Kind: captions
Language: en
This is the defining moment of what it
means to be human. Are we going to blow
ourselves up because we couldn't decide
how to share? Banks either adapt or they
die. We all believe that the government
is supposed to save us. Therefore, the
government says, "Okay, great. We don't
want to raise taxes cuz that's very
unpopular." Regardless of whether
Democratic or not, if you [music] own a
house, you want what Trump wants to have
have happen, right? He's going to pump
your house price, too.
>> I worry very much about society tearing
itself apart.
>> To say that he is against socialism just
doesn't you [music]
don't remember what happened in 2020.
The United States is not going anywhere
just because debt to GDP at the 135 or
140%. There's an immense capacity to add
more debt in the US situation. If you
don't like the way the situation is in
the United States, there's a whole big
old world out there. Leave.
The economy right now feels pretty
brittle to me. Crypto has dipped hard.
Stocks are whipsawing.
Uh AI looks like the biggest bubble
ever. what what is the real force
underneath all of this and is the
economy about to break?
>> I know most of the listeners here are
from the United States and I think that
there's been a lot of discussion of the
the the K-shaped economy. There's a very
small percent of people who are doing
very very well and then the majority of
Americans if you take a look at some of
the consumer sentiment surveys think
this is the worst economy since the 70s.
even worse than the the global financial
crisis, you know, when it looked like
the world was going to uh implode on
itself because of overleveraged American
subprime mortgages.
>> And the question is like why is that if
you know GDP supposedly real GDP is
growing at 3% a year um supposedly
people are making more money and all
these sorts of things and I think the
name of the game is inflation. people
really feel inflation and I know that
the the authorities in the United States
and around the world like to say, "Oh,
the the year-on-year change is either
the decelerating or it's in deflation."
But, you know, every day people don't
give a [ __ ] about the rate of change.
They care about the at the actual price
level. So, like, how much does stuff
cost right now? How much did it used to
cost? Did my salary keep up with that?
How do I feel about this situation? And
obviously the answer is that majority of
people in the United States and around
the world are like, I'm getting inflated
away. I afford less than I used to. I
need to buy all these things just to
have a job, whether it's a cell phone or
it's a car or it's a type of dwelling
that I live in or it's child care or all
these sorts of things. And you know, I
look on social media and I see all the
influencers are partying like it's 1999,
but I'm broke as [ __ ] and I'm working,
you know, one two jobs and I'm barely
treading water. And so I think that's
why a lot of Americans and a lot of
people around the world feel this sort
of apathy and disillusionment with this
supposedly amazing world economy that we
have right now.
>> Okay. So, walk me through how did we get
here? What is the driving factor?
There's a lot of different um thesis
about what exactly put us in this
position. I certainly have one. My
audience will be very familiar with my
take. Uh but walk me through what's
driving all this.
>> I mean, at the end of the day, it's all
about money printing. Every single
economy in the world is essentially a
fractional reserve banking system with
this sort of Keynesian economic bent,
meaning the government's supposed to
spend money to incite demand. And if
there's ever a situation where there's
too much credit or too much um
overlever, then the government comes in
and saves those who are the bad actors
in the economy, prints a bunch of money,
and then we the party continues. And if
we keep doing that over and over and
over again, over time, inflation builds
up and you know what an average person
used to be able to afford on an average
salary, they no longer can. And you
know, pick your country. The average
firsttime home buyer is much older than
they used to be. Household formation is
down. People having less kids. It's all
the same of the same thing. We all
believe that the government is supposed
to save us. Therefore, the government
says, "Okay, great. We don't want to
raise taxes cuz that's very unpopular.
Regardless of whether democratic or not
in terms of how people express their
opinion politically, we're just going to
print a bunch of money. And if you don't
own financial assets, then you're
screwed essentially. And and that
compounds if you've been doing this
since, you know, the end of World War
II, you know, uh 80 years ago. We get to
this situation today where, you know,
the average home buyer in the US is what
40 years old is a four year is a the
first home buyer something
>> something in that where it used to be,
you know, the mid20s in, you know, the
60s and 70s, at least in the United
States context, is literally just a
symptom of of printed money.
This is something that I don't think uh
people really take on board in terms of
going back to what you were talking
about with the K-shaped economy. Um
that's what really got me thinking about
all of this. I I wouldn't have been able
to put words to it, but it just felt
like there were two separate economies
now that I do know how to articulate
this. And you've got one the people that
understand that if you have an inflating
[snorts]
currency that where I'm able to buy less
every day and there is a way for me to
escape it, then savvy people are going
to go wherever that escape hatch is. And
that means getting into something that
has um is protected against inflation.
So assets to oversimplify
and
right now the stat that really drives me
crazy is that 10% of Americans own 93%
of the assets. And so when you get a
moment like this where the so much
liquidity is slloshing around because
um the government or the Fed I should
say to be more specific is just not
raising rates.
How do you think we have to factor
fiscal dominance in this to really
understand what's going on? Well, I
think the underlying problem is, and
it's not all the government's fault, is
that nobody wants to take the hard
medicine in the 1930s. And whether or
not you think this is was the correct
thing for a little bit of time after the
the Great Depression, which was a
creditfueled boom, the thinking was
okay, let's let the amount of credit
contract. People lost their jobs,
businesses went under, they the keys
were handed to the creditors at banks
and you know different industrial
companies and the the medicine was there
and the US econ US and global economy
contracted a lot and it was a great
depression but again there was the
hangover from the the 20s and the early
20th century when there was all this
sort of money printing and activity that
sort of situation obviously you know
Herbert Hoover was a a one-term
president because of that
>> meaning because he was being fiscally
responsible and not just continuing the
party, they booted him out of office.
>> I mean, it's one of the one of the
reasons. But again, at the end of the
day, it's very unpopular. And so, I
don't care whether it's the United
States or you're talking about China,
which is, you know, a different type of
political system.
Nobody wants to be the politician that
stands up and says, "Okay, whether or
not this was your fault. Maybe you're
only 18 years old and this is a result
of decades of fiscal irresponsibility.
We're going to stop it right now. No
more credit. If your business doesn't
have enough cash flow to generate to pay
its debts, too bad. You go out of
business. You fire your workers. We're
going to create contract the economy,
get back to a healthier level, and they
rebuild." and you know unemployment is
20 30% whatever some ridiculously high
number that is not winning your election
the or that is not going to keep the
average person supporting you as an
autocratic leader so you see okay what's
the path of least resistance resistance
it's hey I hear you things are expensive
here's a check don't worry about how
it's funded you don't have to pay any
more taxes we're just going to hand out
money and you know for your bills here
your healthcare there
>> and then it gets makes the situation
even worse because nobody's willing to
stand up and say, "Okay,
>> today is the day. It's over. And
unfortunately,
>> you are you are where you are and some
of you are going to be losers. Some of
you are going to be winners, but over
time, this is going to be the best way
forward for um the you know, our
particular country. That just is not a
winning political strategy. I don't care
what type democratic or autocratic
government you have. And therefore, we
get what we have today.
>> [snorts]
>> The way that I think about this is a
parent who's uh 14-year-old wakes up
with a severe hangover and the parent is
reaching up into the cupboard to get the
medicine and is like, "Listen, you
brought this on yourself." Cracks open a
bottle of vodka, uh, starts pouring it
into some orange juice and is like, you
know, but I feel you. I get it. Uh, so
here, drink this and you're going to
feel so much better.
And because people do not understand how
the economy works, they drink it down.
And it does sort of push off having to
deal with the hangover. But it is going
to come for you. Like eventually you
either become an alcoholic and you die
of cerosis of the liver or you
eventually get sober and you have to
deal with it. When I look at the economy
right now, um I really try not to be an
alarmist. I understand it well enough.
I'm gonna be okay. Um, but I really
don't like the sense that a lot of
crypto people have where it's like,
well, I know how to escape this in an
uninflatable currency. Uh, I've got a
life raft. It's available to all you
guys if you want it, but they will never
because they don't understand it. And
so, I have this pull to really want
people to understand the mechanism by
which this works. And I want them to
understand how fragile the economy is.
All because of that very simple
statement that you made about debt and
money printing and the fact that nobody
regardless of Democrat, Republican, um,
dictator, Democratically elected, no one
says austerity, everyone says print
money. Do you think that I am uh I've
taken one too many black pills or do you
think that I am seeing it correctly but
I should just stop worrying about it and
learn to love the bomb or what do you
take away from all that? So I mean I
think you've contextualized it um well
but there are ways out of it and I think
the
AI
dream for a politician is the only one
of the only ways out which is we're
going to create so much productivity and
abundance that this debt doesn't really
matter. we've taken all the all this
debt, a lot of it was wasted, but we
created these AI companies and then they
created this magical thing called AI and
you know, humanoid robotics and all of a
sudden the cost of labor is essentially
zero. Uh, and the cost of intelligence
is essentially zero. So you know but I
don't think they've realized the problem
that that brings for a fraction reserve
debt based society that we have which is
when the average investment banker and
lawyer and accountant the most you know
vulnerable people to AI are those who
make the most money today who have the
most sort of like
um debt right they have a house they
have a car you know have a you know
rolling credit card bill the for the
nice stuff that they're supposed to have
that Tik Tok tells them that they need
um when you fire those people first
because you know that's the easiest
thing to replace in in the first
iteration of AI and they can't pay their
bills and what happens to the entire
when the when the 9% of the 10% who
won't know everything can't pay their
their bills because they lost their job
because you don't need investment
bankers and lawyers and accountants when
an AI can do it for free essentially.
Well, then what happens to the system
then? What happens when you have, you
know, five companies, you spent all this
money who created the god AI, they have
all this power, they've created all this
abundance. Are they going to share it
with everybody else? They don't need any
other workers anymore. What happens to
everyone else? Is it just going to be,
you know, Mark Zuckerberg and Elon and
Bezos and Altman sitting in the club and
everybody else is starving because they
said, "Well, cap capitalism and property
rights says that I created this. I
invested. [ __ ] you. I took your data and
I made it, but you know, you didn't
invest in my company. So, you don't get
to you don't get to experience this
abundance post scarcity world where
we've, you know, eliminated the national
debt because it doesn't matter anymore
because we have robots and AI." I think
that's what the conversation people
should be thinking about in their head.
The whole debt based financialized
economy. I think that's a postw World
War II, the last 80 years. That's the
last war. People are fighting that. What
they should be thinking about is how do
we reform society to share what is going
to be created by these either super
national,
you know, tech giants, this AI and
robotics, this abundance that was based
on our human data to create this. we're
not getting compensated for that as
society. How do we share that? That's a
conversation that people need to have
right now rather than well what are we
going to do about the national debt? And
I think if people start having that
conversation and thinking about how
they're going to reform political
systems deal with that that is the next
big risk. It's not whether or not you
know the US or Japan or China or Europe
can afford the debt. They can print the
money. There's various ways to reduce
your debt to GDP. It requires lots of
high inflation. But I think that the
real risk that people are not talking
about is what happens when we don't need
everybody or 20 or 30% of people
anymore. Especially the 20 or 30% of the
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to the show. Even if AI does everything
that we think it will do, which on a
long enough timeline, I think it will. I
think it will blow past all of our
expectations. The problem is that when
you drive energy and labor to zero, um
you, as you pointed out, you start
obliterating a lot of jobs, and that
isn't going to be instantaneous. That's
going to happen over time. You're going
to have a meaning and purpose crisis,
and you're going to have a bunch of
people that um will expect a government
handout. Like in the short term, I don't
know. there'll be something where uh
first the wealth is going to accumulate
to the owners
then we'll deploy all the things because
I don't think there's any reason for the
um bots and all of the energy to
accumulate to the top. It's not
sustainable. They will literally be
murdered. So uh the people that try to
hoard that there just be way too many
people struggling. So, their first act
of self-preservation will either be to
create a military, which I just really
doubt, or to start deploying some of the
abundance out to other people. But it's
the transitionary phase where it will
exacerbate both financial hardship and
psychological hardship, which will lead
to deeper fractures in society. America
is just extremely prone to this. Europe
is is like a powder cake right now. So
any sort of downward pressure and you're
going to get this I think very explosive
response. So it's like even if you
believe that AI is going to do all the
things, AI doing the things is a problem
unto itself. So, that's where I'm like,
okay, you're going to take a a system
that is economically fragile and you're
going to make it psychologically
fragile. Uh, and if you think that it's
going to be hard to
get people to migrate into an asset
class that would save them from this, I
think it's 10 times harder to get them
to uh or austerity. It's going to be 10
times harder to get them to understand
that we have to completely reimagine
nation states and uh what an economy
looks like in a post scarcity world like
that is 10x more daunting to me.
>> I think that's going to come faster than
we think. It's going to come faster than
the debt doom loop that I'm sure that a
lot of people will talk about. Oh, we're
adding a trillion dollars of this and
that. Okay, cool. But what happens if we
fire 10% of all of the most highly paid
workers in the next 2 to 3 years?
Because, you know, Anthropic can now do
the job of a junior investment bank
maker who was making $150,000 a year for
$10 a month. I don't need an entire
class of JP Morgan and Goldman Sachs and
Bank of America analysts anymore. I
don't need junior lawyers. I have an
entire corpus of president all in
machine readable format. Do I need an an
an associate at a law firm anymore? Do I
need a CPA? It's just codified rules.
They can follow the per perfectly. So
all the jobs that people were telling
their kids, oh, go to university, spend,
you know, get yourself in quarter of a
million dollars of debt to get this
degree to do this professional career,
that's over. You don't we don't need
those people anymore. Why am I paying
you $2,000 an hour? And I think that's
going to happen faster than people
think. And this conversation about what
do we what is society? What does it mean
to be a productive human? This is
something that people have to think
about because there's going to be
political leaders who are going to
emerge to preach their own version of
this. Whatever that may be. Some of it
will be very militant like [ __ ] the
computers. I'm about humanity first.
We're going to go back to with the way
things were when everybody had a job and
everybody had purpose and all sort of
things. You know, get rid of all this
AI. There are going to be those that, oh
no, AI can solve everything. Just hold
on a minute. We got this. And so I think
that's going to be the contentious
debate and it's going to happen way
sooner than we talk about whether or not
the United States or China or Japan can
afford to pay the interest on their
debt.
>> Okay. So your bet is that that happens
so much faster. So let's say that my
timeline is roughly correct that it's 10
years before we buckle under the weight
of the debt. You're saying two to three
years, maybe a little bit more, and we
have to contend with massive economic
disruption from AI.
>> Yeah. And it's I mean, it only takes
about 10%, right? If you could eliminate
10% of the highest paying white collar
jobs, which are very formulaic and
easily replaced for the very intelligent
LLM. Well, these are the most
politically active people. What are they
going to decide to do with society? is
the rest of the society that you know
still has a job because they flip
burgers to be a bit tright and the robot
can't do that yet. So they actually have
a purpose versus the investment banker
who went to you know XYZ Ivy League
school making 150,000 out of school. We
don't need them. We don't need him and
her anymore. We do need the construction
worker, the nurse, you know, the
policeman. We need those people still,
but they weren't that politically
important in the old system. And now
these people have been disenfranchised.
What are they going to decide to do with
society? And is the rest of society
going to support them? And what they
believe that this post scarcity or 10%
more efficient society looks like
without the wealthiest folks.
All right, let's extrapolate an answer
to that from where we are today. So
there are certain things that we know in
terms of how people respond uh the way
that people are responding to I can't
make ends meet is is hyper gambling. So
they are not being fiscally responsible.
They're not buckling down and saving.
They're going on every gambling
mechanism that they can find from uh
poly markets, sports betting, uh Pokemon
cards. I mean just literally crypto,
shitcoins, bitcoin, ethereum, like all
of it is in my opinion and again I am
happy to fight about this stuff but I
think the only way to intelligently
understand the markets is to think of
them as gambling once you understand
that humans step to them as gambling
mechanisms by and large. I'm not saying
that sophisticated um value investors
are doing that. Although yes, actually I
am saying that some I I will concede uh
that point isn't going to be the part
that I I'll like fight people on because
that gets a bit uh semantical. But uh
just in general, I think it is
undeniable that that's what people are
doing. Um so we know that people are
going to go into a gambling scenario. We
know that right now overeducated people
that are um
undermployed are leaning towards let's
call it socialism. The leftleaning
variant tends to be more popular among
hypereducated undermployed people. And
so you put those two things together and
it's like, okay, you're going to get
some ungodly number of people that are
like, all right, well, my only shot then
is to gamble. And then you're going to
get some ungodly number of people that
are like, um, not only am I going to
gamble, but I want the government to
give me the money with which I'm going
to gamble. [snorts] Um, what say you to
that? Do you think that is what we see
in the tea leaves, or do you see
something different? Yeah, I think
there's some variant of that and it's
hey the mum donnies of the world all
these things that we know socialism is
not a new concept it's a very old
concept there's this dislocation we have
this thing called the money printer
instead of dealing with the hard
conversation with society of what it is
to be a productive human how do we share
this abundance that we've created with
this new intelligence we're going to
just print a bunch of money to paper
over the problem because we don't want
to deal with it because it's too hard to
have this conversation And yes, you get
the hyper gambling mentality, which is
I've got a little bit of money. However,
I got maybe my parents gave me a little
excitement. I'm getting a government
check, you know, universal basic income.
Whatever it is, I'm going to the stock
market. I'm going to meme coins. I'm
going to crypto and and what have you.
And yes, S&P might be at 20,000 and
Bitcoins in a million. And it's all the
same sort of theme. It's we don't want
to deal with a problem. So, we're going
to print a bunch of money to mllify
people until [ __ ] gets so bad, whether
it's, you know, a bunch of young people
in the streets protesting violence,
whatever it is, until we're going to
have this cataclysmic conversation about
what it means to be a productive human.
>> Why was Margaret Thatcher able to pull
this off? Like, what are we missing
right now? Or structurally, what is
different? Um because in the 80s
Margaret Thatcher was able to say to
England, "All right, like we got to
tighten the belt. We got to do less
otherwise we're not going to make it."
Or I don't know. She had some sort of
convincing message.
China China was the deflationary impact
that allowed the West to sort of delever
themselves and do these neoliberal
policies, whatever you want to call it,
and not suffer uh inflation. China
shipped you the everyday low prices at
Walmart [clears throat]
and gave you all these great things
super cheap because you essentially
added let's call it half a billion
people very productive youngsters to the
global economy to make stuff super
cheap. China was willing to degrade
their economy beyond anywhere beyond you
know produce the solar panels produce
the rare earths
um they don't produce energy but um all
these things that they degraded their
uh their local environment so that the
west could enjoy the 80s to the early
2010s that was all predicated on the
Chinese entering the workforce
unfortunately you know policy makers
don't like to acknowledge that that's
really the reason why they're able to
pursue these policies and not blow up
their economies.
>> H All right. So there's no new
>> again, right? We don't we don't have
another 500 million young people or
another country willing to degrade its
environment to the to the extent that
China did for the first part of its, you
know, grow up phase in the 80s and 90s.
Uh right now we have a different sort of
problem and a different sort of
situation.
>> It's interesting. Um what do you think
India entering the market is going to
look like? Are they um already so
plugged in we're never going to feel
anything from them or um or are they
going to be felt in a unique way?
>> Well, I think it's a this right now it's
a story of robots, right? Even if India
plugs in, if you want if you think about
I'm a manufacturer of some I know I own
a I'm a big shareholder in a sexile
company and you cannot beat how
efficient China is at producing things.
Just cannot. There is no other country
that has the infrastructure available,
the amount of labor and not and the
installed robotics
um base that China has. And so I don't
care if you have India, you have
Vietnam, Malaysia, Mexico, all these
other places which are essentially
lowcost manufacturing centers do not
have the ability to have the
infrastructure of China. And so this
isn't a story about adding a bunch of
lowcost workers. It's how many robots
per 100,000 people do you have or
installed? Uh what percentage of your
factory is mechanized? Because okay,
sure, India can add a few hundred
million young people to the labor force,
but China has built the million robots.
Same with Japan. These robots are
infinitely cheaper than than a human
regardless of where they're at. And so I
think that that story of okay, we're
just going to repeat what China did in
the 80s and 90s with India, with
Nigeria, with Indonesia, all these
growing young populations is just not
happening because we have robots and we
have AI, we have these advancements,
human labor is going to be obsolete and
a lot of these things that we did in the
past.
>> Okay. Well, then let us face AI head-on.
So, we've obviously already talked about
a huge part of the puzzle, but we
haven't talked about the economic part
of the puzzle. What happens when AI is a
better investor than anybody else? And
so, you and I are like, we understand
this stuff, bro. We're we're going to
keep being rich all day. And then we get
an AI that comes in that is loaded up
with crypto and it just goes and does
its thing. Does what does AI's impact
into the competitive nature of the
financial markets look like?
>> I don't believe that AI is any better or
worse than a than a human investor. I
mean, think about it today, right?
>> Like today, sure. But in 5 years,
>> well, what is the market? The market is
essentially a discounting tool for human
preferences and scarcity, right? And so
if we remove an AA is just gonna is an A
gonna be better at predicting human
preferences than a human?
>> Yes,
>> I don't know. But if you are this is
already the case. If you're an investor
and you're like I'm going to be a day
trader, right? And I'm going to go up
against you know Citadel and Jump and DW
and all these massive Goldman Sachs and
all these trading firms that essentially
use very intelligent computers to do all
their trading, you're already losing
money. So it's not like this is a new
situation. If you think that you're
going to day trade yourself into, you
know, being the best, being Warren
Buffett, I'm sorry, but there is a
computer out there that is better than
you, faster than you, smarter than you.
>> What you have to do as an investor is
say,
>> okay, there I believe in a future where
this particular product or service gains
traction, and therefore I'm going to buy
and hold this stock, this crypto, this
whatever, and over time I'm going to
make money. But to be a systematic
short-term trader hasn't been profitable
for a retail investor in a very long
time and it won't be profitable when AI
is there either. So I'm not exactly
worried about that particular outcome. I
just think that's just not a style of
investing that is suited for a lot of
individual humans.
>> Like let me see if I can make you
scared. So, we we just talked about that
one of the things that we see right now
today is when people are not able to um
have their income keep up with the cost
of living, they go to hyper gambling. Uh
you give them sty checks, they hyper
gamble the sty checks. So now you are
correct. They would be unwise to go into
the markets and hyper gamble, especially
given that AI is already better than
them at that. 5 years from now, AI is
going to be really better. And by the
way, the AI is going to understand how
people respond to algorithms, how to
sway algorithms. And so the AI is going
to put out messaging that will humans
will respond to. The AI is going to
understand what I certainly understand,
which is that markets are effectively,
entirely sentiment driven. And so now AI
manipulates sentiment. Humans hyper
gamble against that sentiment. AI laughs
all the way to winning at all the PVP
stuff. Now, anybody who understands
better will back off and go, "Listen, I
play a long-term game. I'm not going to
be able to beat the AI, so I don't even
try." But my whole thing is there there
is a generation, and I don't know if
that generation is 2 years, 5 years, 10
years, probably not much more than 10
years, but there's going to be a 10ear
span where we go from uh energy cost is
racing towards zero, labor cost is
racing towards zero, and everybody
settles into the age of abundance. And
in that period, oh dear god, AI is just
going to hand people its ass in the same
way it beats us at chess and the same
way it beats us at go, it will beat us
at the game of short-term investing. It
it will just crush the average investor.
Humans can already crush the average
investor. And so you have this tiny
number.
>> It doesn't change anything. It's okay.
Instead of Ken Griffin making $16
billion a year, it's some AI model. Do
we care? Not really.
>> Yeah. Ken Griffin becomes Ken Griffin
becomes the [ __ ] that's getting his ass
handed to him. So,
>> well, not really. I mean, it's just like
who who's going to take who's going to
extract this vig from the desperate
retail? The desperate retail is there.
No, that's what we should change rather
than saying, well, the AI is going to
beat you at stock. Well, Cidel is
already beating you at stock investing
and Robin Hood and payment for orderflow
and all these microer things were
already [ __ ] you. It wasn't like the
AIA is going to change the situation.
You still were going to lose all your
money in 5 seconds if you won 100x
longs, right? It just it doesn't matter
whether there was an AI on the other
side or you know pick your large
institutional investor that was already
happening. So we're just changing who
makes the money potentially. It doesn't
matter. What matters is just don't play
that game. You already were losing it
today when there was a little bit of AI.
You were losing it yesterday and there
was no AI. Understand that and just
don't do that. I think that's got to be
the message rather than oh let's freak
out about the AI. It's going to be
better at stock stock picking. It's
gonna be better at being Citadel, but
the money is still going to just go to
that particular bucket.
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Shopify by your side. All right, let's
get back to the show. Let's talk
leverage. So one, will AI influence the
rate at which leverage
is available? I don't know if there will
be any impact there, but I've heard you
talk about AI's interaction with
leverage before. Um, so I'd love to know
that. And then I would love to dovetail
into the fact that Maelstrom, your
company, does not use leverage, which I
think is super brilliant. And so I'd
love to get your take on those two
aspects of leverage.
Well, leverage will become more and more
available as sort of the types of
financial products proliferate that you
know especially that the thing that I
invented with BitMX called the perpetual
swap. Uh it's a highly leveraged
derivative that we invented in the
crypto space that's coming to equities
that's already started on some
decentralized platforms and it's going
to become ubiquitous instead of trading
a futures contract or an options
contract that you know we're familiar
with. It's going to be a perpetual swap
on equities, on bonds, on crypto, and
that is going to be very highly
leveraged and and gamified.
What people need to understand is, and I
tell the people, there's nothing wrong
with leverage. The problem is that
people are not dedicated professional
traders. And when I say professional, I
don't mean that you went to a fancy
school and you got a degree that made
you a professional trader. I mean that
this is your job. You live and breathe
the market that you trade. You're on
your phone all the time. You've got
alerts. You go to bed, something happens
in your market, you wake up and you deal
with it. That is a very small sliver of
traders. And if you dedicate yourself to
this craft, you can become successful.
What people don't want to do is they
want to become successful without
dedicating themselves to the craft. And
so they want to work their job, do their
passion, whatever it is,
go on their phone for a few hours a day,
trade fair trade, use a leverage, make
enough money to survive, and then that's
it. And that's just not how it works,
right? It's not the market doesn't
provide you profit just because you got
off of work at six o'clock, you've got
dinner at 8, you got two hours to make
your money. That's just not how markets
work. Uh markets work however they want
to work and they'll provide the profit
whenever they want to provide the
profit. And you need to be there
studiously looking at things to be ready
to accept it. And so I think people
don't understand that they don't want to
put in the 247 365 mentality of trading.
They want to trade two hours a day and
make money. Therefore, they jack up the
leverage. They approach it like they
went to the casino. And what do you
know? They get liquidated all the time
when you should never ever get
liquidated as a trader. If you use
leverage correctly and so my advice is
unless you are willing to dedicate
yourself to being a professional trader
that this is your job, then don't use
leverage long only. Pick things you
understand, whether that's crypto or
stocks or real estate or FX, whatever it
is. Pick something you understand. go
long and you don't have to worry about
these sort of things. And over time, if
you are studious and you buy things that
you understand, you should do okay.
>> All right. That's not a sexy way to
think about things. [snorts]
>> It's it's well, it it is sexy for
anybody that wants a long-term
relationship. So for me from a, you
know, this is sort of the the squares
equivalent of dating advice instead of
trying to bag chicks, it's I want to
fall in love and I want to get married
and I want to, you know, have something
that is prolonged and has meaning and
purpose and all that good stuff. So I
I'm right with you. That is the eternal
advice that I will give people. Now, for
somebody that wants to do the fast and
furious uh dry humping of the leveraged
uh trade, how do you do that? Well, so
you gave us the you've got to be 24/7.
Totally understood. Um is there because
there was a recent event where somebody
got liquidated like just some ungod like
6,000 Bitcoin or some terrifying number.
Um what did they do wrong that we can
all learn from?
So, you know, position sizing is the
number one thing, like how big is a
position relative to the underlying
liquidity. There's a big riskoff event
in crypto on October 10th. Um, started
at Binance and spread to a bunch of
other exchanges and essentially was a
lot of traders didn't understand the
product that they were trading. They
didn't read the information that was
given by the exchanges about how these
things worked. Something happened to the
micro structure of the market, adversely
affected their positions. They didn't
know what to do because they had never
thought about it before. But it was all
written down. Been there for years. And
so again, study your craft. Are you a
professional trader? Yes. Okay. Well,
then you better know every single way
that your exchange operates, right?
People in the stock market found out
during the the GameStop crisis what
settlement meant. What did DTC mean? How
do these things interact with the
exchange and the broker and, you know,
your your trading app? Why were you
locked out of the stock? Why wasn't why
weren't you allowed to trade? You didn't
know the rules. So, if you want to play
the game, know the rules. Study the
rules. Understand the rules. If you
don't understand the rules, ask customer
support. They want your money. They want
you to spend time and effort on this
app. If you don't understand something,
ask them. And they're going to explain
it to you because they want you to trade
and pay them fees. But if you don't ask
questions and it gets ignorant and you
think, "Oh, everything's going to be
okay." Then, you know, overlever things
happen. Certain policies that the
exchange has you didn't read about kick
into effect and all of a sudden you find
yourself liquidated. you don't know why
cuz you didn't read because you didn't
dedicate yourself to what you're
supposed to do as a trader. You should
never ever be liquidated as a trader.
That just means you didn't understand
what it is you're trading and you didn't
size your position correctly.
>> What are the things that people don't
understand? How fast the market moves or
how much collateral they need? What
what's like the common mistake?
Uh I mean so specifically this last
incident in the crypto space or this
thing called automatic deleveraging
where because there was um more losses
than profits some of the traders who had
profit had to get their positions closed
early and some traders run these long
short strategies where they're losing
money on one side making money on the
other. Well what happens when the side
that you're supposed to make back up you
know more than you lost gets closed out
early and you don't make all that
profit. All of a sudden now you have a
loss and people thought well what is
this thing? Well, it's been written
about for I mean I almost invented it 10
years ago and people didn't read the
stuff when I wrote it then. They don't
read it now and CZ and the other crypto
guys write about it on their own
platform. So again, it's you're trading
a leveraged product. There are ways in
which that leverage is created.
Understand how that leverage is created.
Understand the math. Understand how the
exchange polices that leverage and how
it protects itself with its margining
system, how the clearing house works.
And I mean, I'm sure a lot of you like,
well, this is a lot of information that
I don't know, and I'm using these
leverage products. I don't know if I
want to expend this sort of time and
effort to really go deep on this. Well,
then don't use leverage. Just buy and
hold. It's just that simple.
[snorts]
>> Okay. So, um, punchline being that
leverage is basically for the
professional trader. Um, you've already
>> on effort, not on knowledge. Effort,
it's all about effort.
>> Very fair point. Um, so given the moment
that we're in, given that you've got 10%
of people that own 93% of all the
assets, how can somebody today that
doesn't want to trade on leverage, how
do they get into the market and not feel
predated by the fact that they don't
have a lot of money to spend and now if
you're telling them leverage isn't for
you, um, what's the play?
>> Time and compounding interest rates. Uh,
so I was having I was having a
conversation with a friend and he
happens to be a lucky soul that has
access to a rent controlled apartment in
New York City and he was saying that
rents gone up I think since the 70s
three or four times whatever it is. So
if you break that down, look at the
component annual growth rate, it's about
2 to 3%. Right? So a 2 to 3% compounding
on a dollar gets you three to four times
more money over time in an exponentially
increasing fashion. So I think people
just need to understand very basic the
compound interest rate and time works in
your favor if you're patient. If you're
not patient then those things work
against you. And so yes, in the
beginning it might look like you know
the hockey stick isn't going anywhere.
But then you hit an inflection point and
then you go like that. And that's the
whole point is to be able to survive
long enough till you get to the
inflection point. Invest responsibly.
Invest in things that compound over
time. even at a small rate. Even 2%
compounding inflation has taken the
value of the dollar down 99% since 1913
when the Fed was created. Right? So
compound interest rate and time are your
friends if you use it that way. And they
work against you if you use, you know,
aggressive amounts of leverage and
you're impatient. And so I know it's not
the most sexiest message, but patience,
time, and interest will get you to where
you want to be.
>> Yeah. I'm not worried about the sexy.
I'm worried about the effective. I I
really do consider myself a
uh evangelist for trying to help the
average person. Like the people that
already understand the market there.
There's plenty of people for them to
listen to. I'm trying to speak up for
the person that never uh wanted to
understand this, never thought they
would need to understand this and
they're just not able to get ahead. They
can't afford a house, like all of that
stuff. Uh so yeah, I want whatever. Also
the other thing that people instead of
instead of having the market do this for
you, get politically active. Why are you
supporting the same politicians
Democrat, Republican, pick your
political flavor, depending on which
doile you're in, who continue to [ __ ]
you with inflation. Stop supporting them
just because this guy or girl has the
right last name, which are the right to
the right school, wears the right
clothes. Oh, I need to support that
person. They're [ __ ] you. Change it
up. So yes, you can say the market needs
to save me because I'm unwilling to
ditch all these politicians regardless
of the party who over many decades have
continued to [ __ ] me, but I need to go
leverage the market instead of, you
know, using this thing, my voice, my
political activism. I know we have this
thing called the internet and social
media. You know, people can line up for
hours outside a Louis Vuitton store. Why
can't you get politically active and
boot out all these guys and girls who
are continuously [ __ ] you?
>> Yeah, you're not wrong. And I have said
something along those lines myself, but
I do feel a little bit hopeless when I
talk about that because the very nature
of a politician is to gain and retain
power. And you have been very eloquent
on the hard truth, which is that you
don't get elected by promising
austerity. You get elected by promising
free [ __ ] and free [ __ ] is exactly how
you end up in the position that we're in
now. So, that one maybe of all the
options feels the most hopeless to me
because I don't think that anyone will
ever get elected that
is sincere about austerity. So, Trump
broke my heart when I realized, oh, he
was
never going to balance the budget. And
when he put forward the big beautiful
bill, I realized, oh, it's game over.
Like, this is just a question of degree.
So, maybe the Republicans spend a little
bit less than the Democrats. Uh, but
fiscally, they're both wildly
irresponsible. So, when you look at the
next three years with Trump in power,
what do you see? Is it just money
printing as far as the I can see? Are is
he going to be more like is he going to
be more effective at generating growth
than the next person? Um, what do you
see? So I mean technically speaking you
can generate growth to reduce the debt
to GDP and balance the government's
balance sheet by going to you know a
hyper growth scenario but it's
inflationary right and so again you need
to have the right kind of job maybe it's
a union job or whatever where you're
able to negotiate high pay rises or you
need to be in financial assets in that
situation like in the co area era right
you had a lot of these unions that have
been dormant for many years being able
to negotiate 30 40 50% % pay rises for
their workers during co because
everybody needed them at that period of
time and they had had the power and if
you take a look at the years from you
know 2020 to 2022 the US debt to GP
actually declined because they ran this
hot economy model again it produced a
lot of inflation which pissed a lot of
people off but that is the way in which
the textbook way and Trump and invest
have sort of tried to say this that this
is what they want to do that you can
delever the the government's balance
sheet which as politicians who work for
the
That's their number one job is
deleveraging their own balance sheet and
you know sorry for the inflation that we
we generate. I hope you have a good job
and you bought some financial assets.
That's what they're going to try to do.
And obviously you have the mom donnies
of the world on the left who are like
hey I can I can produce better free [ __ ]
rhetoric than you Trump and therefore I
am going to you know win the mayoral
election in New York and state elections
and you know Virginia and New Jersey and
all those sorts of things. So Trump is a
non ideological politician. He wants to
win. Uh he is the most prolific
president since probably you know ever.
He lost his stimulus checks. He can't he
was the first president to hand out
money directly to every you know
household at 200 million household. No
other president has done that before
like Trump has done it. So to say that
he is against socialism just doesn't you
don't remember what happened in 2020. So
he's going to do something similar again
because it's very popular. And then the
question is, okay, well, if you get a
stimulus check for or whatever it is,
whether it's your house price goes up or
there's a check by the government, how
are you going to make sure that you
leverage that money in the most
effective way if you're not going to
advocate for change, fundamental change
in the political system? And then that
is, okay, well, it's it's Bitcoin, it's
a house, it's S&P 500, it's whatever it
is you feel it's gold, right? It's these
sorts of things that you feel
comfortable with. But Trump on one side,
M Dania on the other, they're kind of
saying the same thing. They have
different styles in which they say it.
Um whether or not you support them or
not is not the point. They're both kind
of saying the same thing. And I think
once people realize that, then it's
like, okay, well, I'm going to get this
money from the government instead of
going out and buying a new washing
machine or, you know, going to Vegas or
going on vacation. How do I make sure
that I parlay that into, you know, above
trend growth in my financial assets?
>> All right. If we know that the
government is going to print, if we know
that Trump is doing everything he can to
drive interest rates lower, and we know
that both of those things are
inflationary, they will drive up asset
prices, they will make houses more
expensive, they'll make rent more
expensive, on and on and on. What does
the world look like over the next three
years as that easy money continues to
flood the system?
I mean S&P 10,000, NASDAQ 100,000,
Bitcoin 1 million, gold 15,000, right?
Pick your asset. They're all going up.
Maybe some go up more than the others.
Um, but that is the the state of play.
And so then the question is, how do you
take whatever savings that you have and
buy one of those things? Whatever is you
feel comfortable buying, because those
are the things that that have to go up
as a release valve for let's run the
economy hot. Let's allow wage inflation.
uh let's reduce the debt to GDP on the
government's balance sheet.
>> Okay. So, you've talked about how Trump
would effectively take over the Fed. Um
how does he do that? Because right now,
obviously, he's not able to get the
things done that he wants to get done.
So, how would he pull that coup off? And
in a magical world where you have a wand
and you can either help him or stop him.
Would you help him get control of the
Fed is what he wants what you want to
see happen or would you stop him?
>> So I answer the last question first. I'm
a financial asset holder. So I want what
he wants. I want cheap money. [snorts] I
don't want it to be plentiful. Right? I
own the things that are going to go up
because
>> because this works, right? So, and you
know that's that's just the the truth of
it. If you own a house, you want what
Trump wants to have have happen, right?
He's going to pump your house price,
too. Now, the the situation is,
you know, how does he gain control of
the Fed? So, first of all, every single
US president since the Fed has been
created always gets the monetary policy
that they want. This is not a news
phenomenon where the, you know, the
president and the chairman of the Fed
are are butdding heads. is not new and
always the Fed chairman whoever that is
caves or the Fed as a political body.
There's a great essay written by Arthur
Burns in 1979, the anguish of central
banking, where he essentially says that
because the politicians want to provide
this free money to do stuff for the
people because the people have elected
them to do this, we as a Fed whether we
like it or not are there to facilitate
that. And the um the thing that we'll
let go is the value of the currency and
sort of responsibility of you know what
is the value of the dollar and we will
always do that is essentially the
message that he said. This is the 1979.
So people need to do a read a little bit
of history in terms of understanding
that Trump, Biden, Clinton, Obama, Bush,
Reagan, they all got the binary policy
that they wanted in the end. And so
Trump will get it. I wrote an essay
called 47. We and I talked about the
bureaucratic mechanations on how Fed
votes and how you get control of this
board versus that board. Maybe he does
something like that. Maybe, you know,
everyone in the Fed is convicted of
mortgage fraud and he replaces all. I
don't know. It doesn't really matter.
All I know is that there's there's never
been a president who's never gotten the
monetary policy that they desire. Trump
will get his monetary policy. How long
it takes,
>> I think sometime in the, you know,
second half of 2026, he'll get, you
know, the monetary policy that he wants,
however he does it.
>> All right. you painted a picture or
maybe I painted it and you agreed uh of
what's going to happen when Trump gets
the um economy that he wants or the the
Fed to do what he wants and that's asset
prices go up but right now asset prices
are down. So what's going on with
Bitcoin, Ethereum,
um
yeah, and other assets that we see
struggling right now? What what's the
underlying cause? You know why it causes
the Fed is not printing as much money as
we thought they would print as fast. And
the technical thing is the government
shutdown. Sorry, the debt sealing fight
ended in July 4th and the US Treasury
essentially had to pull a trillion
dollars out of the economy to rebuild
its checking account. And that's
essentially in a very simplistic manner
why Bitcoin all of a sudden caught up
with that that destruction of credit uh
and is previewing what could happen to
equities if the Fed doesn't change
course. Now starting in December 1st
quantitative tightening i.e. the balance
sheet reduction of the Fed ends.
uh the US banking system is starting to
issue more loans and these are loans
that are going to the industrials that
you know the Trump administration wants
to build things whether that's weapons
or nuclear or semiconductors or rare
earth what have you the banks are
starting to lend to those companies who
are now getting government guarantees
for contracts that'll only accelerate so
I think this this little bit of period
of weakness in crypto is is you know
very minimal will keep going back up as
credit expands, the quantitative
tightening ends at the Fed, Trump gains
control of the Fed sometime in 2026, and
money is printed in some way, shape, or
form. There's also the housing market.
You know, a key policy of the Trump
administration is to pump housing. It's
a key policy of every single
administration. I don't care if it's
Republican or Democrat. Um, and so
again, if people I think people need to
take out this partisan nature of like,
oh, Trump's a Republican. He's bad
because I'm a Democrat and I oppose
these things that he's going to do.
Well, put in Camala Harris as a
Democrat, she'd be doing the same stuff.
And so I think once you remove all that,
then you're saying, okay, well, why am I
trying to fight this? But I'm not going
to fundamentally get politically active
and change the system that, you know,
puts puts this structure on how I am as
a financial person in this world, then I
better just get with the program. And
it's buy stocks, buy crypto, buy gold,
don't use leverage, and just wait and
it'll go up. What does it tell us about
human nature or the markets in general
that people just cannot bear to wait?
They always panic like uh they didn't
expect that it was going to go down.
This whole notion of this time is
different is so wild to me. So yeah,
what do you take away every time people
start freaking out when the price dips?
>> We're all human at the end of the day
and this is this is human nature. The
you know the market is not there to make
you money if you're over if you
overtrade and this has always been the
case as nothing changed. We're still
humans. We're still these you know
lizardrained mammals that live in this
you know new computer age world. like
it's only been 150 years since we really
have sort of emerged from pretty much
like subsistence
ba basic subsistence. So I I think that
you know human nature is human nature
and so the average human is impatient uh
wants the future today is willing to
gamble to get it and unfortunately the
politicians play on that.
>> Yeah that that is for sure. So um as you
look out into the future, you know that
humans are going to react that way. Um
do you see anything that can change the
divergent economies? Because this is the
thing that probably I worry the most
about is given that human nature, given
how busy people are, given that some
people don't have the intellectual
capability to understand it, given that
many have the capability but just aren't
going to put the time into understanding
it. Um they are going to be moved by
policy decisions. Full stop. They are
not going to go, oh well given that
there's money printing, I know assets
are going to go up, so let me go get an
assets. Um, do you worry about that? Do
you not think about that at all? Like,
how do you factor that into your
calculus?
>> Well, obviously you worry about societal
breakdown. And I think we we talked a
lot about this sort of this AI battle
that we're going to have versus should
we have it, if we do have it, who should
benefit from it, or maybe we shouldn't
have it at all. These are that's going
to be the colossal defining sort of
battle of of this century. In the same
way that [snorts] communism versus
capitalism, if you want to reduce sort
of the and imperialism, if you want to
reduce the two world wars to those very,
you know, simplistic terms, was the
defining moment of sort of late 19th to
early 20th century humanity, right? And
we're sort of living in that reaction to
that and that post um World War II,
World War I situation right now. This is
defining moment of what it means to be
human. Are we going to blow ourselves up
because we couldn't decide how to share
AI? I don't know. I think that's the the
number one question.
>> I worry very much about society tearing
itself apart. Oh, this is another reason
you don't live in America. So, in
America, man, it's really palpable and
you can feel it. Like, I even have to
think about like what advertisers are
going to consider me uh speaking to
their demographic.
Certainly, politically, everybody's on a
team. When you listen to the way that
people talk, everybody speaks in team
talk. Uh, if I wanted my channel to
triple in views overnight, I would just
pick a team and just do the team talking
points. It is crazy. I know how
effective that would be because people
want that team perspective. Everybody
wants to be in their own echo chamber.
They want the heruristics of just tell
me how to think. They don't want like
I'm all about cause and effect. So I'm
always trying to lay out what's the
cause and effect and where does this go?
And so when I look at this particular
problem which is that most people either
because they can't or they won't they're
never going to get into assets. And so
that problem is not going away. And so
and then I have the belief the base
assumption that the only problem that's
impossible to solve is the political
problem. The other problems maybe, but
the political problem I don't think is
is ever going to be solved. They will
give things away for free because it is
how you gain and retain power and only
on the other side of tremendous pain
will a culture change. This is why every
empire has fallen. Uh so that's my big
concern. So from a um why do I make the
content that I make? making the content
in the hopes that I can make a simple
set of choices accessible to more people
so that at least more people will get on
the life raft. Uh but for that people
have to face what's actually going to
happen and
yeah man I don't I don't know how many
people are
>> I mean I think the the United States is
specific because that's you know
majority of your audience is not in the
worst off shape of all countries that
are highly indebted. There's no enemies,
right? There's two big oceans. Canada
and Mexico are essentially vassal states
uh of the United States. The United
States is energy self-sufficient at the
right price, right? Oil's too cheap
right now. That's why shale is
struggling and some of these oil
producers. There's plenty of offshore
drilling to give oil and natural gas to
the US to have enough energy to be
self-sufficient. There's plenty of food
in the United States. Yes, maybe it's
not the best quality and there's too
much high fructose corn syrup or
whatever nonsense that is in the food
supply in US. But again, there is enough
food in the US. So the debt is a problem
kind of, but from a holistic standpoint,
I don't see this like zombie apocalypse,
hyperinflationary problem for the United
States anytime soon. You think about
Rome, right? It took hundreds of years
for Rome to fall after the underlying
economic model didn't work. They
couldn't import enough slaves to do
enough labor and there's not weren't
enough free you know Italian Roman
citizens to do stuff. Took hundreds of
years before you know Rome fell like the
United States is not going anywhere just
because the debt to GDP is 135 or 140%.
Like there's you know an immense
capacity to add more debt in the US
situation. life might not be the most
fun and you know pleasurable for a lot
of people but I don't see this as this
sort of like oh my god the US is going
to blow up sort of situation because
again there's enough food there's enough
energy at the right price and there's no
uh intern sorry outside invaders going
to come into the US and sort of like
take over the country like why would you
want to do that who wants to rule the
United States like that'd be the dumbest
thing I could ever think of
>> okay well then let me um walk you
through my thesis on what's going to
happen next. So, this is how I see this
playing out. We're stuck in Thusidity's
trap. China's on the rise. We're on the
decline. Uh, no declining power ever has
just gracefully accepted that they were
being surpassed. Uh, England being the
most recent example, only accepted
defeat because they um just got battered
so hard during World War II and just
found themselves so indebted to us, they
just didn't have an option. They were so
fatigued. they had suffered so much for
so long and they were so in debt they
didn't have a choice. So um they
obviously they go through war. So now 12
of the 16 times that a declining
superpower has collided with a rising
superpower uh they've ended up in open
um kinetic warfare. So it's like
statistically the odds are not in our
favor. were already doing weird things
in Venezuela. Um, doing currency swaps
with Argentina from where I'm sitting as
a way to let China know, hey
[ __ ] uh, South America is our
hemisphere. It is not yours. You will
stay out of it. Uh, be a real shame if
something happened to one of your ships
in the Caribbean. So, obviously, China
is now doing all kinds of [ __ ] off the
coast of uh, Japan to let people know
where they're at with Taiwan. Japan
clapped back. China clapped back, you
know, uh, to Japan saying, "All right,
well, if you guys want to [ __ ] test
us, if you want to start talking that
it's existential and that you're going
to have to do something, if you're
feeling froggy, leap." So, it's like, I
feel all that instability. Then factor
on top of that, you've got the US right
now choosing between essentially brands
of socialism. Uh, so we both agree that
there's going to be what I will
characterize as additional stress put on
the system. So if I'm China and I'm
looking at America, I'm like, "Oh, good.
You [ __ ] are going to like tear
yourselves apart. Fantastic. I'm going
to keep going. I'm going to build a gold
corridor in South America. I'm going to
peg the yuan to gold. I'm going to make
sure that the US loses the reserve
currency status. Uh, I'm going to weaken
you guys. Yeah, I don't plan to invade
you, but um I am going to, by the way,
take over Taiwan by 2027. You're going
to do [ __ ] nothing about it. Uh, and
so now you get in a situation where your
biggest rival is uh picking off allies.
Your biggest rival controls essentially
your entire warfare pipeline. So
they're going to be able to do
effectively what they want because they
can choke you off from rare earth
minerals and drone parts and all kinds
of stuff. And so the US is going to be
um just put in a weaker position like
you. I don't imagine this isn't you wake
up one day and it's catastrophic. It's
the US is just put in a weaker and
weaker state is in a worse off position
in terms of who they can influence
globally which means things will get
worse economically uh you'll be in an
economic battle with China for who gets
to trade where with who with what uh and
given that we're already printing money
at infinitum that yeah it just
everything gets weaker and worse and so
that we are already doing political
assassinations we're already at each
other's throat. Um,
you get the Venezuelification or the
Argentinaification
of the US over the next 10 to 15 years.
That's what I
worry about.
>> I mean, there's a lot lot there to
unpack, but I think the US will
transition from a hedge, you know,
unipolar hegeimon to a very powerful
country. And I guess the question is how
does the American psyche handle that?
Could be bad, could be could be okay.
People just like, "Hey, [ __ ] it.
Whatever. China is the number two or
number one. We're number one or number
two." And you know, we deal with it,
right? And as you mentioned, right,
China has rar US doesn't have any. You
know, that'll persist for how long,
however long it persists. But it
basically means that if China's not
going to sell you the stuff to, you
know, shoot the weapons, then you can't
shoot the weapons, which essentially is
a really good thing cuz if the US has
enough weapons to shoot, then this whole
situation would be probably a lot more
scary in terms of the global sort of
situation globally. But because they
can't shoot enough weapons, then you
know Trump has to stop the war in
Ukraine. You know, as sad as the Israel
Iran situation was, it lasted 12 days
because Israel started to feel what
happens when you get bombed by another
country. You don't have enough missiles
to to defend yourself, right? And so
again, this is all predicated on China
is there to make money and trade.
They're not there to supply the United
States with carol launching missiles at
people, which the US would love to do,
you know, because that's just in the
nature of the country. has been at war
for pretty much 95% of its existence. So
again, I I take a little bit more of a
glass
half full sort of attitude towards, you
know, the declining, you know, empire of
the United States where there are
limits. There are other countries that
can enforce these limits on the United
States. And there are internal problems
that will be dealt with however they're
they're dealt with, but hopefully we
don't have a thermonuclear war where
everyone's shooting hypersonic missiles
at each other. And you know, if we take
that off the table, then you know, if
you don't like the way the situation is
in the United States, there's a whole
big old world out there. Um, leave.
>> Yeah, that's easy for somebody like me.
Uh, that isn't easy for the vast
majority of people. That's the thing
that I worry about. Okay. Uh, that's
enough doomerism, black pill. Uh, yeah.
So, now talk to me about um 2030. What
does 2030 look like? This is only, you
know, four years really away from the
time that we're recording this. Um, what
does that look like? What do we have to
look forward to?
>> Uh, I think that we have some sort of
like massive market crash between now
and then. And
>> hey, the end of doom and gloom. Tell me
about the market crash. [laughter]
But it's but no it's more predicated on
again AI adoption is going to happen
faster than we think and impact the
structure of the economy in a way that
people aren't really appreciating right
now but
>> in the ways that we already talked about
or something that we haven't touched on
yet?
>> No, in the ways that we already talked
about I don't but I don't think that's
the common knowledge. common knowledge
is, you know, Facebook is going to be a
$15 trillion company because they've
created the best AI possible or, you
know, Tencent or whatever company,
right? It's not, oh [ __ ] what happens
when all the bankers don't have jobs
anymore? How does that change the
society?
>> But I think we get to 2030, you know, we
have a larger installed robot base. Cost
of labor goes down. We we have
essentially a very intelligent
um prediction engine called an LLM.
Maybe we have AGI or whatever that means
or not. I don't think it really matters.
But we do knowledge work cheaper and
more efficiently and we take human
intelligence and instead of sending the
smartest and brightest people, you know,
like myself to study [ __ ] finance
versus being an engineer or being a
dancer or being a poet or whatever, we
have more people doing creative things,
whatever that means, creating sort of
joy for other people because there is no
other option. You can't be a banker
anymore because that's not a profitable
um sort of profession. But you can be a
writer, you can be a philosopher, um you
can be a sports uh somebody who does
sports, whatever it is, right? And I
think there is a better scenario where
labor is cheap. We have a global
conversation about what it means to be a
productive human. We haven't killed each
other as we've moved to this sort of
much less scarce society. It's
definitely not post scarcity by any
ways, but we have much less scarcity and
so we have much more creativity,
intelligence, doing things to just make
the human condition better. So I I want
to believe in that and I'll be, you
know, positioned in my portfolio for
yes, aggressive money printing. Maybe
there's a backlash to that because the
inflation gets too unbearable in a lot
of countries and so you have to have
political rhetoric that sort of at least
tries to pretend that there's austerity.
And then we have sort of this AI Not
miracle, but labor is cheaper, knowledge
work is cheaper, and we have a better
human existence in terms of more things
to enjoy of just being ourselves and,
you know, communing with each other.
>> All right, so let's talk about the road
to get there. So 2026 is here. Um,
stable coins, I think, is going to play
a big role. I know the Trump
administration is trying to do some
interesting things with stable coins. um
does stable coins become the new bank?
Does that start happening in 26? Like
walk me through what you see in that
near-term window. So I think for stable
coins is a way the reason why the Trump
administration supports stable coins is
they see it as a way to shove treasury
debt down the throats of the global
population at very attractive rates. And
so I think that in 2026 you're going to
start seeing
big tech platforms and the large banks
have their own stable coin or be
distribution platforms for things like
Tether and Athena and you know Circle
USDC to get these stable coins out
there. So you will be more familiar with
sending each other as stable coin than
you are with going on to your online
banking system and sending somebody a
bank wire. I think that's going to
accelerate very very quickly especially
for Gen Z and millennials who already
are comfortable with online online
banking and that's going to lead to a
proliferation of stable coins and people
are going to be using DeFi. They're
going to be comfortable with these
solutions and then there will be a lot
of banks that no longer are relevant.
There'll be some like JP Morgan and
Goldman Sachs who are agile enough to
survive, but your average bank, I mean,
go on. I mean, I go on. I use a lot of
banks. Most of their technology is
trash, right? And now you're going to
say, "Oh, I can literally like move my
money from my bank to this app where it
does everything. I got an AI assistant
to help me. I don't have to deal with
humans at work 9 to5, only five days a
week, and who are very, you know,
annoying to deal with. I've got this
awesome thing called a smartphone and an
AI assistant. I'm going to use that. And
this stable coin that can send money
24/7, you know, 365, great. I'm using
that. I'm not going to use my pick your,
you know, small little bank that is
pretty [ __ ] So, they're going to face
existential, you know, demise. The large
space will still exist. They'll offer
their own uh solution to that. But I
think we're going to be very comfortable
with using stable coins and then very
comfortable with using DeFi. um whether
that's a lending platform that's trading
and you know some of these protocols you
know like Athena like Pendle like Etheri
obviously I'm all invested in these
things and this is why um we'll do well
in this scenario but again we're just
going to move to this postbaking world
and the banks either adapt or they die
either you adapt to this digital first
native way or you die yes there'll be
some banks for the boomers who still
want to walk down this new ranch like my
mother there'll be that cool whatever
but you know the fun stuff's happening
over here and the money keeps getting
printed and crypto keeps going up but
and we sort of crescendo in sort of the
27 2027 2008 2028 time frame where
you're going to have at least a push
back on hey there's an affordability
crisis and maybe there will be some
negative rhetoric to money printing
towards austerity and they might gain
some support which will spook investors
and like oh [ __ ] is XYZ countries United
states, is China, is Europe, is Japan.
Are they really serious about stopping
the money printing and allowing the
credit to contract and putting out of
business all these overlevered, you
know, businesses and financial
intermediaries? Maybe I should take some
chips off the table, right? Maybe, you
know, Nvidia 20 trillion market cap, um,
with all this accounting nonsense that
they're doing with these deals, maybe
I'm done with that. Uh, I'm going to
exit stage left. And that's when I think
we get like a massive collapse in all
these overlevered markets. And by that
time, maybe the AI sort of effectiveness
and usefulness will start to catch up
with the hype. If you think about 2001
when all these massive fiber optics
companies like Cisco and all them
crashed that they built out this amazing
substrate that created social media in
the next decade, it'll be much faster
with AI. So there'll be a massive crash
in all these hyperscalers and you know
model builders like OpenAI and Anthropic
and then in the wake of it we'll get
whatever useful application that
entrepreneurs create to essentially make
labor super cheap and make knowledge
super cheap and what are we going to be
able to do with that as a human society?
The pressure that you see that's going
to make that happen in 2728 is inflation
due to money printing giving us that
K-shaped uh to tale of two economies.
People get pissed off enough that they
begin speaking up. The speak up then
makes the politicians go, "Huh, maybe we
need to start signaling that we're going
to tighten." And just the hint of that
signal is potentially going to spook the
market and that causes the drop. Yeah, I
mean think about 2021, right? We had at
least in the United States, you had what
10% inflation or whatever it was. Again,
that's not Zimbabwe or Argentina or
Vimar Republic teleph.
And just the act of the Federal Reserve
in December saying, "Hey, we're going to
start a tightening program in three
months time was the thing that that
popped all the bubbles, crypto, stocks,
housing, whatever, right?" And so that's
when we got the the bond market worst
performing bond market since 1812 in the
United States from 2022 to 2025 uh three
or five three year rolling average right
so it doesn't take much when you're a
highly levered economy and the leverage
are going to get even more insane
because people are going to print that
much more money because they believe
that that's the way to win elections.
Uh, and so when somebody stands up and
says, "Hey, maybe we should try
something different." Just the threat of
it actually happening, just factoring in
that probability, even if it might never
happen, is what takes investors to say,
"Guess what? I'm going to exit stage
left and maybe I'm just going to sit in
cash for now."
>> Give me the scale of what you see
happening. Is this um 2008? Is this uh a
you know 80s minor downturn? Is this
1929?
Like what scale are we talking about? I
think we're talking 1929 2000 because
the AI capex buildout is as big as or
maybe I should say 1907 um the railroads
uh when the railro 1907 1903 whenever
the the crash due to the the rubber
barons and the railroad trusts in the
United States. The buildout of AI capex
is as big or bigger than the buildout of
the railroad infrastructure in the 19th
century which was one of the largest if
you look at per percent of GDP capex
buildouts in modern human history. That
is what we're doing right now with AI
hyperscalers whether that's in the
United States or in China. And guess
what? Real world business is a shitty
[ __ ] business to be in as a long-term
investor. And sooner or later investors
will realize, oh [ __ ] I'm investing in
the new age railroad. I don't want to be
the new age railroad. Google's not the
new age railroad. there now, but Google
wasn't the new age road in 2001. They
were the thing that used the cheap the
cheap hyper the cheap fiber optic
connectivity to build their service.
Same with Facebook, same with Amazon,
right? They did well after the capex
spoon. So investors will re re-realize
that situ situation be like, "Oh [ __ ]
I'm investing in new wage railroads. I
don't want to be in that. Let me get out
of that."
>> So uh this is interesting. I've not
heard this before. So basically uh there
are business types that are so capital
expensive but people get hyped about
them. So they invest in them but they're
not going to make their money back ever
maybe or certainly not for a long time.
And so bad riskadjusted return. They
finally realize that they get out and uh
then we realize uhoh like we had a whole
lot of capital tied up in something.
They got spooked. They pulled out
presumably at a loss and now we're
basically sucking liquidity out of the
system. Is that how that would play out?
>> No. I mean, it's Yeah. If if AI is a
thing that powers the American and
Chinese forward economy and literally
all we're doing is building out
essentially a railroad for other awesome
entrepreneurs to build something on top
of. Well, again, the railroads are not
great businesses long term. They're a
natural monopoly, if you want to call it
that. What I'm what I'm trying to figure
out is okay, fair enough. But uh England
would go into a country, the first thing
they would do is build the railroad so
they could extract all of the resources
and England becomes a gigantic empire on
the back of railroads. So I get why it
might not be a good investment for a
small number of people that put a ton of
money in. But overall, it's so
transformative. I'm trying to figure out
why you think this brings like a
full-blown crash like 1903, 1907,
whatever the year was. Yeah, like you
mentioned it because the return on
capital is not there. When you invest
alongside the government, at first it
feels great. Oh, great. I got the
government behind me. They're just going
to like pump my bags, right? People feel
great that the United States government
is now getting into industrial policy.
That they're pumping nuclear, they're
pumping AI, they're pumping
semiconductors.
Well, guess what? Go back and become a
Chinese investor and look at the average
return over the last 20 years who did
really, really well. Yes, China built
all all this amazing infrastructure that
helped the average person upgrade their
standard of living. But as a an investor
on a long-term basis, you made no money
in China, right? You invested inside the
government. You provided your capital.
Chinese government say, "Great. Thank
you for that capital. I'm going to build
airports, roads, apartments, whatever."
On a on a macro basis, you made no money
as an equity investor in China. Now,
they're great for society, bad for
investors. We're going to repeat the
same thing with AI in the United States,
especially AI is great for society,
hopefully bad for individual investors
who hold these these investments too
long because yes, it feels great
investing with the government right now,
but you know, maybe by 2028, not so
great when, you know, Nvidia was up 10x,
but now you're down 90%. Because you
didn't get out in time. So, I think
that's the the lesson. And as you said,
right, these are great investments for
the collective. But it's bad for the
shareholder right now. You know, Trump
and whoever else comes after him are
going to be like, "Yes, we're going to
support the shareholder. We're here to
make sure that the private investor
makes money, but guess what? Trump's a
politician. What if you invest with
Trump on some semiconductor fat um fab
and you want to reduce headcount by 50%
because that's more efficient." But
Trump says, "Huh, that's a district
that's at risk for my this so and so
Republican." No, no, no. You're not
firing those workers. I don't care if
your return on equity the clients I have
an election to win. These people uh have
you know put me in power to make sure
that they have a job. I'm going to make
sure they have a job. And so that's the
risk when you invest alongside the
government. The government has different
goals than you do as a as an investor.
And that's what we're essentially the AI
is transforming into with all these
massive deals uh that the US government
is now supporting whether it's
semiconductors, it's nuclear, it's data
centers, it's permitting for the
building out of electric capacity with
you know natural gas and utilities
whatever right you're investing
alongside the government. It feels
really good right now. It's good for the
stocks right now but if you hold it too
long you're going to be you know best
case at flat more likely you're going to
crash out. And you can look at China and
you can look at this and see it happen
over the last 20 years where you know
the needs of the state came over the
needs of private investors.
>> It always happens this way.
>> That's interesting. That one was not on
my radar. Uh I will definitely have to
spend some more time with that. Um talk
to me about how you approach AI
investing. Obviously right now the stock
market is effectively AI period. Full
stop. End of story. There's nothing
else. Um, and now you're saying that a
huge part of what people are hyped about
is going to get them in trouble. How do
you approach AI?
>> I don't invest in it. I'll I'll wait for
what comes after this buildout of the
hyperscalers after they spent the
hundreds of billions or trillions of
dollars building these data centers,
creating this amazing intelligence.
Okay, what can we do with this
intelligence after the fact? Again, I
don't want to be in the railroad
business.
>> I'm not smart enough to know when to get
off the train. So, let me just not play
the game. I don't own Nvidia. I don't
own Google. I don't own the NASDAQ. I
know crypto. I know they're going to
have to print money to sort of, you
know, amilarate the social pressures and
the social dislocations created by, you
know, knowledge work going to
essentially zero in terms of price for
price for intelligence. I know we don't
have to print more money. So, I'll just
stay in crypto.
Am I gonna have the best return if I
picked Palunteer or Nvidia or whatever
stock over the last two or two years?
No. But I don't know when to get off the
train. I'm not that good. So, I'm just
not going to play the game. I'll wait
till, you know, I want to buy Amazon in
2003 and 2004, not in 1999.
Yep. Uh, that makes a lot of sense. Now,
the conventional wisdom would be that
it's not timing the market, it's time in
the market. Um, so while I get you don't
want to buy March of 1999 at the
absolute peak, um,
you actually are in some ways trying to
time the market in terms of waiting. Is
it because you think the signs will be
so clear on the other side and or you
don't mind missing an opportunity in an
industry that you don't really
understand?
Well, let's say that Nvidia goes let's
say that this the the AI I think it's
news and Nvidia goes from a 5 trillion
market cap to a a 20 trillion market
cap, right? Cuz they're just rock stars.
Jensen's the man signing titties all
over the place with his leather jacket,
right? Um $20 trillion Nvidia. So, you
forex your money if you put if you put
your money in now. But then Nvidia goes
from a 20 trillion company to let's call
it uh let's go just go back down to like
five, right? So it goes down what is
that 80%.
>> Or whatever the math is. Bit shaky on
that right now.
>> Sure.
>> And then let's say that you know there's
a period of lull and then Nvidia goes
back from 5 to 10, right? So I invested
at five, it went to 20, it went back
down to five or even even lower and I've
basically done nothing over the last two
years. and Invida is still a great
company. Or I waited I waited for the
first real shakeout and then I went back
into the the the really good companies
that are still around and I bought their
stock after the crash. Even if they
don't get back to the market cap that
they were when I first invested, I still
make more money
than I would have in the first scenario
on a riskadjusted basis or you see
probabilistically,
right? So you always want to invest
from, you know, from 2 to 10 gets you a
5x return, but from like 10 to 20 is
only 2x return. But I'm taking more risk
because I already intrinsically believe
that it's overvalued, but I feel like I
have no other choice. I have to invest
in AI. Well, just wait. You can make
more money in a shorter period of time
once things have actually crashed out on
the rebound than you can investing in
something when you intrinsically believe
you're buying at the top. And so that's
how I feel about AI. And you can look at
sort of the internet stocks that
survived the the crash like Amazon,
right? Amazon went down something like
95% from 2000 to whatever the low it was
in like 2001 or 2002 and then it's up I
don't know whatever like 30 40 50x
whatever it is from from then until
today. Yes. If you kept your money in
from 1999 until the present, you've made
money. But it took you 30 [ __ ] years.
>> So that's just how I I I look at things.
[snorts]
>> Okay. So the investing that you do do,
is it entirely just I'm in crypto
because I understand it, I pay super
close attention, or do you have a
diversified strategy that you use? Um
how do you approach this moment if you
think that the most popular asset on
planet earth is overvalued?
>> So my view is I believe in money
printing. I think everyone does. Whether
you are Warren Buffett or your crypto
division in the basement, you believe
that whenever there's a problem, there's
going to be money printing. Okay. So, if
I believe in money printing, what is and
I and I don't want to pick stocks. I
want to invest in a broad-based either
equity index or something that um has a
broad appeal like gold or crypto or a
house or whatever, right? I'm not a
stock picker. Yes, stock pickers can
outperform the strategy that I'm talking
about, but I'm not a stock picker. I
just want to invest in the fastest
horse. What has been the fastest horse
from 2008 till the present which has
probably been one of the largest periods
of money printing whether it's US,
China, Japan, Europe in human history,
it's been Bitcoin historically hands
down. So if I want to bet on the fastest
horse, an asset that's in fixed supply
that cannot be debased by the government
that is digitally native. So you could
imagine an AI using Bitcoin or people
because now they're more comfortable
using their phone or the internet to
transact value, they'll prefer Bitcoin
over say gold for example, then I guess
want to own the fastest horse in this
race in this debasement race. It's
Bitcoin. So just buy Bitcoin. That's it.
That's all I got to do. The old the my
whole job at Ma and I tell my employees
this is we do investments to make a
return. I pay you a bonus. I take my
return and I buy more Bitcoin. That's
all I do. All I care about is stacking
more Bitcoin because I believe that in
this debasement scenario, as long as I
can have my pulse on the money printing,
the banking system, and this is why I
study, I read very boring reports about,
you know, bank call reports and bank
balance sheets and I understand, you
know, how the central banks print money
and all the different major
jurisdictions are all that's what I
study because I believe if I get that
right, then all I need to choose is the
right horse. And the right horse
historically speaking is Bitcoin.
Obviously, his history doesn't pretend
to the future. It does advise the
future. I believe that Bitcoin is going
to continue to be the best performing
broad asset. Again, it's not like you
picked Palunteer and it went up 20x over
the last few years. Great. If you can do
that, you're amazing. I'm not. I'm going
to choose Bitcoin and it's going to go
up the most. Whether it's gold or stocks
or houses or bonds, they're all going to
go up. But I Bitcoin is going to go up
the most. And that's how I approach
investing. And so that's why I mostly
focus on liquidity. What is the
expectation of liquidity? How does
reality conform to that expectation? And
that's what informs me when you see me
on, you know, when I write an essay or
I'm on X and I post, oh, I think Bitcoin
is going down to this level or I think
Bitcoin is going up to this level. It
has nothing to do with me reading the
chart of Bitcoin and everything for me
to read, oh, I think the market's
misinterpreting what's happening with
the US banking system or with how China
is printing money or the fiscal
situation in Japan or how is Europe
going to fund this war they want to
fight with Russia with defense spending.
Again, these are all the things I care
about because if I get that right, then
I just have to pick the right asset and
I believe the asset is Bitcoin.
>> So, given all that, do you think Michael
Sailor's strategy is perfect or is there
something that you would do differently?
he because he has access to the
corporate debt markets. I think the
initial strategy is perfect. He's able
to um issue an asset, you know, borrow
dollars that are going to be in infinite
infinite supply and buy something that's
going to be in finance supply. So, I
think as a fundamental level, it is a a
great strategy. Now, the nuance is how
is he able to do that in a price per
share creative way for the micro
strategy stock? Obviously, was easier to
do back when rates were lower, a little
harder to do now. I'm not really sure
how if you are have have a dollar of
capital today if the micro strategy is
the best way to play that or to buy
Bitcoin. I don't really play in the
stock market very much. I'll just stick
with, you know, straight Bitcoin.
>> The thing that I've always found
fascinating about what he's done besides
the just absolute gigantic brass
testicles is uh because I just could not
do a single strategy like that. um is
that he basically pulled all of the like
fancy gambling options that the stock
market has on top of Bitcoin so that
people can do all the fancy derivative
tradings and all that but with Bitcoin
as the underlying asset. Um,
is there
any potential risk there given that on a
long enough timeline, Bitcoin should I
mean, Bitcoin's already going down in
volatility? His strategy requires
volatility. Does he hit some sort of
problem or is it just that people will
slowly stop investing if what they want
is volatility? What does that look like?
So, he'll have a choice at some point.
At some point he'll have to he'll have
to take a lot more risk in the type of
debt and structures that he issues
whether that's coupons or it's the date
at which he needs to repay things and he
either makes it either it's a I'm going
to take this add more leverage to my
capital structure and then I have to
really hope Bitcoin keeps going up or
it's okay I'm going to stop playing this
game and micro strategy just becomes you
know my 1x Bitcoin doesn't go it doesn't
go up or down faster than Bitcoin it
just is Bitcoin And if all you can buy
is a listed stock, that's what you get.
I don't think we're there yet. Um, but
at some point, if he gets big enough,
he'll get to that decision. And then
that's a corporate, you know, that's a
corporate decision what they want to do.
>> It's interesting. What did you think
when Michael Bur folded his hedge fund
and said, "Ah, I don't understand how
people are pricing this market. I'm out
returning the money back to shareholders
or investors."
>> I mean, shorting is hard. It's I don't
do it. It's a It's a mindset. It's a
skill. And if you know, maybe he
mentally just wasn't there to to suffer
the the knocks, right? He he
fundamentally believes AI is a bubble. I
100% agree. Would I ever shorten Nvidia?
Never. But Michael Bur will do it. He's
got that the the mentality for that. I
don't have the mentality for that. And
so maybe he was like, you know, [ __ ] it.
I've already made so much money. I've
got my own family office to manage. I'll
pursue these strategies and I won't have
to care what my LPs think about why
these returns are lackluster until I get
to that situation when Nvidia goes down
95%. Right.
>> Interesting. Okay. The thing that keeps
me up awake at night is China. Um I know
you spent a fair amount of time looking
at China. What is their economy actually
like right now? I hear rumors that I
want to believe and so I absolutely hit
the pause button uh because I know it's
what I want to hear. I hear that Xia is
losing power. I hear that uh their
economy because of the housing bubble is
just in terrible shape. Um what's really
going on at least as far as you can see
from the outside?
>> So I I I haven't been to China since the
mainland since 2019. I've been to Hong
Kong a few times. You know, obviously I
live in Singapore with a large Chinese
diaspora. So you can hear what goes on
in shore. And I think that there's at
some point I'll write an essay about
this. I think that China is a potential
future for a post AI world. Let me
explain that. So, China has been one of
the most aggressive in installing
robots, right? They have the most
installed robot capacity uh in an
industrial sense of any country per
capita in the world. They've been the
most aggressive in terms of AI, right?
There is no sort of like individual
data. The data all belongs to the state.
the state says I want to use this data
and to create these these AI services
whether that's ride hailing it's
ordering your food it's using your palm
to pay for things on WeChat or whatnot
right you go to China right now it it it
might feel like and the tier one cities
I'm not talking about the countryside
I'm talking Beijing Shanghai Shenzhen
Guanjo the four tier one cities in China
they are the future right everything is
seamless everything is clean stuff is
[ __ ] cheap the quality is good And
this is the future. But youth
unemployment might be 40%. You have
>> you graduate from university, you go to
top, you know, very it's very difficult
to get into university in China. Um you
have to be very uh and if you do get
into university, you graduate probably
30% 30 to 40% of you will not have a
job. And so you're literally living at
home, you're doing odd jobs. They call
it the lying flat movement. You have
some like micro apartment in Beijing or
Shenzhen or wherever it is.
But you you live you there's great
entertainment you've got you know we
chat everything's on UBI
>> kind of it's your parents it's the
savings of you know one child policy you
have four you have essentially uh you
two parents you have grandparents and so
you have all these people contributing
to you as this little emperor right so
you're [snorts] just living off of your
extended family
>> and it works for now she has a problem
Maybe he'll have a problem, maybe he
won't. I don't know. Of dissatisfaction
because he doesn't care about
employment. He believes that AI is the
future. Now, when they get to that
future, what will this this Chinese
state's policy be about taking care of
the population? Will they increase the
amount of social services that they
provide? You'd be very surprised to know
that, you know, the amount of social
safety net in China is less than Europe
and the United States, which is why the
savings rate is so high in China. But
she believes that the future is this AI
manufacturing techno country um with
lots basically a homogeneous Hanchinese
population and that's what he is
creating and right now it's no it looks
like it's it's succeeding this might be
the future where again most people don't
have a you know most people go to
university don't have the job that they
went to university for but everything
else is so cheap their services are so
good doesn't really matter. They get by.
Can you have a socially cohesive society
when that happens? Obviously in China
because you have a much more ethnically
homogeneous situation, a culturally
homogeneous situation and scar tissue
from you know the the 60s7s during the
Mao era and then previous with the
waring states and you know the such of
humiliation right Chinese people love
the stability that Xiinping provides
society so all this talk about he's
super unpopular is kind of off the mark
if you because you haven't read Chinese
history to understand that people like
the stability and the control that is
you know right now in China. And so
again, but I also think the miscon
people think, oh, they want to go to
war. Well, what parent wants your only
child to be going to the military? This
is what, you know, Chinese woman was a
very good analyst said like she does not
have the the juice with the average sort
of parent who's going to want their son,
their only son, only child. I'm going to
ship them off to the PLA to go to war
against who? For what reason? when you
know from all you know ways to look at
things there's abundance of food there's
abundance of energy and there's
abundance of services provided to the
people why do you what do you need to go
to war for so I think this whole sort of
western
um fear over this like Chinese army
going to like going into Taiwan or like
going in all these other countries is
sort of misplaced because they don't
understand Chinese history and the
demographic situation that they're in
they haven't been there to see these
gleaming cities of sort of what AI and
robotics can do uh and sort of mobile
apps and ubiquitous data sharing between
the government and big tech right that
is what China is I think that the west
is going to move more towards that
situation than they might want to admit
to themselves at this point but that's
sort of how I see the Chinese situation
right now
okay uh very clear picture now on the
economy the economy easy enough to
bounce back from they have a lot more
room to print money than we do. What's
that feel like?
>> Well, I mean they Chiin Ping said houses
are for a living and not for
speculation. I forgot was 2018 or
whatever it is. And the other message is
common prosperity.
He doesn't care that people lost money
in housing speculation. And as long as
people are not rising up in the streets,
I think he'll continue to pursue this
this policy. the Chinese government has
not stimulated uh as much as the West
has to uh abate this property crisis. He
is stimulating to build more AI to
overcome the semiconductor embargo that
the United States placed on them um to
make sure that their BYD car electric
cars, you know, $2,000 US or whatever it
is that they sell those to [snorts] the
emerging world,
>> right? You go to China, everything that
you get in America is better and cheaper
in China. Uh and so it just is a fact.
Uh, so that's what they've been focused.
That's where their credit has gone.
Whereas the US credit went to go blow up
Muslims in the Middle East. China took
their credit and we're going to build
AI.
I hate everything about that last uh few
sentences there, Arthur. That that was
fantastic. Horrible, but absolutely
fantastic. Uh, okay. That's China in a
nutshell. Give me Japan.
uh watching what they're doing, knowing
that they have a birth rate crisis,
knowing that they're assuing
immigration, knowing that the yen carry
trade is unwinding. Um what do you see
there? Are they in trouble? Are they
going to have some sort of contagion
effect on the rest of the global
markets? I mean, Japan again is a very
wealthy country. They have what three
trillion three or four trillion dollars
of net portfolio assets. And so
eventually what will happen is the yen
will strengthen. the Japanese government
will tell tell the Japanese um people
and companies, bring your yen home,
invest it here in Japan, you know, stop
funding the United States and and Europe
um and their build out of AI. Bring this
money home. Let's build back Japan. I
think the end goes below 100.
And you have robots, right? Yes, Japan
does not like immigration, but they've
got robots. And so the robots will be
there. The population will fall, but
they've made a cultural choice where
they don't care. They're not going to
open up this spot of immigration to
essentially fix that problem with
humans. They'll fix it with robots and
again another culturally and ethically
homogeneous country. And so they'll band
together and uh they'll survive. I spent
a lot of time in Japan. I love Japan. I
don't see there's going to be, you know,
any real issue. There'll be a lot of
inflation to get there. But again,
culturally and ethically homogeneous
society uh that is banding together to
do what the government tells them to do
for right or for wrong. And so again, I
don't see a problem because as a
country, they're very wealthy. And so as
they sell their US and European assets
to bring that home, they will rebuild uh
Japan to be, you know, again, a robot
first society. That'll spell trouble for
the United States and Europe to now need
to fund those ex all that capital
leaving. That just promotes more and
more money printing. the same thing that
we've been talking about um over the
last few hours.
>> Interesting. The um yen carry trade gets
a lot of breathless coverage on X for
sure that it's going to have some sort
of big knock-on effect. Uh it doesn't
sound like you share that concern.
>> Well, it will. I guess think as we had
in it August of 2024 or whatever it was.
Um yeah, when that sort of kind of blew
up, what happens? The Fed, the ECB, they
all have to print money to make sure
that the capital that's leaving because
that carrier trade unwinds doesn't, you
know, destroy their bond and equity
markets. And so we know what happens
when there is financial disturbance, the
Western authorities print money. When
the Japanese Inc. removes their money to
repatriate it to Japan to build back
better in Japan, the West will print
money to plug the hole. So there might
be a bit of sort of market dysfunction
for a while, but it won't take much. The
authorities will say, "Okay, cool. We're
just going to print the money." Yeah,
Japanese investors, we get it. You got
to leave. Yen, it's got to appreciate.
All that's cool, and the Fed's just
going to print the money.
Printing
is uh the eternal answer. It is uh man,
that is so true and so depressing that
that is just the solve for everything.
Ah, okay. Um, very interesting. Now,
you've talked about France, just to hit
my uh another country that I'm very
curious to see how this is all going to
play out. You've talked about France
backing out of the euro that you think
that would be a good idea. Um, what's
why?
>> And the euro is a terrible thing. It
should never have been created, but it
was. Uh, it's a
>> because it centralizes power and stops
competition between the different
currencies or something else.
>> Well, there's 20 27 members of the euro.
Are you [snorts] saying that there is
one monetary policy that's right for 27
different nations, 27 different
cultures, 27 different desires?
>> We have one monetary policy for 50
states
>> and well, it used to be 12, right? There
used to be 12 federal reserve banks at a
different discount rates in every
district. Right? Again, I think that
decentralization is better than
centralization. uh the euro is a
centralized you know monster but again
it's fatally flawed and France is
horribly in debt and very unproductive
with that debt they just spend it at the
government level that's coming home to
roost because the United States and
Japan will no longer fund them and
Germany for that amount so Germany and
Japan are the largest funders of
governments and assets globally they
have combined something like eight or
nine trillion of net portfolio assets a
lot of that
>> to Japan And essentially they made that
money off the back of the United States.
The United States said, "Hey, you host
our military to contain communism, aka
Russia and China. We will let you export
to our market and we'll let you restrict
our companies from going into your
markets." And that essentially gave them
an $8 trillion wealth bucket which they
then bought US stocks, US bonds. And in
the European example, Germany funded
France. And and so as that unwinds, as
everybody tries to go their own way
because the population is like, "Hold on
a minute. We created all this wealth and
I'm still [ __ ] broke. [ __ ] this.
Print the money. Give me healthcare.
Give me whatever it is that I want. Stop
investing abroad. That money leaves
France. Like, oh [ __ ] we have to fund
this government. We don't have any real
wealth to fund it with. Nobody's funding
governments anymore. Everybody's funding
themselves. Well, this Euro thing, you
know, Christine Lagard and the ECB says
we can't print enough money to do things
domestically. [ __ ] you, Christine
Lagard. I'm going to print money and
focus on France first. And that breaks
the euro. As soon as France says I'm
going to change banking laws, restrict
capital from movement across Europe or
um not do what the ECB tells me to do,
whether that's for like you know greater
than 3% of GDP budget deficits, then the
euro and all effect is over and capital
is not flowing freely around the Euro
zone and that's what ends the euro. And
so, you know, France is slowly walking
towards that situation. And you can take
a look at the the liabilities of the
French banking system within the EU
system called the target two imbalance.
It's deteriorated rapidly since 2021.
And eventually, whatever that is, this
will come to a head and the ECB will be
faced with a choice to print money to
save the euro. Uh, and they'll print the
money and and again, it doesn't really
matter. Assets go up, [snorts] money
gets printed. Euro is either there or
it's not there, but capital controls are
introduced. So if you're in France or if
you're in Europe, get out while the
getting out is good. Get your money out
of Europe, put it somewhere else.
All right, man. There's uh there is a
lot of money printing going on, a lot of
uncertainty in the world. Uh through it
all, you have stayed very sanguin. Tell
people what is the one thing that you
have as a core belief that most people
do not that allows you to be very even
keel through what is uh certainly in our
lifetimes completely unprecedented um
instability.
I read books and when you read [snorts]
books you find out that everything that
we're experiencing today yes of course
there's an AI money printing debt
jubilee social discontent
empires on the rise empires on the fall
we've done this all before we've done it
in Rome we've done it in my republic
we've done it in World War II we've done
it in you know pick your ancient
civilization they've all had the same
problems they've all had the same you
know menu of solutions and every time
the politicians shows up to print the
money and every time math and the
compound rate of interest and time
worked against them and every time if
you own gold or certain other assets you
did well is something that you could
keep them from being confiscated from
the state. So as long as you do that and
you don't use leverage you'll be okay
because again time mass and human nature
are on your side.
[snorts]
>> Awesome brother I am grateful for every
chance that we get to spend time
together. Uh thank you so much for
taking the time. Where can people
connect with you online?
>> So on x cryptohaze on substack
cryptohaze as well. I write my monthly
bionthonly uh newsletter and yeah you'll
hear me on programs like yourselves and
others across the uh the interweb.
Awesome. I love it. All right everybody,
if you have not already be sure to
subscribe and until next time, my
friends, be legendary. Take care. Peace.
If you like this conversation, check out
this episode to learn more. In the
1980s, under Reagan's leadership, the US
economy exploded with 12% real GDP
growth in just 18 months. And the man
behind that boom, today's guest,
economist Arthur Lafer. Now with America
sitting on 38 trillion,