best heads up,

1092
00:53:12,520 --> 00:53:13,880
Speaker 2: in my view, is to look at something like the

1093
00:53:13,920 --> 00:53:17,959
Speaker 2: move index, the index of volatility in bond markets, which

1094
00:53:18,000 --> 00:53:21,279
Speaker 2: is a pretty good guide to the size of haircuts

1095
00:53:21,320 --> 00:53:23,960
Speaker 2: that credit providers will give on collateral. So we'll give

1096
00:53:23,960 --> 00:53:25,799
Speaker 2: you some sense as to how you know what the

1097
00:53:25,840 --> 00:53:29,239
Speaker 2: collateral multiple could be. And those three together are very

1098
00:53:29,239 --> 00:53:32,120
Speaker 2: good insightful factors for understanding global aquidity.

1099
00:53:32,680 --> 00:53:35,080
Speaker 1: Yeah, all right, we're going to wrap it up with that.

1100
00:53:35,239 --> 00:53:37,680
Speaker 1: Thank you so much, Thanks so much.

1101
00:53:37,520 --> 00:53:38,680
Speaker 3: Man, pleasure. Thank you.