WEBVTT - US Gov Debt, Gold as Money, Bitcoin, History | Nik Bhatia 0:00:13.800 --> 0:00:15.760 They say that if you don't know the history, you 0:00:15.840 --> 0:00:18.000 are doomed to repeat it. Now, if you're a regular 0:00:18.200 --> 0:00:20.479 viewer of this channel, you know that I love to 0:00:20.960 --> 0:00:23.400 go back in history. I love to get historical references 0:00:23.440 --> 0:00:25.880 to show us what's happening and what that tells us 0:00:25.880 --> 0:00:28.800 about the future. Not because it necessarily repeats, but it 0:00:28.880 --> 0:00:32.200 definitely does rhyme. Now, today I have a special guest, 0:00:32.440 --> 0:00:34.360 someone I'm very excited to bring back for the second 0:00:34.400 --> 0:00:36.800 time to the channel. And if you love hearing the 0:00:36.840 --> 0:00:39.640 historical references, you are going to love what Nick has 0:00:39.720 --> 0:00:43.320 to say. He's just authored a new book called Layered Money, 0:00:43.360 --> 0:00:45.640 and it goes back through history, and it goes all 0:00:45.760 --> 0:00:47.919 the way back into future tens. As a matter of fact, 0:00:48.000 --> 0:00:50.559 we start talking about the treasuries, which is something I've 0:00:50.560 --> 0:00:52.760 been talking a lot about the U. S. Treasuries. The 0:00:52.840 --> 0:00:56.600 yield has been plummeting. And he is a professor at USC. 0:00:56.760 --> 0:00:58.600 He talks about this to his students and he knows 0:00:58.640 --> 0:01:00.360 what's going on, and he's got a different take than 0:01:00.400 --> 0:01:02.080 what I've been saying, and it's one that you want 0:01:02.120 --> 0:01:04.920 to hear. Then we go back into history to learn 0:01:05.000 --> 0:01:08.920 about what happened that's actually sparked the renaissance, and then 0:01:08.920 --> 0:01:10.400 of course we bring it all the way back to 0:01:10.440 --> 0:01:12.280 current date. This is an interview you do not want 0:01:12.280 --> 0:01:15.000 to miss. Was one that I really enjoyed. So let's 0:01:15.000 --> 0:01:17.319 go ahead and jump right into it. All right, everyone, 0:01:17.360 --> 0:01:20.479 Welcome to another episode of the Market Disruptor Show today. 0:01:20.520 --> 0:01:22.959 I am so excited to bring back for a second time. 0:01:23.000 --> 0:01:24.640 I think maybe only the second guest that's been back 0:01:24.680 --> 0:01:27.280 a second time. Nick is back with us. He is 0:01:27.360 --> 0:01:30.120 the author of the brand new book Layered Money, which 0:01:30.120 --> 0:01:32.800 we'll be talking about. He's also an adject professor at 0:01:32.840 --> 0:01:36.120 the USC Marshall School Business and Nick, it's just just 0:01:36.160 --> 0:01:37.800 an honor to have you back. Thanks for joining us. 0:01:38.120 --> 0:01:42.120 Great to be Mark, thank you. Yeah. So, Um, you 0:01:42.160 --> 0:01:46.399 are an adjunct professor. Um, you had a career in finance. UM. 0:01:46.440 --> 0:01:48.480 I know you worked with treasuries. I want to talk 0:01:48.480 --> 0:01:50.720 about of course, you have this new book that's amazing 0:01:50.720 --> 0:01:52.480 that I've been loving. UM, and I want to talk 0:01:52.480 --> 0:01:54.400 about that, but maybe just real quick, give us a 0:01:54.400 --> 0:01:57.000 little bit of background on kind of your work in 0:01:57.000 --> 0:01:59.559 in big finance before and then kind of like which 0:01:59.680 --> 0:02:02.240 we're where you are at right now? Sure? So, I 0:02:02.280 --> 0:02:06.600 started in the fixed income industry several years ago and 0:02:06.640 --> 0:02:09.360 I was working at a couple of different bond managers, 0:02:09.919 --> 0:02:12.280 and then the most recent job that I had was 0:02:12.600 --> 0:02:16.280 trading US treasuries on a trading desk for a large 0:02:16.639 --> 0:02:21.360 institutional investment manager and also helping on the interest rate 0:02:21.400 --> 0:02:27.600 strategy team, so global macro economics and trading US government 0:02:27.639 --> 0:02:30.760 securities and other interest rate derivatives I was. I was 0:02:30.800 --> 0:02:33.760 doing that for several years and I really enjoyed being 0:02:33.800 --> 0:02:37.640 on the desk. That was something that Hey, just a 0:02:37.680 --> 0:02:39.959 real quick interruption to let you know that this video 0:02:40.280 --> 0:02:42.680 is brought to you add free by block Fire. Now 0:02:42.680 --> 0:02:45.400 they're giving you the ability to hodal your bitcoin and 0:02:45.400 --> 0:02:47.600 your crypto as it goes up in value, and at 0:02:47.600 --> 0:02:50.560 the same time you can earn high yielding interest on it, 0:02:50.680 --> 0:02:53.200 so you can basically hold it for all the upside 0:02:53.200 --> 0:02:55.400 potential and then you can make cash flow off of 0:02:55.400 --> 0:02:58.840 it at the exact same time. Now, opening accounts super fast, 0:02:59.160 --> 0:03:01.799 super simple, and they've offered to give me up to 0:03:01.800 --> 0:03:04.400 two for every sign up, but I told them, you 0:03:04.440 --> 0:03:06.480 know what, let's give it back to you. So you 0:03:06.520 --> 0:03:09.040 can now go and you can get the two fifty 0:03:09.040 --> 0:03:11.000 dollars whenever you set up your account, and all us 0:03:11.040 --> 0:03:12.880 to do is just check the link in the description 0:03:12.960 --> 0:03:15.560 for details, set up an account super quick and easy, 0:03:15.600 --> 0:03:18.440 and turn up to two and fifty dollars brought to 0:03:18.440 --> 0:03:21.480 you by black Fires, So check them out. I learned 0:03:21.600 --> 0:03:24.160 so much from and I got to study the FED 0:03:24.639 --> 0:03:29.120 really intimately on a daily basis, read research from some 0:03:29.200 --> 0:03:32.720 of the greatest thinkers on Wall Street with regard to 0:03:32.840 --> 0:03:38.520 treasuries and interest rates and um, the way that the 0:03:38.520 --> 0:03:42.640 economy is going and especially how the financial system works. 0:03:42.680 --> 0:03:45.200 So when I was there on the desk, I also 0:03:45.440 --> 0:03:47.560 started to fall down the bitcoin rabbit hole at the 0:03:47.600 --> 0:03:52.400 same time, and as time progressed, I started to read 0:03:52.440 --> 0:03:54.520 more and more about bitcoin, and then I started to 0:03:54.600 --> 0:04:00.160 write more about bitcoin, started publishing some research pieces out 0:04:00.160 --> 0:04:04.760 bitcoin and Lightning Network, and that really, um it really 0:04:04.800 --> 0:04:07.680 put pulled me in that in this direction of becoming 0:04:07.680 --> 0:04:11.440 a writer about bitcoin. And then I left the bond 0:04:11.480 --> 0:04:19.680 market in late and spent the whole year writing layered money. Yeah, 0:04:19.920 --> 0:04:22.120 So I mean that's a it's kind of an interesting 0:04:22.160 --> 0:04:24.279 track that brought you to kind of where we are today. 0:04:24.320 --> 0:04:27.080 It seems like maybe I'm wrong, but it almost seems 0:04:27.120 --> 0:04:30.960 like maybe the more into the traditional financial system people 0:04:31.040 --> 0:04:33.919 are sometimes the harder it maybe for them to see 0:04:34.560 --> 0:04:36.640 um the the other way that it could be, right, 0:04:36.680 --> 0:04:38.760 almost like, uh, what does it see the forest through 0:04:38.760 --> 0:04:41.240 the trees or whatever it is? Um. But let's dig 0:04:41.240 --> 0:04:42.880 into that for a minute. So you were working at 0:04:42.880 --> 0:04:45.520 a desk trading treasuries, So I want to talk about 0:04:45.520 --> 0:04:47.960 that for a minute because I've been talking about that 0:04:48.040 --> 0:04:51.479 quite a bit on my channel. And so obviously treasuries 0:04:51.480 --> 0:04:55.800 are a risk free asset or whatever they call that, UM, 0:04:55.839 --> 0:04:57.919 But lately they've been moving quite a bit. What have 0:04:58.040 --> 0:05:00.800 you been seeing in the treasury market. Let's just talk 0:05:00.839 --> 0:05:04.240 about that for a minute. Are you still following that? Yes? 0:05:04.279 --> 0:05:07.440 I am. And you know I talked about the market 0:05:07.480 --> 0:05:11.360 with my students at USC I teach a fixed income 0:05:11.400 --> 0:05:13.480 course over there, so we talked about interest rates all 0:05:13.520 --> 0:05:16.279 the time. And you know, one of the questions right 0:05:16.279 --> 0:05:19.479 now is why are interest rates moving so much? Uh? 0:05:19.480 --> 0:05:21.680 And they seemed to move quite a bit higher in 0:05:21.680 --> 0:05:24.160 the last several months. What I always like to do 0:05:24.279 --> 0:05:26.880 is zoom out, take a moment, zoom out. Let's look 0:05:26.880 --> 0:05:29.240 at the trend. Let's look at where we are I'm 0:05:29.279 --> 0:05:32.159 a I'm a chartist, I'm a technical analyst as well, 0:05:32.200 --> 0:05:35.159 and so I always like to look at price behavior 0:05:36.000 --> 0:05:38.719 through the lens of the chart and what what is 0:05:38.760 --> 0:05:41.600 the what are the buyers and sellers doing, and how 0:05:41.680 --> 0:05:46.880 is that reflected pictorially in in an image for us. 0:05:47.320 --> 0:05:49.560 So when I show them the forty year chart, I 0:05:49.600 --> 0:05:52.880 see a down channel and interest strings. That channel has 0:05:52.920 --> 0:05:56.159 not been broken by any stretch of the imagination. We 0:05:56.240 --> 0:06:01.520 are still in this multidecade downward trend in interest rates. Now, 0:06:02.800 --> 0:06:06.279 on top of that, we had an extremely dramatic move 0:06:06.440 --> 0:06:10.480 lower in interest rates in February March of last year 0:06:11.000 --> 0:06:13.440 and on, you know, through the summer, as rates went 0:06:13.480 --> 0:06:18.719 to zero almost across the whole curve. So when you 0:06:18.760 --> 0:06:22.680 get a move like that, and you get a retracement, 0:06:22.760 --> 0:06:27.560 for example, that is in context of a normal move. 0:06:28.400 --> 0:06:32.680 And so right now I would characterize the vast majority 0:06:32.839 --> 0:06:36.360 of this retracement higher and interest rates in the United 0:06:36.360 --> 0:06:40.960 States as a natural retracement of a very dramatic move 0:06:41.279 --> 0:06:45.200 last year. As last year, the market starts pricing in 0:06:45.400 --> 0:06:50.720 total calamity and economic collapse, and then we realize that 0:06:50.760 --> 0:06:55.400 people are not deathly afraid to go outside of their 0:06:55.440 --> 0:06:59.040 homes and they're still spending money, and so the economy 0:06:59.200 --> 0:07:03.560 recovers and uh, interest rates rise back up to levels 0:07:03.640 --> 0:07:07.960 where you know they were around the beginning of the pandemic, 0:07:08.000 --> 0:07:10.120 and I don't you know, we're not even there yet. 0:07:10.240 --> 0:07:14.680 It hasn't retraced all of that move. So you know, 0:07:14.760 --> 0:07:16.960 that's one side of the story, is that this could 0:07:17.000 --> 0:07:20.000 just be you know, things starting to get back to normal. 0:07:20.560 --> 0:07:23.080 The other side of the story is that, yes, there 0:07:23.200 --> 0:07:27.000 is more growth worldwide in the economy in the last 0:07:27.480 --> 0:07:30.000 three to six months then there was before that, and 0:07:30.600 --> 0:07:34.240 rates always priced in this rate of change and momentum 0:07:34.320 --> 0:07:37.120 and how things are going at the margin. Well, right 0:07:37.120 --> 0:07:39.840 now things that the margin are going better. So sell 0:07:39.920 --> 0:07:44.440 the risk free asset treasuries. That decreases the price, raises 0:07:44.480 --> 0:07:49.000 the interest rates. So treasury rates right now headed higher. Um. 0:07:49.040 --> 0:07:51.800 If they start going above to pretent above two and 0:07:51.800 --> 0:07:54.440 a half percent and tenure part of the curve, then 0:07:54.480 --> 0:07:57.520 we can like start waiting some flags and say, hey, 0:07:57.960 --> 0:08:01.800 what is happening longer term year with United States treasuries. 0:08:01.840 --> 0:08:05.560 But I think it's far too far too premature to 0:08:05.680 --> 0:08:09.200 make any grand conclusions about treasuries as the risk free 0:08:09.200 --> 0:08:15.160 asset right now. Um, I do personally anticipate uh treasuries 0:08:15.200 --> 0:08:19.800 to reach a yield level somewhere between here and two percent, 0:08:19.960 --> 0:08:21.880 meaning you know, one and a half to two percent 0:08:22.240 --> 0:08:26.400 on ten year yields. That actually starts to slow down 0:08:26.960 --> 0:08:30.400 the economy. And how does that happen? Higher interest rates 0:08:30.440 --> 0:08:34.160 are a tighter financial condition. If you have cash in 0:08:34.200 --> 0:08:37.320 the bank and you're looking at treasuries at zero point 0:08:37.360 --> 0:08:41.040 five percent, you you say, I'd rather invest that money 0:08:41.320 --> 0:08:44.120 somewhere else. But if you see treasuries at two percent, 0:08:44.760 --> 0:08:48.160 you can lock that in for ten years. Investors are 0:08:48.240 --> 0:08:52.400 going to sell their risk assets, purchase treasuries and drive 0:08:52.440 --> 0:08:55.880 down interest rates. And higher interest rates themselves carry more 0:08:56.040 --> 0:08:59.680 interest costs for companies when they're borrowing. So higher interest 0:08:59.760 --> 0:09:06.199 rates are a natural, uh um tightening of financial conditions. 0:09:06.400 --> 0:09:08.600 They do make things a little bit more difficult, and 0:09:08.640 --> 0:09:12.240 I think we're probably at that level and interest rates 0:09:12.280 --> 0:09:15.640 sometimes soon that they will start to reverse, and I 0:09:15.679 --> 0:09:18.679 do anticipate that rates will stay low for a long 0:09:18.800 --> 0:09:22.640 long time here in the United States. Yeah. So, I 0:09:22.640 --> 0:09:25.360 mean we saw them sell off down to about you know, 0:09:25.480 --> 0:09:29.440 fifty about point five, right, and then I think since 0:09:29.640 --> 0:09:31.960 that was August of last year, they've almost gone up 0:09:31.960 --> 0:09:35.559 at back to the buck fifty range. As you said, Um, 0:09:35.880 --> 0:09:39.280 and you think they were just oversold or over bought, oversold, 0:09:39.280 --> 0:09:41.680 and now they're just kind of um, reverting to the 0:09:41.720 --> 0:09:44.440 mean almost if you will. Yeah, you know that's a 0:09:44.440 --> 0:09:46.880 good way. And it's always confusing when you talk about 0:09:46.880 --> 0:09:50.560 treasuries because you can say that the prices are rallying 0:09:50.880 --> 0:09:53.720 or selling off, or the yields or rallying or selling off. 0:09:53.760 --> 0:09:56.680 But yeah, the bottom line is that when yields go lower, 0:09:56.960 --> 0:09:59.920 it's when the price is going up that demand is 0:10:00.040 --> 0:10:03.200 going up. And that's what happened last year. And and 0:10:03.240 --> 0:10:06.520 so yes, I do feel that people are selling their 0:10:06.600 --> 0:10:09.800 risk free asset right now and reinvesting that in other 0:10:09.840 --> 0:10:13.880 places as it's it's clear to us that um, you know, 0:10:14.000 --> 0:10:19.360 the economy is is surviving, this pandemic is growing out 0:10:19.360 --> 0:10:22.520 of it, and um that people are you know, starting 0:10:22.520 --> 0:10:24.960 to travel around the world again. But what about when 0:10:24.960 --> 0:10:27.040 you look a little bit deeper under the hood, right, 0:10:27.080 --> 0:10:30.719 and you look at like who's buying the treasury? So um, right, 0:10:30.760 --> 0:10:32.960 it looks like maybe we have kind of a lack 0:10:33.040 --> 0:10:36.680 of foreign buyers. Maybe more buying from the Fed. In addition, 0:10:36.760 --> 0:10:41.480 looking forward, we have a lot more stimulus coming, you 0:10:41.480 --> 0:10:44.120 know to one point nine and the winds they're already 0:10:44.120 --> 0:10:46.720 talking about a three trillion and based off of the 0:10:46.760 --> 0:10:49.600 Biden administration and the New Green, New Deal whatever, like 0:10:49.880 --> 0:10:52.719 I mean, we could be who knows, five, six, ten, 0:10:52.760 --> 0:10:54.520 hilly And do you think that has anything to play 0:10:54.559 --> 0:10:57.360 into those those yields on the treasuries as well? Um 0:10:57.440 --> 0:11:00.320 one the increase of stimulus, and two maybe is there 0:11:00.320 --> 0:11:01.920 a lack of buyers and the Fed has to start 0:11:01.960 --> 0:11:04.600 kind of controlling that a little, you know it. They're 0:11:04.760 --> 0:11:08.000 they're always these couple of things that are blamed when 0:11:08.040 --> 0:11:11.280 treasury go treasury rates go higher. One is that the 0:11:11.320 --> 0:11:13.920 Treasury is issuing a lot, so there's just a ton 0:11:13.960 --> 0:11:17.360 of extra supply, So where's the you know, the incremental buyer. 0:11:17.760 --> 0:11:19.960 And the other is that, oh, there's gonna be fiscal 0:11:20.000 --> 0:11:23.720 stimulus that's going to create aggregate demand and the economy 0:11:23.760 --> 0:11:27.200 that's going to trigger inflation. And then you know, interest 0:11:27.280 --> 0:11:30.440 rates go up as a natural kind of result from 0:11:30.880 --> 0:11:36.600 inflationary environment. UM. But I challenge, I always challenge these 0:11:36.640 --> 0:11:41.760 things because now we have this um, this additional buyer 0:11:41.960 --> 0:11:46.080 of the FED, which you mentioned, So it's a little 0:11:46.080 --> 0:11:48.360 bit nuanced, but really what you have to think about 0:11:48.480 --> 0:11:52.360 their thirty trillion treasuries existing, right the FED now owns 0:11:52.360 --> 0:11:55.440 seven plus approximately of them, so call it a quarter 0:11:55.480 --> 0:12:00.920 of the market. If things go badly in the world, 0:12:02.760 --> 0:12:05.960 the actual amount of treasury is available for the public 0:12:06.000 --> 0:12:09.040 to buy that the FED doesn't own, that's not also 0:12:09.120 --> 0:12:12.760 tucked away. It's only a few trillion, and so you have, 0:12:12.880 --> 0:12:15.439 you know, a hundred plus trillion of assets that are 0:12:15.520 --> 0:12:18.599 trying to jam into only a couple of trillion of treasuries. 0:12:18.920 --> 0:12:20.960 And that's what makes this price go up and the 0:12:21.040 --> 0:12:24.319 yields go down. When when ship hits the fan, right, 0:12:24.320 --> 0:12:27.720 when things go badly in the economy, it's the flight 0:12:27.760 --> 0:12:32.680 to safety. When we're in this um, we're in the 0:12:32.720 --> 0:12:35.640 opposite environment right now where there's no flight to safety. 0:12:35.679 --> 0:12:39.800 There's actually um you're leaving the safety to go invest 0:12:39.840 --> 0:12:43.560 in other way in other ways. Then there, you know, 0:12:43.640 --> 0:12:47.319 there's maybe this worry like where's the buyer, the foreign 0:12:47.640 --> 0:12:50.040 you know, demand has gone down, and we can see 0:12:50.080 --> 0:12:53.600 that maybe in the statistics a little bit. The domestic 0:12:53.600 --> 0:12:57.040 buyer or the investment managers themselves. They're not lining up 0:12:57.080 --> 0:13:00.240 to buy because you know things are going well. They 0:13:00.240 --> 0:13:02.520 want to put that money to work elsewhere and get 0:13:02.600 --> 0:13:06.560 some credit spread on top of what treasuries yield. But 0:13:07.240 --> 0:13:12.840 then when rates go up and things actually start to 0:13:12.920 --> 0:13:17.440 go bad in the economy, it's a it's a reflexivity 0:13:17.600 --> 0:13:22.600 sort of situation where the higher rates actually cause things 0:13:22.640 --> 0:13:27.599 to break, and that causes people to go into the safety. 0:13:27.679 --> 0:13:32.559 The FED then also then threatens to buy more treasuries 0:13:32.640 --> 0:13:37.760 and actually remove the supply of risk free assets to 0:13:37.880 --> 0:13:41.800 the rest of the world. And so there's always this 0:13:42.280 --> 0:13:46.840 FED being an infinite buyer in the back of people's minds, 0:13:47.480 --> 0:13:51.360 and it makes the marginal supply available to the market 0:13:51.559 --> 0:13:56.160 in crisis incredibly small. And so if you don't already 0:13:56.240 --> 0:13:59.520 own the treasuries as part of your portfolio, you're gonna 0:13:59.559 --> 0:14:03.600 be cha seeing a price higher and a yield lower 0:14:04.200 --> 0:14:06.320 as you try to lock in these yields for the 0:14:06.360 --> 0:14:10.640 next ten years and survive any you know, financial collapse 0:14:10.720 --> 0:14:12.720 that you know might be happening over the next couple 0:14:12.720 --> 0:14:15.400 of years. If you don't own the treasure is already, 0:14:15.400 --> 0:14:18.360 you're just gonna struggle to get them. So I'm I'm 0:14:18.480 --> 0:14:22.480 very cautious to ever say that extra supplies causing yields 0:14:22.520 --> 0:14:25.280 to go up, or that fiscal stimulus is causing deals 0:14:25.280 --> 0:14:28.640 to go up, fiscal profligacy is causing deals to go up. 0:14:28.920 --> 0:14:33.360 I don't really buy all of those things unless we 0:14:33.440 --> 0:14:37.560 do end this bull market in bonds, unless yields go 0:14:37.680 --> 0:14:40.200 to If if treasure yields go to three percent in 0:14:40.200 --> 0:14:43.280 the next three months, mark I'm definitely wrong. We can 0:14:43.320 --> 0:14:46.400 have another chat and I'll have to change my investment thesis, 0:14:46.640 --> 0:14:49.120 but not here at one and a percent. Definitely not 0:14:49.280 --> 0:14:53.440 at one got it? So last question about that, and 0:14:53.480 --> 0:14:55.200 then I want to move on and talk about how 0:14:55.240 --> 0:14:57.200 we tie this into the whole layered stack that that 0:14:57.280 --> 0:14:59.720 you that your thesis is on. But one more question 0:14:59.760 --> 0:15:01.600 about debt. So, just as you said, if it went 0:15:01.640 --> 0:15:03.360 to two two and a half, you wouldn't be so worried. 0:15:03.360 --> 0:15:05.360 At three you would be willing to be right that Um, 0:15:05.400 --> 0:15:07.480 at what point does the FED get I mean, obviously 0:15:07.520 --> 0:15:09.600 they've talked about not raising rates, They've talked about, you know, 0:15:09.600 --> 0:15:12.440 potentially controlling the yield curve, etcetera. I mean, do you 0:15:12.480 --> 0:15:14.520 think they let it get up to almost three before 0:15:14.560 --> 0:15:16.520 they really come in hot and really try to control that. 0:15:16.680 --> 0:15:18.480 Or two and a half is where they're starting to 0:15:18.520 --> 0:15:22.280 kind of pay attention, especially considering the deficits that we're 0:15:22.360 --> 0:15:26.200 running right now. Yes, especially because the deficits that we 0:15:26.240 --> 0:15:29.440 are running right now, and that that's really the core 0:15:29.520 --> 0:15:34.960 of it, right it's a mathematical restriction. You have a 0:15:35.040 --> 0:15:37.160 huge stock of debt. If you have to roll over 0:15:37.240 --> 0:15:40.400 that debt at three percent, all of a sudden, you're 0:15:40.440 --> 0:15:45.800 taking huge, huge revenue or i'm sorry, you're taking a 0:15:45.880 --> 0:15:51.400 huge chunk of money from the treasury going to interest 0:15:51.480 --> 0:15:54.640 you know, the interest holders, including the FED who owns 0:15:54.680 --> 0:15:57.640 owns all of this treasury debt. Of course they remit 0:15:57.720 --> 0:16:01.080 any profits they make back to the treasure, but they're 0:16:01.080 --> 0:16:04.640 paying all these coupons and they're not going to be 0:16:04.680 --> 0:16:09.000 able to afford other things, and that is uh limiting 0:16:09.000 --> 0:16:12.920 to economic activity. Then it actually gets into the employment 0:16:12.960 --> 0:16:15.000 picture when the FED is looking at it. And so 0:16:15.560 --> 0:16:17.680 there is definitely a level It's hard for me to 0:16:17.720 --> 0:16:20.920 say what it is, but there's a level close to 0:16:21.000 --> 0:16:23.360 here two two and a half, three percent, somewhere in 0:16:23.400 --> 0:16:26.400 that range where the FED starts to worry and says, 0:16:27.000 --> 0:16:31.120 we might have to, you know, start buying more treasuries 0:16:31.760 --> 0:16:35.840 on top of what they're already doing. Got it. So, um, 0:16:36.240 --> 0:16:38.360 that was great, Thanks for doing that. And and now 0:16:38.400 --> 0:16:41.080 I want to transition us for everybody listening, and I 0:16:41.080 --> 0:16:44.040 want to transition us into my favorite subject. If you 0:16:44.080 --> 0:16:46.280 watched the channel, I always try to bring this historical 0:16:46.360 --> 0:16:48.640 reference in, and so Nick's written this great book. It's 0:16:48.640 --> 0:16:50.880 called Layered Money. If you like my videos where I 0:16:50.960 --> 0:16:53.440 bring historical references forward, then you're gonna love his book, 0:16:53.520 --> 0:16:56.600 Layered Money. But I want to tie. We'll tie. Treasury 0:16:56.680 --> 0:16:58.760 is back in because it's part of the stack. But 0:16:58.840 --> 0:17:01.440 let's go ahead and just start back into that book 0:17:01.840 --> 0:17:04.000 and go back to history. You and I were talking 0:17:04.320 --> 0:17:08.639 off camera before we start recording and talking about how 0:17:08.920 --> 0:17:13.120 there was this, um, this this Renaissance that was created 0:17:13.160 --> 0:17:15.920 because the whole world had got onto like a standard 0:17:16.560 --> 0:17:20.000 unit of money, and then things started evolving from there. 0:17:20.040 --> 0:17:21.760 So maybe take us back to that point and kind 0:17:21.760 --> 0:17:24.960 of give us that that frame of reference. During the Renaissance, 0:17:25.080 --> 0:17:29.200 the Florentine meant issued a coin in the year fifty 0:17:29.200 --> 0:17:33.080 two called the gold florin, and that gold florin had 0:17:33.160 --> 0:17:36.679 an unchanged purity and wait for over three hundred years, 0:17:37.160 --> 0:17:45.000 and that was this remarkable advance in UH currency denomination stability. 0:17:45.320 --> 0:17:47.200 And because what were they doing, what were they doing 0:17:47.440 --> 0:17:50.720 before that? I mean, why was it so unstable? Yeah, 0:17:50.720 --> 0:17:54.160 of course it was so um it was so revolutionary 0:17:54.200 --> 0:17:58.200 what the Florentine meant did because before that, government after government, 0:17:58.240 --> 0:18:02.160 monarchy after monarchy dive their coins over time, they would 0:18:02.200 --> 0:18:05.840 have less gold content or silver content in the coins 0:18:05.880 --> 0:18:09.280 that they would meant throughout time. So the coin from 0:18:09.280 --> 0:18:11.520 the year five d and the coin from the year 0:18:11.560 --> 0:18:15.720 five and fifty a d um, we're different from each other, 0:18:15.760 --> 0:18:18.240 even though they were called the same thing by the government, 0:18:18.520 --> 0:18:22.600 and that creates confusion and it creates um. Hey, just 0:18:22.640 --> 0:18:24.879 another quick interruption to let you know that this video 0:18:24.920 --> 0:18:27.440 it's brought to you add free by Block five. Now 0:18:27.560 --> 0:18:29.800 they allow you to hold onto your bitcoin and your 0:18:29.840 --> 0:18:32.480 other cryptos for all the potential upside, and at the 0:18:32.520 --> 0:18:35.240 same time you can earn high yielding interest on it, 0:18:35.320 --> 0:18:37.800 so it basically cash flows. Now with Block five you 0:18:37.840 --> 0:18:40.600 can earn up to eight point six percent interest. You 0:18:40.640 --> 0:18:43.840 can also borrow against your crypto as well. It's super fast, 0:18:43.880 --> 0:18:46.120 it's super easy to set up an account and right 0:18:46.119 --> 0:18:48.200 now you can get up to two hundred and fifty 0:18:48.240 --> 0:18:50.720 dollars when you set up your account. Check the link 0:18:50.760 --> 0:18:53.160 in the description that I have for details in order 0:18:53.160 --> 0:18:56.399 to claim that two hut. Because Block five is the 0:18:56.440 --> 0:18:58.440 future of finance. Just check the link in the description 0:18:58.480 --> 0:19:00.359 for all the details of how to claim aime you're 0:19:00.400 --> 0:19:04.399 two and fifty dollars today. Obviously it creates inflation. It 0:19:05.000 --> 0:19:10.840 is it is m technically a devaluation of your currency, um, 0:19:10.880 --> 0:19:13.679 you know, by definition. And so that was the trend 0:19:13.760 --> 0:19:16.320 before and it guess what, it's still the trend after. 0:19:16.720 --> 0:19:20.200 So what what the Florigentine mint did during that time 0:19:20.359 --> 0:19:24.480 was very remarkable and gave this base for things to 0:19:24.520 --> 0:19:27.080 flourish on top of it. And of course the foreign 0:19:27.520 --> 0:19:31.000 as a coin ceased to exist just like every other one. 0:19:31.080 --> 0:19:34.119 But the fact that it lasted for so long during 0:19:34.119 --> 0:19:36.480 a time just like you were mentioning before we got 0:19:36.520 --> 0:19:40.080 on camera, during the time of a renaissance in so 0:19:40.200 --> 0:19:48.760 many other things science, mathematics, architecture, art, innovation, business structure, maritime, insurance. 0:19:48.920 --> 0:19:54.399 I mean, you're talking about so many different advances as 0:19:54.440 --> 0:19:58.760 a human civilization during this time. It really um set 0:19:58.800 --> 0:20:02.320 forth this system a monetary system that could be built 0:20:02.320 --> 0:20:05.359 on top of the forum at the time. Yeah, so 0:20:05.640 --> 0:20:07.960 do you think my guess going back to the to 0:20:08.040 --> 0:20:09.840 the history, and we did talk about it, but I 0:20:09.840 --> 0:20:11.639 don't know. I didn't go back and study as well 0:20:11.640 --> 0:20:14.679 as you did. But I've I've always kind of thought 0:20:14.720 --> 0:20:17.040 that maybe it was going to that standard unit of 0:20:17.119 --> 0:20:20.800 account that allowed for free trade to start flourishing, because 0:20:20.800 --> 0:20:23.000 now everybody could trade from country to country, everybody knew 0:20:23.000 --> 0:20:26.280 what that money was worth, which then allowed people to specialize. 0:20:26.760 --> 0:20:30.199 And then we had this explosion of of the Renaissance, 0:20:30.280 --> 0:20:31.840 right like, as you said, do the science and the 0:20:31.920 --> 0:20:34.600 arts and things. But um, were those two correlated that 0:20:34.640 --> 0:20:37.040 you take it started before? Did the money help that? 0:20:38.200 --> 0:20:42.040 It's hard to know what. What I concluded in the 0:20:42.080 --> 0:20:46.720 book is that during the time this idea of an 0:20:46.760 --> 0:20:51.040 international economy, let's call it in the thirteenth century at 0:20:51.040 --> 0:20:54.960 the fourteenth century, the international economy was this series of 0:20:55.160 --> 0:20:59.280 traveling fairs between merchants. So imagine, you know, like a 0:20:59.359 --> 0:21:03.399 cloth trade er and a spices trader, um, you know, 0:21:03.920 --> 0:21:08.680 and all these different traders coming together across the European continent. 0:21:08.800 --> 0:21:13.360 So Spain, France, Italy, Germany, Switzerland. They were traveling all 0:21:13.400 --> 0:21:18.840 over and when they met once a quarter every three 0:21:18.880 --> 0:21:24.119 or six months, they would trade. And so what started 0:21:24.160 --> 0:21:28.920 happening at these fairs bankers started following them and bridging 0:21:29.000 --> 0:21:33.720 debts between merchants for three to six months. And when 0:21:33.760 --> 0:21:37.560 they bridge debts, they are issuing these promises. They're issuing 0:21:37.600 --> 0:21:42.440 credit form you know, credit instruments, forms of money. And 0:21:44.080 --> 0:21:48.040 when you can say, oh, I want to borrow a 0:21:48.080 --> 0:21:53.800 little money by my textiles, make my finished product, and 0:21:53.840 --> 0:21:58.399 then sell the clothes, and I financed that activity with 0:21:58.440 --> 0:22:01.000 a banker, that's going to cause the economy to grow 0:22:01.880 --> 0:22:05.080 because that I now am adding value to the economy 0:22:05.200 --> 0:22:07.439 that I wouldn't have been able to do had I 0:22:07.480 --> 0:22:10.040 not had access to credit, because I don't have the 0:22:10.080 --> 0:22:12.639 money to buy all that all that cloth or that 0:22:12.760 --> 0:22:18.400 raw material to make clothes with. So yes, bankers issuing 0:22:18.440 --> 0:22:24.280 credit stimulated the economy during that time. And as the 0:22:24.280 --> 0:22:28.480 bankers traveled with the merchants from fair to fair across 0:22:28.520 --> 0:22:35.119 the European continent, the fairs started to become more important 0:22:36.080 --> 0:22:39.280 because not only could you trade, but you could also 0:22:39.400 --> 0:22:45.720 finance your business at the fairs. So and remember that 0:22:45.760 --> 0:22:50.120 had nothing to do with the Flora. That was just 0:22:50.600 --> 0:22:55.439 bankers forming a network with each other. Now, if the 0:22:55.520 --> 0:23:01.640