Kind: captions
Language: en
everyone's got a lot of debt all the
corporations in America plus the
households are 120% of GDP in debt and
the US government's 100% of GDP in debt
and they have that's the one I want to
talk about so the when I think about the
US government and the amount of debt
that we're carrying and I think about
interest rates being this High it it is
there a conversation I know I'm asking
you to prognosticate here but is there a
conversation going on between the US
government and the FED of like hey get
ready to pull those rates down because
they themselves have all this debt
service that they're going to have to
do yes and I think it's Global I'm I'm
I've just been developing I've written a
lot of that sorry I'm not finish any
sentence I've just cut discovered
something that really quite shocked me
that I've been writing a lot about to
get my thought process in global macro
investor my understanding is
that all all debt that the US has
borrowed
above GDP growth so GDP grows at 2% and
debt growth grows 4% everything
above is only for financing interest
payments since 2009 since the
recession and so that all of that money
is the exact same amount as the size of
the FED balance sheet so they are
issuing
bonds to pay the interest that's so
that's paying your credit card with
another credit
card and then giving it to your dad and
saying well you settle the bill whoa
It's which is the
Fed so I think they completely know
what's going on and and I haven't really
shared this with anybody yet I also
think it's Global and it's
understood and it's all smokeing mirrors
that we never saw what the game was and
I've think I've proven it that this is
all all the central banks did this is
what quantitative easing and step back
is what what am I talking about in this
scrambled nonsense that I'm
saying the US for easy
maths long-term Trend rate of growth is
1.75% but let's call it
2% interest rates have been average
around 2% let's say but easy
deaths and the government is 100% of GDP
in
debt
so so therefore their interest payments
are 2% of the entire GDP which is how
much the economy grows okay put that
over there but you guys in the private
sector you're also 100% of GDP in
debt where does your 2% come from
because GDP is all of the activity in
the economy and that's just gone to the
government sorry guys you're either
going to go Bust or we're going to blow
up and you're going to blow up the
banking system or or we're going to have
to keep eating this negative growth
difference of 2% every year until you
get rid of this debt and we're all
[ __ ] so once you realize that these
two polls are both
100% you realize okay somebody is going
to have to do something to ends up on a
fair balance sheet so when you go to
Japan really interesting because Japan
the households are massive
Savers companies are pretty in debt but
the government's massively in
debt and it's the same but because their
interest rates are lower they can have
more
debt but their economy grows really slow
as
well so you get to a certain point and
then you have to say right it has to go
into the balance sheet the Europeans
have been doing the same the Brits have
been doing the same it's all the same
thing it's like a there was like a it
feels that and this is going to sound
ridiculous it feels like there was a
global
Treaty of which okay this is where we
are we can't the debt has got too big
and nobody can pay the interest payments
without destroying the global
economy so we're just going to have to
pretend we're not um debasing the
currency and call it quantitative easing
and say it's a precise way of injecting
money exactly into the right part of the
financial system and it's like no what
you did doing is getting a credit card a
perfect your credit card and then giving
it to your dad and say you you worry
about this it's not my
problem whoa so I want to see if I'm if
I'm tracking this because not to get
back into Doom porn but this seems
pretty Doom porny uh okay so for people
because the world works it's not Doom
porn because it works time working or
are we just pushing off a
problem okay
so it's making assets go up when they do
it it is meaning that companies don't
default the banking system remains
sound but are we actually able to get
out of out of debt so let me make sure
I'm understanding what you're saying
this is going to be very important okay
so the I know we're using round numbers
but this is very helpful so
worldwide GDP gross domestic product the
the amount of productivity so the
capital that is usable
effectively uh you have two different
people that have debt in that amount
which there's no one to to have real
money to pay the [ __ ] thing
off so if you had one person that was
like okay we're maxed out we're at 2%
but GDP is 2% cool we have the path Just
Be Frugal and and you've got a path out
of this but when you have two people
people that owe the whole amount
effectively you now go into money
Printing and I mean if this works I'm
actually okay with it I know how that's
going to get me lit up but it so the
solution here is okay we have two two
large groups governments private sector
which are all the groups that exist and
each one of them owes the entire
worldwide GDP in
debt you can't both be in that situation
there's no Peter there's no uh you can't
rob a Peter to pay Paul because they're
both in the same
situation so now the only thing left is
printing money devaluing everybody to
get out of the situation but the way in
which we do that by buying things from
uh the private
sector is we're making people that hold
assets wealthier we're increasing the
gap between the rich the poor because
the way that we inject money into the
system only reaches people that own
assets and so we've created this problem
and the only way out is to print money
which is going to increase the the the
jny coefficient for people that know
that phrase where it's like nobody cares
in absolute dollars how much you have
you just hate that your neighbor Timmy
has more than you and so you freak the
[ __ ] out and so it becomes the
differential that becomes the
destabilizing element so what you said
assuming what I just repeated is correct
that sounds
destabilizing and Doom porn so help what
is the other what is the other
outcome social media has already changed
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anything so you can see it directly for
yourself the other outcome is let it all
burn clearly a terrible
idea when you're this far in debt let it
all burn doesn't work anymore right
that's the end of that's the kind of end
of civilization stuff Ultra Doom porn so
your faced with Doom porn and Ultra Doom
porn what are
youing right there is no other way so
this is what people need to
understand what is
GDP GDP is a sum of all the economic
activity that goes on and it's comprised
GDP growth rates are comprised very
simply of the number of people in your
economy is it growing if it's growing
your economy grows because there's more
people generating more activity
generally secondly
is how much productivity does it have I
are those people productive do they make
a lot of stuff for each manh hour and
finally is how fast is debt growing so
when we have an aging
population the number of humans declines
over
time what happens is we stopped
immigration almost everywhere because
every was under pressure for income
because real wages haven't gone up so we
we we lowered the rate of immigration so
that lowers Trend rate of growth aging
population they're less productive and
they spend less so GDP keeps doing this
for decades on end baked in the cake
from from that they become less
productive because they're older people
and a whole bunch of them aren't in the
labor force anymore okay so you're not
very productive you're getting old not
population growing so guess what Bingo
answer debt ding ding ding ding ding we
just took on
debt right it was rational until it's
not it's like it's rational to Super
leverage yourself in a house and house
prices go up and you look like a god
until you get it wrong and you lose
everything so it was rational to take
the debt and this is where we've got to
and then it was the government's got to
the same boat and everyone was just the
debt so now the debt is the debt debt
growth is actually not that high anymore
because we've hit the ceiling
so the only way to solve this this goes
back to our earlier conversation is we
cannot solve population
growth and debt growth is peaked out so
we got the one thing in the middle
called productivity and that takes us
right back to Ai and the robots and
cryptocurrencies internet of things
green energy all of these
things so if you are governments look
what Europe's doing it's interesting and
maybe I'm just inventing an AR
but Europe the US Japan they all know
what they're doing so they're printing
money to cover their bills um and Europe
thinks well Christ we need to get the
bloody economy going here because GDP
growth is what pays our bills and it's
pretty sluggish because everyone's old
here and everyone's in debt and the
banking system is a
mess let's do a double whammy which is
what the US did back in the
40s let's put as much stimulus as we can
from this fake
money and ran it into the green energy
sector and we're going to build a lot of
stuff and we understand a lot of stuff
is going to be wasted Capital but out of
it we're going to do one amazing thing
and the it will happen is out of
this energy costs will
collapse now this is really important
for people to
understand what does technology do
technology drives more productivity out
of a single unit of
energy kind of once you see this thing
it's like that's what humans do with
everything it's like find a way of
getting extracting more for that barrel
of oil because that's what we
use now that barrel of oil has been our
fixed energy source since we replaced
whale oil so we've been using
this and so it's been the constant so
Technology's had to drive all the
productivity in every way it can based
on how much is this so we had to bring
computational power down and everything
down so that one fixed thing which is
the price of oil which on a inflation
adjusted basis has been pretty stable
for the last 70 80
years and if what the US is doing with
its inflation Act and the Europeans are
doing what its green energy and Japan is
doing and China is doing and Australia
is doing and the UK is
doing if they force enough investment
in they will change the energy source of
the world
and because all of these have
exponential downtrends in cost we will
change the energy
coefficient and what happens is
productivity times the lowering of the
cost of energy is an exponential change
for all of us that's how you solve this
there's almost no other way of solving
this problem of slow GDP growth old
populations massive
debts without blowing up everything so
you're going to have to keep doing this
money printing thing which is miserable
because it makes some people rich and
other people
poor and or you can have inflation which
just makes everybody miserable they're
all terrible things but the faster you
can get to changing that productivity
equation the better because it's the
it's the only way there's no there's
simply no other way of solving
it you either Rob from everybody or grow
the
economy with a declining population um
so talk to me about the energy you're
saying saying that so maybe I have uh
just an undereducated view on the green
energy front
so you see the cost of energy coming
down as we invest more and more into the
green energy
side yes
so right now we're in transition where
we're not probably producing enough oil
and we don't have enough energy coming
out
of solar winds GE thermal nuclear all of
that so you know we've got this Market
where Energy prices are high because of
supply issues and other stuff but when
you look at the
trend all of these are growing as a
percentage share of the energy grid
there's still oil and coal are still
massive right but they're coming down
and Europe's really forcing it uh
decarbonization and so we're seeing a
rise of these others they start some of
them subsidized but the subsid go over
time but the really interesting is none
of that is the fact that the cost per
unit of energy keeps coming down and
many of these are now cheaper than
natural gas which was very cheap so it's
like huh okay and we've only just
started where we are in this
exponentiality so my view
is in 20 years time the cost of energy
will be marginal for everybody and
everything much like the cost of water
is marginal for everybody and the cost
of many things we take for granted are
totally
marginal now I don't know if given your
um macro Outlook that this is a
reasonable question to ask you or not
but
um when when you look out at uh the rate
of adoption of green energy do you think
that we're because you just said like
maybe we're not producing enough oil and
gas do you think that we're moving too
rapidly in that direction or do you
think no no no you you make these huge
Investments you have to put regulation
in place force people to do it faster
because these have a a far more
Technology based exponential um okay so
this is the inverse of the GDP
problem do you manage its smooth decline
or do you blow
up here do you transition slowly with
the issues of climate change and the
issues of um cost of energy and all
these other things and the need for
productivity or do you blow up I do you
just take short-term pain to get to the
promised land
faster again it's probably a rational
economic decision to do that so maybe or
maybe not Energy prices rise I'm not
entirely sure will copper prices rise
probably will some prices rise probably
can that be offset by Ai and other
deflationary pressures probably you know
it's not baked in the cake people always
conflate some commodity going up in
price to see inflation's back and it's
all going to run rampant again it's very
rare that that happens we've just had it
now so it's going to be an everybody's
head is the boogie monster but they're
looking they're usually looking at the
wrong boogie monster
so
so it's going to be a balancing act and
maybe they get it right maybe they get
it wrong but I think they're all pretty
most of these governments are pretty
sure that they want to do it as fast as
they
can and so does that mean that they
would if by their actions they cause
high energy prices for 5
years would they give out stimulus
handouts to
people probably is that not the best way
to say listen if you are getting hurt by
this and guess what that's exactly what
Europe's just done last year it was
giving handouts to people to say look we
understand your electricity bill is high
and it's hard for you so we'll we'll
help you um now did that drive inflation
to some extent
maybe but maybe not I mean it was just
going for the electricity bill you
didn't give people extra money in their
pocket so it's complicated as everything
is but I don't know I'm kind of in a I'm
a fan of if you're going to go for
positive change do it as fast as
possible if you're going to go to
negative change and you can glide path
take the Glide
path very interesting so um and I'm not
a fan I'm not a fan of conative easing
or any of that stuff I'm just like this
evil this evil
which one do you want to
choose yeah it is a very interesting
question so when you were talking I was
in in full acknowledgement of the human
mind goes to the
problems
um in the context we're in now and I I
am not a geopolitical thinker and so I
want to be very clear about that I want
people to understand that I am I am
seeking to uh increase the island of my
knowledge
um when I when I look at as somebody
some who
has studied from uh how do evil people
get control perspective studied what
Hitler did in World War II he was very
much like not seeing the increase in
productivity path out of things and so
he's like well for Germany to get out
from under this terrible weight we have
to start land grabbing and when I see
Russia that is the population part of
the
equation right when you're taking over
countries what you're actually doing is
getting their people in resources so
you're solving for your own population
productivity more resources but you're
actually getting the people part of the
GDP equation that's interesting so um
how do you
contextualize Russia and the Ukraine in
this moment where you've got the private
sector the governments are completely
indebted you're at a position where
birth rates are declining certainly in
the Western World very rapidly if
demographics are Destiny and we are just
in a a [ __ ] show
demographically does that when you were
talking I started looking at the Russia
Ukraine thing in a totally different
light and I'm very much somebody on the
outside of that I'm not close to it at
all uh but I'm very curious if that sort
of recontextualization of oh this is
somebody who's like well I know how to
solve this problem quite rapidly uh or
am I looking at it
wrong
um I don't like
geopolitics
because so much of it is stuff that we
don't know so there's so much
conjecture about almost everything in
geopolitics apart from the fact that
Russian troops are in Ukraine and
they're fighting each
other whose motivations of what for what
and how I don't even know but one thing
it did do to go back to what we were
talking about it accelerated Europe
everyone thought well the Europeans
going to back away from their green
energy policy now aren't they the
Europeans went no [ __ ] you we're now
super motivated to get this done as fast
as possible because we do not want to be
beholden to Russia or the United States
or anybody else for that matter energy
Independence is an incredible thing
right it's one of the powers that
superpowers that the United States has
has energy
Independence all other energy on Earth
could go and the US has oil and gas and
more of it than pretty much anybody else
in the world
so I so it also if you think about the
history of war and how much has been
fought over the Middle East not because
we want some sand or the few
people because we want the energy and we
want to control it because the energy is
the thing can't remember what it was
called called in in um in Dune but
whatever the thing is Right humans want
to control the thing whether it was
whale oil or this or whatever the thing
spice right in spice that's right spice
so that's what that's what the US
controls and the Russia controls a bunch
of it and we want to change that
equation and the Europeans are in the
Middle with with not enough of it and
it's in everybody's interest for
everybody to walk away from this one
commod ruling the
world because it's not the commodity we
care about it's the energy we care
about well said talk to me about China
um seemed for a while like things were
getting pretty dicey you had people if
it can be believed people protesting
like crazy uh governments making funds
unavailable to people um I saw that
happen in Cypress up close given that
Lisa's family is from Cyprus
[Music]
um what what's the status of things
uh a China's economy was slowing down
and they locked themselves into a really
brutal lockdown for the pandemic and
even the Chinese people who quite
compliant you know Asian populations
tend to be more Society compliant than
us who kind of like saying [ __ ] you to
everybody if it doesn't suit their
interest so you know Europeans are quite
Society minded as well generally
speaking um
so the Chinese ask too much of their
people for whatever reason I don't know
whether it was actually for a real
reason in the end or whether it's for
autocratic reasons or whatever anyway
economic growth falls off a cliff uh
people are angry growth is weakening
property markets a mess that's where
that's one of the big wealth gates for
everybody in China That's where people
make money um people in the streets and
people are angry the Chinese have kind
of interesting enough started
stimulating and then you know they
locked up all these entrepreneurs and
threw them in prison or threw them down
a well um they're now like well we've
decided we need to be growing up five
and a half percent a year and we want
entrepreneurs back in you know and they
reopened Hong Kong for cryptocurrency so
it feels like whatever they were
doing they've got what they wanted
whether it was because she want to get
control again the Game of Thrones is not
a game that I I like to get involved in
and because everybody speculates we
don't know all I know Chinese are
stimulating they want the economy to
grow and um they seem to want to be an
entrepreneur I don't know why you choose
to be an entrepreneur in China because
you know the next cycle around you get
shot and replaced by the next one but
somebody's going to do it that's
interesting I I didn't know that they
had reopened back up sorry go ahead yeah
so again think about mentality we're at
the bottom this is the worst markets
forward looking I Chinese stock markets
up like 50% already
and they're driving parts of the global
cycle so when you read it in the news
headlines it's usually too
late no doubt no I didn't realize that
they had opened um uh Hong Kong back up
for crypto what do you think about the
General State of crypto is this uh
crypto like I I've have heard um people
now it's AI has become like the new hot
girl and all that energy that was in
cryptos future it's going to change
everything web 3 oh my God uh is now
like no that's whatever AI is where it's
at um how do you see crypto where's this
going is this a temporary downturn that
we boom back up literally nothing's
changed since I last came to talk to
about it I said it bottom then and I
still think it's bottomed six months
later it's bottomed and some of these
are up 100% plus from the low the global
liquidity cycle the forward-looking
indicators had turned up a while ago
so and the business cycle will get
through the trough and through the other
side so cryto is going up now does it go
up straight does it have some
volatility I don't know but it seems
pretty good so far just seems to go up
do a bit sideways go up do a bit of
sideways at some point there'll be a bit
of a a reasonable down everyone like oh
my God and then it'll keep going up so
you know there was no free money you
take risk with crypto I'm super
comfortable all I speak to is giant
Brands giant people you know just spoke
to had a great interview uh on real
Vision with the two of the heads of
institutional business at coinbase what
they're building out the kind of people
they're speaking to I'm seeing on the
other side you know everybody from car
companies to sports teams to music
companies all looking at the space we're
looking at you know what we're building
at real Vision what you're building what
is going on how the vibrant the
community is in a bare Market um I'm
seeing consolidation I'm seeing the
regulatory fight
happening um we're seeing court cases
finally going through like the the
grayscale and the Ripple case where
people eventually get the SEC into a
place where it is acceptable but I
always said this they will always push
too far every job is to push back and
they'll they'll get somewhere in the
middle if you like that clip check out
the full powerful episode here and I'll
see you there