Kind: captions
Language: en
the crisis kicks off the money printing
continues and I assume when you think
about money Printing and analogy to use
would be a rubber band that's being
pulled farther and farther back and
every failure releases tension because
we those people they lose and we don't
have to make them whole and there's no
more printing there's it's not
inflationary and every time we print
more there's more tension more attention
more attention um is that how you look
at that you're waiting for the Domino
the housing Mark or sorry the regional
banking goes uh the the FED decides
they're going to bail them out we pour a
ton of money into this system uh and
you're just waiting for that moment
where there's too much tension like is
do you see a um when you say a big
disturbance happens do we just load up
more tension on the rubber band but
we're still who knows 10 20 years away
from a real crisis or do you think it
has to break and that's why we go into
the a great depression style um problem
so I think we've moved the crisis
upstairs to the the the sovereign debt
markets and so this crisis will
be the buyers
refuse to buy long-end bonds of a
particular government because we're all
every government's in the same sort of
position different things can set it off
but again Global debt to GDP is
360% why on Earth would I as an investor
own a long-end bond when I know that
there's nobody getting
born and there's not going to be an
energy productivity miracle there's just
no way for me to get paid back in a real
dollar a real Yen a real
renb uh at a rate that's affordable for
the government for me to make money over
time so then why own these bonds I'm
perfectly happy to sit in like overnight
you know fed deposits or um short end
bonds of a particular company because I
know I can just sell those pretty
quickly and not suffer any sort of
capital loss but if I'm forced to sell a
10-year treasury or or you know a 10year
Chinese Bond or a Japanese Government
Bond 10 30 20 years because rates have
gone up I'm going to suffer a massive
Capital loss so then why even own that
stuff and if nobody wants to own the
long end on the Government Bond
Market the rates will go up a lot and
then the response is some form of either
closing down the banking system so
making sure that depositors cannot f
to other asset classes and then forcing
deposits to buy um government bonds uh
this is called fiscal dominance is is a
theory or it's called the next thing is
called yield curve control where the the
Central Bank says okay we know you all
want to leave this market so we're going
to fix the price at a particular level
whatever is politically expedient
whatever is Affordable for the
government we're going to Telegraph this
and we're going to expand our balance
sheet INF ly to make sure that the Rat
St out that level so in Japan the bank
of Japan is doing this been doing this
for almost a decade where they say they
determine a band of the yield and they
say if the if the yield gets um to a
certain level we will go into the market
and buy bonds by printing money to make
sure the yields don't go up the United
States did this back in the late 40s and
early 50s to pay back the the debt from
World War II by capping long end
treasury rates 10 year rates at 10 2 and
a half% the Fed was expand its balance
sheet to make sure the rate is that
level so if we get a Revolt from large
asset holders who say I don't want to
own these long bonds because I know
mathematically there's no way for me to
make money um in a real basis I would
rather own stocks I would rather own
crypto I'd rather own oil field I'd
rather own gold whatever it is then the
only response is to move to the end game
which is okay we fix the yield and we
just print money until uh as long as
it's it's required to keep the yield at
that level and once you've gone to yield
curve control in or something similar in
in the US um it's already in Japan um
something might happen similarly in
China and other places then the question
is okay can the authorities keep the
money inside their banking systems or
are there ways for us the people to get
our money outside of the system so that
on a real basis we're able to maintain
our energy purchasing power and that
becomes the real fulcrum of the crisis
because because if if all the money is
sitting in the banking system and it
can't leave which has been able to do
prior to bitcoin and some of these other
um blockchain based cryptocurrencies
then they just tax us all and over time
uh the government basically earns itself
out of the of the situation yes there's
High inflation um depending on how your
company your country is structured maybe
it's hyperinflation maybe it's just you
know High inflation and some governments
fall some governments stay the same but
at the end of the day most The
Government Can Survive but if we the
people can get our money into a month a
type of money or a type of asset that's
outside of the government control
outside of the banking system then the
system collapses well that is uh that is
a very unnerving thing said very calmly
Mr Hayes uh so okay how give me give me
like the odds here so if if Japan has
been doing yield curve control for a
while uh for a decade you said um I've
been to Japan it's amazing so is there
really a problem because it sounds bad
but having experience if if my time in
Tokyo is what yield curve control looks
like it's not so bad so what am I
missing why is that something to be very
wary of so I think people have mistaken
the fact that we've been able to print
so much money and not have an adverse
effect they're not looking at why what
has changed in the global economy over
the past um let's call it 20 years and
what has changed is China China joined
the WTO in 2000 and essentially became
the workshop of the world and so you've
lowered the cost of goods across every
single sector because of China and
they're willing to number one degrade
their environment to capture market
share and a lot of the dirty processings
so rare Earths um different types of
commodity
refining um that the west and Japan are
not willing to do um they have had a
growth of young people willing to go
into factory work and do these things at
a very cheap wage um and that is it we
don't have China anymore China number
one is dying just like everybody else
their population is like forecast to be
half of what it is by the you know by
the end of the century China the
population in China has also decided
that they do not want to live in a small
field Factory and they have told their
government to prioritize um protecting
the environment which basically means
that China does no longer want to
essentially pollute itself so that
America Western Europe and you know
Japan and Korea don't have to right so
we're going to make these things more
expensive um and so there is no more big
country that's going to join and
essentially degrade themselves so that
the rest of the world the rest of the
very developed and Rich world can enjoy
a higher standard of living all the
while they're printing a bunch of money
so there is no more that's this not
going to happen again and so I think
that's what people miss about why we
were able to print all this money over
the last 20 years and not really have
any sort of adverse effects um that's
just not going to happen
anymore well so I'll ask maybe the UNC
question but the obvious question so
India is still growing um is there
because the the thing that I'm dancing
around is being right about the concepts
but getting the timing wrong is the same
is being wrong and so what I don't want
to do is um get myself all worked up
that you know the sky falling this is
all going to be bad uh I need to get my
money out of the banking system I don't
want the government to close the exits I
don't want them to force me to buy
things uh I want to maintain my
financial autonomy I want to maintain my
freedom I want to come and go where I
want uh and certainly there are many
many many horror stories throughout time
of governments doing that um and if
there is a way to keep this party going
again I'll just use Japan as an example
you know my whole life I've heard Japan
is in stag flation but again being in
Japan it's it's beautiful and lovely and
there are wonderful restaurants and
exceptional people and for me as a
Storyteller some of my favorite
storytelling comes out of Japan like
there just doesn't seem to be look I've
never lived there but there doesn't seem
to be downsides it's not like I'm like
oh my God I would never want to be in
Japan I'm like this [ __ ] place is
amazing um so I hear your point about
China and China the just booming growth
and the amount of things that we were
all able to reap the benefits of is as
the you know developed World a little
bit ahead of them uh we were able to
reap the benefits of their transition
period which is just astonishing to have
been cognizant while it was happening
was really something magnificent and
look I was far removed but still had a
sense of how extraordinary their growth
was um are we not poised to see the same
thing in India so on the Japan thing
because this is called the the
Widowmaker trade the oh my God Japan's
dying oh my God Deb to GDP just only
goes in one direction oh my God the
boj's balance sheet is is going through
the roof so Japan is essentially just
like China Japan is a more successful
version of China they both have run the
exact same industrial Playbook Japan had
two nuclear bombs dropped on it by the
United States um
and the US essentially baited a colony
for a bit uh and so what did Japan do
they reoriented reoriented themselves to
making [ __ ] for America and essentially
the Japanese government and the large
companies made essentially a PCT which
said okay we're going to give all the
people jobs for life you work really
hard for the nation of Japan to make
things to you know the grow the
prosperity of the country and but you're
not going to keep all of the
productivity gains right that difference
uh is going to go essentially to these
large companies and they're going to
reinvest that profit back into the
United States and Western Europe
essentially so if you look at Japan as a
country they're one of the richest
countries in the world on a net
investment P um portfolio perspective
they've got like one or two trillion
dollars worth of assets what are those
assets the those are that's essentially
the productivity gains of their people
over you know since World War II so
Japan has this buffer of money that can
cushion themselves they owe the money to
themselves it's not as if um the the
money is owed to you know the the
foreigners out there you really can't
buy Japanese debt in in large quantities
so yes ja Japan is a unique situation
where number one they they have a lot of
assets um number two their banking
system is relatively closed right it's
not as if Saudi Arabia can go in there
and buy a billion you know a trillion
dollars with the Japanese bonds they
just won't let them do it right because
they don't want the the the situation
that the United States is in where
essentially Capital holders determine
the the policy of of the nation and and
number three Japan has been you know
very fortunate to use the labor of China
and Southeast Asia to reduce the cost of
Labor if you look at the major Japanese
trading houses and manufacturers and if
you go around southeast Asia you see
there's a lot of Japanese companies who
have factories in all these countries
employing all this labor that's very
cheap versus the very expensive J labor
in in Japan Japan's a very special case
but again all that's running out because
the countries that did not benefit from
the last 80 years are like well why am I
the the donkey for Japan to make a lot
of money or the United States where
Europe I want High wages I want to live
in the Hollywood movie I want more
energy consumption I'm not going to sell
my resources to these other countries um
cheaply anymore and so inflation in
Japan is actually for the first time
Rising it's at I don't know four or
five% highs in 40 years the isahi for
the first time in 30 years rais beer
prices right so the problem is when
inflation shows up and so when you
exhaust a cheap labor when you exhaust a
cheap energy when you sell on all of
your trillions of dollars of assets and
inflation remains in a world where the
United States is not able to dictate the
flows of energy
unilaterally then your special
circumstance you know since the collapse
of your Equity market and property
Market since the late 80s is no longer
valid and so I think people are making a
mistake by not understanding why Japan
is successful to say oh if Japan did it
they they can be successful let's take a
look at the United States the United
States owes the world something around
$1 to2 trillion do the United United
States runs a current account deficit
and a budget deficit um so it's the
completely different financial situation
than Japan the United States foreigners
own a lot of the debt the United States
relies on the foreigners to buy the debt
to fund itself at affordable levels it's
a completely opposite situation of Japan
so saying that Japan did it and it's
okay it can work in the United States
misses the differences fundamentally
between
the two um the two situations now want
to like you know don't freak out and go
you know move all your money into gold
or what or something and you know suffer
some Capital losses my you know how I
structure my portfolio is to benefit
from both situations I have high nominal
rates right now right I know on a real
basis I'm losing money but thankfully um
as a percentage of my uh my net worth
the amount of money I consume on food
and energy is very low so even if I have
a 5% rate and it's still a negative real
gate on the amount of capital that I
have I'm still making more than I need
to sustain myself so keep some money in
cash put it in a money market fund
you're making five six% and take
whatever you can afford a small amount
and put it in something that's going to
benefit if money printing resumes that
could be Nvidia stock it could be
Bitcoin it could be um productive
Farmland whatever you want to have a
barb you want to make sure that in the
event that the the money starts getting
printed I can easily move on out of my
short-term you know money market fund
government bonds into the risky stuff
for the fixed Supply and zoom up that
way or if nothing happens I'm still
earning money I'm stting earning yield
over here on my my uh my treasuries or
whatever short-term government bonds I
can fund some of my my expenses and I I
run a positive carry trade meaning I've
structured my portfolio such that if
[ __ ] really [ __ ] up I'm going to make
so much money on on the on in that
situation but as long as not it's very
calm I'm still covering day-to-day
expenses and so you want to have a a an
optionality portfolio that costs you
little to nothing if not makes you money
over time if you're able to construct
that then again timing doesn't matter
because you're not paying for time if
you're selling a bunch of stuff and
you've got everything in the risky
bucket yes I would agree with you then
you're like well when is it going to
happen it didn't happen last month and
I'm down I'm down such percent or I
needed to buy you know go to the
hospital because I had an e injury and I
had to sell down some of my this
portfolio that I'm like betting on this
collapse and that was financially
ruinous right so it's all about trying
to construct this portfolio where the
cost of waiting is zero to making money
versus you know it's costing me money
the longer this takes to happen Okay so
I want to go a little bit deeper um into
exactly how you structure your portfolio
from so I heard the we're going to do a
barbell strategy we want to make sure
that we can move one way or the other
depending on what's going on um as
something starts to pop off but you said
uh risky stuff with a fixed Supply so
hiding in that are are what I'll call
two philosophical principles risky stuff
I'm guessing you mean High volatility
and so explaining to people why
volatility is a feature and not a bug I
think may be surprising to somebody and
then why a fixed
Supply so again we want to make the we
want to basically participate in the
upside to the maximum we can um right so
we want the high volatile stuff we want
the crypto we want the the tech stocks
right um but on when stuff doesn't
happen then we want our breaks so like a
car right you want to go as fast as you
can on the straightaway when you are
racing and you want the best brakes
possible so you can take those corners
and and not get wrecked right so the
braks are cash short-term cash
instruments that are earning yield
that's that's paying you your grocery
bill you're you're filling up your car
tank whatever it is that you need to do
you want to be making sure you can cover
those expenses with some cash in the
bank or in a money market fund or
something like that and hire a yielding
instrument so you can pay some of those
expenses so that when shit's ready to go
oh I'm over here I'm ready to make as
much money as possible when they're
printing money I'm not in this safe
boring thing because this situ doesn't
happen there's not very many
straightaways right I need to make as
much money as I can when the making
money is good and then put the brakes
back on right as if you were a race car
driver that's kind of how I want to
think about it okay so knowing that
these trades are excruciatingly
difficult to pull off so for people that
don't know you you manage your own money
you've often said you find it
intellectually stimulating it's fun uh I
will ask the question that better be on
everybody's mind so lifetime are you up
or down up okay good so we know at at
least your strategy has worked once uh
that's very valuable so how do we make
the volatility work for us because the
obviously the best advice and and people
laugh at this but I think they laugh at
this at their own Peril because they
don't understand why it's become the
phrase Buy Low sell high now it got
repeated so many times that it became
funny because people think it's so
self-evident but in reality it's the
thing people never do they almost always
buy high and sell low they buy High
because it's hype it's moving they
finally pay attention they ape in and
then it starts trending down they panic
and they sell as it's lower than when
they bought it so um let's assume that
they're going to be uh emotionally
cognizant they're going to stay calm
they're not going to make that mistake
but how do they know which of the risky
assets to do do how do they know how to
do volatility
well um it's personal preference right
like obviously I'm in the crypto sphere
I love crypto I understand it um the
volatility doesn't scare me for some
people they might you know that that's
that's that's too much for me maybe I'm
going to stick with NASDAQ tech stocks I
understand that I get you know I
understand why this particular company
could do well you know I'm going to jump
on the AI Tech it doesn't really matter
what it is right but looking at whatever
it is that you think is going to be your
upside winner look at so hold on it it
not only does it matter what it is it's
the only thing that matters because if
they bet wrong they either make no money
or God forbid they lose a lot of money
so the most important thing is not the
upside it's the break the break is I own
right now the break is I own cash and a
five and a half six% yielding money Mar
or wherever you are in the world
whatever that is like shortterm
government that's the break that's
paying your bills that's you know paying
your rent that's earning you a little
bit of income right because at the end
of the day you want this portfolio to
make you money while you're wait so if
to turn that into to turn it into a
principle you're saying basically you're
going to move into high volatility
something that you have some reason to
believe is going to do well but you
should not be putting more into the high
volatility than you can see go to
absolutely zero you should have enough
in the break category that even if all
of that goes to zero that you're still
going to be able to eat and fill your
tank up exactly because you're going to
know when to move into highall stuff fed
Market panics everything's getting
dumped fed comes in overnight says we
are backstopping the financial system
and we've created some alphabet letters
that essentially mean print money right
and it could be you know pick your
different Central Bank and wherever
you're from then you know okay cash is
trash I was earning 6% overnight now
it's zero I'm out of this and guess what
you're not going to suffer any Capital
loss versus if I were in some other type
of instrument you need a liquid or
whatever right so I can get out of this
thing very easily and boom I maybe I had
some already in my high volatility
bucket but now I'm I'm fully out that
high volatility bucket because I no
longer earning anything on the cash so
there's no why would I have anything in
the other bucket I wouldn't because I
I'm getting zero I'm getting nothing so
I have to go into that because I have to
find something that's going to maintain
its purchasing power once the when the
denominator of Fiat money expands
infinitely so you'll know it'll be it's
not as if like the S&P you know went up
three times the instant that um Ben beri
unveiled quantitative easing in 20 in
March 2009 it took many many many years
it's not like it's you have time this
isn't like oh [ __ ] I gotta go you know
sell this buy this and I miss it by a
day and therefore goes my return for the
next year no you're going to have time
um it'll be very clearly communicated
it's just are you listening to what
they're
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today okay so that makes investing sound
easier than I have uh experienced it to
be so the way again saying very clearly
nobody should take investing advice from
me and I mean nobody I am still
grappling to understand this stuff but
when people do ask me hey Tom with your
limit an understanding of investing what
do you advise that I do my thing is
always uh you're going to lose if you
try to trade so don't try to trade
meaning actively like I'm in there oh I
got just right and I'm trading in the
morning and in the afternoon like you're
going to lose guaranteed uh what I would
tell them to do is pick the most
Diversified bundle of whatever whatever
uh so whether that's the S&P or you said
AI grow stocks I don't know if You'
consider that high volatility uh but
something that where it spreads your
risk risk that is commensurate with the
amount of knowledge that you have if you
don't have a lot of knowledge in it then
I would go very Broad and I would be
very careful and I'd be trying to get as
close to rayo's all weather fund as
humanly possible something that's going
to perform four or five% no matter what
happens um that's when you're ignorant
like me that is the the thing that I
would push people towards um do you
agree with that when people don't know
and do you agree if you're going to get
into something that's high volatility
you should only do it in an area that
you understand I think you need to
Define your time span I think a lot of
people think they're like wow I see this
person on TV or Tik Tok or Instagram or
whatever and they went from Zero to Hero
and you know five trading days and made
all this money so I should do the same
thing like if you're not willing to
dedicate 247 of Your Life Energy looking
at a screen then you should not be
trading on on short time frames so what
does that mean don't use leverage um
don't open up the the the the the
options trading account or the Futures
Trading account if you're not willing to
put in the work to sit there and trade
now obviously I have a large ownership
in a Futures exchange I'm not saying
don't use my product I'm saying if you
are going to be a day trader then be a
day trader and dedicate yourself to
doing it don't work a day job think
you're going to come home at night for
two hours and just trade yourself into
you know quitting your job right it's
it's a profession it's a dedication you
can do it but be willing to put in the
work to do it
if you're not willing to put in the work
to do it then you know broad-based
indices you know different things
whatever you understand collectively
okay I want to own stocks I don't really
know what okay well my country has a
particular Index right everyone's gonna
be a lot of people going to be on this
buying the same thing it's a question of
taking that index and combining it with
the breaks that's the the point to be
able to both participate in the general
rise in in asset prices but not care
when it happens and if you can construct
that port pfolio then you can sit at
home and you know not worry about
it not worry about it meaning you need
to have patience for when the moment is
actually right and if you've deployed
Capital into long-term things uh you're
not going to be able to take advantage
of the moment when it comes or if youve
if you've basically thought you're going
to day trade yourself out of this and
you're staring at the screen all day and
you're not willing to put in the work to
actually be a good day trader then youve
you've squandered your opportunity
versus saying okay I don't know when the
timing is going to be but I know that I
have thank
to these relatively higher interest
rates I have the ability to both earn
some income on my excess cash and play a
small amount of cash into highly what I
what I believe is highly volatile things
whatever that is for you and and that
can allow you to sit there and patiently
wait for the inevitable math to catch up
with the bad
politics okay so let's run through what
you said is your uh likely scenario that
3 to six months something bad is going
to happen uh it's going to cause a ton
of money printing but I'm guessing in
the money printing is when you're saying
we're going to have this sort of
jubilant moment uh where everybody is
feeling flush and um I forget the you
said it's G to be some huge moment I I
forget how big you were saying but it's
really going to be wonderful and then
it's all going to lead to uh something
like the Great Depression um how do we
ride that wave and that crash so that we
do well in both moments when the money
printing starts we want to go to High
volatility that's the play yeah so my my
my sort of mental mind cap now is I
think the the biggest Trend in so you
always want to own the new tech thing in
in the in the Bunty bing bull market so
if you look over history the new tech
thing it's been railroads it's been
radios it's been computers it's been the
internet right every single money
printing cycle has a new technology
that's going to fundamentally alter this
modern civilization that we've had since
the Industrial Revolution in the mid
19th century and therefore we all need
to be in that because the way we exist
as humans is going to fundamentally
change and yes that's true in a longer
term
perspective however there's a Mania that
happens so the mania this time around is
going to be AI right chat GPT has been
the fastest growing technology adoption
ever in human history went from I don't
know Z to 100 million years or in
however many days it was it's fastest
ever
uh so we are all in on AI and you can
look at Nvidia and some of these other
you know AI related stocks and they do
not give two [ __ ] about this banking
crisis about the the debt overhang the
population issues they're going straight
to the roof right because everyone's
like okay I know AI on a on a long-term
basis fast forward today is going to
completely change what it means to be
human what the human economy is or isn't
and I want to own the next Google
Facebook Amazon Alibaba bite dance right
I want to be in that company and so I'm
going to start trying to find anything
that's related to Ai and pumping money
into it so on one hand we have the most
amount of money that's ever going to be
printed in human history to try to save
the global Keynesian bond market of all
these governments and we have the newest
technology that has the fastest adoption
in ever in history of a technology we're
going to combine those two we're going
to get the biggest Tech boom Mania that
we've ever seen and it's going to be
predicated on anything related to Ai and
artificial intelligence so for me
personally I have a portion of my
portfolio that is predicated on AI I
actually am one of the largest
shareholders in one of the largest sexy
manufacturers in the US that has robotic
sex dolls um and so I did not see that
coming um the I think we actually plan
on going public at some point so that
stock that company I think is do very
well in this boom on the crypto side of
things I've been making the case that um
artificial intelligent economic agents
inherently need decentralization and
therefore they should be using Bitcoin
for money they should be using ethereum
for um smart contracts and governance
and Dows and they should be using
filecoin for decentralized storage I own
all three whether it's mining companies
and filecoin fcoin itself lots of
ethereum I have my family office we're
investing in decentralized architecture
technology that's going to power the
growth and decentralization in the
future and obviously have you know I
have a lot of Bitcoin right so I'm all
in on number one AI in the traditional
sense AI Robotics and I'm all in on the
intersection of AI and crypto on the
technology front because this is the
Mania that is going to Captivate
investors to take that money and to
funnel it somewhere because they're not
going to be buying companies like
General Motors I mean maybe it'll go up
but that's not going to be where the the
Zeitgeist of a world is it's what is AI
the governments are printing all this
money it's got to go somewhere it's
going to go predominantly in my opinion
to AI listed companies Venture Capital
funds doing AI investment and so it's
going to be absolutely insane because
we're combining the most money amount of
money printed in human history with the
most destructive piece of technology to
what it is it means to actually be human
and interact in this universe and so
it's going to create fantasies of growth
that will never happen in the time frame
that they say it is but we're going to
believe it as a collective investment
public which is going to drive that so
that's my super
volatile um segment that I want to
participate in um and then on sort of
the the the boring side I will continue
to move money from the high interest
earning you know money market funds and
stuff as rates start to come down but
I'm not going to do it beforehand I'm
gonna wait for them to tell me uh and
usually unfortunately before right after
the fed or any other Central Bank is
printing money there's usually some sort
of financial crash because the reason
they're printing money is something bad
happened so it's not as if they start
printing money and things just keep
going up further things usually went
down a lot something happened they say
oh [ __ ] we need to print money they
print the money then things go they they
retake that level and then they go
higher than that so it's a mistake to
think that just because you're investing
now yes if you have long enough time
frame you should make money if they
print enough of it however it's the p is
very path dependent so instead of trying
to time the market just wait for them to
tell you about it they're G to tell you
but why not just earn 6% of your money
market fund just chilling so I'm not
trying to time when it's going to happen
I have a mental model I'm getting
prepared I'm making sure that we're
ready to make investments and
identifying the things that I think are
going to do very well from a macro
perspective and a thematic perspective
in terms of where I think the investment
public is going going to focus on but I
cannot predict the timing and nor do I
want to lose money because I try to be
too cute and predict when you know
something's going to happen where
exactly it's going to happen in the
financial
system and so when you say that they're
going to tell you meaning we're going to
print money we're raising rates we're
lowering rates whatever the case may be
yeah they're gonna they're gonna come
out say oh because something happened in
the financial system we have now lower
rates to this we've introduced that
program uh whatever it is right it's
very transparent regardless of whether
it's the Federal Reserve it's the pboc
it's the European Central Bank it's the
bank of Japan Bank of England they're
going to tell you exactly what it is
because what do they want you to do the
Market's already fallen they want you
the investing public to gain confidence
to go and buy stuff so they need be very
clear about what they're doing uh and
the question is whether or not you
believe them or you're just going to say
no no no I'm just going to stay in this
very very safe thing it's fine but on on
a a real basis you're probably not going
to make the money you would like to make
before we get you know Judgment Day when
things go down a
lot okay so if we know that the market
prices in the things that it already
knows um you have to be betting against
the consensus and being right so what
would a well-intentioned person who
disagrees with you say to what you're
saying right now because if it really
was that easy everybody watching this
video would just do that and they'd make
out like Bandits but of course it won't
play out like that the consensus says
that we're going to have a a a soft
Landing that um these these few men
mostly men very few women have somehow
Divine the business cycle and thus can
print just enough money and raise rates
just enough and the inflation rate of
the world is going to come down just to
their level of 2% and the employment is
going to stay the same and we're just
going to go along and be nice and happy
right that's the consensus that these
guys know exactly what they're doing and
they got it so which means
you don't need you don't need to sell
your stocks you don't need to sell your
bonds you don't need you just just sit
tight and keep adding more because
there's not going to be any Financial
disturbance because they have it right
and inflation is going to Trend down
right to their level exactly at 2% and
it's going to be amazing that's the
consensus so if you don't believe that
then you believe something on either
extr is gonna happen either rates going
to go up really really high or some
Financial disturbance is going to happen
because they keep raising rates and
force them to go right back down to zero
and so my thesis is that when you have
360% Global debt to GDP you no longer
have situations where things happen in a
calm fashion you go to the extremes very
quickly and so to think that all of a
sudden you know less than 100 people are
able to determine how this global
economy is going to somehow soft land
after printing the most money that we've
ever printed in human history and gone
from 5,000 year low of interest rates
Rising the fastest Pace ever um in in
financial markets then you're you know
that's a bet I'm not willing to take do
you know chamath
poopaa yes I know chof okay I could be
misquoting but I'm almost certain this
is correct that he he was saying that
you know people make such a big deal out
of this 130% debt to GDP but he it's a
big nothing Burger it doesn't really
matter there's no law of physics that
says that we can't go over it so even
though historically uh that that's been
a sign that has led to collapse
given the modern economic theory and I'm
so this is how I remember it oh God
forgive me jth if I'm way off um but
that that was my
takeaway um so other than it's very
compelling to me that we have all the
historical examples that say every time
that we do this it it leads to collapse
but what do you if you were to take his
stance for a second um can you see how
maybe it is Poss possible that we get
the soft Landing that they do get it
right that that isn't some magic you
know thing like the speed of light it
can be crossed and people can still come
back from it um and I think you would
say that well I'm just gonna I'm gonna
listen to what they say anyway I'm not
going to make a move until I actually
see it happening
um yeah get could he be right so I would
say
we're investing is a game of
probabilities and expected values so if
chatha is saying okay there's been other
examples where this has not been the
case but this is going to be the one
example where the markets just keep
grinding a bit higher okay then you're
taking a this is this time is different
mental and every single time there's
been a this time is different whatever
aspect of the financial markets right
the problem is you're not just getting
you're not getting paid enough for this
time is different this time is different
means um S&P
goes up I don't know four five% right
I'm making 6% sitting my money in cash
so why bet on this time is different if
I can earn the majority of the excess
return of Stocks by literally just
putting my money in a money market fund
and I have no risk the Federal Reserve
is going to pay me that money why take
the risk um this time is different
because usually it's not different it's
the same as every other time but there
so I'm not getting paid enough to be
this time is different that the only way
to get paid enough is to add more
leverage which increases your risk
I'd rather take okay well the everyone
believes this time is different
therefore I'm not getting paid enough
for it but the other alternative which
is it's the same as it's always been but
I get paid a lot more money to be in
that camp I want to go there and on an
expected value basis I'm going to make
more money over time why not if you
believe in shath just put your money in
a money market fund don't buy any stocks
why would like the S&P part from you
know Nvidia and Facebook and Google and
those seven big stocks has not beaten
return on cash so either put your money
in cash and go in AI stocks and believe
this time is different or just put your
money in a money market fund there
there's no point to take the risk on the
General market for this time is
different because it's never different
it's always been you know this time is
different gets clobbered other than the
AI High volatility stuff do you have
anything deployed in the stock market
right now uh
uranium so I believe that we finally
going to get our our [ __ ] together and
somehow believe in nuclear and there's
been vast underinvestment in uh uranium
refining capacity and as the world moves
to nuclear and maybe the the West
decides that they want to be dumb and
not do it fine but China's going nuclear
India's going nuclear Saudi Arabia is
going nuclear the rest of the world's
going nuclear um and they just not
enough refined yellow cake to go around
so um you know Uranian mining companies
and certain jurisdictions are going to
do very well and um I'm I'm a large well
not large it's by largest Equity
position is um kamiko mining ccj uh it's
up I don't know 80% this year uh so um
that's something that I I believe in as
a longer term Energy play okay so
understanding now then the way that
you're deployed I want to talk about
Euphoria so I never experienced what
Euphoria at the like Humanity level
looked like until uh the 2021 2020 2021
crypto uh r it it was really fascinating
to watch it it was great and it felt a
certain way so I certainly know now what
to look out for in The Ether um how how
do you think about as a disciplined
investor how do you think about Euphoria
I know you're planning it into the AI
like hey I know people are going to get
their stimulus checks or you know the
bailout however we want to categorize it
uh they're going to put it into whatever
is the hype thing of the moment you're
expecting that to be AI um how do you
know because I'm assuming you're going
to get in probably not try to time the
top perfectly but you're going to get in
you're going to get some level of gain
and then you're going to come back out I
would assume if we're talking about
Euphoria because Euphoria is I would say
quite irrational and we know when that
clicks over I would now uh be fearful
when others are greedy and greedy when
others are fearful my now honed Instinct
for that would kick in so I think
Euphoria in my perspective is the the
willing to invest in eLiquid things that
have a beautiful long-term future so the
problem with AI is that to get liquidity
in my cycle time which is 2026 time
frame you need to have been investing
three four five years ago right because
it takes if you're talking about
equities takes five to seven years to go
IPO for a company so if you're putting
money into a series a startup today
you're not going to see any liquidity
until 20 30 you know time frame well
after the ball Market even though on
paper your thing might be up you can't
actually sell it um because it's not
it's not liquid now obviously I do a lot
of um cryptographic token investing uh
and stuff again if I'm signing a ter to
you today due to lockups and whatnot I'm
not getting my tokens until maybe 2026
2027 which might be a little bit too
late for me on on the cycle Ty
perspective so to the extent that I can
I want to participate in my theme which
is a in crypto in a way where I have
liquidity by 2025 and 2026 so that when
I get the feeling and you're going to
see something I don't know what that
something is whether it's just something
that looks mispriced like I don't know
um FTX has Tom Brady and a basketball
stadium right it's this exchange that
never existed two years ago now now has
you know has our logo on top of in Miami
and you know Tom Brady one some some
would say the biggest American football
player ever is now stumping for them on
on TV that looks about strange right
there's going to be something that looks
a bit strange that's going to tickle
your mind you like huh that doesn't make
any sense maybe we've gone too far when
you get that sense you want to be able
to go to your portfolio and liquidate
things now the Euphoria is that I
believe that you know AI can be such a
transformative thing that I'm willing to
give somebody some money and not see it
for a very very long time and not be
able to to liquidate it at all and there
therefore you're going to get caught off
sides when the market all of a sudden
goes okay well show me the
growth show me how you're going to
generate enough earnings to pay me back
100 times earnings Nvidia show me all
the people willing to pay real money for
these AI Solutions show me how your
startup has any defensibility against
open AI or Bard or any of these other um
large um initiatives that could
essentially just you know dis
intermediate your little plugin on top
of their large language models show me
the money when the market starts saying
that and you can't liquidate you're
wrecked um because then the market is
going to start asking the question
where's the revenue where are the users
U or where are the users that are
actually willing to pay real money for
for the product and that's usually the
end of that particular bull market and
things just start falling to bed because
there's just no liquidity and people
just sell what they
can and so and the game is up now
obviously out of the wreckage comes your
Amazon was down 90 something per from
high in 2000 to 2002 or whatever it was
and then Rockets up multiples of what it
was worth but the majority of us are not
going to be able to find the Amazon
we're going to be finding the pets.com
um and so uh that's the game so it's
trying to try to invest in the theme and
the liquid Vehicles available and not
getting to caught up in the hype and
putting your money into eLiquid things
that you can't sell when the mood turns
we are at the culmin
of the post World War II period we've
we've we've had four generations since
then so all the people who fought in the
War pretty much dead so we've lost that
that knowledge that reticence to ever do
something stupid and terrible like a
total World War ever again now we have
people around the world who are
celebrating these leaders who are
bombing indiscriminate civilians because
it you know solves their particular
issue whatever that is because we don't
have this institutional knowledge else
is dead who would participated won World
War II so and we also have a a situation
where you know the United States did
very well out of War War II and created
a whole global system that to preserve
their hegemony and now that's coming
undone uh and you know when top dog is
getting challenged by the dogs at the
bottom there's always conflict and so
we're at that point in time we have no
institutional memory of how bad war is
and we have a preeminent power that's
being challenged by others who was going
to resort to violence to preserve their
position I think we are at this
situation that has happened in the past
many times empires have come and gone
but now we have for the first time in
human history a an ability to save in a
currency Bitcoin and the cryptocurrency
situation in general that is globally
owned by
everyone and so the people own a new
type of money it's people around the
world can still sell their Fiat whatever
and buy Bitcoin it's not blocked or
banned in most places yet and so you're
able to move wealth between this analog
system that we've had for thousands of
years into a new way of socially
creating Financial wealth the financial
system uh a new type of money this sort
of this sort of situation is never going
to happen again because we have all
these Fiat assets that are being
depreciated and everyone knows it's
happening and now we have this little
small door called Bitcoin and people are
starting to go through the small door
and that's why the Bitcoin price is up I
don't know 50% or 60% this year already
as now we have the institutional
investors saying yeah I understand this
game is rigged I helped rig the game now
I have a product where I can get out of
this mess that I created get me the [ __ ]
out of government bonds I want some of
this Bitcoin too so now everyone's
competing to get in this little door and
that's why the price is going up so this
is a once in a-lifetime
opportunity we have a system reset and
we have a way to preserve wealth in the
old system and bring it into the new
system and that's what crypto is all
right that's powerful so if we think of
crypto as the arc that we can all get on
before the rain comes uh the catch is
that you've got all kinds of different
cryptocurrencies all kinds of different
thesis about which one we should be
getting into um what's your take how do
you break down the world of crypto so
Bitcoin is the reserve currency if you
will of crypto it's the ultrasound money
it's it's crypto money it's and it's
proven that's that's what it cares about
the community of Bitcoin cares about
security and um the IM immutability of
the Bitcoin blockchain and it wants to
make it the soundest crypto money so if
you're thinking about okay I don't know
anything else about crypto but I kind of
believe in this whole inflation and
changing Global relations story then
just buy Bitcoin right it's got the
largest market cap um it's very
conservative with the types of things
that are added to the the network
because everyone wants to make sure that
Bitcoin is always the hardest money so
the experimentation is much lower on
bitcoin than other uh other networks um
next you go to well okay can we build a
new Financial system within crypto
that's decentralized Finance defi um and
ethereum in my in my worldview is the
the best decentralized computer that has
been built uh thus far and so if you
think okay I think we need a new
Financial system that's based on these
crypto know crypto assets that's the
centralized that's transparent blah blah
blah then ethereum uh is where it's at
now once you get past those two things
I'd say most other things than crypto
are either some sort of application that
rides on top of ethereum or a
decentralized like
computer another blockchain trying to
disrupt either being the best money or
the best decentralized computer and then
you sort of have to get into the Weeds
on understanding what it is these
Protocols are are trying to do so for
those who just want to like close their
eyes and buy something that's crypto
safe not saying that's you know there's
no risk here I would say Bitcoin and
ethereum are where you should start your
journey and once you say okay maybe
there's some things I think these
protocols could do better or I've been
hearing some things about these exciting
new very smart people building something
then you start going down the rabit hole
of of other coins that do other things
and obviously have more risk because
they're experimenting more what do you
advise people around volatility I think
one of the things that draws people to
crypto specifically is the volatility
I'm actually very curious to see what
happens to um cultural energy around
crypto once it's the the tried and true
thing volatility is your friend the
reason why you're even thinking about
crypto is because the price went up a
lot and you heard about it so you want
volatility the
entire
trafi traditional government apparatus
is trying to do something unnatural
which is remove volatility from the
system entropy is always
increasing it is unnatural to try to
suppress volatility think about it like
your lawn if you have one at your house
right entropy says the grass keeps
growing because that's what the grass
does what do you try to do you spend
energy to cut the grass because you want
it to look a certain way a certain
nonvolatile Pleasant way but it's
unnatural if you don't have the energy
to cut the grass the Grass Grows and the
grass will grow long after you're gone
because you can only do this so long and
that's the same thing governments and
central banks and banking systems are
doing they're trying to squash
volatility we don't want volatility and
they're try to convince you that it's
safe but there is no such thing as safe
there's chaos in the universe it's
always increasing they're doing the
unnatural Thing by trying to remove it
and then at certain points they can't do
it anymore and then there's an explosion
somewhere whether it's a war whether
it's a financial crisis so embrace the
volatility this is the nature of the
universe and that's why Bitcoin and
crypto is a good thing because there is
none of this manipulation it goes up it
goes down but it's a TR reflection of
what the universe is so I think
volatility is a good thing obviously
that means if you use leverage be very
judicious about it if you're a leverage
if leverage trading is your thing that
better be your full-time job like you
better eat breathe and sleep the thing
that you're trading because that's the
only way that you're going to survive
thinking that you're going to get home
from work put on some highly leveraged
crypto trade and just trade for a few
hours and then go to sleep you will lose
all your
money okay volatility as a good thing do
you think that crypto will lose some of
its um its potency its C cultural energy
when the volatility begins dying down or
will like in a given cycle the way that
this traditionally goes is uh you've got
Bitcoin which has massive volatility but
is less Vol volatile than some of the
what people lovingly call
shitcoins um so people tend to go down
the curve so they'll start with Bitcoin
they'll ride that up as that begins to
stabilize and chop sideways then they're
going to go to the next volatile if that
crashes or whatever they go to the next
the next the next constantly chasing
volatility
um will that forever be people will just
keep introducing new and highly volatile
things or will it become more like gold
where it's it's a far more stable entity
well Bitcoin has you law of large
numbers the larger it gets the less
volatile it become um and as you
mentioned right for people who are
saying I want to make big gains in a
short period of time Bitcoin might not
do it for them they say well I need the
next new new new thing and so they start
trading whatever the new shiny Bobble is
that's being sold out there in in crypto
there's nothing wrong with that just
recognize what you're trying to do if
you're saying I want to save in a
ultrasound money then yes so volatility
is not a good or bad thing for Bitcoin
it's it will go down over time as the
asset class gets bigger if you're saying
I need the volatility I'm a professional
Trader this is what I'm here for then
there will always be a new thing to
trade because the great thing about
crypto is it's this the only free market
left where humans are expressing
themselves and whatever is we think is
valuable there's no manipulating force
with you know an unlimited bag of fiat
currency that's telling us what is a
good and or bad investment and so there
will always be volatile things within
the crypto ecosystem so long as there's
human beings trading it and I guess we
other machines too soon these AI
operators uh in the
ecosystem it's really interesting so I
want to get to the essence of um what
crypto is I want to get to the essence
of whatk are why people play them so I I
really want to be the contribution that
I make to um I mean anything that I do
quite frankly is helping people get to
the essence of it to think from first
principles to build a thesis uh even
though ultimately I think that only the
simple spreads I do want people to be
able to understand the the nature of
this do do you see markets as gambling
like are they gambling at their very
nature
i' move it even more fundamental we are
gamblers everyone all the time
constantly because we don't know what
the future holds um so let's take an
example and I wrote this in a previous
essay so imagine you're going to there's
a building you walk outside the building
you can either take the stairs or take
an
elevator um so the stair taking the
stairs using your own feet walking up is
safer than the mechanical thing which is
is an
elevator but walking up the stairs takes
more energy than riding up the elevator
so what do you do well your brain you
know whether you're conscious of it or
not is constantly evaluating the
probability that if I do one of these
things will there will there be harm
that comes to me and is the probability
of that harm outweighed by the gain
whether it's time or energy by using one
or the other modes of transportation and
so you're gambling know what do you know
if this elevator is going to break down
and fall 30 flights in an instant no but
you believe that there's been a um
credible engineer that's designed this
piece of technology that there's a
government building codes that govern
how it's been installed and how it's
been maintained so the risk of me taking
this elevator even though I don't know
if it's going to fail when I get on it
is very very low therefore I will take
the elevator because it's faster and
less energy spent than walking up the
stairs to the top of the building right
so we gamble all day every day because
the future is unknown so for people that
say that oh markets are bad because it's
gambling no your whole life is a gamble
you do not know what's going to happen
one moment to the next you are
constantly assigning a probability to
the Future and that's what the market is
the market is for a particular thing
what does the crowd say the probability
of the future of this company building
this product making this money or this
asset being wor worth whatever it's
worth in the future what does the crowd
think that's what the market is telling
us and the market gives us great signals
as to what the crowd actually thinks
because we're putting our money on the
line and what is money money is Just
Energy and our time in an abstracted
form that's why money is the most
important thing in any society because
if you degrade the value of money you
degrade someone's time and their effort
and their energy and it's you know a
front to human dignity if you grade the
value of the money that they earn by
doing work to you know earn a living pay
for food blah blah blah right so markets
are gambling but your entire existence
is a gamble as well so I don't think
there's a problem with that okay this is
uh really interesting and it goes back
to what I was talking about with um the
ability to save from where I'm sitting
feels like it should be a human right uh
so okay let me just go back and recap
what you said money is energy and time
and abstracted form so uh you go to work
and some you do a thing that the world
says that they value which is why
somebody's willing to pay you for that
because they're able to create a thing
that they sell to somebody so you spend
energy and time creating a thing that
people want to buy now what that allows
you to do is proof of work so you have
this unit of money that you've exchanged
for your labor now when you are putting
that into a system where they can
socialized losses so H this is it drives
me crazy how complicated this all is but
let me just walk everybody
through what ends up happening in the
current Keynesian economic model that we
have which uh I'll give a brief
summation of Keynesian economics if you
see that I've gone wrong in any way
please jump in uh Keynesian economics is
basically hey uh the market left to its
natural devices is going to swing wildly
there are going to be massive upsides
there are going to be massive downsides
and if you if you get to one of the
moments where the economy is not able
to progress forward part of the reason
it may not be progressing forward and
this was the break from the classical
model is that people are just poor and
so if you stimulate money into the
system now you can get the economy
moving again and so you flatten the
curves both on the upside and the
downside so you're squeezing the
volatility by going back to your mowing
the lawn analogy you're injecting energy
into the system the the government is
putting this new money which they're
making up out of thin air into the
system in order to get people feeling
like they have money again it is very
much a a man-made manipulation of the
system but this is essentially what
we've been doing since the Great
Depression so uh kees comes up with this
idea in the Great Depression and he
realizes hey wait a second there are
people willing to work there are
factories here that are not at capacity
there are even people willing to buy and
if they just had money then the economy
would start moving again so hey make up
money okay sounds amazing until you put
it together with what you just said and
the fact that this is socializing losses
so all right something bad happens 1929
we have an economic collapse um people
got into a bubble we just got into a bad
situation for a whole host of reasons I
won't go into it right now but anyway
bad thing happens the government then
says oh I'm going to print more money
which is now taking that loss and
spreading it across everybody that's
what happens when you're printing money
because there's no new Goods put into
the system that anybody wants there's no
new labor that has gone into the system
there's only the artifact what should be
the artifact of somebody's time and
energy but it's not it's just made up
and so that ends up diluting across
everybody so you have individual losses
with that are spread across everybody to
the benefit of only people that hold
assets so now you get this massive
bifurcation so I'm very worried about
the hollowing of the middle class and
going back to what exactly creates this
as far as I can tell is this it is this
moment right here where you are
socializing losses across everybody so
the poor the middle class and the
wealthy are all going to have their
buying power reduced but only people
that have assets are going to get
wealthier and so what's crazy is if you
look at the moment that we're living in
right now you have a growth in the upper
class so if you break lower middle upper
you've growth in the upper and you've
growth in the
lower and only the middle class is going
down now first I was like well that's
kind of exciting you actually have more
people going into the upper class than
you have going into low lower class
amazing right but as you Hollow that out
you get just literal Division and
warfare within a
country all of that makes sense based on
what you just said which is that money
is your time and energy in an abstract
form and it is an affront to human
dignity when you begin messing with that
system yes now laying all that out this
this is why I am really
unnerved by the moment that we're living
in now and we'll I'll try to tie this
all back to um crypto as the potential
Arc that we're all going to get on as
the the rain continues to fall but just
today uh one of my employees came up to
me and was like I'm finally seeing the
data that backs up what I feel which is
I just cannot get she didn't say
American Dream but that was the
punchline I can't afford to buy a house
I see other people people making huge
amounts of money and I'm not I'm not
able to get ahead and on paper it seems
like I'm making enough money but I just
don't feel like I'm getting anywhere and
so
she isn't positive about the moment that
she's in nor is she optimistic about the
future because there there are these
cues that people look to buying nice
things having a nice car having a nice
house feeling like you can afford
children feeling like when you retire
it's going to be travel and fancy rest
and it isn't going to be me working
until I'm 85 and you know super unhappy
and so when you take that you take the
anger you take the frustration you take
the GameStop of it
all again people yoloing in
people I don't want to say following
sort of culty ideas but like an idea
will gain momentum and they just get on
board with that momentum versus doing
what you said get your spending under
control figure out your risk appetite
deploy that into um an asset class that
you believe is matches your risk
appetite and is going to go somewhere
okay so there's been a
demoralization
of
people they don't understand what it
is but
it's not to be too harsh but it's it's
Keynesian economic
it's the
manipulation of the currency it's the
massive inflation to deal with
debt
okay if all of that is true then it
certainly
explains this Great Migration from trafi
over into crypto does all of that feel
right or do you feel like I'm being
unfair to
the current economic situation the
Keynesian economics maybe I don't
understand it I mean the only wrinkle
that I would say is that if the
government is able to borrow money and
build things of real economic value
like okay in the
1950s Eisenhower did the in the United
States President US President Eisenhower
did the highway act right and the US
built however many millions of
kilometers of roads which lowered cost
of
Transportation you know had all this you
basically had the explosion of mass
Market stuff because you could ship
things from coasta coast blah blah blah
in China you had building of
hydroelectric dams okay there was some
environmental costs but it brought
electricity to the countryside and so
these are only projects that governments
can can do because they have the ability
to tax uh and spend on a on a aggregate
level so I see the only cave is if
you're able as a government to build
these types of things that have a rate
of return greater than the debt the
implicit debt cost that you're hoting on
the economy then those are good things
to do the problem is that there there's
there's a finite amount of projects like
that uh the society that you're building
these things in can only accept so much
of this infrastructure spending the
problem is that governments don't know
when to stop they don't know they think
everything's going to be like the
highway act in the 1950s in the United
States or building free gorg's Dam and
China versus where it is today which is
the buing they're building a lot of
stuff that has no value because it'll
never earn back its its return what are
we building today well I mean I'm saying
we as a global Society I don't know what
politicians in the US are building in
China or anywhere I'm just making of
sort of a oblate statement of people I
don't know there's Biden doing what's it
the inflation reduction act or some sort
of act that they're building stuff and
all these government subsidies to build
things whether it's electrification of
the Grid or whatever right there's
industrial policies for governments
around the world saying we need to build
whatever it is we think is valuable as a
government sometimes that's rooted in
Market signals other time it's just hey
I want to give a a backhander to my boy
in my uh in my district that's the
problem there is a good there is good
that can be done doing that but
politicians abuse it and we're at the
abusive stage of you know the initial
gains of building some of these pieces
of public infrastructure now we're just
doing stupid [ __ ] Ray alio talks a lot
about debt cycles and the inevitability
of how this just Loops over and over um
is all of this inevitable and do you
think that the migration to
cryptocurrency will be complete and
we'll never be back in a system like
this again or do you think these systems
will coexist so it's definitely not
inevitable uh the great example is
what's happened down in Argentina so the
policy of Argentina is if you've never
been it's a beautiful country I [ __ ]
love it down there I've been skiing
there and you know to the the falls and
all kind of stuff it's got a massive
Coastline it's got aable land great food
great wine space for people to live and
yet it's mired in poverty and inflation
because of political choices of
Keynesian taken to you know another
level the her ownest um sort of
political culture down there and the
people after I don't know 50 or 60 years
of this [ __ ] are finally fed up let's
try something different and you have
President melee down there who basically
campaigned on their promise of I'm going
to cut down government services close a
bunch of Ministries we're going to
balance a budget and he's already
balanced a budget I think within the
first quarter or two of him being there
so we'll see how the economy reacts so
the people do have an option they can
reject what the elites are telling them
oh there's only one way to do this which
is print money and do c in economics no
there's another way which is you earn
them you propose a taxes we the people
agree to pay these taxes and you the
government do what we told you to do
build roads build schools healthc care
police force blah blah blah and don't do
anything else and this other [ __ ]
that that you got that the government
has tacked on to their
responsibilities um and created all
these deficits so there is another
option but it requires people to
understand you know where's a situation
there is there isn't just one way to do
things there's another way to do things
there's a way to run the government like
you run your household you make a $100 a
month you're only able to spend $100
that's it no nobody runs our household
like that though there's something about
the the culture that we're in right now
because if you look at um debt the
government operates on a debt businesses
are all in debt uh individuals are all
in debt we were at 0% interest rates for
so long money seemed free people just
like just took on debt Deb Deb debt debt
and so it really requires a cultural
shift more than anything and I worry
that what we're seeing in Argentina is
that oh yeah there is a point at which
it is so brutally painful that people
would rather austerity than then
continuing to suffer the way they've
been suffering but are we
anywhere near that point or maybe a
better question can we make the change
without needing that amount of
suffering no because the loss is there
the debt has been taken there's been
unproductive activity and this is the
global thing right Global debt to GDP is
I think 360% for the World Bank or
something like that and it's been
accelerating over the past two decades
right so there is an implicit dead
weight loss in the system the question
is who Bears the loss now that's
whatever government is tackling what
does everyone government do they push
that loss down onto the people
themselves VI an inflation tax but the
loss has to be paid it's not like the
Argentinian situation is without losses
people are going to lose money in
austerity right the question is who
loses the money so if it's I don't like
austerity because deflation destroys the
banking system well in a capitalist
Society what happens when a bank goes
bankrupt the unsecured creditors take
over the bank so put the [ __ ] CEOs of
City Bank and JP Morgan and Goldman
Sachs and Morgan Stanley on the [ __ ]
Street after 2008 and give the bank to
the
depositors that's how bankrupcy law
should work it didn't work in that
situation they would rather save the
managers of the banks than allow the
people who are unsecure creditors of the
bank take it over and run it how they
think it should be run so I think there
is we have we being a lot of
capitalistic systems and you know even
in China they have these sorts of
bankruptcy sort of laws it's just that
nobody wants to use them because it's
going to disenfranchise the elites we
have all the tools available to us we've
thought about these things we're just
unwilling to use them because of who
Bears the pain so that's the situation
but I think when more people realize the
reason why crypto exists it's crypto is
valuable because we're unwilling to take
these losses if all of a sudden the
United States and China and Europe and
Japan said we're going to run balanced
budgets we're going to cut out 75% of
all these government
services I would be thinking harder
about whether I want to be on crypto at
that point and maybe I should be doing
something else because the societal
mindset has changed to something more
responsible and maybe we're not going to
see these massive price gains in crypto
because the Fiat debasement part of the
equation has ceased okay so if that's
the scenario that would cause you to
rethink crypto um if all of those
governments were hey we're going to be
like Argentina we're going to get our
stuff together we're going to run a
balanced budget how would you respond to
that in terms of your investment
strategy there's obviously going to be
some short-term a lot of short-term pain
and then you have to see what is bitcoin
or crypto worth really fast will you
explain why why will there be short-term
pain what happens in a austerity when
we're not printing like right now the US
government is so in debt that surely if
they were to just balance the budget
immediately without printing any more
money that holders of government
treasuries bonds poof they would be gone
yeah who owns the bonds rich people at
Banks so that's who suffers if who's
making all these you know the U the US
Treasury spends about a trillion dollars
on an annualized basis and interest
payments who is getting these interest
payments all the [ __ ] I saw at
the ski resort who now get five and a
half% on on their um their cash and like
great I own these treasury bonds getting
five and a half percent I've got a good
Capital base I'm going to go enjoy the
world right it's all the rich people who
own these Financial assets they're now
worth a lot less in a deflationary
environment the primary one being
government
bonds who now the government to balance
a budget and guess what all that debt
we're just going to gone I mean we can
do it Deb Jubilee it's happened in the
past study the Roman Empire and you know
Greek Solon and certain people like it's
a feature of the society where a leader
comes and says this is not a good idea
for the rich to be rentiers on the
entire productive capacity of society
let's destroy that asset that they have
and requal system we forget that this
happens but it has happened in the past
and so if we did something akin to a
debt Jubilee who loses rich people and
then at some point if the government
does float another bond with aorn more
balanced budget then oh that might be a
good investment at a very high rate of
return is that better than owning
something that has made its gains in
Fiat terms I'm not saying that the
Bitcoin network is not valuable I
separate Bitcoin into technology plus
liquidity but if you remove the
liquidity piece what's the technology
worth I don't know it's worth a lot for
sure but removing that liquidity piece
from the equation for crypto probably
means that it corrects quite
substantially and you want to own other
types of Assets Now that you know we
have the society is decided that we're
going to run our public affairs in a
different manner all right really fast
when you say liquidity are you talking
trading volume just the amount of back
and forth credit money credit Fiat money
in so sorry you said uh Bitcoin is the
technology plus liquidity so you mean if
nobody's manipulating Fiat and printing
printing printing then you take a
fundamentally different uh calculation
on the value of Bitcoin correct
interesting liquidity is one of those
words that I've long been like okay I
think I know what people mean by this uh
but clearly not so when you say
liquidity you mean printing yes I mean
how much credit money has been created
by the government in the banking system
and obviously the more Fiat that's
around scarce assets finite assets like
Bitcoin go up in Fiat terms but that's
just a denominator issue it's not
anything the value of Bitcoin itself as
a network of peer-to-peer decentralized
electronic money again that has a value
what is that value I think it's very
valuable is it I don't know what's the
Bitcoin bark up now like two trillion or
whatever it is is it that so if we
removed all the money printing we said
you know US dollar the end the Yuan you
know the euro is now sort of very stable
currencies not going to go up or down
much in terms of their supply do I want
to own crypto anymore maybe not at this
price maybe there's something else I'd
rather own maybe I want to own a power
plant in a new productive country where
the people feel happy and engaged and
want to do productive things maybe I
want to own something different so
that's that's just the
mental you know construct that I'm
operating under because the system will
change we as you said there is this
anger we have Global conflicts spreading
up around the world we are not going to
be in this Keynesian system in the next
40 or 50 years there will be a different
system I don't know what it is it could
be that the people all wake up and they
say this is not for me we're going to
create a more Equitable system or they
create something even more [ __ ] up
than the one we're in today I don't know
but we're just going to change okay uh a
couple questions one did Argentina
default on their debts they have
defaulted multiple times on on their
peso dollar like you could probably
write a whole university thesis on the
history of Argentinian mon monetary
policy I mean specifically since melee
took office is that part of his strategy
like hey debt Jubilee I'm not sure okay
I'd be very curious to know that um so
okay one possible way for this to end is
you have an Argentinian solution uh the
country wakes up they realize hey I'm
not willing to suffer like this anymore
it's a bunch of Rich [ __ ] that are
controlling the place we have all these
um programs to take care of people but
we don't actually have the money and so
we've inflated our currency into
meaninglessness um this is dumb so let's
elect somebody let's take our lumps
austerity measures the system's not
really working anyway so I imagine to
some extent that probably even the
wealthy feel like they're on such
unstable ground they've probably long
ago fled to dollars or something like
that anyway if they have the wherewithal
to do it uh we elect this guy he comes
in literally with a chainsaw for people
that haven't seen the footage it is
hilarious uh and he just cuts Cuts Cuts
removing entire um portions of the
government entire
departments uh okay so that's one way to
do it um
the other way to do it is war why does
this why does the
debt inflation through money
printing why does that lead to this
changing dynamic between countries what
I I can't mentally track I get it I've
seen it I know the data but I don't
understand why that happens so when
you're printing money you're inducing
economic activity that's unnatural so so
you're producing stuff that you don't
you can't sell so what is you know what
are most wars about it's I have all this
excess production I have people that
need to work because that's how I stay
in power because they had job and money
and whatever they have they're producing
all this stuff I need someone to sell it
to so if you want to think back to sort
of World War I World War II you had the
major Colonial Powers each had their own
home Market us has you know Central and
South America Britain had the
Commonwealth um French had the West
Indies and sort of parts of Africa and
Germany was like Hey I'm a I'm a white
Imperial power I deserve I deserve some
colonies too rather than going into
Africa my Colony should be Russia we
read what Hitler wrote he's writing
about taking the Russian land and
creating space for the Russian people
for the for the German people that's why
he did the dumb thing of attacking
Russia during the winter didn't learn
his lesson from Napoleon um the Japanese
wanted their colon they thought they
were a powerful colonizer as well and
China specifically Manchuria would be
their sphere of colonial projection and
their Market would be southeast Asia and
as you know the Western Allied Powers
challenged that assertion that Germany
and Japan could have these Colonial
spheres of trading influence because
they also had overproduction as well
remember coming out of the Great
Depression what was the problem too much
production nowhere to put it deflation
of assets everybody produced too much
[ __ ] they needed to sell it somewhere so
that was a Genesis of all these of the
world wars now what do we have today
China has exhausted its ability to build
roads pump a property bubble now they're
saying we need to we need to manufacture
more stuff well so does America they
need to manufacture more stuff so does
Europe they did a manufacturing more
stuff why is Europe all pissed off at
China right now because China's the
largest the auto exporter in the world
surpassing Germany and Japan and they're
like oh [ __ ] there goes one the one
industry where we were kicking ass which
was high-end luxury cars and your German
and French Vehicles China's beating us
at this like hand over hand over foot so
everybody's producing stuff because
they're they're just printing money say
go to work make stuff and then it's like
okay where do we sell it oh we need to
sell our Goods in China chin need to
sell their goods in America well nobody
wants to open up their Turf to others
because they need to sell stuff not to
buy other
and so that's why when you print this
money and you have all this uneconomic
activity happening the drive to sell
your goods in other markets is what go
is what prepares the road to war oh
you're not going to let me sell this
particular type of product in you know
this country well [ __ ] you we're going
to war and I'm going to make sure that
you can't sell your stuff into into my
turf and that is what we're gearing up
towards as all the major economic blocks
like okay we need to keep people in
their job jobs so we're going to print
the money they're going to make stuff
and now where do we sell it the over the
last you know 40 to 50 years the
financial ecosystem um has been
predicated on a scenario where there's
never been a situation where long end so
let's call it 10 or 30e bond yields in
the US um rise so they go up but they go
up faster than in shortterm yields it's
called that's never happened
for a sustained period of time no over
the last 40 50 years it's called a bear
steepener right so if I'm a bank I'm an
insurance company I'm a pension company
and I'm going to model what I think the
future's going to look like I'm going to
model the way the future's looked for
the past 30 40 years which is every
time the there's an issue and uh yields
go up the government comes in and prints
money and squashes it B down they squash
the volatility down in the markets
because they want to save the banking
they don't want anything uh anything to
blow up but now because we're in a
situation at least in the US Treasury
Market where the US government is the
issuing the most amount of debt ever
right Federal deficits like seven or
eight% of of GDP it's as if we're in a
war this is you know the largest longest
sustained sort of deficit since World
War II but we're not in a war you know
at least not um an over one uh you have
7 point I think $7.75 trillion worth of
debt must be rolled over by
2026 massive amount of debt that's just
on the US side so who's going to buy it
right the the traditional buyers were
one China Japan right China Japan are
not buying any more us treasuries China
because it doesn't want to become more
tether to the dollar from a geopolitical
safety issue um Japan because it's also
facing an issue in their bond market
where their currency is getting trash
because they are also trying to save
their bond market Japan thankfully to
themselves have saved a lot of money
over the last 30 40 years and so they're
now starting to draw down on that money
they're not buying new treasuries
they're starting to sell treasuries
China is starting to not buy new more
treasuries they're starting to sell
treasuries and you can look at the
official data from the US Treasury you
can see the the balance of treasuries
owned by China and Japan are declining
on the the oil exporter side right
talking about OPEC you know Russia is a
big member of OPEC Russia is obviously
not buying any more treasuries they just
and them from the the Western Financial
system um Saudi Arabia is not increasing
its treasury position it's also
decreasing so the oil exporting Nations
who previously would earn dollars
internationally and park those dollars
in the US banking system and buy
treasuries they're no longer buying
treasuries the US banking system the US
banking system is functionally insolvent
because The Regulators made the rules in
such a way that it was profitable from
an accounting perspective not an
economic perspective um to essentially
take in deposits and Buy Low yielding
treasuries and they could do it with
almost infinite leverage and a few basis
points difference in the in the change
in the price and everybody make a lot of
money and everybody gets a big bonus
right so the banks collectively bought
all these treasuries in 2021 and
obviously the prices went down a lot
since then and that's why we have the
the regional banking crisis so at a
structural level the US Bing system
cannot buy more debt because it can't
afford to because it's function ins
solvent and so and and you know that
leaves the Federal Reserve but the
Federal Reserve has committed to doing
quantitative tightening which means it's
letting the treasuries roll off of its
balance sheet it's not accumulating more
treasuries so the treasury has to issue
all this new debt it has to roll over
all this new debt but the major buyers
of this stuff for all their own you know
disperate reasons cannot purchase it and
so what we're seeing in the markets is
relationships that held clad are
breaking down if you take a look at the
the 10-year US Treasury versus gold you
would think as yields are rising and US
Treasury Market that gold would be
getting clobbered that's how it's worked
um in in modern Financial history
because if the interest rate is high
money says I want to own that I want to
own the 4 and a half% treasury versus
owning gold which pays me nothing but
nowadays Gold's holding firm it's not
like Rising crazy in a crazy fashion but
it's not getting clobbered either as US
Treasury uh 10e yields are at you know
was 4 434 basis points last time I
checked um so hold on that that makes a
prediction uh at least as my mind grasps
it that people think that the bank is
going to default because uh sorry the
government's going to default because if
you're getting whatever risk-free money
of it's right now it's like something
like 5% uh if you can have risk-free
money at 5% and people are not fleeing
gold to get in into that risk-free money
at 5% that says to my limited mind that
the market no longer believes that it's
risk-free is that an accurate uh
assumption the market US debt is
risk-free in a US dollar perspective on
a nominal basis why would people stay in
Gold
because they say I'm not getting paid
enough right um now I I use a term of
real yield and if you ask an economist
you'll get a different answer depending
on who you ask my definition of
the real yield is I take the government
bond yield and I subtract nominal GDP
right so if I'm lending money to the
government from a philosophical
standpoint I should receive at least the
yield of the growth of the economy so if
the economy is growing at 10% I should
get paid 10% too because I'm
contributing to that right I'm lending
to the government the government is
doing its thing you know and the economy
is growing I should get paid the same
amount now from the government's
perspective you're like hold on
I can make a profit if I can somehow
engineer the economy to grow at 10% but
I only pay you 5% that's a negative
yield I I the government and making a
profit or conversely if the yield is 10%
and the economy is growing at 5% then me
the bond holder is earning a profit but
right now the economy in the US if you
take a look at the latest um Atlanta fed
GDP nowcast and they have a real- Time
guesstimate on with GDP is running
nominal GDP this quarter is running
around 9% the 10year yield is about
4.34% so I as a bond holder I'm getting
short changed now people are starting to
realize like hold on the US economy on
paper is growing like Gang Busters I
should be getting paid more money if I'm
not going to get paid more money then
I'm not going to own these bonds because
I can own something else that's going to
give me a better return whether that's
stocks gold
crypto whatever right just to just to
take a non-controversial one would gold
ever outperform that
number in terms of the the yield yeah
because the way you're explaining it
sounds like people are cutting their
nose off to spite their face like if
you're going to get 5% risk-free with a
treasury and you're going to get next to
nothing with gold then why on Earth
would you even if you could get 10% even
if you have a more moral just you have
moral outrage at the government for
keeping half of that yield for
themselves which I admit if you loan the
money to the government it's pretty
fishy that they would keep that for
themselves but if you're getting a
better yield then you would get from
gold what on Earth are people doing um
just saying ah I'd rather get nothing
because I'm angry I don't understand so
you know most people who own bonds that
hold them the bond is a price right so
as the yields rise the bond price goes
down um so as yields go from 5% to let's
say 10% so the fact just keeps raising
rates right as a hold over the bond
you've lost money because the yields are
they're Rising the bond price goes down
right so as yields rise I lose money
because I've locked in the lower rate
and it's going higher the bond price
goes down um versus gold which you know
could go up right or just could stay
flat at the end of the day and I'm I'm
fine so if you take a look at returns of
10year bonds starting in two end of 2021
when the FED started raising rates
you've gotten absolutely killed it's
been the worst bond be markets in
hundreds of years right so owning bonds
has been a terrible terrible investment
over the last two years because
inflation is going up and the bond
market is saying actually I demand more
yield and the g keeps going higher and
higher and higher and higher to attract
more and more buyers now if the US
government was perfectly willing to put
the 10-year treasury yield up at 10%
they'd have a flood of money into the
market that's awesome I'm getting paid
the same growth as the US economy but
right now I'm not because the government
can't afford it right now the treasury
is already spending something like 34%
of um the budgets like interest payments
on an annual bas4
34% yes so it's a$1 trillion dollar
annualized right now is the interest
expense as of uh second quarter the last
time the Tre publes statistic so they're
issuing more debt and they're paying
more money in the debt and that number
is just going like that um in terms of
the interest expense handed out to
people who own own bonds right but on
the long end and this is how bonds work
the the longer the maturity the more
risk more sensitive you are to interest
rates especially if the bond the yield
starts at a low level going from 1% to
5% on a 10year treasury absolutely
destroys you as a long Bond holder which
is why a lot of these bond funds have
done terribly well have done terribly
over the last few years because of how
Bond math works and it's it's a
nonlinear change when you raise interest
rates and how the bond price performs
gold is pretty much held constant um
over that time you Haven made money
haven't lost money but if you were
holding a long Bond at 1 2% and now it's
at five you've gotten crushed and that's
exactly what happened with the banking
system you know svb First
Republic uh silvergate signature you you
know um this year they've gotten crushed
on Long Long bond
trading okay I want to walk people
through that uh so I when it comes to
math I have a very simple mind you're
going to correct me where I go wrong but
I think people at home some of them are
going to benefit from what I have
struggled over the last year or so to
put together in my mind again you're
gonna when I go wrong you need to jump
in and and let people know uh but here
is how I understand bonds if you hold a
bond to maturity you're not going to
lose your principal so what you're
losing is potential earnings so you
would not be able to sell that Bond so
uh for those keeping score it goes like
this you buy a bond that bond has a a a
interest payment and that interest
payment let's say is 2% and if you buy
that bond for 10 years to get the 2% and
a year later a new Bond comes out for 10
years that pays 5% now if you try to
sell that bond in the secondary Market
are going to go why on Earth would I buy
that when I can for the same price I can
get a better yield and so you have sort
of lost money in that you can't sell it
before the mature date you are now going
to have to hold it all 10 years in order
to get all of your money back but if you
hold it for all 10 years you will get
your 2% and you will get your uh money
back assuming that this is a Government
Bond and they don't default so that I I
want to make sure people understand the
difference between you're losing
potential Revenue because if you didn't
have your money tied up in a 10-year
bond and you could now put it into that
other 10-year bond that's earning 5%
obviously you'd be better off but you
don't lose your money unless you need to
sell now that brings us and you will
notice he has not interrupted me so I'll
assume that's well I'll give it even
more even closer to home example people
who have a mortgage on a house right I
think this is even more understandable
like everybody rush should bought houses
in 2020 2021 and the old olds I know
mortgage 30 your mortgage rates in the
US are around three three and a
half% and now there's another job
another location maybe you're living in
a high tax state you want to move to a
low tax state right and you need to buy
another house same value of the house
that the price of the house is the same
but you need to get a new mortgage now
the mortgage rates are 7 8% and you're
like holy [ __ ] I can't afford this house
anymore because my this mortgage this
this bond that I have at 3% is more
valuable than the bond of the mortgage
at
78% therefore I can't find another loan
that I can service with my income
because of the change in interest rates
and so that's I think a even more hits
home example the majority of the public
who own the house or an apartment or
whatever it's oh I had a mortgage at 3%
I can't and the same value of the house
I cannot afford that house in another
location because I'd have to get a new
mortgage at 78% that is Bond math that's
the exact and you can put the same thing
for you know treasuries mortgage is a
bit more complicated but at a high level
that that's that's exactly the
phenomenon
describing now the mortgage though would
be completely inverse right so on a
mortgage I want my rate going down on a
bond I want my rate going up yeah makes
sense um okay so now let's take that so
we understand that I buy a a longterm
Bond and back in 21 when all the banks
gobbled up all this US debt they had to
go along to get a return which a bank is
incentivized to do so they're going to
take the deposits that they're getting
everybody's getting stimulus checks
everybody's depositing into a bank the
bank's like amazing I'm going to invest
the first of all the FED is like we're
not going to raise rates oh my God it's
going to be like this basically forever
and so they buy all these long-term
Bonds on the word of the FED that
they're not going to be raising rates so
they think okay well if rates aren't
going to go up then I don't have to
worry about the value of this going down
this will get me a higher yield by me
taking a longer term which uh we need to
get back to because you were talking
about how it's very atypical for
shortterm to raise faster than longterm
so that's a sign that something weird is
happening but in 21 that hadn't happened
yet so a longterm was the way to get the
extra interest payment so the banks
gobble up these long-term uh treasuries
so they're buying debt I'll add one
little caveat here is you can actually
hedge this stuff so it's not as if there
isn't instruments to say like okay I
bought a bond at 2 3% I'm worried about
a future where the FED raises rates let
me go out in the market and hedge that
the banking system could have easily
hedged a lot of this risk and some banks
did um a lot of banks didn't but that
comes at a cost so I can either have a
higher bonus or a lower bonus the FED
says don't don't worry I got this know
inflation is transitory never raising
rates you know we we never going above
2% inflation blah blah blah why would I
go out and hedge the long end rates why
would I go out in hedge rates going up
and reduce my bonus so I'll stop there
dude that's horrifying if that and look
I'm sure it did I don't want to play
naive uh but that's horrible okay so if
that's right then to get their bigger
bonus they buy these longer term uh
treasuries they lock themselves in now
the FED does raise the interest rate now
that Bond they can't sell it early and
therefore they're losing that potential
income wouldn't necessarily be a problem
except for the fact that people begin to
realize hold on a second now the
risk-free rate of a US Treasury that I
can get myself is 5% so I don't want to
leave it in the bank where they're
paying me next to nothing I want to go
get my 5% risk-free with the government
so hey svb I will take my money thank
you very much and now svb has to cover
that so that they can give you the money
back and now they're forced to sell
these long bonds at a loss and all hell
breaks
loose yep that's exact exctly it the US
government bankrupted the banking system
essentially that that is brutal when
said that plainly okay so now my
question is they create the uh I just
had it the btfp bank term funding
program which basically says hey
everybody don't worry your deposits are
safe uh but the problem is that puts
them on the hook for up to $4.4 trillion
doar that they would have to print their
way out of so do we still have a banking
crisis or do we only have a looming
potential inflation
crisis there is a political Choice there
there you know
either as people say again I don't I
haven't looked at the deposit rates yet
but if you are a non- too big detailed
bank there's eight of
them um it's very hard to attract
deposits and it's very hard for you to
raise your deposit rate because again
you have this this portfolio of stuff
and your your deposits are not
guaranteed so if I'm a JP Morgan a City
Bank or Wells Fargo I forgot the other
ones the big Banks they have an
unlimited deposit guarantee now they
have to pay a bunch of other charges for
that but if I'm a deposit in those Banks
I know I'm there's no question the
politicians have told me I will get 100%
of my money back no limit if I'm not in
one of those Banks I have to think to
myself okay is this Bank going to get
saved is this going to be the Leman
brothers or is this going to be the
Goldman Sachs which one's which one is
going to be right they let Leman fail
they didn't let Goldman fail right and
so it's the thought and so we like well
why even take the risk get me the [ __ ]
out of here I'm giving my money to Jamie
Diamond right and so that's the issue
people are fleeing because number one
the political Choice has been we are not
going to extend a blanket guarantee to
all these other smaller Banks because of
moral hazard and all these different
things we're only going to to these
Banks over here so then the rational
response of the public is well I don't
want to be in that bank I don't want to
have to take the risk that they decide
that this is the bank they're going to
believe in capitalism on I'm GNA go over
here let me go to socialism I get my
money back um and so I think that's
driving part of it and then the other
thing is the rates are still going up
right five and a half percent you know
maybe the FED raises a couple more times
it we'll be 6% I can literally two
clicks go online go to my money market
account deposit money with the
government essentially and get more
money than my bank can mathematically
pay me so yes there's a banking crisis
we it was smoothed out a bit with the
bank term funding program but it's not
as if people have stopped noticing that
in less than five minutes they can you
know go from 0% to 6% interest income
that didn't stop so the bigy crisis is
still there the acute political choice
that the regulators and the government
is going to have to make is still there
there is still looming who is going to
pay for these losses on the bond
portfolios of all these Banks I don't
know what they're going to decide but I
think they're going to decide to print
the money and make sure that the
electric gets their deposit back and
nominal dollar terms so that's just my
my opinion so the bank term funding
program does not cover Regional Banks I
thought it did no no it covers it covers
banks that have um Alle Securities so
that essentially means US Treasury bonds
and mortgage back mortgage back
Securities now the big thing that a lot
of people are now focusing on is a
commercial real estate right that's not
included so it's not as if I lent money
to some real estate developer in some
Market who's going to build Office
Buildings I can't take that loan right
now and give it to the fed and get back
um 100% of my money back in in dollars
right I can take a treasury I can take a
mortgage back security I can swap that
for dollars I can't swap commercial real
estate which is a problem because
small Regional Banks were the engine of
commercial real estate lending boom over
the last you know decades whatever you
want to call it so now as we're changing
the way we work and you know two to
three days work from home for a lot of
folks these Office Buildings are
becoming kind of irrelevant and the
market has frozen so now it's a question
of okay what when deals get done how big
is the price decline going to be and
then Are banks going to have to write
down this this section of their balance
sheet
and oh [ __ ] they're in solvent again or
at least we know they're in solvent
again or what's the FED going to do are
they going to expand the btfp to include
commercial real estate loans because
this was you know this is the thing
that's going down in price or they can
expand it to auto loans or are they
going to expand it to you know personal
loans like all these things that the
banks have been lending out where the
ability to pay or the asset value is
declining that aren't US Treasury bonds
and mortgage back securities is the btfp
going to be expanded to cover those
because if those go down in price the
banking system still insolve them right
so yes they've solved one portion of the
market the one they really really care
about which is mortgage back Securities
they want Americans to own a house and
us treasuries they want Americans to
invest in the government now it's all
this other stuff they would rather not
have to bail it out but again the
banking system is choking on all this
stuff and they're going to have to make
the political choice at some point
either they're going to let the non-t
Bic to fill Banks actually fail and a
lot of you know Americans with small
deposits not get their money back or
they're going to come in and save the
day and bail everybody out and print
more
dollars okay I think this is the part uh
in our program where we point out
exactly what inflation is when it was
first described to me as an invisible
tax I was like it didn't make sense to
me and now understanding it better I
realize that what you're doing is you're
saying okay
um we're going to make everybody's money
worth a little bit less so by making
more of it then the value of any $1 just
reduces a little bit and so it becomes a
way to spread the taxation across
everybody um so the real question the
government is asking is okay this Bank
whatever they did something that isn't
uh well so we already know that mortgage
back Securities uh and Treasury those
are going to be one for one but if they
have something other than that they're
asking the question do we want everybody
to have to cover this thing that didn't
end up working out this investment that
didn't work out or are we just going to
let them roll over and die um as you
look at that and when you think about
this three to six month big disturbance
is that the thing that you think happens
that we get some something triggers a
run on these small Banks could be
commercial real estate starts uh
something kicks off and it starts going
down or are there other things on your
bingo card other than the regional bank
failures I mean usually it's the
problems are known it's a question of
whether or not we're focusing on and we
being the market right so the market
knows the commercial real estate's a
problem but we haven't really seen a
big price markdown because no one wants
to trade the the sellers don't want to
realize a loss and then have to mark the
rest of their portfolio down and thus
being solvent and the buyers don't want
to buy at this price because they know
it's too high so nobody's Trading right
so it's that calm situation where okay
well the price is still where it was you
know 12 months ago but there's no
transactions right so once there's a few
transactions when people have to sell
for whatever reason we don't know what
that that it's going to be then we're
going to go then it's the fiduciary
responsibility is okay well there are
these transactions in the market and I
now need to mark down my portfolio
report to my Regulators oh [ __ ] my
Capital buffer is declined therefore I'm
insolvent and what usually happens is
you know because of the politics they'll
let somebody fail someone's gonna
there's going to be at least one failure
and then the Market's gonna [ __ ]
throw a fit um shit's goingon to be
trading all sorts of [ __ ] up ways and
then you know on one weekend they're
like okay we can't let the next one fail
right they let uh uh silvergate fail in
in March of of this year but they didn't
let svb and by fa I mean silvergate went
bankrupt and the the depositors are not
guaranteed to get their money back by
the the um Federal Deposit Insurance
Company FDIC whereas with SCB and
signature and First Republic they were
bailed out they being the depositors
were bailed out now obviously the bank
management was replaced and Equity
holders lost money but the the
depositors were were bailed out so
usually one person fails there was a
Leman there was a bearer before there
was Goldman Morgan Stanley everybody
else City G so they'll probably let
somebody fail first first because the
politics demand it once the fear of um
looing collapse is instilled in in The
Regulators they're then going to say we
have to print the money because the
system is going to fail what that's
going to be I don't know I just see that
for whatever reason financial crisis
happen in the fall and in you know the
winter in the northern hemispheric
perspective and so we haven't solved any
of these problems they're only getting
worse um they're getting exponentially
worse and the countries that would
usually bail out the American Financial
system by buying assets for their own
reasons can't do so and so as we
progress further into this season where
traditionally crisis happens there's
going to be something I don't know what
it's going to be that's just my my my
base case and I want to prepare myself
and make sure that I'm able to make
money in uh in a situation where um she
gets all [ __ ] up yeah okay I didn't
know that there's a preponderance of
problem s in the fall and winter is that
the obvious guess for somebody that's
never heard that before would be it has
something to do with Energy prices as
people have to crank up their usually so
in the past it was agricultural um
issues right so um the
farmers uh the credit tightens in
certain parts of the Year depending on
when um the farmers need credit to you
know buy more equipment to do the winter
planting right they receive a bunch of
money now they need to to draw down on
credit and so that's why you get the
spikes in in uh in credit as we move
through the agricultural cycle and
that's part of the reason why you have
um different federal reserve banks in
different districts is to try to smooth
out that um the demand and supply of
credit between the banks in the East and
the the agricultural regions in sort of
the center of uh center of the country
um and you know every other country is
kind of the same right farmers are
always in debt and they're always Bor
Bing money and then receiving lots of
money depending on on how the Harvest
goes and I think that's part of the
reason why we usually experience crisis
in harvest season and then winter
planting now you said the problem is
usually known but it's a question of
whether the Market's paying attention to
it or not what are some of the problems
that you're already aware of whether the
markets focus on them or not that could
be those um early dominoes that fall so
we already know that the US banking
system is insolvent from us perspective
um we already know that the the major
buyers of us treasury debt are not
buying and the treasury needs to issue a
lot of it that's known um we already
know that commercial real estate in the
US is a problem it's just that nobody's
trading right now because of what I just
described you know globally we already
know that um China has this massive real
estate issue and is deleveraging which
means that China cannot contribute to
Global growth in the ways that it used
to meaning um doing massive government
stimulus and essentially buying stuff
from the rest of the world to build up
their country right China's been P the
economic Powerhouse of global growth
which leads into the US and European
economies you know since the early 90s
they they have lost their capacity to
stimulate in the ways that they are used
to um Japan has is a problem either
they're going to save their government
bond market or they're going to save
their currency Japan holds is one of the
richest countries from an asset
perspective on their balance sheet are
they going to sell down their treasuries
their you know fancy us real estate um
their Equity positions to essentially
help fund the um uh the ability for
their Central Bank to manage uh the
depreciation of their currency so these
are all known things there's nothing
hiding which one is the one that causes
the spark for everyone to start focusing
on freaking out I don't know I think the
train wreck will happen so slowly that
it might be more imperceptible than we
think how long can we print money before
that bad thing happens in the bond
market and I'll set the table with Japan
as far as I know they print money like
fiends
um is there an obvious breaking point or
are we like at the 10% of what we can
print Mark 90% of what what we can print
so let's use two countries and the big
narrative and this is sort of the
Keynesian
monetary a modern monetary Theory mmt
crowd is the government there's infinite
capacity for the a federal government to
have debt and the first example they
look at Japan they have a I don't know
what the debt to GDP of at the
government level is like 300% or
something and look this is perfectly
fine you go to Japan everyone's nice
food's great trains run on time super
safe blah blah blah what they don't
understand is what Japan actually did
there's a great report by deuts bank and
I forgot what it is and it's the label
is um Japan the best C the biggest Cary
Trade ever run so everyone always looks
at the the central government's debt to
GDP and they say oh it's ridiculous they
forget that you know they think Japan if
you ever been to Japan and done any
business there you'll realize that Japan
is a socialist country with hoisted with
capitalism was hoisted on it they're
they're very collectivist culture and
I'm not saying that in a negative way
that's just how they are so you have to
combine things that you otherwise
wouldn't believe as one into one to get
the real Financial picture of Japan so
you have to look at okay yes you have
government debt then you have the
corporate and private sector of Japan
the people of Japan they
own something like3 trillion us worth of
assets around the world World Japan is
probably the richest country in the
world on sort of an aggregate basis
because what happened after the war the
US made Japan a colony for a bit lent
them a bunch of money helped them get
off their feet and said we're going to
give you access to our Market please
sell us [ __ ] the Japanese said great
we're going to essentially subsume the
individual and promote the collective so
everyone we're going to financially
repress you but we're going to make
really really good stuff you're going to
have a job for Life we'll pay for you
year Education Health Care cheap
Transportation good food work really
hard so that these major companies can
sell great stuff to America and that's
what Japan did they started with America
then it went to Europe then it went to
China and Southeast Asia they are the
largest holder of us treasuries which is
just the savings of the nation plus they
own in total about3 trillion dollars of
just assets mainly in United States but
around the world with all their savings
so if you add that back to their debt
and then you add back the private
Savings of people which is estimated of
like5 trillion dollar of just money and
just sitting in bank accounts of the
Japanese people because they haven't
spent anything for the past 30 [ __ ]
years because of the deflation that
they've been having you get a much
different picture you get a DE to GDP of
around like a 100% something much
different so Japan can print all this
money because it owns the [ __ ] world
they're not that broke and so people say
oh Japan just print a bunch of money
it's okay okay it's okay because they
were extremely productive they had a
captive Market in that the richest
country in the world from a GDP
perspective America they could freely
sell anything they wanted into America
and that's how they got so wealthy so
that's a Japan example on the why it
doesn't really work then you get to
China China says we're completely State
socialist again not saying that in in a
bad way the central government owns
essentially all the most productive
companies
and we are going to debt Finance our way
out of the poverty of the you know 1949
to 1980s right massive transformation in
the society and there wasn't an
infrastructure project that China didn't
love and they they've run up with
something like a 300% debt to
GDP they built all this stuff now if you
believe that debt you can print as much
debt as you want then why isn't China
responding to this property bubble by
printing as much money as they can and
just doing the same thing they did for
the past 20 years because they've
reached the capacity of the amount of
debt they know that the more debt I
spend I produce no value and I just make
the problem bigger I create more angst
amongst the PO population I create more
desire for people not to have children I
created a declining population because
people you know cannot make ends meet
because I've just overproduced and
there's just not enough real return
there so there is an internal capacity
so
there China and Japan are probably the
two examples that prove the point that
I'm trying to make which is there is a
capacity limit for debt it's not some
number that we know once you go higher
than this that things you know
automatically happen um there's a paper
by Ken Ken rogoff I forgot what it is
and he did a study and basically the the
the study was that once you get above
about 130% debt to GDP on a government
level then you're almost you're assume
to have a financial crisis sometime in
the near future now
again you can't put a time frame on it
the Us is around 130 140% so it's on
that path to doing so does it have
capacity to load itself up with a lot
more debt absolutely China's at 300% GDP
right so you can you can go that far or
even farther maybe but again then you
start to have the decay in society you
get to have you get to have this moral
angst that is amongst the population who
feel it they can't put their finger on
why they don't feel confident or why
they feel angry but the reason is that
the government has again taking away
their dignity by [ __ ] up the money
monetary Supply so again I don't know
what that number is we're in the
territory where something could happen
and so my thought is as an investor I
want to be long that volatility by being
long a put option on The Sovereign bond
market which is crypto I don't know when
it's going to happen but it's going to
happen if they continue doing the these
same same things so want I buy something
where I have insane upside if it [ __ ]
up and what's my downside it's a super
liquid asset as soon as if it's not
working then I sell a bit of it whatever
so I have an asymmetric return debt the
debt
flywheel uh how is it possible given our
need to at a minimum make interest
payments that we aren't already in
trouble so I think right now
our interest payments are already our
third biggest line item it's more than
our National
Defense we're adding a trillion dollars
to our debt every roughly 100
days that will compound so what takes
100 days now will be 95 and then 90 and
then 80 and then
60 uh I don't understand how we're not
at the end what what am I
missing because the money because
there's so much money trapped in the
trefi Western Financial system it's
there to be inflated it's there to be
taxed every dollar you have in your
retirement account every dollar you have
in the in your trei big account every
stock that you hold that is required to
trade on the you know the clearing
functions of the US or the European
governments is right to get taken by
government via an inflation tax so
that's how they're able to do it because
this capital is sitting around and not
doing anything the Pension funds are
forced to own government bonds the banks
are almost forced to take their excess
reserves and buy government bonds and so
that's how they're able to keep the game
going because there's all this Capital
that's sitting around that they can
inflate away now that's why crypto is
such a fundamental problem because it's
an Escape valve it's outside the system
I take my Fe out I sell it and now I buy
Bitcoin can't take it away from me you
don't even know I have it and so that's
why the ETF is such a key component
which is okay recognize that we have a
problem we're not going to change our
spending we don't want to outright ban
the thing okay now it's time to allow
these fund managers to ingest this Fiat
into a derivative but keep the Bitcoin
within the system you know so that is
why you can afford to do this and of
course the US is a reserve currency
issuer largest military in the world
again you have the ability as the the
the Empire to to do this a lot longer
than other countries can now to the
extent that other countries stop saying
I'm willing to sell you oil or food or
whatever in dollars then the ability to
keep this game going uh the time frame
diminishes yeah what do you think about
the Petro dollar being used to to um
have at least a response to our
financial Warfare which may be a little
unfair but when we for people that
haven't thought through this yet when we
inflate the currency that spreads it to
people like Japan that own trillions of
dollars in bonds um so we're we're
exporting the inflation tax do you see
people weaponizing that do you think cuz
I've heard people say oh my God
dollarization is imminent and I've heard
other people say get out of here there's
literally nothing else um so people
would flee the dollar to
what so I think that they're get missing
the point so dollarization started in
2008 when the US authorities decided
that they're going to save the banking
system by this massive uh money Printing
and if you look at the charts and you
take a look at U amount of gold that
foreign central banks started buying
with ner was in 2008 now it's ticking up
similarly for the the effect of foreign
central banks on buying us treasuries
the height 2008 now it's tapering off so
detalization is happening slowly at the
margins the Roman Empire the the British
Empire these Empires didn't fall like
overnight it's not like overnight you
just stop using these currencies it's a
it's it's a slow process it happens at
the margins we're already seeing it in
2023 20% % of all oil sales were in a
currency other than the US dollar
highest ever so the Petro dollar is
breaking down slowly at the
margin of course the Western world and
the US major allies are going to
continue using the dollar whether you
know China Saudi Arabia whoever uses it
or not that's not the question the point
of for an investor and trying to save is
okay align myself with the
trend but don't get blown out of water
if it takes a time if dollarization is a
trend if the trend is to have a
multi-polar situation of currencies
being used what do I know that central
banks and countries have used in the
past to trade between themselves to
settle debts and trade flows gold okay
that's why I own gold I own gold because
I know the countries who are not going
to use the dollar to settle their
tradeing balances will use gold and are
using more gold I want to be alongside
that trade okay well what about the
people the people don't want to continue
to be [ __ ] over by inflation whether
they're rich or poor here's a global
decentralized digital system that anyone
rich or poor can access okay I want that
system too another put option on the
current you know order of things and
again I think people try to get more
realistic about it like right or wrong
like I believe America's good or bad it
doesn't matter all all I'm saying is
we're going to change and I want to be
long the change and I don't know what
it's going to happen in the future I
just know what won't be like it was
yesterday is there anything right now
that is um a plausible replacement for
the dollar is it um brics I know is
trying to back their currency with gold
I think central banks are buying up gold
is it a return to a gold standard is
there another um governmental currency
that has more respectability less
inflation I would say the you know in my
view the most likely outcome is that
countries will continue to use dollar or
whatever currency is to trade amongst
each other so let's say that I'm you
know I have a I have some oil and but I
also import food so if I sell more oil
than food I need to import I say okay
don't pay me the difference in dollars
pay me in Gold but I can still invoice
my oil in dollars or whatever depending
on who's buying it so I I don't think
there's going to be one particular
Global Reserve currency I think there'll
be different economic spheres and the
trade between those economic spheres the
net of that trade will be settled in
Gold interesting okay are you surprised
at all that gold does not go up in a
similar fashion to
bitcoin no because gold is different
it's bigger door um it's not digital
it's not the new new thing the drivers
of gold are very very slow methodical um
Central Bank purchases is the crazy
volatility in goal will be when let's
say that you know the US government
wants to help the situation they devalue
the dollar and gold and say okay I think
the gold on the on the fed's balance
sheet is held at $35 an ounce same price
that's been since 1970s right they say
now our gold on the FED balance sheet is
valued at $10,000 an ounce which is
basically them devaluing the dollar gold
shoots up massively and now all of a
sudden a lot of these problems go away
because the FED has so much gold they're
valuing it at a certain price and now
the dollar is seen as a stronger
currency so that's a situation that
could happen which would massively
oneoff increase the price of gold by 3
to 5x and other countries could do the
same thing who hold gold at an
artificially low value but could revalue
it higher on their own balance sheets so
that is probably the gold bull market
scenario that I'm sort of that's why I
own the thing that's the optionality
that I'm um playing is a revaluation by
central banks to make their currency
seem stronger in Gold
terms I've never heard that before what
what would trigger
that oh a war budget crisis I mean the
same things that you know the
government's done in the past right the
when the gold
window closed I think
FDR
um depreciated the dollar in Gold terms
by like 80% overnight or whatever it was
but obviously you couldn't own gold as a
person he did it after that said okay
I'm gonna take all your gold now I got
all your [ __ ] gold guess what dollar
is worth the gold is worth way more
dollars now
sorry so I think that's a simp Serv of
situation that could
occur okay let me see if I understand
this uh
you're I don't understand this why would
you want to make gold more expensive
what do you plan to do with that buy
more gold buy more dollars like what are
you doing no you already have a bunch of
gold so at least the US is a very Stark
example the US Federal Reserve has
however many metric tons of gold a lot
of it it's held at I think it's $35 an
ounce or whatever that price is the very
low value gold right now is valued at
are they artificially holding that price
down they not Hing it saying this is
what this is what we value gold at so
this is so our balance sheet if you
think of like think think about what's a
dollar worth it's worth the assets that
they hold what's the only real asset
that the federal government has in a
monetary sense it's gold how much gold
do you have what do you value at so us
being the reserve currency issuer could
say overnight we think that gold is
worth $20,000 an ounce and guess what we
have I don't know how much they have but
and so all of a sudden I was like oh
[ __ ] they've just devalued the dollar
and gold terms but they own a bunch of
gold so now the dollar instead of being
a
US Treasury backed currency and the US
treasuries are trash because of all this
spending it's now a gold back currency
and guess what they've got a lot of gold
and it's worth $20,000 an
ounce so hold on hold on sorry sorry
sorry I my brain is just too small for
this uh but I really want to understand
this uh so are you saying that they are
reping the dollar to gold in this
scenario yes well it wouldn't be a peg
per se it's it's what do you think a
dollar is worth right if if this if
you're if you believe in this
dollarization thing and that country is
say I don't want to hold the dollar
because it's inflating away it has no
value it has no assets backing that I
don't believe in the US trases well then
the federal government and the FED could
say oh actually guess what we've got all
this gold it used to be worth this now
it's worth that this new price we
believe gold is worth is massively above
the current clearing price of gold
for certain individuals we'd be willing
to exchange gold for dollars not
everyone obviously only certain
individuals certain probably Sovereign
Nations and all of a sudden the dollar
becomes a strong currency again because
it why on Earth why on Earth would a
government do that like if I saw that
you just changed the value of your
dollar
massively why then would I exchange gold
because I'm thinking oo dollars are
still great I still want to have dollars
and I have gold and so now I'm going to
get those dollars like to to me again
I'm sure I'm just missing something but
to me I would see that as such a wild
manipulation of the currency I'd be like
I don't want anything to do with a
currency that just changed 35 you should
old Bitcoin but this is how Fiat
currencies have worked in the past and
this and this was done in the 19 what's
the incentive it is because you have to
devalue the currency the US needs a
weaker currency a weaker currency helps
you sell your export I get our incentive
but something is only worth what someone
else is willing to pay why is someone
else willing to trade their gold for
dollars in that scenario obviously
someone is or they wouldn't do it well
no one no one has to trade anything I'm
saying the the government itself says
that we believe go is worth this price
right now they say it's worth $45 or
what $35 whatever it is on their balance
sheet now it's worth we will exchange
gold at this price way up here and
they're able to do that because they own
a [ __ ] ton of gold if you didn't own a
lot of gold then
I would agree with you why would you do
that this is more a way to engender a
belief that the dollar has a a large
gold value well okay here's what we
value gold at on our balance sheet and
we're able to do this because we're the
central bank and you can exchange gold
at this price now it's much higher than
the price that it is around the world
now that only works if you have a lot of
gold us has a lot of gold China has a
lot of gold Russia has a lot of gold so
there's there is a thinking out there
that any number one of these countries
that have been accumulating a lot of
gold could say our currency is very
strong guess what we're willing to bid
for gold at this high price therefore
sell me oil in my currency because you
know that you're going to get gold at a
very attractive price because this is
what it's worth sell me medicine sell me
wheat whatever it is so it's a
confidence game amongst other issu other
trading partners to say my currency is
worth a lot of gold because gold is has
historically been the real currency of
the world not these Fiat things man
again so that seems false what you're
saying is my gold is worth a lot of
currency my currency is worth a tiny bit
of gold if my currency used to be um $35
buys you an ounce of gold and now it's
,000 buys you an ounce of gold the gold
got expensive the currency devalued in
its purchasing power anyway
probably tearing their hair out right
now say that again but I also but I also
have trillions of dollars of debt so now
my currency devalued in Gold terms but I
owe a fixed amount of debt right so the
reason why and another the reason why I
devalue your currency is well I own I
owe a lot of it I I owe a lot of it and
now it's worth less I've decided it's
worth less so I can pay you back but
you're getting paid back in depreciated
dollars now obviously going forward
people who trade going forward have a
different deal than people who have
traded stuff in the past so again yeah I
agree with you it's a [ __ ] up way to
treat people who invested in and your
bonds but again it's another option that
you can use as a sovereign country is
devaluing your currency and goal terms
to pay back an unsustainable debt load
if you don't want to outright default by
saying I'm just not gonna pay you back
instead of saying that you're saying
okay I'll devalue in Gold I'm gonna say
psych it's worth like on10th of what uh
you thought it was worth that's crazy I
can't believe that they can do that uh
insane okay let's talk about uh all the
liabilities since we're on the
subject uh do you think that the US so
going back to this idea of Argentina
comes in they slash spending uh for the
US to get back on track they would have
to slash spending um Social Security is
basically a pyramid scheme um would they
be wise to to Lop off Social Security
and uh could you see that actually
happening with any sort of political
plausibility the United States given
that boomers are more uh politically
active I would say that it would
probably be a death sentence for most
politicians to try to take away those
health benefits now a very skill
politician who's able to get a lot more
younger people out to vote and explain
to them how they've gotten [ __ ] over
by the old people in the
country if that person's able to do that
put in that kind of work then yes I
think that you know a Reformation of the
United States's healthc care system
could be on offer but if if you're not
willing to put in that sort of political
work to re-energize the younger
constituents there's no [ __ ] way
he'll be able to do
it did you see the video that um Ben
Shapiro posted about retirement and
Social Security
no it's very interesting lighting the uh
the internet on fire and he basically
said look Social Security is not going
to play out the way that you think
you're probably not going to be able to
reap the benefits um not with people
retiring as early as they are you should
you know look at pushing retirement back
or removing retirement all together
um if you look at managing a fiscally
responsible country is that an option on
the table for you or do you think that
there are better ways to get that
done absolutely you should remove I I I
think these these programs are great for
the people you know the Boomers right
they're the biggest beneficiaries of of
all these you know around the world they
sort of like Social Security Programs
depending on how you you pay for them
and removing them would remove that that
dead weight but I think at the other end
you also need to sort of Reform like you
know Global sick care which is the
health industry and the misalign
incentives right people shouldn't be
dying the way they're dying based on the
shitty food that we eat and the
overprescribed medicines there shouldn't
be and that's why people oh I need to
have this health care because everybody
gets sick why does everyone get sick
because we eat [ __ ] processed food
and all this dog [ __ ] that's you know
put out to us as healthy there's a
reason why everybody spends a majority
of their money in the last like two
years of their life dying of horrible
cancers and heart disease and all this
kind of [ __ ] right we're poisoning
ourselves every single day with these
[ __ ] up food chains so I think it's
not just let's remove the retirement
benefits and the healthcare as well
let's get at the root problem of why do
we treat people the way we treat them
and the Healthcare Systems around the
world let's have a better relationship
with
food yeah one thing I don't think people
really understand is that you can
obviously because we print to make all
these problems go away but if healthc
care costs you know let's say 10x what
it needs to cost if people were actually
healthy um you are quote unquote
bankrupting the country and that you get
to a point where there's no way that the
productivity uh of the country could
possibly match that so you've got the
interest payments just absolutely insane
you've got sickcare management insane
you've got Social Security retirement um
all of it becomes really
unmanageable I have until recently I had
no visceral relationship with how those
expenses actually played out in terms of
the budget until I started looking at
how much the government spends versus
the actual GDP of the country that stuff
gets very
scary and that's why we race towards War
we flood into crypto it all comes back
there all right then let me ask you
where does eth go we've talked about
Bitcoin where do you think eth goes from
where it's at
now oh maybe 340,000
uh
whoa that's
mosive what what do you think gets us
there just the knock on effect of
everything that happens to bitcoin has a
trickle down to eth trickle down you
have you have the um eth ETF possibly
the ethereum is the decentralized
computer
and the decentralized computer has a
commodity the eth the currency that pays
an intrinsic 4% yield which is the
staking yield of it's the only you know
crypto asset of that size that has this
intrinsic yield and that's going to draw
a lot of it's the internet Bond it's the
bond of the internet computer and pays
you a yield to own it and so I think
that's going to be very powerful
narrative as people start to think a bit
more about what actually what eth
actually is and they're going to
allocate and say oh well not only do I
get sort of this
deflationary network value increase and
the E the currency I'm also getting paid
4% Yi e where else do I get that sort of
return that's great I want to allocate
to this and there's all sorts of
different interest rate strategies you
can do around that but I think that's
going to be a big narrative for people
who are going to get into eth and
understand oh great I get to participate
in let's create a new Digital internet
on Defi and I get for % yield why do you
think that right now eth seems to be
more to the upside I don't know if this
is true to the dollar but it seems to be
more to the upside than Bitcoin so I'll
see Bitcoin dip but eth just keep going
not that it hasn't had its own dips but
um are people pricing
in the future in a greater way than
they're pricing in the reality of
Bitcoin
today I don't think so it's a smaller
asset right so smaller things move
faster just law of large numbers so I'm
not
really yeah I don't think so so do you
think its rate of um rate of increase
will speed up if an ETF goes for sure
just like Bitcoin just more more assets
and you know if people are actually
using the ethereum network post the the
merge you it becomes the the supply of
eth actually
declines so there's less eth available
the more people use the thing so if we
believe in Defi and the network activity
grows in defi because more people know
about it they want to experiment then
not only the the total supply of eth
declines and then you have the ETF you
know taking eth out of circulation as
well so you get sort of a double whammy
effect uh on on sort of the price on the
upside the narrative that I've been
hearing is you're going to get big gains
in Bitcoin you're going to get bigger
gains in eth and then you're going to
get even bigger gains in salana
is that just one do you agree with that
narrative and two is that just a law of
large numbers or is this um people
seeking out the highest volatility
clearest narrative
assets it's oh I guess timing is
everything so we think about last cycle
so Bitcoin went down something went from
69,000 down to 16,000 right salana went
from 250 I think to seven so yes from 7
to 250 is going to be a bigger return
from 16,000 to 69,000 right it's just
it's the um path dependency of returns
and the time in which you get in and out
of an asset so you could make much more
money in salana or some other much lower
market cap shitcoin than you could make
in Bitcoin but if your ass doesn't get
off the train at the right time you're
going to get absolutely wrecked versus
Bitcoin yeah you might get wrecked but
it won't be as bad as going from 250 to
7 so again it's it's one of those things
where yes you can make more money in
lower market cap shitcoins but if you
don't time it right you're going to lose
more on the downside so you have to sort
of balance those those two together all
right as a Trader you seem very
comfortable with what I'll call trading
on culture trading on um Trends
momentum because when I talk to people
about why I'm a Believer in Bitcoin why
I'm a believer in ethereum I can say
very robustly that I have a thesis
around where the world is going and
those are going to be long-term
adoptions they're not fugazi as you have
said about other things including the
trafi system um there there's just
something really intrinsic about them
now there's a flaw in the Bitcoin thing
if it can't whether it's ordinals or
whatever whether it can't become another
thing which it it has that sort of
looming Spectre but that narrative
digital gold it being the store of value
makes sense uh ethereum world's computer
it's a bond in the distributed world's
computer cool those make sense beyond
that when you get into nfts maybe salana
although if they can speak to maybe
gaming uh web through gaming or
something like that then they're there
could really be a core thing there um
but I have a feeling that's not why
you're trading on it that this is really
just about H people get hyped about a
thing I'm able to read the tea leaves I
see what they're getting hyped about I
know the signs to get on the train I
know the signs to get off the train and
I trade on that is that an accurate
assessment yes so I believe that I have
a at least for the assets that I large
in my portfolio I have a fundamental
understanding of like what they are what
they're not and I can trade on the
narrative and know when the narrative
gets out of whack with what they
fundamentally are then maybe it's time
for me to step off versus I don't
understand what these things I've never
read the white papers for Bitcoin or
ethereum or you know reading research
from very much smarter individuals on
the like technical things that are going
on I just know what I read on Twitter
your ass is going to get wrecked because
you don't even know whether you're
believing in something that's true or
false at least if I know I'm trading a
piece of [ __ ] I know it's a piece of
[ __ ] and I'll size my position
accordingly that's interesting uh okay
so everything is gambling getting in the
elevator versus walking up the stairs is
a gamble I think that people would do
well to
conceptualize all of investing to an
extent as a gamble the reason that I
think that um Bitcoin specifically and
crypto in general will be here is I
believe that tomorrow is going to be
more digital than today I believe that
every generation grows up like a fish in
water and when you're born and crypto is
just a thing and you don't even think
about it uh yeah you it would not make
sense to you that that is somehow less
valuable than uh Fiat money especially
when everything you do you buy your
skins and video games and to you there
those are as valuable as your real
clothes and you love them just as much
and um so you know when I think about
kids uh and v-bucks it's they're just
digital natives like through and through
so I think for them it will just make
all the sense in the world and so once
something is digital then why wouldn't
you want your money to be digital as
well then it becomes a question of
control because hey the government will
be more than happy to come out with a
cbdc uh and the that then collides with
freedom so I don't know how humanity is
going to answer that question I'll be
completely honest when I think about I
think people like being taken care of I
think there is a Hu like when you read
the rhetoric from
1776 like those guys were ready to Die
For Freedom we're not there we're not
there like right now it is just a
different time man and so I think people
want the convenience of something
digital I think money will be digital I
think people will live in digital worlds
I think they will buy digital Goods but
I don't know where we're going to settle
on uh a desire for protection like even
myself I it wasn't until um svb looked
like it was going to collapse that I
finally was like you know I should just
get I didn't have any direct exposure to
svb um but it it made me just take
everything off every exchange uh but
then when you look at the realities of
cold storing and you realize you have to
store them in different places and not
at your house and it was like oh God
like I just felt so I still feel so
paranoid I'm GNA forget where I put
something or half of my key which is in
you know this place like I forget which
one has what oh god like that kind of
stuff terrifies me and
so what do you think about that do you
think that people will truly while
they'll Embrace digital money I think
most people will agree to that do you
think they're going to care enough about
money privacy which is something I've
heard you talk a lot about with Bitcoin
will they care enough to make Bitcoin
which maybe's trying to be choked by the
government and all that will they do it
or will they just take their
cbdc so I think most people don't care
about privacy and that's I I know this
because they have a mobile phone in
their pocket a smartphone a smartphones
tracking you um we voluntarily have
given the most amount of information
about ourselves to Facebook Google
Alibaba WeChat all these things right
because we want Community we want to
communicate with each other um we want
to look at thirst traps whatever the
reason is right um uh we've done this no
the government didn't force us to do
this these were private companies
creating these products right so most
people as you said it's just too much to
be financially independent to actually
be your own financial institution for a
lot of people is is just too much and
they're going to stay in in this system
and I like to say that there's a there's
a flood coming this you know
inflationary uh maybe pseudo collapse of
the Fiat Financial system there's an
there's a Noah's got an arc of you know
Satoshi on there with Bitcoin
unfortunately most people are going to
drown because this isn't this isn't for
them right and so um when you move it up
to the government aspect crypto in
itself isn't a problem the problem is
that the people own it and it's not the
standard individuals and firms that are
used to owning the new lovers of
Technology ology and that's their issue
with it uh and so now we're seeing that
this the experiment has worked so far we
have however many millions of wallets
created we have however many trillions
of dollars worth of transaction that
have been completed on these systems
they work it's more sound than the
traditional finances it's faster it's
cheaper fine well let's not have a bunch
of Muppets running around the world who
uh aren't a bunch of old bald dudes
sitting in New York London and comp
parison whatever uh owning this thing we
want to move it back to who should be
owning this so we're going to now allow
the traditional Financial players to
launch things like ETFs right which is a
very easy way for everybody to own the
financial return of Bitcoin very
important I say the financial return not
actual Bitcoin as you said I don't want
to M private keys I don't want to worry
about where I put my wallet I guess want
to earn that inflationary protection
aspect of Bitcoin
but I don't necessarily care to really
experience the real Financial Freedom of
it of owning my own Financial system in
my pocket in my head right so I'll just
put some Fiat into the Black Rock ETF
the Fidelity ETF or the pick your large
asset manager wherever you're from ETF
right you don't own Bitcoin you don't
you don't care about custody like oh the
price goes up and down on the screen
I've beat inflation but guess what my
money when I want to sell comes right
back into right back in the banking
system right back ready to be
financially repressed to make sure that
bonds are purchased by the banking
system to keep governments afloat now
fine Bitcoin is an open architecture
everyone should be able to build
whatever Financial products they want
the question then becomes and I don't
know the answer to this is Will so much
value in currency be owned by these
centralized asset managers who are
essentially arms of the the trafi
ecosystem
that the underlying fundamentals of what
Bitcoin is the Privacy will those be
altered will you know a black rock
support through maybe ownership and
large mining companies different sorts
of improvement protocols that detract
from the mutability of the money or the
censorship resistance or the the
decentralization right so while we as
Traders re are cheering yes ETF ETF ETF
that's going to bring all this money
into the system because now people who
want to escape inflation understand the
the value prop of fixed Supply and all
that but just don't want to deal with
the the technology aspect of a be a
cryptographically bearer asset because C
is bad with passwords and whatnot people
don't want to deal with that they want
to put their money in the ETF and we're
yes great more money in the in the
system number go up everybody's rich but
are we inviting in something that's
going to fundamentally change what
Bitcoin is because now they're going to
have a say through large ownership and
Mining pools or they're going to run a
bunch of nodes or they're going to have
control over the price right it's an
open question and this is going to be
the real Crucible we're going to have to
face as an industry of determining what
is bitcoin when now we have trefi who is
a stakeholder in this system how do we
deal with them how do we maintain this
ethos that makes Bitcoin valuable this
immutability this money this the hardest
ever existed with a system that is
basically trying to capture as much
capital and sequester it so that I can
pay the inflation tax to make sure that
the government stay afloat I don't have
the answer to that but that is the real
you know crucible that we're going to
have to face in going forward because as
you rightly point out it's just pain in
the ass to be your own financial
institution it's interesting that one
feels easy to me I don't uh I if if the
money really stands stands for Freedom
then you have to let people do what
they're going to do I saw this in web 3
a lot and there was a sense of like uh
we the vanguards of web 3 are going to
decide who is web 3 enough and uh if you
don't pass the purity test then you know
we don't want you in here and it's like
you're never going to be able to to get
something to scale by trying to impose
culture top down culture is always and I
mean always going to arise from the
bottom and you can manipulate it through
media and stuff like that but at the end
of the day man that what what people
internalize is going to become the
culture the youth will always get uh
whatever culture they decide they want
like it it is just an Unstoppable force
and yeah to me it's like Satoshi created
the thing and then the thing's going to
become what the thing becomes and if if
there is a way to control it then it
will become no better than the thing
that it's trying to replace which is
already something that's being
controlled and the whole point is you
think you want to be able to control it
because you think you have all the
answers and you're going to do
everything right and the reality is as
soon as somebody can control it then
they will control it and use it against
you which is the whole point like I mean
just to get myself in hot water here
when I saw what was going on with the
Canadian trucker Convoy I was like yo
they are freezing people's assets that
donated to a cause like that's crazy I
couldn't believe it that that really got
me way more interested in having
something that I could control now I'm
not convinced the government can't um
use Force to get what they want at a
crypto because at the end of the day
look if the government puts a big enough
gun in my face here's my crypto
so you know I get it it's easier and if
I leave before they start breaking out
the guns then fair enough but God I
don't want to I don't even want to
contemplate a world that
gnarly yeah I hope it never comes to
pass you and me both so I have to ask
where do you think Bitcoin is going is
this something that you know uh breaks
100,000 is it something that breaks a
million is Michael sailor gonna be a
hero or the world's biggest L what do
you think so my my working model is that
you know we're going to continue
chopping around 25 20 30,000 this year
um as we get to some sort of financial
disturbance and people recognize that
real rates are negative if you know if
Government are growing if the economy is
growing at nominal rate of 10% but I'm
only getting 5% 6% even though it's High
people are on the margin going to start
buying other stuff crypto being one of
those things so coming into 2024 either
we get a financial crisis rates go to
zero or we keep raising rates but not as
not fast not as fast as governments are
spending money because they're just
trying to keep people doing things and
the rates are negative that we get to
crypto around 70,000 uh by the end of
2024 and that's combination of the
crypto havening event right um maybe
there's going to be you know a few ETFs
launched by large asset managers in the
US and Europe and China maybe Hong Kong
to be specific so we regain the all-time
high by end of 2024 and that's when the
real fund starts right that's when real
bull market starts and so my mental
model for where we could go I think
we're gonna go somewhere
between you know 750,000 to a million
dollars in Bitcoin on the upside right
and we're going to whatever the level is
there's going be a round number everyone
be focusing on I guess like Bitcoin hit
69,000 999 didn't hit 70,000 and then
it's going to go and just crash you know
75 8 90% whatever it is right doesn't
matter but yeah so my upside Target ises
so of the 75
750,000 million
level
2026 um time frame just because again I
believe this is going to be the largest
market in financial bull market in
financial assets we have ever seen in
human history so not only will Bitcoin
be at a ridiculous price you know NASDAQ
will be at a ridiculous price S&P will
be at a ridiculous price you know pick
your you know stock indic wherever
you're if you're not in one of in the
Europe or the us that'll be at a
ridiculous price right certain types of
property ridiculous prices um so we're
going to have a lot of ridiculous prices
out there and not just in in
crypto yeah that that will be a weird
moment and with people thinking that the
party is never going to end uh of course
it always does um let me ask you so that
I can help better understand the sort of
way that this all plays out at the
global level what what is with Hong Kong
and crypto China clamped down really
hard it seemed like that was a really
bad sign for me I was like
whoa this was the thing that I was
concerned about that a government would
be able to effectively eliminate it from
its country uh not that they'd be a one
China never eliminated crypto they never
eliminated crypto from China tell me
more so the the you know if you want to
think about from the Chinese government
perspective the thing that they most
they care most about is social stability
right and so as everyone becomes a
Speculator because they're desperate
right the last thing they want is a
bunch of Mom and Pops rolling up uh and
gathering in groups with a communal
grievance it could be crypto could be
anything right we know all this stories
you know uh has played out over Chinese
history they do not like this and so
seeing that you know that could cause
disturbance in China and also you have
the energy aspect of Bitcoin mining
consuming a lot of electricity that
could be used to do other things um they
basically made it very hard to trade it
so the exchanges all left you know
Chinese people still own Bitcoin that
hasn't changed you can't mine it there's
no exchanges fine they can't really
acquire it but at the end of the day I
think the Chinese government sees that
this is a technologically sound
thing um and they want more of it in the
Chinese diaspora that they can control
it doesn't necessarily need to be in a
government Coffer but the Chinese
government thinks if you are Chinese we
own you as a person you are Chinese we
are the Chinese government therefore you
are our subject no matter where you live
uh around the world ethically speaking
and so if you think about Hong Kong
which is part of China now and always
was but now it's very explicitly part of
China um but it's has this Western
Capital western eastern Capital meeting
point if they want to experiment in
allowing a more General um ownership of
crypto or if they want to allow certain
types of Chinese individuals to own
crypto crypto through Hong Kong
regulated financial institutions which
essentially means that they're
controlled by the Chinese government in
the same way that black rock is
controlled by the US government it's no
different um then they're going to allow
these companies to buy and hold crypto
because at the end of the day as long as
the crypto is inside of China they
believe that they can control it so why
not let a part of the country experiment
with this thing let people own it let
people buy it um by controlling it in in
terms of the way firms are able to
acquire users and let those users on
crypto so that's why there's been
licenses issued um the Hong government's
very positive on bitcoin the Hong Kong
government is part of China therefore
they would never do this if it was not
blessed by uh blesson Beijing as part of
a national prerogative for this
particular part of China to be positive
on crypto so it's similar sort of
situation to how to describe the Black
Rock ETF right Larry thinkink and
BlackRock having a trillion dollars
Bitcoin under its custody is the same
thing as you know Bank of China
launching an ETF on the Hong Kong Stock
Exchange and having a trillion dollars
of crypto they're both essentially in
the orbit of either the United States or
China and that's the goal if this
technology is as transformative if it is
the hardest money that's ever existed
wouldn't you rather your citizens have
it rather than someone else's and so as
the American political establishment
decides what they want to do with crypto
and that uncertainty drives companies
out of America out to the rest of the
world China's already gone through that
they've already purged the exchanges you
know starting in 2017 and culminating in
like you know I think 2020 right now
they've gone the other direction okay
let's try to control this let's try to
permit certain types of ownership
through firms that we can control in
Hong Kong which is our testbed region
for sort of you know Financial
Innovation and give the Hong Kong
economy something to um draw in to
expertise foreign Capital because you
know Chinese government believes in
technology crypto is a forfoot and
financial technology why not bring these
smart people here let them experiment
and we think we can control what they do
right so that's in my opinion what's
behind the Hong Kong story we're going
to see how that progresses I obviously
live in Hong Kong I love Hong Kong um I
hope that there is a vibrant
cryptocurrency ecosystem there and that
people are able to experiment with
different things because there is you
know a task of government support for
the technology we'll see what happens
you know at the extreme if you know all
of a sudden there's all these firms with
you know trillions of dollars with
crypto I don't know but at least there
are some people who are given the space
to at least experiment and try it versus
other places in the world where they're
being pushed out and
shun yeah I'll be very interested to see
how it plays out I was super intrigued
when China opened that back up in Hong
Kong it made me realize okay maybe
they're not as negative as I thought
they were and you said this is really an
element of control uh which does make me
super uneasy in terms of uh just
governments having more control than I
am comfortable with but uh I fully
recognize uh
that the way that it's looked at and as
somebody who lives there you can
certainly speak to this better than I
can that it's not necessarily one is
better than the other they are just
different but man from my perspective it
just seems better uh to be free but I I
won't try to export my values um so one
thing that I want to get a better
understanding of is um I had Peter
Schiff on the show and in the comments
because he was like right down my alley
in terms of all my fears like he was
right there uh everything that if I'm
honest he comes very close to
articulating exactly what I think is
going to happen when I just objectively
look at the math of all this uh and then
one of the comments in the feed was uh
Peter shiff has predicted nine of the
last two recessions and uh I had to
laugh at that so you know we've the
backdrop to our whole conversation has
been a sort of mutual acceptance that
yeah all hell is probably going to break
loose uh that we think we have a pretty
good handle on just the physics of the
math and that it can't go up forever
that you using my analogy you will pull
this rubber band back until it snaps uh
there's just no way around it what if
we're
wrong so what if we're wrong well if
we're wrong if there is a energy Miracle
like we discover some form of energy we
instantly commercialize it like think of
how long it took for us to get to a car
me every household in the US think of
how long it took us to Electrify the
world even though these Technologies
created in the 19th century mid but that
already assumes we can't have a soft
Landing what if we just they get it
right
if they get it right then you earn you
could you what you earn now right the
S&P is up I don't know let's remove the
tech stocks right it's up I don't know
six seven eight% this year whatever it
is right could made the you say you
could I could make the same amount I can
make the same amount in bonds and in
live literally overnight lending to the
Federal Reserve zero Financial Risk I
get paid five and a half 6% why take the
risk if they get it all right
great I'm taking I'm getting 2/3 if not
75% of the return of in the US Stocks
with taking none of the mark to Market
risk so it's actually makes zero sense
to own stocks if you believe they're
going to get it right because stocks
aren't returning enough it's not like
the SV is up 25% and cash yield six
right so from a risk adjust R risk
adjusted perspective if they get
everything right
then okay maybe the only s you know is
an Nvidia fine the rest of the market is
dog [ __ ] why even why even why even play
the game put your money in a money
market fund take your money out of your
0% yielding bank account put it in a
money market fund there's just no point
to trading stocks if they have it all
right what would have to be true for you
to say yeah I no longer think there's
anything looming on the horizon there's
no financial crisis coming they'd have
to get I assume the uh debt to GDP down
below below 130 I assume they' need to
start uh pulling some money out of the
uh economy without it causing any sort
of secondary knock on effect um what
else well so the US government right now
is running the The Playbook they should
be running right which is nominal GDP is
at 9% but the government debt yields
four and a half call it right so the
government's making money it's if it can
continue to keep money in the bond
market in the banking system at these
rates and at this growth level then the
US government at least for them will
deleverage themselves over time the
problem is that Capital can move so
we're making the assumption that Capital
doesn't move so if for my for the you
know go go luck scenario number one no
Capital leaves the long-term bond market
when they have a negative real yield
right number two there there is a energy
Miracle or we decide that nuclear is the
next thing and we run out to invest in
all sorts of different types of startups
to basically miniaturize nuclear
reactors such that instead of pumping
oil into our car we have a small little
U nuclear reactor and that powers our
our vehicles or we're going to build all
these different power plants like that
needs to happen right
immediately that those are the things
that would say okay maybe I'm wrong and
we're going to have sort of an
acceleration in energy productivities
therefore I should own a company that
makes real stuff apart from you know
semiconductors
otherwise I'm
put overnight bonds because at this the
second they cut the rates cool I don't
care I didn't lose any money I just take
my money of the bonds and I go buy stuff
right but I'm definitely not gonna own
longterm long end bonds that that trade
is negative EV negative expected value
in my perspective I don't see how they
get all these things right before money
leaves the system saying [ __ ] this I
want 9% not four and a half um so why
own the long end just put all your money
in short-term bonds if you believe that
they are going to get S everything just
put your money in short-term bonds and
take no risk to hear more about Ray
Delio's warning on the upcoming
recession which we're almost certainly
already in watch the full episode here
talk to me about the three forces that
you see that are influencing this moment
we've got Banks collapsing US dollars
under attack uh looming recession what