A Great Depression Worse Than 2008 - Survive & Thrive During The New Economic Reset | Arthur Hayes

Ray Delio recently said the next 5 years will be a period of radical disorder money printing Rising inflation a potential banking prices and a whole lot of debt threatened to shock the global markets and many people including today's guests believe that something approximating World War III has already begun but even if that's all true we can't control it whatever hand we're dealt we have to figure out a way to play it well so I bring you Arthur Hayes the controversial macro investor who's going to provide a master class on navigating these difficult times what are the signs that you see on the horizon that a financial crisis might be headed our way I absolutely agree there's going to be a major financial crisis probably as bad or worse than the Great Depression sometime near the end of the decade before we get there we're going to have I think the largest bull market in stocks real estate crypto crypto art you name it um that we've ever seen since World War II and the reason I believe that is if we back up to like 1945 essentially Europe blew itself up China was destroyed by a Civil War and and Japan uh Russia essentially fought the War for everybody else and you know massive destruction so if you look across the world the only country that was left was uh the US and you know they had a manufacturing base that was unharmed from the war and they essentially rebuilt the war and reaped them enormous benefits and we're still you know people who American are still living off of uh those benefits today but at the end of the day everybody started believing this thing called you know Keynesian economics which basically is if something gets in trouble the government should rush in um spend money if they don't have the money the Central Bank should print it and you know everybody collectively in the world depending no matter if you're you know what sort of ism you believe in subscribe to this this Theory and what that means is you know we all have collectively agreed that the government is there essentially to attempt to remove the business cycle like there should never be um bad things had happened to the economy and if there are we want the government to come in and essentially destroy the free market so every time we've had a financial crisis over the last you know 80 years what happens the government rushes in and they essentially destroy some part of the F of the free market because they want to you know save the system and what does that mean it's like whack-a-mole so every time there's a disturbance you know the central banks like you know the Federal Reserve in the US they come in they print money they enact a bunch of regulations and they basically say okay we don't want this sector to fail we don't want you know the creative destruction that is so-called you know capitalism if you actually believe in that um we don't want that and every you know five seven years there's another sector of the economy that's essentially price fixed and so we've gotten to this point where you know globally central banks have basically destroyed the free pricing mechanism in just about every single sector of the financial economy except one which is the the Government Bond markets because they're so large so unruly that it's practically impossible to essentially remove the market forces from this part of the market but the problem is right now we're going to try we've you know gone from I know 100% debt to GDP globally to about 360% um as per the roal bank and we are accelerating the amount of debt that we're adding onto the pile why because in the rich world including China Russia and Brazil we've stopped having enough kids so the population is actually declining so if you have all this debt and you don't have more humans being born to essentially do stuff to pay it back um the only way to ensure this system is solvent is for the governments and the central banks to start printing money uh and now we've gotten into the situation where we have all this debt that needs to be rolled over we have a population that has been told that hey you're good anything ever happens we the government are going to come in and we're going to make sure that you know you have enough food to eat you got Health Care um we're going to protect you blah blah blah right and all that's expensive especially as you have less and less humans who are doing productive stuff and so we're just going to keep adding on debt because that's the only way the government can stay in business and now we've gotten to the situation where there's so much debt that and it's accelerating in an exponential fashion that in order to save the market this time right so I think in the next three to six months there's going to be some sort of Major Market disturbance and probably in the US Treasury or other large Global bond market markets and the solution is going to be let's print the most money that we've ever printed to try to save essentially this Fiat Financial system that we've created um since World War II which is going to in the first instance create a massive bull market in anything you know like stocks crypto real estate things that have a fixed Supply um maybe they're productive they have some earnings and then after that we're going to find out actually the government can't save everything they can't just print as much money as they think to try to save themselves and um fix the price of the the yield of their bonds and we're going to get a generational collapse and hopefully that doesn't coincide with a major global conflict usually it does I hope it doesn't uh because I don't really want to live through World War III While I'm Alive um but that's sort of the my overarching like macro cycle thesis so you know massive top 2026 time frame and then um you know some sort of you know Great Depression like situation happening towards the end of the decade if we want to take a look at the progress of human civilization of the past 150 200 years it's all predicated on hydrocarbons um the moment we started extracting oil uh commercially out of the ground and turning it into thousands of different products that we all use every day that basically Powers our modern life um development supercharged right you know we went from I don't know how many billions of people in the 1970s to today a population more than doubled right and that's all because we were able to harness this particular type of potential energy of the earth that's underneath us okay and we we've piled on all this debt we've brought forward all this future growth and we haven't really innovated on another form of energy that makes us that much more productive you know maybe if the world started adopting nuclear um today immediately like small nuclear reactors in our cars our Apartments powered by nuclear energy maybe we'd have a chance at growing our way out of this debt or you know if there's some magical alien that comes down and gives us you know some basic resource that allows us to tap a new source of energy and like we can commercialize it instantaneously yes then we could pay back all this money or if the population doubled overnight right to 16 billion people then okay great we've built all this stuff there's more people that need to use it okay we can pay back this debt but borrowing any of these you know you know I like to say it takes 18 years to make an 18year old so it's pretty much impossible to create humans on a thin air no matter what any politician tells you and you know we're not really you know what we've seem to be doing is um in certain countries is saying you know hydrocarbons are worthless we want to use these other forms of energy that are less dense less productive and somehow think that we're going to grow our way out of this debt which is is mathematically impossible there's just no other way other if the government wants to save itself by it than printing money and printing money isn't growth it's just a piece of paper out of fer and once the population thinks hey there's more and more of these pieces of paper floating around there's only so many real Goods there's only you know there's only so much oil there's only so much electricity well I guess I should be consuming everything I can now that's not actually generating real growth if we just print our money in J real growth then Rome would have survived Zimbabwe would be the richest country in the world same with Argentina we've had you know the the Yar Republic in Germany like if this was the answer there's plon of other you know societies that have tried this and the sit the result was always the same massive inflation and then social unrest and collapse with the government so I think we've proven over thousands of years of human history that printing money is not growth it's a Shima and and at the party lasts for only so long and then you know it's Bad News Bears this is the thing that really freaks me out about what Ray alio is talking about is the predictability of this cycle and what I want to do you're really good at explaining this I want to go through the different things that build up to this moment this this inevitable moment and then one of the things I want to make sure we talk about later is getting the timing right on this is next to Impossible and so uh that's going to loom in the background but first I wanna I just want to go through the things now you said that you hope that this doesn't all happen in a moment of political instability but I would like to quote Arthur Hayes to Arthur Hayes here real fast uh this is from th this is the opening line from one of your recent articles you said World War III has already begun whether the mainstream media and political Elite wish to acknowledge it or not um so let's talk about the political instability we're going to get to the debt we're going to get to the banking crisis inflation all of that um but set the context for us right now what what's happening right now that unnerves you from a a political standpoint so for whatever reason and I don't know why Western Europe starting and then America following has it in for Russia and I know if you read the I think it's mender um his um Global home Island theory that he wrote want to see in the early 19 early 20th or end of the 19th century whatever he was a very famous um War strategist and he basically said that the the home island is essentially EUR Asia right so think of China Russia um Western Europe right whoever controls that portion of the world controls the world and so if you think about the naval Powers such as Great Britain and the US let's talk about Great Britain first right what was the British foreign policy all about in the 19th century and early 20th century preventing a strong continent whether it was France or Germany they didn't care they just don't want a unified Europe now as Russia industrialized in the late 19th century they started to worry about okay what about Russia right we can't have an alliance of German strong Germany after bismar uh United Germany and and Russia because Russia has all these Commodities that would be the worst thing that could ever happen for us great Britain and Naval power so what did they do that you know a series of alliances that you know precipitated World War I which was let's make sure that Germany and Russia are not friends and essentially that was a strategy going into World War I you know obviously that blew up what was the strategy in in World War II you know if you take a look at the rise of Hitler and you know all the different you know Western powers that were okay with Hitler as long as he was going to turn his army and just fight Russia right you know Hitler wrote about this he said we want to create the space for the the German people to ass eradicate the Slavs in Russia and and go in there and the Western n was perfectly happy about that because again what do they want they don't want a United Home Island they don't want a United Eurasia because that threatens the the hegemon you know Great Britain out the time obviously that didn't work out so well Hitler turned his army on on the other half of Europe um and then everybody started fighting again uh and then we ended that war and then what we were left with we were left to the United States versus Russia again and again it was all about let's make sure that you know Russia and China aren't align or um Russia and the rest of Russian Europe are in a line that's why you know us poured however many billions of dollars through the Marshall Plan into rebuilding Western Europe to make sure it was a Bull workk against Russia and the virus of of Communism and you know I forgot I was reading a recent book it was called the wars of Asia um 1911 to 1949 and the author made a very good point about why communism is so hated as a form of government to anything that's not communism and the reason it is because you know obviously communism has its flaws but at it's the kernel of Truth for lots of people is we're going to completely uproot the the social system we're going to replace the classes that are oppressing us it's not like okay it's one class of who was running things we're going to go over to this other class of Elites which is like socialism fascism you know capitalism it's just one group of Elites versus the other communism is let's destroy the whole class of Elites and bring the people up to power now obviously that never actually happens but in the beginning it does and so if you're a bua intellectual and you know and one of these other systems you're like I can't have communism take over I can't have the actual workers rise up replace me as an entire class and then try to rule which is why they hate communism so much and so you know the Russian system and what they're trying to export in terms of an ideology is so is so hated in in the you know liberal Democratic or pseudo fascist West and any case the the US is now you know locked the heds with Russia to make sure that a divided Eurasia because a strong Eurasia um will control the world because it controls most of the natural resources of the world and most of the population and that's been the US foreign policy since the end of World War II fast forward to you know the 90s when the Soviet Union collapses the US response was not let's do another Marshall Plan and rebuild Russia it was let's um incentivize a bunch of former gangsters now called oligarchs to come in and take all the natural resources impoverish their people and move their wealth to London and New York right and so that was the policy now out of that came you know essentially Putin who was all about about let's build a strong you know revisionist the Russian ideal believe it or not whether you think that's good or bad but that's his appeal to the Russian people is hey you guys suffered through the end of the Soviet Union the West was not your friend you know they stole your I'm here to rebuild the Russian for the Russian people believe you that that's his message to his his constituents you know you can like it or not like it and so now we're at the situation where um Russia invades Ukraine and the West pumping in resources to essentially fight them using the blood and the Blood and Tears of the Ukrainian people it's not Americans fighting it's not European you know NATO Europeans fighting yet right so it's a it's a proxy war between Russia and the West obviously Russia is tacitly supported by by China and the rest of the world is like well we don't want to part of this this we're trying to be nonaligned we don't want to get involved in this thing so we have this sort of the setup of all over again of what was happening in in the late 19th century of the West aligning to create a divided Eurasia and so you know we can call it a a conflict or a skirmish or whatever but you have I don't know how much how many billions of dollars have been authorized by US Congress to essentially ship weapons into Ukraine you have NATO shipping in weapons um different countries providing intelligence so that the Ukrainian forces can attempt to stymy the Russian Advance now while yeah there's not boots on the ground from from the West in Russia to our knowledge maybe there are I don't know it's it's basically a war um and so you can you could make the argument that World War II has already started um it's just not this hot super kinetic you know I'm gonna throw my nukes at you kind of thing um that we had in the last World War now why do you think this matters is this going to play out in Energy prices is it going to play out as a a debt problem um why does this become uh part of the backdrop of uh the the context that will lead to this coming financial crisis so at the end of the day right human civilization is a transformation of the potential energy of the Sun and the Earth into useful economic work right so cheap Energy prices equals Prosperity Russia is the largest commodity exporter in the world um they have oil they have natural gas they've got you know Metals they've got food right Ukraine the Ukrainian bed Bread Basket was one of the largest wheat exporters in the world sunflower seeds oils all this stuff is is in this in this region and now we've the West has decided that we're no longer going to trade with Russia on paper now if you actually look at the details you know India China some of these other countries are basically just buying the Russian stuff refining it selling it back to the Europeans and the Americans at a higher price right so the the the result of this policy of let's ostracize Russia is let's just raise prices on our energy inputs globally and so there gu the war is causing the inflation that now the central banks have to fight by raising interest rates which then bankrupts the banking system because they now have all these bonds you know that are underwater so the this ideology we need to fight Russia to you know keep the Eurasian Island um fractured is the proximate cause of the inflation that's causing the financial crisis in the west itself so it's a dumb policy but it is the the natural result of what happens when you say I'm not going to trade with the largest commodity exporter in the world I think it's important to break down exactly the cocktail of things that go into making a um an economy weak this was something it took me a long time to learn and for anybody that's been watching the show for a while they they've gotten to go on this journey with me of figuring out how all this works the debt cycle exactly what happened with the banking crisis inflation all of that um how does how does this begin does it all start with the money printing which leads to the inflation which causes the banking crisis what comes first how does this ball get rolling so you know the situation wouldn't be so bad if there wasn't all the money picking prior so at the end of the day you let's take the US for an example because it's the largest and richest country um in the world my you know opinion is thesis is you know back in the you know 1970s the US government made a tcid promise to the Baby Boomers and they said hey go out work spend your money don't save we got you we're going to make sure that when you get old you're going to have health care covered by the government and don't worry you can be as energy inefficient as you want two cars in a garage driving all you know all over the place not supporting public transportation we're going to make sure that where there's Oil we're going to get it so our defense budget is going to be astronomical and so the baby boers are great we're you know we're going to go out there and live our lives and consume the most that any generation ever has in human history us baby boomers and what's happened Health costs continue to rise now they didn't rise so much starting until maybe five or 10 years ago because these are they in the productive years of their life but now and I'm sure probably you've had some guests on talking about they call us sick care right right the the amount of money you spent at the end last 10 years of your life dwarfs all the money you spent preceding and the way the incentives work in the US Healthcare System there's no incentive to actually have preventative care it's you know when you get sick let's stick you up in the H hospital and like just go to town on on the insurance company which essentially is a US taxpayer because of Medicare and Social Security now no us politician and I don't care if you're a Republican or Democrat or third party whatever can stand up there and say I'm going to reform the US healthare system and guess what baby boomers who are the richest cohort and the most politically active your health benefits are going to decline you will not get re-elected um and so these two programs are s are sync you also will not get re-elected saying hey we're going to really tackle this you know the this runaway us defense budget we're not going to go around the world bombing everybody to make sure that you have enough oil so that you can have the newest you know badass pickup truck in your uh in your garage guzzling oil you also will not get reelected so Healthcare and defense these these line items in the government budget cannot be altered under the current political system and what has been promised to the people over the last 50 years which basically means that as the population gets older and as the world becomes more multi-polar meaning there's other Challengers namely China who are saying hey this quote unquote rules based order that's determined by 4% of the population doesn't work for the rest of the 96 of the population that never got to say and what this order was we want a new order we want to we want to have our own Commodities we want to have our own material wealth we also want to eat a bunch of beef and and drive a car right if you think about the per capita energy uses of the world for it to match the United States on the global level we require an inordinate amount of energy that we just don't have right that just means inflation so what our country is doing is say actually we're going to keep our stff stuff for ourself will only export finished products which makes things more expensive and so this is all happening before we even got to what's going on today and as we've had less and less kids because rich people have less kids and when women have the choice of contraception they choose not to have as many children the the Federal Reserve is like well okay we don't have any growth of humans we don't have any you know we have an escalating cost of keeping the political promises we made to our people the only option is to print money to make sure that the government can fund itself at at an affordable level and every time there's a financial crisis instead of reforming the the the banking system and allowing some people to fail they it's print money to make sure that the banking system is sound and the goal of the banking system is to take the people savings and hand it to the government that is why the banking system must always be saved from the government perspective because that's what it's there for um and different countries use their banking systems in different ways to essentially get to the same goal of funding the government at a cheap level and so that's why whenever the banking system is threatened the government or the Central Bank must come in and save it by printing money so we've gone through this situation you know coming up in today where you know the US went from I don't know 30% dead to GDP in the 1980s to 130% today which is you know a massive amount and if you read U forgot the other other Professor name rogoff wrote a piece about um debt May 2011 the book came out I forgot what um when sometime in the last 15 20 years and the empirically showed that once a country crosses about 130% debt to GDP there is always a default and a default could be massive currency depreciation it could be massive Financial repression or it could be some sort of uh default in in the Government Bond Market every single time no exceptions right so they're at this level already and now the comes and the inflation is part and parts a result of there's less humans doing productive things the war on climate change and the rebuke of hydrocarbons and then more players in the world wanting getting assertive over their natural resources saying it shouldn't just all go to the United States and Western Europe it should come to our people we should enjoy the same standard of living that we see in the Hollywood movies you can reboot your life your health even your career anything you want all you need need is discipline I can teach you the tactics that I learned while growing a billion doll business that will allow you to see your goals through whether you want better health stronger relationships a more successful career any of that is possible with the mindset and business programs in Impact Theory University join the thousands of students who have already accomplished amazing things tap now for a free trial and get started today the idea that 130% debt to GDP has always historically equal default I've never heard that before um that's troubling uh we'll come back to that so the the idea of money printing this is what I want to Anchor people around so okay so you you you make all these promises to a gigantic generation that generation does not replenish themselves so they're not more people to be productive and take care of them and so your only tool that you have is to start um using debt the only way to manage the debt is to print money to not default on it and now walk us through uh this took me a while to really get my head around the idea that money printing is inflation inflation is simply saying that the the the amount of money is inflating like a balloon compared to the things you can buy with it so since there are no additional things to buy then people just start charging more for the things that are on offer because there's more money floating in the system um how accurate is that that's that that that's basically it right there's the denominator I the amount of money is just growing infinitely and then the stuff the finance stuff and I think about Finance stuff is energy right we produce and that is in my opinion hydrocarbons because that is the thing that powers our entire Global civilization I don't care what you believe about the good or evil of oil but your entire Modern Life is predicated on oil whether you believe it or whether you want to believe it or not and so it's not as if we've gotten that much more productive in pulling oil out of the ground or have found or you know decided to commercialize nuclear energy energ which has been around since I don't know the 1960s right for whatever reason we as a civilization globally decided to ignore this amazing energy source and poo poo it now if we had decided back in the day to commercialize nuclear and spend the amount of energy and money that we have spent on wind and solar on making nuclear the safest possible energy usage in the smallest possible um delivery mechanism we might not be in this situation but those are the political choices we made as as a ization so the energy the amount of energy and how much energy we''re producing every year is not growing an actual fact like we hit peak oil you know a while ago meaning the entire growth of the the oil industry has been predicated on us Shale and the the number of new discoveries and new wells being drilled is declining precipitously because Shale depletes itself very quickly but it's not like we're finding a new Saudi Arabia every 10 years no you know these massive oil discoveries um we're just not making them like we were in the you know 60s 70s 80s and so more debt the amount of energy we're producing is is is flattish and so that's why we're going to have energy inflation and when you have energy inflation you have Goods inflation because every single good we use is a derivative of energy so this is a unique take at least for me you're the only person that I've heard anchor everything around energy I've heard you say and and this is really important for people if they want to understand the um point of inflation and why it becomes so problematic is that uh what you're really trying to do across time is preserve your purchasing power uh as it relates to the amount of energy so energy is going to determine the cost of a flight energy is going to determine the cost of a car energy is certainly going to determine the cost of gas uh Plastics on and on and on like even when it's not Plastics can be confused because made of the same substance roughly uh but even just to to do the the creation all of that stuff requires energy which right now obviously the main um uh the main source of that energy is still currently coming from fossil fuels so understanding that that you're in this race against that so now you've got two problems problem number one is what you just laid out that we're flattish we're not finding new Saudi arabas uh every 10 years which would be lovely and would certainly um help make that easier setting aside any obviously potential um uh global warming issue but just from an an energy cost standpoint so then problem number two becomes that we're inflating the money supply and so now the cost of that is already going up um so what I want to get into so if we know that we have this magic mark of 130% debt to GDP is going to equal a default we're already at 130% debt to GDP but we have two promises help Healthcare and that uh to keep the prices where they are from an energy perspective we're going to have to run around the world uh defense um to make sure that we have access to the flows of oil um we're going to be doing more money printing now walk me through what are some of the things um that are other than that because the crazy thing is is you listed those two I wasn't even really thinking about those two as being something that's going to cause us to inflate I was thinking about uh for instance the btfp bank term funding program so which is basically um stealth money printing quantitative easing just under a different name um it's actually bigger than the coid stimulus which was 4.1 trillion so walk us through what are some other things that you see on the horizon that are going to lead to more inflation um so that's sorted in the past in the future we have essentially the rest of the world and you know call it the non-aligned countries they don't subscribe to the West I.E NATO or um the China sphere right there go hey we're a bunch of countries we've been impoverished ever since pretty much forever um we have the natural resources that are needed to power the Green Revolution um we have hydrocarbons uh we have people who will come into the US and be your nurses um we'll clean your toilets we'll take care of your children right this is what we have U we want to keep these resources for oursel now we don't want to choose a side China or the us we just want to get wealthier ourselves how do we do that we trade what do we trade we trade know higher value Goods right so an example would be um Indonesia a large producer of of nickel one of the largest in the world um Joko W Doo the the president of the country has recently banned the export of raw nickel he said You know guys you want some nickel come down to Indonesia build some sort of manufacturing plant and Export the refined product um so I think if I read the statistic recently they went from about um uh a billion dollars of economy around nickel when they were just exporting um the raw stuff to something about20 billion do of value added when they were said guess what guys you need to build stuff to employ our people to elevate the standing of our country so this is just one country the rest of the of the world is like why the are we letting these guys come down here own our natural resources not give us jobs and then send back the raw stuff and then we import finished goods right that's been the entire um structure since since World War II and why stuff is very cheap in the US and Western Europe relative to how expensive things are in in the rest of the world and so they're fed up with this uh and now sort of they've broken the the ideological position you know conditioning you know maybe some of the leaders who were on the take from all these countries or the longer power and they're like we want to be like the Americans and the EUR Western Europeans we've seen the movies we want to be like them why can't we be like them well we're going to stop giving you guys all of our stuff essentially almost for free and so this is just a movement um resource nationalism this is what it called um koreal soala from 13d calls it the the uh allegiance of the grieved the grieved being anyone who suffered you know postcolonial issues from essentially being um an economic vassel of you know some European nation or or America and so they are saying they're they're gaining their voice again and at a time when the you know the appetite of the western public to go and knock heads against the wall is is declining and so you have the situation where the the raw stuff that powers the awesome standard of living that's that's in Western Europe and America is going to get more expensive because it doesn't come from those countries themselves and in the case of America America has all the stuff it ever needs it's just that the companies in charge would rather ship all the stuff out to you know third world countries and have a cheaper labor base than employ Americans who are expensive right um Europe's not so lucky uh but I think that is a s source of inflation that's only going to grow as the rest of the world says I want to live the Hollywood movie too okay so the when I think about some of the stealth liabilities that we have um the number starts getting pretty scary when you think about the um the buildup as we're having this big party there's all the stimulus coming in um one what do you think is going to trigger that you said in three to six months you expect some sort of big disturbance what kind of big disturbance are you looking for what are things that you know the government is going to um Pony up for is it just the things you've listed so far Healthcare defense um and then the banking sector or are there other things that people aren't thinking about in terms of liabilities there's no way they'd let go down yeah so at some point I need to write an nessing on this but essentially 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 a situation where long end so it's call it 10 or 30y year bond yields in the US um rise so they go up but they go up faster than in short-term 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 that down they squash the volatility down in the markets because they want to save the banking system 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 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 US dollars 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 and 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's 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 ban 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 banking system cannot buy more debt because it can't afford to because it's functionally insolvent 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 in the US Treasury Market that gold would be getting clobbered that's how it's worked um uh 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 10year 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 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 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 persp 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 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 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 am IE of the government and making a profit or conversely if the yield is 10% and the econom is growing in 5% than 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 GP 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 is just to just to take a noncontroversial 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 despite 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 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 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 and so as yields go from 5% to let's say 10% so the F just keeps raising rates right as a holder of 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 bear markets in hundreds of years right so owning bonds has been a terrible terrible investment over the last last two years because inflation is going up and the bond market 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 is 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 30 4% of um the budgets like interest payments on an annual bas4 34% yes so it's a$1 trillion do annualized right now is the interest expense as of uh second quarter the last time the Trey published statistics 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 the 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 help constant um over that time you haven't made money you 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 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 going to 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 people 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 would 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 all well I'll give it even more a even closer to home example people who have a mortgage on a house right I think this is even more understandable like everybody rushed bought houses in 2020 2021 and the yelds I don't know mortgage 30e mortgage rates in the US are around three three and a half per. and now there's another job and another location or 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 the price of the house is the same but you need to get a new mortgage now the mortgage rates are 7even eight% 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 or 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 a house or an apartment or whatever it's oh I had a mortgage at 3% I can't in 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 you 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 long 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 GNA 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 short term 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 no 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 and hedge rates going up and reduce my bonus so I'll stop there dude that's horrifying if that and 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 exactly 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 dollar 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 detail 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 GP Morgan a City Bank a 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 depositor in those Banks I know I'm there is 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 gon which one is it 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 blinket guarantee to all these other smaller Banks because of moral hazard and all these different things we're only going to give it 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 going to go on 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 will 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 of 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 bgy crisis is still there the acute political choice that the regulators and the government is going to have to make is still 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 in 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 eligible 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 the commercial real estate right that's not included so it's not as if I lent money to some real estate developer and 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 and 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 our 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 insolv them right and 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 there 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 tubic defiled 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 treasuries 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 estates a problem but we haven't really seen a big price markdown because no one wants to trade the sellers don't want to realize a loss and then have to mark the rest of their portfolio down and thus being ins 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 going to throw a fit um shit's going 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 fail 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 deposit 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 bear before there was Goldman Morgan Stanley everybody else City G so they'll probably let somebody fail first because the politics demand it once the fear of um looming 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 happen 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 and uh in a situation where um sheit gets all up yeah okay I didn't know that there's a preponderance of problems 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 borro 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 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 this is 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 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 has 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 to manage the depreciation of a 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 so then as we um start putting all of these pieces together what becomes the the next step is there um the crisis kicks off the money printing continues and I assume when you think about money printing an 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 tension more tension 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 the 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 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 debts 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 RB 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 country 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 10year treasury or or you know a 10e 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 of 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 flee to other asset classes and then forcing deposits to buy um government bonds uh this is called fiscal dominance this a theory or it's 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 infinitely to make sure that the rates sit 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 10e rates at two and a half perc the Fed was expanded 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 bounds 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 endgame which is okay we fix the yield and we just print money until uh as long as it's as 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 similar in 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 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 blockchainbased 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 type of money or a type of asset that's outside of the government control out outside of the banking system then the system collapses well that is uh that is a very unnerving thing said very calmly Mr hazes 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 sound sounds bad but having experienced 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 joins in 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 processing to 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 fi 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 and 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 even all the while they're printing a bunch of money so there is no more that's that's 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 gonna 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 their timing wrong is the same as being wrong and so what I don't want to do is um get myself all worked up that you know the sky is 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 and 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 those are that's essentially the productivity gains of their people or 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 J 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 job 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 or Western 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 in 40 years the isahi for the first time in 30 years raise 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 the United States runs a current account deficit and a budget deficit um so it's a 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 on 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 in 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 out of my short-term you know money market fund Government Bond into the risky stuff for the fixed Supply and zoom up that way or if nothing happens I'm still earning money I'm starting 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 emergency 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 how often are you checking your credit score afraid of identity theft or account breaches we all use the internet every single day for important things like Personal Banking and remote work so why not protect yourself with our sponsor Aura Aura is an all-in-one cyber security service that keeps you safe online Aura identifies data Brokers exposing your info and submits opt out requests on your behalf Ora also monitors your credit tracks your passwords for data breaches and secures your online activity with VPN and anti malware protection you can try AA for free for 2 weeks by clicking the link in the description or scanning the QR code 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 brakes so like a car right you want to go as fast as you can in the straightaway when you are racing and you want the best braks possible so they can take those corners and and not get wrecked right so the breaks 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 situation 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 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 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 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 how do they know how to do volatility well um it's personal preference right like obviously I'm in the cryptosphere 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 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 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 6% yielding money Mar or wherever you are in the world whatever that is like the 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 okay 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 High Vol St fed Market panics everything's getting dumped fed comes in overnight says we are back stopping the financial system and we've created some alphabet letters 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 May it's 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 saying 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 limited 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 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 in you know five trading days they 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 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 treade 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 are 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 an asset price prices but not care when it happens and if you can construct that portfolio 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 staring at the screen all day and you're not willing to put in the work to actually be a good day trader then you've you've squandered your opportunity versus is saying okay I don't know when the timing is going to be but I know that I have thankfully to these relatively higher interest rates I have the ability to both earn some income on my excess cash and Appo 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 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 Chad GPT has been the fastest growing technology adoption ever in human history when from I don't know Z to 100 million years in however many days it was it's fast as 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 e 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 sextile manufacturers in the US that has robotic sex dos 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 uh 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 foul coin for decentralized storage I own all three whether it's mining companies and filecoin filecoin 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 invest vors 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 Ze of the world is it's what is AI the governments appr 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 going to 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 sh 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 a 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 going 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 Ive and a thematic perspective in terms of where I think the investment public is 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 or 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 lowered 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 to be very clear about what they're doing uh and the question is whether you 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 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 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 divined 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 know 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 extrem is GNA happen either rat's 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 chth poopaa yes I know chth 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 chth if I'm way off um but that that was my take away 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 take his stance for a second um can you see how maybe it is possible that we get this 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 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% 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 apart 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 this 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 is going nuclear Saudi Arabia is going nuclear the rest of the world's going nuclear um and there just not enough refined yellow cake to go around so um you know Uranian mining companies in certain jurisdictions are going to do very well and um I'm I'm a large well not large it's my 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 look like until uh the 2021 2020 2021 crypto uh rush 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 in 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 willingness 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 the 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 2003 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 term sheet 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 timee of perspective so to the extent that I can I want to participate in my theme which is AI and crypto in a way where I have liquidity by 20125 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 that's this exchange that never existed two years ago now now has our you know has our logo on top of in Miami and you know Tom Brady once some some would say the biggest foot 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're 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 is going 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 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 bar or any of these other um large um initiatives that could essentially just you know dis intermediate your little plug-in 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's going to start asking the question where's the revenue where are the users U or where the user 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 that was down 90 something per from high in 2000 in 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 trying to invest in the theme and the liquid Vehicles available and not getting caught up in the hype and putting your money into eLiquid things that you can't sell when the mood turns that's really interesting so uh with your AI stuff you're planning to be in a position where you are liquid by the time that that Euphoria Peaks you see the FTX moment and you exit so you've this isn't something where uh you're going to wait for that first moment where they say okay we're printing money and then you're in you're already deployed in some of the places that you're expecting to be ready to go at that time of euphoria yeah so thankfully I have the the capital position to do that right I can pay my bills um with my income from just stuff right so I can actually be a little bit more early and wrong on things because I don't need the money but for someone who does need the money you're not going to have that opportunity to invested in in AI startup or some crypto thing years before and now receiving liquidity at the top of the market you're you're going to have to be very disciplined to participating in the things that you know you can buy and sell on a day's notice and not get suckered into your boy down the streets got this new AI thing he's been cooking up and why don't you lend him some money or invest in his in his startup and in seven years he's going to go IPO right that's what gets you in trouble yeah you can buy the liquid stock and it goes on 90% but at least you can try to sell it you can't sell the term sheet it's that's where people get in trouble it's buying you liquid stuff that's predicated on the theme continuing forever okay so that is the first part of the wave everything goes up um looks like it's going to last forever but then we get the big explosion we lead to something like the Great Depression um how does that party end just all the money got poured into um the new hype thing let's say it's AI uh and what makes the music stop well if we've already bailed out if we've already printed money to do yield curve control and the system is still buckling whether that's the price of oil is $1,000 avable now or or something that it's G to be some energy component of it that or you know the cost of end of Life Care is millions of dollars right you can't print Healthcare you can't print oil right so these are the things that are going to go up massively in price and then the system just breaks because people are like holy hold on a second like yes the government bond yield is 2 and a half% in the baking system is solved on a nominal Fiat basis but it cost me $10,000 to fill my my gas tank just being obtuse here right and then there's social unrest because I can't get enough to eat or you've broken the promise of the the lifestyle that I'm supposed to live being in this country but I was promised to vote for you and I'm no longer going to be there and then it's okay well if I don't have it internally let me go out and get get it somewhere else else right oh don't worry everybody we're going to go over there and take their and give it to you so support me as a politici right and trade no longer becomes the way in which we acquire the things we need we resort to force and then that's unfortunately how we we lead to conflict okay um so is to when you look at that is this a us China conflict do you see that going um hot uh hopefully not I mean maybe it's I think it's um I forgot I can't pronounce her last name uh pipa M something or other uh she let she coined the phrase a um a hot War World War in cold places cyberspace the Arctic Circle space right there's Wars going on right now in these different FS that are not the same as boots on the ground in the kinetic conflict what's more important today owning territory or owning your your citizens data right so there's different things that we we consider important and the the substrate to our our Modern Life so if we are in this new AI World your data is more important than going out and acquiring your territory so it might be that the war is not to shoot them up on some border but it's you know aggressive hacking between different countries trying to ensure that they have access to certain data or their AIS are able to operate in certain Fashions right so we don't it could be a different type of War not exactly the same war that that we're used to maybe that's even more dystopian I don't know um I'm hoping that we don't you know get into I'm just going to go take your and you know maybe get to the nuclear situation but again whatever it is that countries believe is the the good that they need to provide to their people to stay in power they're going to try to go out and take it for somebody else all right I'm going to set aside the most diet stuff uh largely just because I hope it doesn't happen and two I don't know just like the best thing so rarely ever happens I think the worst thing so rarely ever happens not that it doesn't happen I'm certainly a student of history and I'm well aware that things do actually go off the rails um but let's take a a scenario where we don't end up in a hot War but we do get that rubber band snap effect we just printed too much money uh gas tank is way too expensive to fill we do have the social unrest uh government does lock things down put in capital controls um we do more silly things like sanctioning countries and so they're terrified of buying our debt and we just end up in a position where um other countries are incentivized to begin to break away from the dollar do you see a real threat to dollarization and if so how does that impact the average person so dollarization um negatively impacts the financial Elite of America it could have zero if any impact to the average American um because I've argued in some essays that the current system of you know the Fiat Financial system that works in America doesn't really benefit the average American it benefits New York and you know San Francisco and LA right essentially the coast people who are in finance people who are in Tech right the average America as a is a great you know land mass right it has enough food to feed itself it has enough oil I think us is either number one or number two largest oil producer in the world right I think number one which I was surprised it's it's protected by two oceans and Canada and Mexico you might as well just call part of America right and if you count the Mexican population and growth in terms of um their demographics America actually um can hit the replacement rate of like was it 2.05 kids per uh per woman right so as a economic unit America is unique in that it can become um an notar and it basically was until World War I uh and so it can go back to that place but the current crop of people who are in power uh would lose standing in that sort of situation which is why they continue on carrying about what the value of the dollar is because their wealth is international companies where half the you know half the business is abroad where the workforce is in China Vietnam wherever right it's not in America so dollarization is you know pointed at this big thing and America needs to protect the dollar but for who it doesn't actually benefit the manufacturing worker uh the UAW you know union worker or the UPS truck driver right I mean so it's it's a question of what the political system is there to benefit who is it there to benefit and so America and the dollarization it's you know Bing about it's a super bad thing yes it's bad for for some people who are tied to the Fiat Financial system and that's where their wealth is but if you want to think about it from the average American person made in America is great wages for the bottom 50% rise they have better purchasing power yes stuff is more expensive but at least they're able to get it there's lots of parts of the world in Europe is probably the most where they don't have population growth they don't have energy and they don't have enough food that's where you proba could see a big uh internal conflict again as the Ed of the euro is crumbles where these countries are like don't want to be tied to a bunch of faceless bureaucrats in Brussels who tell them what to do do you see that as a real concern I didn't realize that Europe was um higher risk yeah I I see Europe is higher risk because again it's dying like the rest of the Wern World um it doesn't have energy security it doesn't have food security um I mean most of the productive region of Germany was powered by Russian gas right the the EUR Ukrainian Bread Basket um helps feed a lot of Europe right um North African oil and natural gas helps keep things running in in most of uh in most of Europe and so removing those things uh Europe's the Euro's it's a poor it's a construct you know this I'm quoting um paraphrasing uh macro guide Felix zolof the Euro was created to keep France strong and Germany weak um and it's it's attempting to paper over these differences in um e econ economics with this structure that just doesn't work and it'll come to a head when all of a sudden there's just not enough stuff to go around and Europe's traditional trading partners are like well you're you're if you're going to be aligned with the us then we're no longer going to sell you stuff on a preferential basis there's no no longer any Russian gas there's no longer a bunch of West African countries willing to sell you stuff cheap l u we're just going to let you figure it out yourself uh and what's the answer print more money but again with the Euro perspective you have a bunch of countries that think that they you know are some sort of democratic you know po polies and the population might be why we have this Euro anymore but there's obviously an elite that likes the Euro and that could come to blows okay so uh I've talked to Ray Delio several times and one of the things that I'm asking him routinely is because he sees so much disruption coming uh what do we do about it where do we go and he keeps drumming this idea that what matters is how people treat each other and he said you want to be somewhere where people are treating each other well there's rule of law that you can trade um what what is the move and is this how crypto enters your thesis what is the move if the Western World does get dramatically disrupted either uh uh hot Wars and cold places um or Capital controls so the government is um trying to lock things down yield curve control you know they're just doing all of those things to continue to prop up the system um what's the play is you obviously are American but you do not live in America um yeah how do you think about that step and is cryptocurrency part of that so the easiest thing right now is to protect your your financial wealth right for the first first time in human history we have a financial system that is not predicated on government violence that is crypto it's an opt-in violence-free Finance free coercion system where I can opt into this this Bitcoin blockchainbased Financial system and now I have a way to transact with anyone around the world on an honest um transparent open- Source basis and I can escape the Fiat system with as much or as little wealth as I deem appropriate right so now I have the ability to take my wealth outside of the government system and unlike gold nobody knows how much crypto I have I can store my crypto in my head I can memorize my private Keys um and my my seed phrases and restore any of my wallets and not that I do this but you can do it if you if you're good at that so you can hold as much wealth that you could in Fort Knox in your head that's absolutely revolutionary um so that's had we have the financial Freedom if you choose to use it um and so once you've obtained Financial Freedom then it's about as bellagi says choose your tribe where're is a place that has the same ethos as you you know has a good food supply the weather you like the weather but most importantly you like the community of people who are there and there's no prescriptive of where that is that's that's very personal maybe it's where you are right now and the only thing you need to do is obstain your Financial Freedom such that if the board is closed and whatever you're cool you're able to maintain purchasing power in in energy terms and but you're around a community of people that you like like and love uh so um I think yeah the community aspect a very personal one there's no one right place the financial aspect is if you have the ability to do so get your financial freedom for the amount of capital that you wish from the Fiat Financial system if you believe you know in the thesis of me and others and that the math is going to collide with bad politics then you now have Financial Freedom which gives you the ability to move if you want to or not want to so the thing I think a lot about with this is timing I'm obviously a big believer in crypto um but I really don't want to leave where I'm at and I'm not only am I in America which does not strike me as the most crypto-friendly place uh I'm in California which is definitely done some legislative things that I have found questionable um but man I don't want to leave so is that is that how they get you like that you just wait until it's a little too late or um did that play into your decision to move out of the US no I moved out of the US because it's just not a place that you know resonates with me personally right I love being in asah uh I love the people love the culture um yeah just you know my place The Economic Opportunity all that kind of stuff right for some people America's great that's fine it's it's a very um personal thing but yes there's a lot of inertia right with people in money they understand how this monetary system works Bitcoin didn't exist 20 years ago you're really going to take your hard-earned money and you're going to put it in Magic internet money with a bunch of people with like P py penguins and crypto punks as like avatars who are like debating macroeconomic policy on on Twitter and other social media platforms you might think these you know we're a bunch of clowns over here right and so you're like why would I why would I trust this financial system versus the man of the woman in a navy suit with a Herz tie and a pair of lubaton on right so it's all these things that factor into whether or not you trust the financial system or not um again very personal but the unfortunate part is that most people aren't taught the math they don't understand how a bond Works they don't understand how a bank creates and removes credit from the system they understand why mathematically this this cannot continue the way it's it's going and that there will be a reckoning and history has told us the exact Playbook they're going to use it's not as if they're hiding it from us there's paper upon paper written about exactly how to financially repress the population to make sure money doesn't leave the banking system to use the banking system to purchase the government debt at a level the government can afford that is below the level of growth in the economy such that the government profits this has all been written about you can read it on the internet but most people are too lazy or too distracted or they they work a job and they just too tired to open up a book and read um but it's all there for you to read and if you read it all you'll understand very quickly that this situation cannot continue and you have to do something and that something depends on your financial position obviously I'm in the position to put a lot more of my wealth in crypto and not care um to much where the price goes maybe you're not the the most Insidious part of inflation is that the poorer you are the harder the more percentage of your income is spent on energy therefore the more inclined you are to become a degenerate Speculator because the little bit of money you're able to save you need to lever up so much just to make an impact uh on the depreciation of your wages versus the cost of uh food and fuel that you make bad choices especially if you're not educated about what these financial markets are because that's been essentially government policy globally is to keep people in the dark about how money works so they gets blindly trust the supposed person in power yeah that's something that I heard you say that uh really hit me which is that inflation makes a Speculator out of all of us uh speculation is the one thing that really I find super unnerving that I to me speculation and gambling are basically the same thing like people are just taking a guess uh how is it though that people cannot understand the system and yet still feel the force that compels them to be a Speculator is it that they're looking at their wife and their kids and they're like I'm only going to get a 2% raise but I can feel that that's not enough like I don't even know if they like it doesn't seem they would think through all of that so what is the Instinct that kicks in that makes people speculate because I want to I I know I can't earn my way out of this I can work as hard as I want I can put as much overtime but I'm only going to make so much money per hour period but I watch the TV and I see the the successful mostly guy mostly men driving the fancy car has a nice clothes whatever and six months before he was on the street whatever the story is it's you know the Horatio alar you know Rags of riches very little effort there was this thing I did it was trading stocks or whatever it is right um usually as financial markets because things move so fast and you can apply leverage and yes there are people who have done that but the majority of people who try that fail um because it's very very difficult to do uh and so you're desperate you're like I know I need to uplift my economic earning potential but working my job in my Lane I can't do it it's just impossible I see myself losing day after day after day I see my family having a lower standard of living day after day after day if I could only pick the right stock if I could only predict where you know the Yen Euro crosses go on 200 times leverage if I could only hit black five times in the roulette Ro if I could only you know go to the casino and play CRP if I can only and then you spiral a out of control yeah it's interesting the idea of creating a financial system that people can and I'll use my words that people can bet on uh to create Capital to move Capital into the system so if I'm a company and I'm trying to grow I could say hey who would like a piece of this I don't even have to offer a uh dividend like dividend stocks I understand because they actually you're getting profits out of the company that makes all the sense in the world to me when I was first when I was in my is trying to wrap my head around the stock market I was like okay so wait a second some of them are baseball cards and some of them are dividend paying stocks that that was like that just made sense to me I was like okay well sure like if this thing which does not pay me a dividend but if I can get somebody to pay more for it to own it for whatever reason uh than I can which is that they think somebody else is going to buy it from them now all of a sudden that company has access to Capital I see well that's good I have a chance if I can actually sell it to somebody then okay that makes sense for me I'm able to make more money it's really a genius system but hiding inside of it is the greater fool theory of well wait a second if the stock isn't paying a dividend then if no one else is willing to buy it for more and the number is not always going to go up I mean it's never always going to go up but it can go up for some companies for a very long period of time um but it's really ingenious but yeah that the the element of speculation the element of I have to the element of um I don't know what I'm doing but I'm going to YOLO in anyway it all makes me very nervous so one thing I hear people say a lot is crypto is your exit from that system where because it can't be inflated and this is the thesis with Bitcoin and again stop me if if I go Ary uh Bitcoin has a finite Supply going back to one of the things you said very early on is that uh it's risky stuff but it's a fixed Supply that idea of it's a fixed Supply there's only 21 million of them they're not going to be any more made they can't be more made cry cryptographically so um and therefore if everyone agrees that it has value and I put money in that then that money should maintain its value because it's not going to get inflated away um but is that really an exit from the system of having to speculate or is it just another bit of speculation so you can speculate in crypto absolutely there is all different you can speculate in Bitcoin itself right you know you put a lot of your wealth in it it it's very volatile it goes up and down a lot right um so when you're moving yourself out of the Speculator category if you're putting a you know a certain amount of money into crypto for example and you say I'm going to assume this goes a zero and I'm not going to care then you're not specula ating right you're speculating on a future but again your lifestyle is not going to be impacted like the the mo the worst part about speculating is I need this to go up because I need to buy my dinner tonight right and and so that is when you get into dealing into problems but yes speculating on more human you know Humanity getting into a new system and that system being worth more because there's a bigger Community fine but just choose the size it's all about sizing no one knows feature we're speculating every second of every day every step we take right we're speculating on things we have informed you know historical experience to say that this thing is less risky than the other but none of us know what the future holds we're always speculating the question is the size and the risk right don't put your whole net worth in into crypto where if the price goes down a little bit you can't eat that's that smart seems that don't put your money in thep 500 or or you know some other stock inoc SE um and go long you know too much where if it goes down 1% you can't eat right again it's all about you know creating a system that works for you and where your financial position is in life uh and if you do want to go into the Super leverage speckling aspect make sure it's a pot of money that you could afford to lose what's your thesis on crypto why do you think that it's going to be here for the long run it's been around for 12 years 13 years something like that uh obviously it's done well but that's a pretty short period of time what what is the thing that gives you confidence that it's going to keep mattering so it's a financial system that's gone from zero right you know first jestice BL in 2009 to A system that has weathered multiple crises right in the most recent we had one of the largest exchanges in the world bunch of the largest lenders some of the largest hedge funds massive amounts of fraud uh all this happened in the span of six months um people lost hundreds of billions of dollars of value yet blocks kept being produced every 10 minutes for Bitcoin 10 seconds for ethereum and whatever the block chains are for a lot of other currencies the decentralized finance or def5 movement people were still trading uh on decentralized exchanges um people were still borrowing and sell borrowing and lending different currencies on some of these lending platforms the financial architecture worked even though we had one of the biggest losses of wealth and biggest amounts of financial M feasant ever in the crypto ecosystem and I mean if you want to compare the amount of money that um you know Sam bankman freed and his crew allegedly stole from their customers it would rank it one of the largest thefts Financial frauds in in uh in human history right all this happened there was no bailout there was no Central Bank that said we need to preserve the system and therefore if assuming they could print a bunch of Bitcoin or ethereum or whatever and make sure these entities are made whole so that you know certain people don't lose any money none of that happened people lost a lot of money but the architecture of the system worked the community was still there people are still shipping code I was just at token 249 in Singapore the energy 11,000 tickets sold sold out um you know basically almost took over the whole of Marina Bay Sand Convention Center uh for this conference people around the world believe in this system there're some of the smartest people in the world who have ever met who are building this system you know you take a look at what's who are the smart people in the The Scholar Financial Fiat system bunch of Muppets right they're there because they've always been there not because they're special not because they're um uh inspiring uh so they're not building anything new they're trying to keep the old thing relevant and so that's why I believe this is going to have staying power because the math works the Crypt the cryptography works but most importantly the people are so impressive and so um dedicated and so enthusiastic about what they're building and I've worked at a bank too there was none of that energy working on uh working in the traditional fin Financial sect we're there punching a clock earning a paycheck and trying to take as much risk as possible so we make a little bit of money so we can get the out of there okay but there is a question to be asked which is there's regulation for a reason and that the average person I mean look at FTX the very thing that we're talking about it it's very impressive to me and and again I want to say I I am a big believer in crypto for a different reason than you which is interesting but uh but at the same time I want to face head on the things that strike me as worrisome uh and this may be a feature and not a bug and we may all just have to wrap our heads around it but there the uh amount of Regulation that's in the trafi world is pretty extreme now I will admit the first time I realized that just because I had over a million dollars that I was suddenly a um oh God what's a qualified investor it's not the term but um that I was now accredited I was an accredited investor and I was like but wait I don't know anything more about investing money now I I know how to make money I don't know how to invest money uh and so I was very um shocked by that just seems stupid that you couldn't pass some sort of test and and be able to do your thing um but at the same time there are people get their wallets drained constantly in uh crypto PE the amount of malfant uh just in FTX is just absolutely bananas and either crypto tends to attract those people or the current lack of Regulation um just creates the the incentive structure where that's what's going to happen one one thing to jump in there it says FTX was regulated in I don't know however many jurisdiction around the world they had licenses all around the world right so the the the notion that regulation would have stopped the FTX is patently false um they were highly regulated not highly not as regulated as a bank wouldn't say but they did have Regulators around the world that had given them licenses and they were supposed to do things in a certain way right if you want to take the other example like let's take a look at credit s and they didn't steal anybody's money right but credit s was a Global systemically important Bank Gip right and yet the most highly regulated of regulated Industries in the world banking the most highly regulated regulated banks credit SS in Switzerland up and and blew up and require the Swiss taxpayers to bail them out for billions of dollars right so Financial regulation when the incentive structure doesn't work is useless it doesn't solve anything it makes you feel good at night that's fine F you can get your money back on a nominal basis but what happened they printed more money and made us all poor in in the result so I would say that Financial regulation yes it's nice that a bank needs to be run in in a certain way but it doesn't prevent bad people from doing bad things it just makes the if someone's going to run a scam it usually makes it bigger so what do you think how does how does this all begin to settle out and I'll give you my thesis 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 will 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 that 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 going to 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 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 the smartphone is 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 the system and I like to say that there's a there's a flood coming this you know inflationary uh maybe pseudo collapse with the Fiat Financial system there's an there's a Noah's got an arc of you know Satoshi down 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 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 sing in New York London and Paris and 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 just 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 Fe got 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 you 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 Fiat 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 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 and 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 cul 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 invaluable this immutability this money this the hardest monor 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 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 I if if the money really 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 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 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 going to be a 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 happing 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 spe specific so we regain the all-time high in by end of 2024 and that's when the real fund starts right that's when the real bull market starts and so my mental model for where we could go I think we're going to 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 to be a round number be focusing on it guess like Bitcoin hit $69,999 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 some my upside Target ises so the 75 750,000 million doll level 2026 um time frame just because again I believe this is going to be the largest market in financial bull marketting 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 Indy 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 gonna 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 be 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 in 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 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 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 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 own crypto so that's why there's been licenses issued um the Hong Kong government's very positive on bitcoin the Hong Kong government is part part of China therefore they would never do this if it was not blessed by uh blessed in 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 I describe the Black Rock ETF right Larry thinkink and blra having a trillion dollars of Bitcoin under his 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 culminating in like you know with 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 test bed region for sort of you know Financial Innovation and give the Hong Kong economy something to um draw in expertise foreign Capital because you know Chinese government believes in technology crypto is a Forefront of 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 at the extreme if you know all of a sudden there's all these firms with you know trillions of dollars wor crypto I don't know but 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 like 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 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 shiff on the show and in the comments cuz 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 Schiff has predicted nine of the last two recessions and uh I had to laugh at that so you know we 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 ru even though these Technologies were created in the 19th century mid 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 ear 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 % this year whatever it is right I could made the same am you say could I could make the same amount I can make the same amount in bonds and in Liv literally overnight lending to the Federal Reserve zero Financial Risk I get paid five and a half six% why take the risk if they get it all right great I'm taking I'm getting two-thirds 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 adj risk adjusted perspective if they get everything right then okay maybe the only stock I should 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% yearly 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 130 I assume they'd need to start uh pulling some money out of the uh economy without it causing any sort of secondary knock on effect um 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 making the assumption that Capital doesn't move so if for my for the you know go goie lock scenario number one no Capital leaves a 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 as 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 the 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 going to own long-term 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 U 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 Arthur Hayes this has been a wonderful conversation where can people follow you um so on Twitter crypto haaz I have a a substack as well same handle crypto Hayes um and I write essays probably you know twice a month on macro geopolitics obviously there's always a a crypto angle but um yeah that's where you can find me and I speak globally at conferences around the world all true brother thank you so much for joining me today everybody if you haven't already be sure to subscribe and until next time my friends be legendary take care peace if you really want to understand the complex Financial landscape we all face watch this conversation with bology shr vason the problems go all the way to the Bedrock of the financial system in terms of treasuries being the new toxic waste it's going to be at least as bad as 2008 but probably worse than that

Channel: Tom Bilyeu

Views: 2,125,278

Keywords: Tom Bilyeu, Impact Theory, ImpactTheory, TomBilyeu, Inside Quest, InsideQuest, Tom Bilyou, Theory Impact, motivation, inspiration, talk show, interview, motivational speech

Id: -de-ZIA5ouo

Length: 163min 42sec (9822 seconds)

Published: Tue Oct 03 2023