AMERICA'S COLLAPSE: Raoul Pal's Warning For The Dollar, Housing Market & Upcoming Recession

we have a financial system that is a volcano waiting to erupt and it is inevitable that it will erupt and will obliterate Life as we know it and it is only a question of when and so I don't know if it happens in five years 50 years a hundred years can't imagine this more than 50 but but I think it's going to be cataclysmic am I barking up the right tree no all right here we go tell me about it so where where do you think we are right now the world blew up in 2008. the world is now entirely about the management of the debts that is everything now and there are two ways for that to happen if we didn't do quantitative easing in 2008 9 10 11 you know all of that stuff the world would have burnt and destroyed in the manner that you thought which is like the Argentina collapse you know the Cyprus collapse this huge destruction what we chose was a Glide path Glide to wear because my my thinking is you Glide until you crash it's a slower crash for sure well the the crash is ongoing but you're buying time for GDP growth to come back right our problem is if you're in debt and you don't have enough income uh your income's not um growing enough to service your debts you get into a problem so what we've been doing is monetizing those interest payments on the debt which is basically using a credit card to pay off your credit card or using a credit card to pay off your mortgage okay that's not sustainable but what you're hoping is that eventually your income goes up and there are ways to do that and the the big issue here is demographics let me ask you a very pointed question before we move on when was the last time real wages went up they haven't really written since about 1972 not easy for why I think the Glide path is is going to be gnarly so I don't want to skip ahead too much because we're definitely not ready for this part of the conversation but I'm very curious is is it increased productivity born of the exponential technologies that are happening is that what you think is that that is the only option we have okay and right now I want people to hear like playing in the background because I I think that that will that is going to create the world's gnarliest 20-year period And so agreed we get on the other side of this we hey I'm super optimistic 20 years from now I am just real worried about the next 20 years okay so planting that terrifying seed for people now if you don't mind walk us through so we know what your punchline is we're gliding and it's buying us enough time that we can get to a new lily pad that Lily Pad is exponential technology that increases productivity and addresses real wage increase for the first time since 1972 but I want people to hear that 1972 was a long time ago so we haven't been able to do it yet even with the internet yeah that was the death of the American dream that happened is the American dream was you participate in the US economy you get richer the reality is it didn't happen and I'll come back to why because this is the this is a really important story because everybody has a thesis on who's to blame what's to blame how it happened who's to blame is probably as an Englishman the French it was actually it's actually all about the the Treaty of Versailles actually the Germans who are to blameful of this um so after World War One everybody was so pissed what happened with Germany and the war that the US the UK and the French got together and said we want Germany to pay War repatriations I that would make good for the devastation of Europe Germany can pay it so they eventually hyperinflated their economy and the rise of populism which was okay Hitler's German hyper hyperinflation is going to be so important in this discussion yeah uh I think it's worth taking a second to explain why hyperinflation is a go-to strategy one that we're using right now by my estimation what is hyperinflation how does it happen why is it a go-to strategy hyperinflation is when you issue more money to pay your debts and it just it comes in an endless cycle because you're not generating GDP growth so you're you're just keep printing money so in excess of anything in extremist everything becomes worthless um you know so if you're thirst and you've come out of the desert and somebody gives you a bottle of water you'll pay pretty much anything for it if somebody's there with a million bottles of water was a bottle worth you almost nothing once you've had the first one right so so anything in a in excess Supply just supply and demand too much supply of currency the value goes down so what happened in Germany is they had these gigantic impossible to pay debts to the West so they printed as much money as possible that blew up spectacularly Prices rose millions of percent and really fast I want to use a different word for people and a shout out to Robert Breedlove for introducing this idea to me uh if you change one word from print to counterfeit people understand what's actually happening and so if you think of printing money as Government approved counterfeiting then it's like oh because I think people have an intuitive understanding for why counterfeiting is bad but they I certainly didn't have an intuitive understanding for why government printing is bad which shame on me uh but once I realized oh yes this is literally the equivalent of a guy at home with a printing press just making more money that's right but so let's carry on with the story so the Germans destroyed their economy the people got angry because the only way to pay their debt was to make up fake money fake it's not really fake but they make it up so they can pay it and every time you got paid as a German citizen that Fistful of notes barely brought you a loaf of bread one day and half a loaf of bread the next day and then nothing at all until you have wheelbarrows full of cash and we've seen this in Argentina we've seen it in Venezuela we've seen it in plenty of countries we just saw in Lebanon recently as well that's a total collapse of the valley of a currency okay so therefore all of your productivity is a human is devalued as well because you can't buy anything so you end up having to ignore currency in Bata and we've seen that in many places as well because the the value exchange of a currency in the middle because it falls so fast in value it's a nightmare to deal with and it's a destruction of total Destruction of wealth except those who own assets and that's an important point we'll come to much later so Germany goes to war again end of World War II everybody's like okay we're done with this now out of curiosity how how well do you know the story of Hitler's rise what how does he re-stabilize the economy um he starts building roads he starts rebuilding Germany and making them proud in Germany nationalism how does he pay them like if their money's worthless how does he get I think they'd already reset the currency after that so he didn't rise out of the currency collapse he wrote post the currency collapse so you you've now got the new currency I can't remember this is the right smart whichever one it was at the time so or the Deutsche Mark so anyway so Hitler comes so World War II peace in our time and humans celebrate in the way the humans do they all had sex and have babies because they felt like there was security and what we got and this is the most important point of the story what we got was the largest population bulge the world has ever seen they're called the Baby Boomers the Baby Boomers were all doing the same thing at the same time because there's a massive group of them 76 million of them were born in the United States alone but we had it across Europe we had it everywhere that cohort was what caused the 1970s inflation because they're a bunch of 20 to 30 year olds go into the workforce at the same time and this is the important point I'll come onto this Workforce point they come into the workforce at the same time and they all buy their first house their first car their first suit their first tie their first everything they all get married they all have kids all at the same time right so that's a competition for resources that was unparalleled the rate of change of demand increase was massive and that was the 70s inflation I don't think it's a monetary phenomena I think it's a demographic phenomena and I spent a long time talking about that demand driven which is why it's so impossible to deal with well right now it's not demand driven inflation it was supply issues okay but those baby boomers remember went into the workforce at the same time so I'm an employer I have a factory in America and suddenly I've got 76 million people I can choose from to give a job to of course I'm not going to pay them more money why should I I don't have to because they're all looking for a job so there's too many people remember excess Supply means falling in prices excess supply of people wages don't go up so this is a function of demographics it's not a function of the map it's not a function of somebody doing something bad it's the problem of people shagging in celebration for the end of World War II that is the actual issue quick question is is that moment of the flood of um the Boomers coming in is that a good moment for the greatest Generation their parents who are basically now the owners of the factories by the time that they come into the workforce and it's like hey I don't have to pay more money and PS the the price at which I can sell the things that I'm making is going up because there's so many people buying it that moment feels like it would be good for someone yes because labor cost is low versus a booming economy which is what we had so we had labor costs not going up so margins for Corporation goes up but we had inflation that ate into it but then the 80s onwards it's been a one-way Street so that competition for wages actually gets worse because by the mid-80s the computer's now in the workforce you know and it's everywhere the PC the Mainframe everything so now you've got something that can do jobs so what happens is Wages don't go up and then 1996 we have the World Trade Organization agreement and NAFTA the North American Free Trade Agreement so now you're bringing in other workers who are paid less to compete against U.S workers there was a guy that warned against this right like walk me through that this is very interesting so he he in 1996 I in 1996 was a free trade person I was like of course everybody should trade free and I think they should but he said you have to do it on the right terms because you'll totally destroy Society because everybody will undertake labor Arbitrage and that means all of the capital and the labor or um a cruise to China Vietnam and other places so these Chinese workers were the were the cost input for goods in the west so Goods fell in value we had kind of deflation disinflation Etc but what happened was U.S workers didn't have jobs and you could never raise their wages because if you try and raise your wage you're just going to Offshore and get it from India or China or somewhere else but James Goldsmith's point was it's it yes it will benefit the Chinese economy but the Chinese worker probably won't benefit to the same order of magnitude because a lot a lot of these economies are kleptocracy so somebody's going to take the money so there'll be a bunch of super rich who'll make all of the money in those countries and the business owners in the west will make all of the money and the worker will get destroyed and he said this is going to lead to populism anger um and this is not the right answer his idea was the right answer and there's a Charlie Rose interview I urge everybody to watch Charlie Rose James Goldsmith the guys terrifyingly intense and terrifyingly smart incredible interview so his idea was don't allow labor to be the Arbitrage allow a U.S company to go manufacture Goods in China for Chinese market but don't export those goods because that's going to create this problem and he was absolutely right everybody thought he was an idiot and he was a you know he's a true capitalist James Goldsmith say ultimate capitalist and everyone's like well this guy's being you know some sort of trade protectionist he's crazy but he was right but then so that WTO and then China eventually enters in 2000 so we've got no chance for wages to go up and now we've just added the next leg of the equation which is AI and Robotics the wages are never going to go up they're never going to stay up so what has happened is so as a CEO that doesn't feel true to me but to channel your boy William Goldsmith James thank you uh what it feels like is happening right now is that you have so many workers refusing to work that even though there are a lot of people that are of that age that theoretically you would expect to be flooding the market you have so many people going out and we're printing so much money that they can afford to do that you've got so many government subsidies whatever that now people willing to work become a scarce resource even though there are a technically a lot of workers so I am paying more for sure now than I was even two or three years ago now what that comes out at a population level I don't know but I saw somebody ask this poll on Twitter uh or in a I think it's actually at an event that my wife was speaking at anyway they asked like who here has had to pay more for High Caliber in the last couple years and massive number of people raise their hand I was like oh my God yes like I didn't even think about it sort of Beyond myself I wasn't thinking about it as a trend but that really feels true does that happen true to you or once you even it across the population like no firstly you're confusing real and nominal real wages have not gone up versus prices okay meaning and prices raise more than wages so if you look at Peach P I don't know what Peak wages were but let's say they were six percent um last year yo year-on-year wage growth but Peak prices were nine percent so people actually got poorer which is why we've got a recession going on because everybody lost purchasing power versus just basic Goods so would you say we are in a recession already yes Yeah by every indicator I've got we're in a recession already um and it will become more abundantly clear the other thing I think is a point that's also important is we need to think about total aggregate demand within an economy and who are you giving those increased wages to right so yes you are paying more for scarce labor certain skill sets expertise whatever but when the labor force participation rate is only 65 percent you have to average that over 65 percent of the economy not a hundred percent and that's the function of demographics so there's a whole bunch of people who are retired who wages can't go up which is retirees which is basically that 35 is that bucket plus people who've opted out so so you you actually reduce it by that and the labor force participation rate is actually a function of the birth deaths rate forward lagged 30 years so what what we know is we know in the future that there's going to be less and less people in the workforce which is interesting and it actually mirrors inflation GDP growth everything's driven by this Monumental demographic issue so yes you're paying up for wages but your margins have gone down anyway because you're the the other cost of input so real wages for everybody have actually gone negative massively negative which is why everybody's feeling the pinch that's the issue we've got and that demographics does not go away we know that because we can look at the birth deaths rate today and we can figure out what the population is going to be like in 50 years time 70 years time 20 years time all of this the only difference of changing that is immigration so why this is important is it something called I call the magic formula magic formula is economic growth economic growth is driven by three factors and three factors only at a long term level in an aside from just the normal business cycle ups and downs population growth the more population you have the more your economy has activity so population growth well population shrinking the entire Western world the only way of offsetting that is immigration but we talked about the fact that the workers are angry they can't get wage Rises there is a less of a desire to have immigration than there was maybe 20 years ago so most countries have started to restrict immigration fine so there's no way of solving the population side the next part of the magic formula is productivity that's how much output each of us can generate for the economy and that becomes more efficient problem is it seems to be a function of demographics too and productivity has been declining since the 70s well actually since the 50s so productivity is going down the population is shrinking over time so the answer was debt the answer all the way through this equation from these people who were sold the American dream back in the 1950s the Baby Boomers you know they're listening to Elvis Presley getting into the Beatles they're like let's go let's go the American dream I'm gonna get rich but as we pointed out their wages never went up but because there were so many of these people they competed for houses and houses went up they invested in the stock market the stock market went up everything all assets got more expensive because of their demand so they did the rational thing which is I'm just going to borrow money and the difference between the rise of the assets and their wages is essentially what were the debt was the debt side of the equation is what the government's done too because GDP is declining the trend rate GDP keeps going down what's up guys it's Tom bilyu and if you're anything like me you're always looking for ways to level up your mindset your business and your life in general that's exactly why I started impact Theory a podcast that brings together the world's most successful and inspiring people to share their stories and most importantly strategies for success and now it's easier than ever to listen to impact theory on Amazon music whether you're on the go or chilling at home you can simply open up the Amazon music app and search for impact Theory with Tom bilyu to start listening right away if you really want to take things to the next level just ask Alexa hey Alexa play impact Theory with Tom bilyu on Amazon music now playing impact Theory theory of Tom bilyeu on Amazon music and boom you're instantly plugged into the latest and greatest conversations on mindset Health finances and Entrepreneurship get inspired get motivated and be legendary with impact theory on Amazon music let's do this one question that I don't quite understand is why is debt taken into account when we Factor GDP is it because we're essentially bringing new money online when we make those loans essentially yes you're leveraging your ability to consume stuff or invest in stuff now at an economic level you might argue well you know you're taking it from one person for another but there's interest payments there's a whole bunch of mechanism but but really if you see the Chinese economy and what happened is they did the same they just they had population coming in productivity probably Rising but then they massively borrowed money so the head of the fastest growing colony in the world for a long period of time you know leverage gives the illusion of growth but obviously it has a payback later and this is the payback we've got now the leverage that the Baby Boomers took on their governments took on and the corporations took on for all of this issue is what we're dealing with now so what wages didn't go up assets went up because they were competing for them like you're competing for scarce resources of people right now but when you put 76 million people in the housing market goes up the stock market goes up because they start pension plans and stuff like that so the difference is debt and that was okay although we were all starting to look at this saying whoa this is now getting absurdly debt Laden the government's 100 of debt the private sector is 100 of debt Health households are 100 of GDP in debt it's like well this is out of control then 2008 comes along and that is the debt crisis I mean every [ __ ] bank blew up I mean everything blew up it was a complete total collapse and that rolled on into Europe in 2012 when the government Spain Italy Etc blew up and all the banks in Europe blew up I think this is where you and I began to diverge so when I look at 2008 it feels like we just kicked the can and the thing that I'm worried about is that you can only Kick the Can for so long and at some point you're going to run out of ability to Glide and you do hit the ground and well let's go through this because this is an important point my view is 2008 was the uncovering that the geyser is not a geyser it's a volcano hmm they see it and it's like the holy [ __ ] moment so they did something unparalleled the great reset happened they reset all interest rates to zero I had not realized this until recently that was the debt Jubilee we will we set all payments to zero because we understand and then Europe kind of forced the car 2012. it was then okay there's no way around this so the blow up happens but it's now disguised and the disguise is the important next part of the story because what they did is somewhere around 2012 I believe G7 made the agreement learned from the Japanese which is seven or the seven biggest uh nations in the world uh Seven Nations in the world okay nothing to do with their central banks at this point no but it's the finance ministers who get together but there's a realization and I think the Japanese realized it first when your government debt is a hundred percent of GDP this is the really important point of the everything code when your government debt is a hundred percent of GDP and your private sector debt is for easy math call it 100 of GDP in debt okay now interest rates let's say they're two percent for easy numbers so when the government has to pay well economic growth is what pays for debt right it's the earnings of the economy so if economic growth is growing at two percent and interest rates are at two percent then the government which is 100 of GDP in debt uses all economic growth to pay the interest so then the private sector has got to pay its two percent and that means the economy will contract and this will continue in perpetuity before we move on to the everything code because I want to go through that in detail I want to recap uh how we've got here and what here is so here is effectively we have this constant looping um cycle of debt where we have these boom and bust periods because we are masking that a blow up happened in 2008 which was this devastating moment where we realized okay the whole system is very fragile because people are disguising the fact that real wages are not going up by taking on more and more debt both at the individual level and at the governmental level we've also weakened because of the demographic boom we have um we go into this globalization moment where we are driving the cost of goods down by doing labor Arbitrage and uh very well predicted that what's going to end up happening is you will begin creating a Schism where the rich are getting richer and the poor getting poorer because the the quote unquote poor or middle what used to be the middle class they are the workers they're building your cars your widgets your whatever but if you use the labor Arbitrage and you send that to a foreign country where labor is cheaper yay the people that own assets are very excited because the companies that are overseas that the asset is they own a piece of that company just to be very clear and so the people that own the assets in these companies that are using labor Arbitrage to drive the cost of their goods down to drive their revenues up their loving life but all the people that used to go to the factory they're either stagnant down or headed towards you know the deaths of Despair route where people are just doing drugs if anybody wants to understand the opioid epidemic in the US going to be a big part of it yep I mean this is why why this is necessary before we can talk about the everything coach so okay so that we're in that world where everybody is disguising the problem through debt but eventually you're going to hit uh come to Jesus moment where you just can't keep going up we had a massive bubble in the housing market that pops boom like a series of things series of dominoes fall now the reason that I say this is where you and I begin to diverge in terms of where we're predicting what goes on in the future is a stat that you'll know better than I but the number of banks that it took to um wipe out how I forget how many billions of dollars in value was like 500 or something during the 2008 collapse what we've just gone through with the collapse of four Banks we had even more value wiped out so we have this consolidation consolidation consolidation of all these what used to be you know back in the 1920s when 1929 happened it was like 5 000 Banks or more had to collapse before we wiped out as much uh value as we've wiped out recently in the banking crisis with again four Banks wiping out not quite as much value as were wiped out in the Great Depression but it's distressingly close so 5 000 Banks Now it only takes four Banks to wipe out the same amount of value and so it's like I just feel as the the system is getting more fragile it's not like we're just going horizontal we're getting more Fragile with every passing day every time this boom and bust cycle happens and again we're papering over this simply by making money out of nowhere and I really want people to understand that we are making money out of nowhere so we'll come on to the outcomes in a bit what we are doing since 2008 is neutralizing the bankruptcy of the system by the debasement of currency which is that when you're saying neutralizing you may mean making everybody's problem yes you can either raise taxes which they're trying to do too but they're also printing currency via the mechanism called quantitative easing which is actually debasing the currency which means that every time they do it asset prices optically rise they don't actually rise because if you if you look at the central bank balance sheet and divide all assets by it so you're changing the denominator it's normally US dollars but when you use the balance sheet you say okay this is the purchasing pair of dollars so how many dollars are in the economy or access printed and what you find is something like the S P 500 has gone nowhere real estate Gold's gone nowhere and there's only two assets that are actually outperformed which were crypto and Technology okay which is why we all feel like even though stocks are going up on our 401ks going up nobody's getting any richer okay there's a we all know this intuitively that we're not actually getting richer because the stocks I sell doesn't buy me more of a house so what the [ __ ] what was the point of buying the stocks if like the value of my assets aren't going up but that is a mutualization but it is bad because it neutralizes it amongst people who don't have assets so you'll never be able to buy an asset which is why when you speak to a millennial now they're like we can't afford a house why because they came in to the labor force after the FED started monetizing or or um or lowering the value of the denominator so property's got more and more expensive for them it's impossible for them to buy property really unless they're really lucky in the workforce or in entrepreneurship or whatever it is but generally speaking it's become impossible and everything has got more and more expensive assets have because of this optical illusion but wages haven't gone up remember right that's the key thing assets are going like this we were doing this before because of demographics and it was making people pissed and now we're doing it from debasement and there's there's no way around it so what debasement does on the other hand remember it makes the price of assets look like it's going up this is why you can't have a banking crisis of the order of magnitude that existed before 2008. the reason being is you just print money the moment you see it and voila everything goes up so the value of your collateral so if you think about a debt it's collateral plus the debt and the collateral is what guarantees the debt if you've got a banking crisis your collateral is often falling so fast that like commercial real estate right we're gonna have a problem with that so there's a bunch of debt and the and the and the banks have got this commercial real estate it's collateral and it's all bloody empty and everybody's going to try and get out of it so the answer to that is print money and and essentially magic that collateral hire or put it on the central bank balance sheet Europe has already done this so I don't think you can have a systemic collapse because the value of the assets can never go down enough this is what most people can't get their heads around well so I'm gonna but we will get you know but there is we'll play out the future a bit because there are ways where it could go even more wrong than this ongoing mutualization amongst the people of the of the costs it can go even more wrong well this is wrong because it's it's Insidious you don't see it you don't notice it you just sense it right that's what's going on but it could lead to another outcome the other outcome could be a total loss of control of the financial system I don't think that is going to be the case but there's a possibility yes and so this is getting into I have a growing thesis that is it's beginning to touch everything I need to find a word for this but the level of awareness of a problem when it is ubiquitous you would think that's good because it kills the Arbitrage where only the people who are aware of it are able to take advantage of it and that sounds bad and it sounds evil but as everyone becomes aware of it the only outcome that I see from that is cynicism and I I come at it from an entertainment perspective which may seem very weird for people but I grew up in the 80s which I actually want to talk about the 80s and why the 80s felt so awesome living through it uh because I think it actually planted a seed for something problematic but anyway so the 80s from a film perspective was awesome uh you could have a movie where Arnold Schwarzenegger throws a knife and it goes through a guy and it pins him to the the wood beam behind him and he says stick around and it and it isn't uh you're you're actually laughing in the moment you're not laughing at how uh many times you've heard a line said like that or oh my God that's like an Arnie line it was the first time you'd ever heard or seen anything like that and it was just legitimately funny and over time though we become aware of all these patterns to the point where if you grew up watching movies and you grew up in a world where 80s movies were a thing and they've been mimicked so many times and done to death everything happens with a wink and once everything happens with a wink everybody lives in this ironic world where being more cynical than the next person memeing something faster than the next person becomes the thing and so one of the things and and I feel a moral obligation to get the information out about what the world of Finance really is as fast as I can and yet I know that as everybody becomes aware of the trick the trick won't work anymore so I'm in this weird spot of like wanting to tell people hey when they print money quantitative easing they are counterfeiting money it is destroying your buying power and but it is the only way that we Glide so it's like no but yeah but you're keeping the the monkeys Happy by lowering the cost of TV sets and other stuff right that's the other weird thing consumable goods are cheats now we're really getting in because now that we have to talk about metaverse and how if you you want to pacify people that's a totally different thing with cheap TVs cheap beer cheap food cheap everything but there's a real derailing man they are still derailed because the asset which is your future self it's your future consumption has gone up so much that nobody can afford them so you've kept them happy with dopamine and sugar hits of crap you've kept them numb I won't say you've kept them happy you've kept them numb okay yeah Happy's the wrong word but you're right but look this is I went down this journey that you're going down now in 2012 and that Journey led me to crypto I saw it and I knew that this was the answer and that's why I first bought Bitcoin in 2013. was exactly this is once you see what has happened we know the system now regardless of How It Ends whether it ends in slow ongoing death of of economic vibrancy or a spectacular blow up the answer is you need to transition to what I called the Bitcoin life raft or the parallel Financial system it's there and you can participate with one dollar or a billion dollars it's okay we're gonna we're gonna get to crypto but we have to get to your um everything code uh I think this is this is crazy important so um I went in and listened I I must have listened to it oh God you're gonna think I'm kidding 30 times to write it down verbatim you you delivered I had never heard you do it so succinctly um and so I I wrote it down verbatim and what I want to do is I'm going to go through your everything code but we're going to stop in a couple key areas to make sure that people really understand this so I'm going to read a section and then give you a chance to if you think there's something that you can say even more concisely or whatever but you just deliver this so well so here it goes so Raul has a a theory that everything is related to one phenomena and once you understand it things get a lot easier to predict so here we go it's a quote from Rel what I had suddenly stumbled across in the everything code was the fact that the global central banks had probably agreed together sometime around 2012 after Europe blew up that with governments at 100 of GDP in debt they were going to crowd out all of the private sector and we were going to just keep having Financial crises okay so you mentioned earlier this idea of a hundred percent debt uh 100 of GDP in debt so I don't think we have to go over that again but the part in the section that I don't understand is uh this concept of the government competing with private sector so this is the bit we talked about right so the economy grows at two percent the government needs that to pay its interest because it's how does it use that to pay its interest well basically it comes because they're just taking more in taxes exactly right there's a there's a level of economic growth that needs to service the interest payments but if everybody's interest payments are too high the the answer is firstly to have the interest rate as low as possible which is why the um which is why the Japanese have a much lower natural rate of interest than everybody else because they're 260 of GDP in debt but their companies are less in debt so they they've trapped themselves they have so much debt they can't let the interest rate rise nobody can this is why we're gonna have a recession we're going to cut rates back down to zero it doesn't it's impossible to work so this is the thing is once all of these governments hit 100 percent then they either blow up the private sector the banking sector corporates or the government section how how is there's not enough income to service that level of debt because GDP growth keeps declining okay so let me see if I understand this so when you say private sector you mean private banking no I mean all private sector households so how do you how does the average person service the the interest it's again from economic activity the activity that they have so the same with corporations and the banking system is involved intricately within that whole system so economic activity is what pays the interest if you don't have a job you can't service your mortgage or your credit card right fact and if your growth if your debt growth keeps going up you need to keep your wages going up to pay your debts that's that's the GDP side of the equation but what we're finding is that all debt that is in excess of GDP at government level is ending up on the balance sheet three and a half years later okay how quantitative easing they and I did the maths on this and I think I was the first person to really think I don't think anybody's really figured this out yet I went and looked at this and I realized that what they were monetizing was the interest payments on the debt three and a half years later okay why three and a half years in 2008 ALL interest rates went to zero everybody every government refinance itself at zero and most of the debt for all governments is in the three to five year sector so somewhere between three to five years three and a half four years and what happens is every time you service the debt you need to get the interest rates back down again you end up having a recession you get this very cyclical phenomena because they say are they deferring the need to pay for three to five years nobody pays back debt nobody nobody is paying back any debt anywhere so what they're doing is every time it comes to pay to service the next amount of debt it ends up on the FED balance sheet now it actually happens because there's an economic slowdown driven by the debt but that's what happens and the there is a marginal difference in the size this is sorry this is true of the US the UK the EU Japan they're all the same and the difference of the balance sheets is slightly bigger and the difference is every time they say direct financial crisis they have to put direct money in so we you know we're already just seen a little bit of that in the US okay the difference difference would be buying the Federal Bank buying assets versus just stimi checks is that we mean by direct money so stemi checks is that's coming in onto the bank balance sheet because that is government debt that ended up will end up getting monetized three and a half years later which happens to be end of this year into next year which is why I think we've got a lot of quantitative easing coming because we've got to monetize all of the bloody interest payments from the pandemic and when we say as we mean print money print money and put it on the FED balance I just print money expand the balance sheet of the Federal Reserve to match what is owed we will create money correct and that that's using a credit card to pay off your other credit card essentially right or printing is that what you mean by nobody is servicing debt is just everybody's printing more money correct because surely they are actually nobody's making the debt payments no no debt is getting paid off you're just rolling the interest payment so it keeps getting bigger every year hold on if we owe China money there's no way China's just like oh word it's all good push it off so surely we are at a minimum printing money in order to pay those government debts what that comes up for no after four years you just issue new debt but you issue new debt to yourself so that you can then pay off whoever you owe money to shortly no because the government is borrowing the money here right so what that they just pay off they don't pay off the debt they just do it again so it's like your mortgage comes up at the end and imagine you've just had interest payments you just roll it again and say I'm just gonna pay interest for another 30 years nobody ever pays off the actual loan and nobody cares as long as you get the interest which is weird now if you pay off the loan you optically do it but you wish you a new one again so it's like I'm going to pay off my credit card with my brand new credit card I've got and so that's what I mean Capital One credit card yeah that's what I'm saying is when they're printing the money they are paying off the debt they're just creating new debt in the equal amount or more but they they are technically paying that debt off otherwise I can't fathom how anybody would do it okay so debt is growing in all of these countries at GDP plus the interest payments and that interest payment component is going on the balance sheet and that's happening everywhere including Japan so they're all doing exactly the same thing which is interesting because that doesn't happen by accident that there is an understanding that the world is too much in debt and there's no way of dealing this without us all going back into the caveman times so this is the answer yes I think this is this is where we have to look at Ray dalio's thesis and I think this is what has really painted my thinking so rage is like Look Backwards last 500 years of History every time every time you've gotten to this point where you're gliding uh it it always ends with either economic war or actual hot Weaponry war and you need this level of trauma so that people will finally go fine everything that I owed I'm just going to let go of it whatever it is what it is I just want peace and so you get this complete upending of everything we reset we go back to zero but we do it in the most grueling brutal sacrificial way possible I mean and and I hear this a lot from people like ah this all rebalanced in 100 years sure but that is cold comfort to Millennials who could never buy a house right like so yes but this is where the fourth turning comes to me right I think we are at economic Warfare everybody needs an enemy so we've decided that China Russian whoever we want to be our enemy is our enemy so we are economic Warfare for the share of the pie but the world is not it's not actually a fixed pie there's an abundance and that abundance is the other economic Warfare which is technology right that's happening at a massive scale and it's going into space it's going everywhere so we've got physical kind of warfare economic Warfare over technology which is what Taiwan is all about you know they own the secret code which is the ability to produce computer chips uh in ways that nobody else can replicate so there's that and then we are at war with each other as the population has split and wants to blame each other for what has happened when in fact it was actually the Baby Boomers that actually caused the problem in the first place the people cause the problem to the People In fairness it was the greatest Generation that had all the sex that gave birth to the Baby Boomers that created the problem and this is where it gets tricky because God bless the greatest Generation for fighting the wars Etc et cetera okay before we keep going down that road because I I want to keep this all in the construct of your um everything code because this was very enlightening okay so you just walked us through uh that first part about why we're going to keep having these Financial crises and the only way out of that uh is to print money basically uh okay next section and the only way here we go and the only way of solving this uh is putting it on the central bank balance sheet because there's not enough GDP to pay the interest that's what you're just talking about so if you think about GDP growth let's call it two percent and let's assume that interest rates are two percent which is roughly where they've been since 2008. so if the government is 100 GDP in debt and GDP grows at two percent but interest payments are also at two percent that's all of GDP growth just to pay the interest on the U.S government debt but the private sector excluding the financial sector so households and corporations are another 120 percent of GDP in debt uh well that will give you negative growth every year of two percent and it just come compounds so what happens is those interest payments go to the FED balance sheet and they monetize it again this is what we're just talking about so then the private sector is not competing with the government and that was provable across all major economies it's like they all decided that they're they're too far in debt and the only way to solve this is quantitative easing and then I started thinking well if I know this to be true and I know that the central bank balance sheets are 97 correlated with the asset prices well all I need to do is use forward-looking indicators to predict the central bank balance sheets and or interest payments dude talk to me about this 97 correlated with assets that that seems like having a crystal ball so it doesn't actually reflects today so you could basically as I explained before the thing that's actually driving the S P 500 is the Fed balance sheet it's not you mean driving the price correct so it's an optical illusion it's a money illusion so the price simply Rises to meet the level of inflation caused by printing money correct you're readjusting the price so that is what's going on and so then when you understand that and it's 97 percent you understand that nothing matters apart from this liquidity which is what I've been trying to tell people is sorry all your economic models are wrong yes you need to forecast the business cycle to know where you are in the probability of printing money cycle but that's all that matters and it drives assets and that's why people right now are getting very angry because the stock market's going up and they're like don't you know there's a recession yeah I know that the answer to a recession is more cowbell printing of more money people this this is what I'm talking about with as people become aware of these issues as you zoom out and you see the gigantic crater you begin to realize oh we're in a recession that means they're going to print money so in a recession prices are going up and people are like yeah I know where this goes so that's crazy and that it'll be very interesting to see what the knock-on effects are of the um Everybody becoming aware of these patterns and I've heard you say that uh it's almost always the path of most pain is the the path that ends up actually happening and so as we begin to predict oh this is what's going to happen the fact that we can predict will have some very sort of painful uh consequences the important point being here is I know what drives liquidity it's driven by the business cycle and there are certain cycles that are forward-looking the Chinese credit cycle happens to lead by about 18 months or two years people that don't know what the business cycle is can you give a quick primer the business cycle is the ebb and flow and economic activity that occurs and that's a boom and bust a recession expansion is it caused by interest rates we don't really know what causes the business cycle it's caused partly by interest rates it's caused by excess production excess inventories to limited inventories to there's many things that can can drive a business cycle but it's observable and has been observable for millennia and one of the things we do is when the business cycle is too hot and inflation starts Rising central banks tend to rise raise interest rates that tends to bring down economic activity I think even without a central bank interest rates rise naturally um because I think the free market can set interest rates without a central bank and then the economy slows down again and we see this this endless cycle so what I think my hypothesis is is that okay this is very observable I think it's going to last this relationship between assets and the central bank balance sheet because of the mechanism of debasement of currency and I can forecast out what the business cycle looks like and I also know the amount of interest payments that need to be made because that that happened three and a half years ago and I can see how far the balance sheet is going to expand so the balance sheet right now is what six and a half trillion dollars and it looks like it will get over seven trillion dollars or so and it looks like it will get to 12 to 14 trillion dollars by the end of 2025. so that puts and there's a number of other ways I've proven this out in this whole thing and I'll send you the whole piece uh myself because I've not really gone public with all of the whole thing of how it works but in the end that puts asset prices massively higher than here hugely higher um so we're looking at more than a doubling of the NASDAQ from here we're looking at another gigantic crypto run that's into 2025. so we're seeing huge moves that just come from the debasement and I've gone through in the everything code article that I wrote for Global macro investment which is my kind of Premium research service in that I've gone through various ways of proving this all out um so that's what I think I can do but your observation I think is really important okay when people I mean I've sent this to quite a few people and obviously the subscribers the global backer investor are kind of looked the world's most famous hedge fund managers um asset managers and I I think it it really shocked people and resonated with people they're like oh my God everything makes sense now and so once you see it it all makes sense um now as it becomes more public as a thesis and Mike Howell at cross-border Capital has been talking some elements of this liquidity you can see liquidity becoming part of the conversation on financial Twitter and stuff now what I think we'll probably do is create boom bust Cycles again you can't have the bus cycle going below the level of Central Bank liquidity because optically they make it rise this is what people don't yet understand but of course the stock market should go down 90 can't happen literally can't happen because of the debasement it's a money illusion but what I think we'll do is see hey off we go to the races that's what happened in 2018 2018 uh sorry 19 uh early 20 we actually diverged from the central bank balance sheet uh massively because people starting to figure out this game which is the moment the feds stop the tightening cycle markets take off because they know that the probability of more cowbell more more Central Bank printing of money more interest rate Cuts is coming and so therefore we get boom bust Cycles so the boom times are too big and then you get a bust and we people know that from crypto as well the long-term Trend remains intact but we we keep getting these huge booms collabs boom claps but the trend is still up I think that's what we'll see we'll be more like the crypto cycle which is pretty much what we've just seen as well we had a big collapse last year and now we're straight back into the boom as we're starting to forecast this all right so uh let me see if I'm tracking all of this sorry there is a lot in this no man there there is but the the more I go over this stuff the more times I encounter it the more I'm I'm really beginning to piece together what's happening uh it it is though leading me to a level of distress it does not make me calm and it's leading me to a level of distress while I agree with you when you start looking beyond the next 20 years it it evens back out and and we hopefully get the exponential Age and and that works out but I think there's such a period of tumult that no yes okay let's get down to an individual level let's not get to societal level I can solve I can unfuck your future which is the series that we ran on real vision by simply offering you the right asset you get caught in this trap if you own crypto or technology you will outperform this entire thing now if you're not wealthy enough to buy you know sort of a brokerage account doing that because it's complicated for you you can do it with crypto for no money and you'll participate not only in the in the trend of debasement so you're not getting left behind because if you're just getting an income and you're not buying any assets you're truly going getting behind so your 401k may look like the S P 500 that's not making any richer just by technology or by crypto and those are the only two assets that outperform the central bank balance sheet so there's your solve at a personal level I think we have to track we have to track why let's recap why you get this uh the stock market rising and falling with the printing of money so you've covered that very well but just by quick recap as you pump money into the system then the cost of the assets are necessarily going to rise because they are a scarce asset and as there's more money available those prices are going to rise they're going to rise in proportion and so you can just watch them rise and lower together now the reason why and I'll say Bitcoin maybe instead of crypto just because there's a lot of things going on in crypto they get a little dodgy and so I'll Focus uh while this I don't think Bitcoin I'm not a Bitcoin maximalist by any source of the imagination but a clear way of describing this correct so when you look at Bitcoin the reason and you were the first person to show me a chart that basically shows the the price of Bitcoin goes up as money is pumped into the system and it's interesting that it tracks in the same way that that the stock market tracks but for the exact opposite reason so the reason that the price of Bitcoin is going to go up is people are like yo I need to be somewhere where I can't have my value debased through the creation of additional right so printing a money so when you print money buying power goes down because prices rise in commensurate with the amount of money going into the system so you feel like you're getting richer but you're not it's an illusion God I love that you use that word okay so people then pour into Bitcoin because they're like there will only ever be 22 million that that's just it and so since I know that that's it that it is a finite cap it will never go more then you can't debase it through the printing of additional Bitcoin okay so people flood into that and you see it rise and so that was the first time because I was like people were speculating what is bitcoin what does its price respond to and once you pointed out it responds to the M2 Global money supply I was like okay that makes a lot of sense so um walk people through then how to play that game well why technology that we haven't addressed yet so why technology and how do you do Bitcoin well is it a Buy and Hold are you trading what does that look like so if with Bitcoin I treat it as an asset that is going to protect my long-term wealth and that sounds crazy when it goes up and down like it does right and you've just gone through that full first cycle and you're like oh oh but what you'll find is the low is higher than the last time it it hit the bottom and then the next low will be high and each high is higher oh it's in an uptrend so I just don't need to sweat about the ups and downs what I should do is just accumulate every time it's at a down cycle why well because the down Cycles signifying that economic contraction is happening and the world is slowing down and Money's been taken out of the system quantitative tightening which is the opposite process and assets full and interest rates are going up so your disposable income's going down because your wages aren't going up enough and the interest rates have gone up more so it's at that point you know the outcome is if economic activity is going to slow down the next year in a year's time they're going to be printing money or cutting rates because it's very cyclical for the phenomena of this rolling of this debt so therefore you should be buying more at these points because then you've got the next upside cycle to come which is what I've always said is it's the cyclical Trend within a secular trend okay this guaranteed people do not know the difference so secular trend is something long-term Trend driven by a large explainable Factor Bitcoin is an answer to the financial system and over time the number of users and people who become aware of its um of its superpower the more people move across that is a secular trend of of adoption that's really important the cyclical Trend the cyclicality is the ebb and flow within it so that's the boom bust of the economy not at a gigantic bus level it's just a boom bus now Bitcoin halving Cycles correspond with all of this why is there some magic in that reduction of Supply Maybe but Bitcoin came out exactly at the same time that all interest rates went to zero they're all part of the same cycle so every time we get into this economic cycle it affects Bitcoin in the same way but over the long run the adoption the secular cycle means it outperforms everything because there's no secular adoption of of the S P 500 there's no secular adoption of General Electric or you know that stuff's not really happening yes there's an ongoing purchasing by 401ks but that's really it so so that big Mega trend is the observable Trend that people can participate in and it is going to more than offset what is going on with the debasement of currency and that's to do with metcalf's law and the exponential trend of the adoption of a technological Network or a technology itself great so that's why Bitcoin charts over time just keep doing this it's because it's exponential the S P 500 doesn't do that because it's not exponential but the NASDAQ does most Technologies do and the reason why the NASDAQ keeps outperforming the s p and keeps out performing value stocks and makes people so angry is because it's all about the adoption of new technology if you think about what's been driving the NASDAQ recently it's the adoption of AI obviously that's the fastest adoption of any technology in history crypto is the fastest beforehand but this is Eclipse step it's gone from in six months from basically zero users to 100 million users in six months we've never seen like it I want to put an interpretation of what you just said for it and tell me if this is accurate because I thought your punchline was going to be the reason that technology performs outperforms the illusion of prices going up uh is because it's an increase in productivity per capita but what I hear you saying with metcalf's law is it's actually outperforming because of what I will call you're going to hate this word but hype that basically the people are pouring into it they're so excited about oh my gosh that's not what metcalf's law is but I'm saying if if you really think about why metcalf's law would drive value that exceeds the illusion that is the only thing I can take away from that because if it isn't increasing productivity per capita why would it otherwise outstrip it is we'll come on to that in a sec but metcalf's law is the number of nodes on a network I number of users of crypto versus the number of applications in the interconnection so the more we build out a web 3 world the more that that's the multiplier as opposed to the people initially it's the people who use it so like Doge has no use case apart from memes memetics but it has a bunch of users um Bitcoin has limited use but a huge amount of users as well but the use case is very you know it's very clear which is the you know the scarcity of the assets and the purity of the asset and the security of the network ethereum has lots of nuises defy nfts all of this stuff and a whole load of users so the the this is what's driving these things why are we adopting the technology that's the productivity equation the financial system becomes more productive and safer and secure by using cryptocurrency rails we become super powers as humans by adopting AI robotics we become more productive and ability to do stuff by adopting EV technology we you know all of this stuff is actually driving productivity now here's another so I need to push back on that so I don't think it's it the value created in web3 speaking as somebody is as in web3 as a human can be I've put just a gazillion of my own dollars into this uh it's right now it is all people betting that this is going to be the future versus it actually being the future right now so that's why I say that's how you make money my friend the moment it works right is the moment the bet the investment the there are use cases so let me just let's just get out of the nft noise and everything else I'm having dinner with a friend of mine he used to run one of the largest the training operations one of the largest banks in Australia that's a big Bank the equivalent of Bank of America and um he's like yeah you know he's just retired he's like yeah I've been heavily involved in crypto at the bank doing stuff so I'm like what are you guys doing guys we've issued five stable coins I'm like why why do you need the stable coins why you know what why not use tether or usdc or whatever he's like okay so this is what people don't understand why crypto is so important for the financial system he said we're in Australia we have a gigantic pension system our pension system buys a gigantic amount of U.S equities the US is about to you go to settlement So when you buy a share and you have to pay for it from t plus two or t plus three so that's trade date plus three days to pay for the bill to t plus one okay that seems fine foreign exchange transactions are t plus two they can't settle the US stocks that they buy so they either have to leave massive amounts of money with a broker that they dealt with who could go Bust or use uses the money ineffectively or they create a stable coin for instant settlement so they can so and they've built that this one is on top of ethereum okay fine but that is a multi-hundred billion dollar use case for why crypto is very powerful for increasing productivity within the financial system alone and there's many of these all over the place so why is tether such a big useful stable coin you've basically fractionalized the US dollar and now a person in the Philippines who works in a rice field to receive a payment from his cousin who's living in New York City instantaneously without any cost in dollars which is the currency they all want that's mind-blowing that's why the stablecoin system alone is sojigantic so I don't agree with there is no productivity or killer app the killer app of crypto so far has actually been stable coins and that was so I want to make sure what what I'm saying is is very nuanced but I I don't think I'm being clear enough yet so what I'm saying is that um metcalf's law if the reason that Tech has outperformed is because of metcalf's law which remember I was surprised to hear you say I didn't think that's what you were going to say I thought you were going to say productivity but you said metcalf's law if that's true and I'm just trying to understand what the reality is and you're saying this is how you make money I hey I'm with you I'm just trying to understand what this is in without fancy uh Concepts just like the the down home nitty-gritty so metcalf's law is as far as I can tell that is the point at which it is hype it's people getting excited now they may be hyped for good reasons they may be hyped because they're right about where productivity is coming from but is well then let me ask it this way for those just listening he's shaking his head uh is there a difference between metcalf's law and productivity or to you are they one in the same no they're two entirely different concepts metcalf's law is the value of a network and how to Value it and the the value those are two very different statements is it the value of the network or is it how you value its future uh utility every vote that goes into a market I every time price moves is a vote about current expectations and future expectations so it's difficult to pass out what that means but I've provably shown that I can distill metcalf's law pretty simply in cryptocurrency to two things number of active users okay that makes sense that's the nodes and then the value of the economic activity and all I did was the dollar value that gets exchanged every month or week those two numbers multiplied out gives this crazy ridiculously large number but that when you put it on a graph is exactly the same as price and so it's remarkable because price is not in that equation the math that you were just saying the value of the transactions on the network it's the it's the it's basically no met cops look nobody knows how to fully measure a metcalf's law value system so you need to approximate it because it's quite a complex mathematical formula and you're dealing with imperfect worlds where you can't put it in but anyway that's nothing to do with the productivity people are flocking to the technology because it increases whether it's your productivity or solves other solutions for you you know so I'm going to say that slightly differently and this is where I'm surprised it's very possible I'm missing something you were so much more thoughtful on this stuff than I am currently but this still what I'm about to say still seems true to me and that is that uh metcalf's law is the is the observable response to when people believe something is going to be going to be amazing so take eth people believe that building on ethereum is going to be the future I'm one of them I believe it to the core of my existence but it hasn't yielded that yet no that's not right every mobile phone network is priced metcalf's law all networks the price of metcalf's law but but why can't they be I think I don't think it matters Tom I think you're getting caught in a in a thing that doesn't really matter what matters to the bigger equation the two things that matter with with um this whole thing is does Bitcoin protect you from this issue of debasement the mutualization of losses amongst everybody yes okay fine nothing else matters there does it could it be form part of what I call the exponential age of Technologies which could eventually increase productivity yes now they're not mutually exclusive there's no you know better it's just a measurement of the value of the network but this productivity idea is the big one and the productivity idea is if we can't change we can't keep increasing the debt remember the magic formula was population growth or productivity growth plus debt growth we can't change the population the debt growth has got too far so we've got this one thing in the middle it's the only thing that can change this entire equation so what we can do is try and grow that okay now let's step back and say okay what's happening to the world that's a really big change that happened that the central banks are looking like they're going to print money to do and that's the Green Revolution it's being driven by Europe but it's being driven elsewhere so yes climate change yes all of the benefits of doing this but there was a magic outcome so productivity let's say we use AI we can do more stuff and you and I have talked about this in the past right we can expand now human knowledge in ways we can do before and Factory lines and agricultural Machinery just basically creating more productivity per human okay fine but the big equation in this is the inflation-adjusted price of oil which let's call that the the kind of best Benchmark for energy input costs have been forty dollars in inflation-adjusted terms for 70 years 60 years so we've got a fixed thing here which is can we put more output per calorie or kilojoule of energy that is what productivity is all about so technology keeps rising and that's great keeps going but all of these governments are focused on the other part of this equation which is can I lower the cost of energy because if you drop the cost of energy from 40 bucks per barrel of all equivalent to 10 you four x productivity and there is your solution and that is why they're pouring trillions of dollars into this and we're seeing what's known as Wright's law sorry all these terms which is the increase in output of a new technology has a commensurate measurable decrease in the cost and we're seeing that with all of the green energy so it's just getting cheaper and cheaper and cheaper and cheaper now we can't scale it enough yet but we know that there's nuclear there's going to be part of this equation there's a bunch of things but over time we will move away from that forty dollar fossil fuel anchor and move to ten dollars so think of the multiplier because technology is doing this and the cost is doing that that is that is what the productivity miracle that is coming you can reboot your life your health even your career anything you want all you need is discipline I can teach you the tactics that I learned while growing a billion dollar 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 and impact Theory University join the thousands of students who have already accomplished amazing things tap now for a free trial and get started today so help me understand why didn't the internet which still to me feels like a productivity productivity Miracle why didn't that um change all of this why why isn't it already the lily pad that you believe the exponential age is going to be so I think because it replaced jobs I think is going to replace jobs yes I do but I think the the productivity trend is a function of demographics as well and I don't fully understand why the internet didn't do that but it also hold out manufacturing jobs so there was a balance on aggregate what happens within the economy so I'm thinking it's on aggregate it wasn't enough to offset these Mega trends that we talked about that were driven by the demographics and the Denton and the globalization so I'm thinking it's that and so we have to have an accelerant because technology growth is not enough to offset demographic issues and that's what I'm thinking it probably is you know we did create I mean Trend wrap GDP has been falling so whatever we've done with technology and the same number of people roughly we don't seem to have pushed up GDP growth let me ask a really ugly question hearing everything you're saying it seems like I know it's not but I I I'm not yet sure why not why isn't the baby boom generation dying off and population Contracting uh deflationary in a good way it is well then tell me more uh I thought so population collapse my gut instinct is that it's terrible um what's the benefit the benefit is more stuff for you and I our per capita GDP goes up and it's observable in Japan it's observable in Switzerland so GDP per capita goes up and that helps offset some of these now the problem is is per capita is a nice economic term but right now it accrues to Mega giant companies so it's a way of redistributing that Capital amongst the people which is important which is why you know I believe in things like web3 Technologies because that allows more people to participate in ways that they couldn't participate in before because if not Google captured it all and apple capture it all so I think there's a probability that as the population shrinks it it creates a Slowdown in growth because of the magic formula but if you can increase that productivity element then we will be richer per capita now there's a government problem of how you distribute that you know you need to tax corporations more than they're being taxed these giant corporations that pay no tax most people with the average business pays tax up to here but Google pays I don't know what that model rate tax is five percent it's wrong and Amazon because they're benefiting from the holding out of the American worker in the technology boom and the people aren't which is what's making people angry now they're not doing it because they're bad people it's just a set of cards they've been dealt with it's been incredibly attractive to be you know a super large company particularly one with a growing industry like technology so okay so I think net net you can orchestrate it that per capita GDP Rises but you have to think about that issue of does it accrue to the people or not what happens if the population is declining but productivity doesn't go up well then we just go Trend rate of economic growth just keeps falling and so the reason that that I'm so I always assume that the reason that population falling was a problem is there are fewer people that want to buy your goods and that's why it it Hollows out the sort of uh GDP core economic engine but as I think about it it would also um it's interesting it's going to create a weird sort of uh feedback Collision but it would increase wages so if there are fewer people for companies to hire uh that's great for the employees wages but if there are fewer companies because there's no one to sell anything to no problem bad assumption and this is I can see the the IMF go into this whole mess as well and everyone's now says inflation's going up as population dies out bad assumption because technology is in the business of replacing costs and they will just find ways to employ less people I mean again you and I have talked about this is like 10 years ago video editors and sound people Etc were really expensive but now we can do it on AI so people have to do two or three jobs they hustle it's it's changed the structure of stuff and Technology will just keep looking for the cost and replacing it it's it's it's Relentless it's the biggest observable trend is once you digitize things the cost goes to zero in everything it touches did you hear the recent speech I think it was in uh the European Parliament oh God uh I don't know exactly where it was the speech was in English though and uh they were saying basically uh that we want to degrowth and they made it sound like this is going to be amazing greatest thing ever d-growth uh less people on the planet just all good all good um but you're saying that's a bad assumption so now the bad assumption is that it creates wage inflation the degrowth okay degrowth at first creates more for less people okay great and if you can distribute that great the issue is at the end of it you end up with the robots and the AI because you are hyper incentivized to keep increasing productivity that you are sowing the seeds of our own demise because of the economic engine is actually forcing you to to take this incentive it's kind of weird but that's where it's going woof okay slow growth and the shrinking population is more productivity the way of creating productivity is robots AI Etc the faster they grow the more that we use them the more that we need them because the population's smaller this is why Elon Musk keeps saying people don't understand this he keeps saying shrinking population is bad it's not bad for economic growth going down it's bad because it incentivizes everybody to increase the workforce so the the human the the population side of the equation can be offset by the machines so look at an Amazon warehouse perfect example Amazon has gone from having one and a half million people uh about a million people working there and zero robots to a million people and 500 000 robots the robots work 24 7 365. they're more productive than humans in all aspects and they just keep replacing humans sorry didn't you say that that was still a million humans working though so it's just increased productivity through robots so are you saying that that should be to match their scale it should be 1.5 million people correct so they're replacing the jobs that would have naturally been coming from humans and this trend will accelerate until there is no need for humans because the machines will have taken over this is Elon Musk thing is the more we try and make these machines more intelligent the robot's better elon's building this damn thing himself right Twitter is the training model for the AI that he's built and he's got Dojo one of the largest supercomputers at a focus task that's ever existed it is the largest and then he's got the Optimus robot I mean there's the end of humanity right there because once the Genie's out of a bottle so that's why he's worried and that's why you know you need to pull the rip cord and piss off to Mars it's not from anything else it's The Logical conclusion of economic forces creating more and more powerful intelligence that doesn't require humans gets to now I feel seen by you because this is where I'm at um so then take us back to your early statement that you're optimistic about the exponential age whereas what you just said is how I feel about the exponential age when I don't forcibly put my optimistic hat on because look I I ultimately I default to optimism I think it's a wiser place to be I certainly think it's a more enjoyable place to be um and I think that people should find that path where they can explain things in a way that end well and I thank you for letting me wear my more pessimistic hat because I knew you were going to be in the more optimistic seat here but why when you look at exponential age if you can see the the economic forces will incentivize that path where as population demographics or destiny they're in plain sight everybody can see it it is going to decline massively at least temporarily that that is for sure and so as the population begins to decline dramatically as we then the economic forces push us to lean more into Ai and Robotics and the guy closest to the problem is like hey P.S let's get to Mars um where where do you like what's the thing that has to go right or where do you think that either Elon or myself are looking at this wrong so your confusing time Horizons a lot of people do this a lot of people go the dollar is going to collapse because it's so much in debt probably right is it gonna happen this year next year or in 20 years time you can't worry about something that is 20 year out because the future paths are yet unknown right because we're too far out The Event Horizon is too far out to get a high probability forecasting so we have to make a huge bunch of assumptions so let's go to the shorter time Horizon is is are we likely to benefit from the ability to superpower human knowledge probably are we going to benefit from cheapening energy costs probably are we going to benefit from the things like self-driving cars driving us to work delivering packages drones all of the stuff are we going to benefit from the space Technologies and starlink how are we going to benefit yes yes yes is the stock market going to go up if we invest in this stuff yes okay so there's a lot of benefits that are being laid out for us all is longevity of life going to increase yes are we going to have massive breakthroughs in in genetic Sciences yes can we train AI models on cancer and all of this stuff yes right okay that to me sounds like a golden age I call it the Renaissance or I'm English I call it the Renaissance um but that is but after that you get to what people refer to as the singularity is where it becomes unforecastable and this is what the debate is going on amongst Sam Altman emad mostacc with um Elon Noah Harari everybody right it's that moment is that what the hell does that look like elon's like I don't know so let's just have a plan B makes sense none of us really want to go to Mars but I get it right if we completely screw this up but I don't see how the the virus of Technology isn't like in 2001 A Space Odyssey just doesn't go with the ship you know so I'm not sure yeah that's my I don't know that are we able as humans because we're so such an Adaptive cockroach of a species well we haven't proven to be yet we're still pretty young on the planet versus others but let's assume we're like crocodiles and sharks and we can hang around for a few million years will we figure out an Adaptive mechanism to deal with this maybe that's the that's the Optimist outcome is like oh no humans we're humans we're we're amazing we'll figure this out and the other one is we're never going to be smart as these machines we're so totally [ __ ] I don't know but I know that in my lifetime there's a 20 or 30 year period which might be a truly extraordinary moment in history and like and the issue is we can't see through the other side of it and that's terrifying but you know it's you know we I think we mentioned this last time we chatted I don't have kids so I have to worry about it less hmm people who do I get it I get it it is an existential threat of which we cannot figure out how to stop it and regulation is it's not going to stop it because the technology is out of the bottle it's like you can't stamp crypto out because the technology is out of the bottle now and it's everywhere and yes open AI is the current leader with Microsoft but all of the big us companies are incentivized to out-compete each other and so they're incentivized to create more and more powerful models but if they get regulated or somebody else will do it this is the geezers you're talking about geysers is they're popping up everywhere but really what is happening is it's a massive bloody explosion that is Unstoppable so talk to me talk to me about regulatory so as somebody who doesn't live in the US but you pay attention to the US uh you probably have a much clearer picture than somebody like me who's not only in the US but I'm in California uh how do you think this is all going to settle out is the US going to get left behind are we being too strict regulatorily um how does this play out I mean this is an impossible choice right how do you regulate this thing and how do you get a bunch of 75 year old politicians to regulate this thing I don't know I don't think anybody knows oh we're gonna align the models with Humanity what does that even mean nobody even knows how to do that for God's sake we don't even understand how large language models learn we don't even know what they know all we know is hey we're figuring out different questions to ask it and it seems to be able to answer them but when you listen to Sam Altman he's like well have we created um you know AGI I don't know he said I don't think so and elon's like worth three to five years away it's Unstoppable because the profit motive um well also what you're talking about earlier with the need for increased productivity but if you were to so map this on to the way that different geographies are responding to bitcoin and crypto which feel very similar to me uh in terms of either you're embracing the new where things are going you're willing to face that the way that we're handling the financial system creates these incentives and so you're either trying to Capital control lock people in not to let them leave the country or certainly not let the capital leave the country or you're like hey you're using it as a way to get because this is a really important Point Tom why why do they want to stop you leaving because they want to mutualize the losses on you um if you leave to the other place they're not neutralizing the losses on you because your crypto it's you know that's why the capsule controls it's like don't leave our old system it's like exactly what's happening with the regional Banks please don't take your deposits out because they all go bust um our participation in the fiat currency system is our deposit and if we go you're just left with leverage because it's the collateral of the system this is why they don't want it to happen and do you see how do you see the US do you think that we're we're being because it feels very antagonistic to crypto at the federal level you're getting some stuff happening at the state level which is interesting so this is really important so firstly just on the AI versus crypto very oppressive on crypto the biggest AI companies in the world the US so they're probably going to be a bit softer touch around that and these guys are playing the usual trick of we'll be good guys you don't need to regulate us we'll kind of do the right thing right because there's too much money available in this equation so crypto us because you know the US Pro U.S citizens actually have a lot of capsule restrictions the land of the free is actually pretty unfree people don't want to deal with U.S citizens in Banks so if you come to the Cayman Islands or the UK or Spain a new U.S citizen you want to open a bank account nobody wants to open a bank account really it's pain because of the US reporting and the U.S tentacles State tentacles its grip on the Global Financial system it owns Swift payments it owns everything and it wants every U.S citizen to pay its taxes because the the mother beast needs to feed the debt burden right so it's actually very restrictive so it doesn't like you being able to opt out the financial system okay they want to make sure they get like taxes it's fine you're your citizen but different countries have been more loose on it I think Europe is going to freak out over AI more than it the US is but Europe's been actually better on crypto than the US has why I don't know but the crypto side of the equation is really important because I've lived this my entire life why is London such a big Financial Center considering it's a tiny little island in the middle of a really Brown muddy cold sea because it speaks English and it has a well-developed financial system and legal rule of law but what really changed for London was the U.S coming off the gold standard um back in 1971 to wherever it was so that created something called the Foreign Exchange Market because before everything was pegged to gold and now the pound and the dollar and the Deutsche Mark and the Yen were all moving around independently and the U.S had Capital controls because it's got the global Reserve currency it's like please don't mess around you know we've just gone off and changed the global system we need to be careful okay I get it fine so the use case said well all these people we trade with they need to get access to different currencies now so the Foreign Exchange Market started largest market the world had ever seen then the US made another full step so the banks started moving to London right big lucrative massive Market deepened the UK's trade linkages with everybody Financial trade linkages next thing happens is now everybody's trading around with currencies the dollar is the middle currency the reserve currency and people want to borrow dollars and the US is being restricted with its capital so the UK says forget it we'll do it it became what's known as the euro dollar market which is the overseas market for dollar borrowing and lending that becomes a we don't know the size of it but let's call it a 400 trillion dollar market whoa and then the US then we get this big breakthrough in derivatives the US has got the Chicago Board of Trade doing Futures and options and all of this stuff but we start to figure out more complicated structures things like swaps and the US stops its banks doing it by its use of regulatory Capital they're like no no this is inefficient you can't do this the UK and Europe went well we're going to regulate and allow it to happen because it's big we've seen this before that becomes a quadrillion dollar market Jesus that's why every single Bank from about 1985 well particularly after the Big Bang in London so let's call it from about 1990 to about 2008. 2010 all the major Banks largest operations for London so Goldman Sachs biggest operation most profitable London Merrill Lynch London uh Merrill Lynch is different because it was a brokerage firm but JP Morgan they're all London so London if you've been watching the news is going to do the same thing it's called regulatory Arbitrage London is putting together a very sensible set of crypto rules as has Europe as has Switzerland as has Singapore as has Hong Kong as as Australia okay there's its old Trading Group that it did with Euro dollars and it did with derivatives and it did with foreign exchange all got their regulations in place the UK is the Hub at the middle and it will capture the Lion's Share and before you know it coinbase Gemini and everybody will move to London they'll still be listed firms in the US but they will move and this is the issue with the AI and crypto you can't shut it down because if it is productive and it has value and it has future expected value that's higher than today it will go somewhere and if we look at the crypto market now it's a trillion dollars okay that's meaningful for the UK economy where is it going to go well 10 30 50 trillion well the UK wants that pie because it shot itself on the foot after brexit um so the us could try and regulate it all at once it'll just move it's like water decentralized networks and Global finance and money is like water it flows everywhere and it's the same with this AI which is why I don't think we can solve it with regulation um because somebody's gonna believe yeah it will go somewhere that is for sure walk me through the reversal the Chinese reversal on uh Bitcoin so they had clamped down everywhere including Hong Kong but they've now opened up Hong Kong that was startling to me well like I'm searching they've done this several times before is at the wrong time they're trying to stop Capital flight because everybody knows that the China's been using this to get money out of the China economy which is what stable coins are being used for as well as has the global Art Market as has there's a lot of things that the Chinese use to get money in and out of the system so they try to stop that when the US dollar is very strong that's a start because they can't lose control of their currency it's a big fear of the Chinese Additionally the Chinese have moved towards the Central Bank digital currency which is very useful for them because once you you do it you can now take stock of the number of yuan in your system because there's no cash there still is but you know what you're doing is you can then see where it goes um and so I think they did that they got the size and scope of what their money supply really is and now you can reopen it because you can now track it because it's all digital well you couldn't track it easily before because you could hide it with bank payments blah blah blah but blockchain makes everything transparent much to you know everybody's Chagrin because everyone thought it was a privacy thing it's actually not not in that kind of mechanism and I also think this is more contentious is that's the reason Finance survived everything is the Chinese government wanted it to hmm because that is the linkage between the Fiat world and the crypto world and they own the you know Chinese State essentially is a supporter of the largest crypto Exchange in the world because that is a potential bet on the future of the system of money and it once I'm saying that and makes total sense where is binance headquartered there isn't one where does oh God what's his name CC Dubai okay I was gonna say I can't fathom that he's actually in China uh very interesting so when you think about um sorry in the U.S will probably support coinbase in the end what because everybody needs control of the situation if not the UK will take control of the entire monies the global world of new money I hope you're right about that but I don't see a single move on behalf of the US government that would lead me to believe that uh unless they lose the coinbase lawsuit I think they're just gonna we have a change of government yeah true true what do you think about 2024 I don't know we haven't yet seen the contenders you know everybody's got a bit too much hair on them still so we don't it doesn't feel like there's something obvious but maybe there will be maybe something out of this you know I thought Frank Suarez not because he's a um Francis Suarez not because you know he's the pro crypto guy but he's the mayor of Miami right he's the mayor of Miami he is Centrist essentially you know he it's just that kind of person younger more direct we need to find somebody of that we can't the US can't keep going down the same thing of baby boomers voting for the Baby Boomers voting for Baby Boomers and trying to protect themselves that has to be broken somehow it broke in the UK look Rishi sunak he's Young he's a Centrist young whether they keep him in or not I I don't I I don't vote in the UK anymore but at least they're making progress like crypto regulation and Ai and technology and fintech and because they've got a young young government and we've seen that in you know France has done well because macron is younger um that you know so we need that yeah that I will agree with so since I'm wearing my uh my Doomer hat today I'll push on the geographical thing so what it feels like here in the U.S is that things are really beginning to intentionally divide along geographical regions and uh you're getting like this hunkering down into blue State Red State uh people peeling off if you're into crypto you're either going to Texas or you're going to Miami um and seeing the there's this whole new idea of uh make America States again where people are saying hey we need to stop doing all of the regulation at the federal level we need to start pushing this down to the state level and letting the states compete for The Residency effectively of the populace and let them begin to move now I'm grateful as somebody that feels out of step with the federal government on my take on crypto I'm certainly very excited that that is at least an option but like your boy um Goldsmith gold weight James Goldsmith there we go uh I am I would like to to broadcast my dire warning while there might be a part of that that is good that ends so badly because you end up fracturing you end up pitting people against each other it ends up I think becoming very problematic very I saw this in 2012 um because of what happened in Europe and I saw what was happening in the U.S it's one of the reasons I bought a and built a house in the Cayman Islands I just thought I need a plan B and the plan B needs to be somewhere where nobody cares about hmm but I can still live a high quality of life it was a very purposeful decision knowing where the world was going to go because there was no solution so the kind of realizations that you're having now I had it's more visceral for you now because you're just seeing another banking crisis but we saw it in 2012 we saw really bad outcomes there and I think the US one is still to grow so it's just it's just the the delayed response of having it happen to you the moment it does it's like okay I get it now so I did this and I don't think that's going to go away I'm hoping for a miracle what doesn't go away sorry populism anger uh Division and a separation into smaller States I actually spoke to um an old client of mine's old friend who's one of the world's great macro thinkers is Italian counts and he speaks very quietly I was telling him about this I was like I think Spain is going to Splinter into countries the UK is probably going to Splinter Scotland will probably separate you know blah blah and he said listen Rel the trend of the last 50 years was super States the EU the United States of America he said usually those things end up separating again and if you think he said you know he was a whatever he was a count from a Italian you know one of the Venetian States these little small states he said the world does this Ebbs and flows centralization decentralization right it's very common he said it's not necessarily a bad thing it's the getting there that could be Troublesome depends how it how it happens you know don't forget we disbanded the British Empire that was gigantic and yes there were some pretty ugly stuff that happened like you know the uh what happened in India when when we kind of gave back the keys and everybody killed each other in the partitioning which was ugly but it did happen over time so I don't know I think the trend is not going to go away unless we somehow change this economic equation because that's what's driving it yeah it's the same equation that's driving it yeah very very distressing and I think unfortunately I think the pieces are already on the table in terms of how we could potentially change the economic system which is effectively Bitcoin you have to remove the ability to inflate once you take that away though there are also consequences on the other side and so uh it is a very um my argument has been you can't do this at once anybody who does this wants the end of the world it has to happen as a Glide path and over time the crypto side of the equation the new rails for the system hmm can experiments get itself sorted out figured out and then we can go so my I spoke to the to the Department of Defense about this in 2014 13 13. and I said you know but they periodically you know reach out to people like me you know thinkers about stuff who who are looking at crises and stuff like that because their job is to to assess risk and I was talking to them about it and I said obviously he said you know we're worried about debt we're worried about the system blowing up I said yes obviously everybody is um because that's one of the things that need to game out what happens if the West loses control of money and debt and everything else and I said well I think the answer's there and I think it's Bitcoin and he said yeah well tell me more I said and I think the US government and the UK government invented it which is the NSA and the gchq in the UK who the two World centers of cryptography because even how the white paper's written do you think there's times yes I always have and I asked the Department of Defense they said yeah we've considered that too or it was just people from that that went rogue I don't think it's necessarily A rogueness I think like Google have like Google X where they do tons of experiments right they know that one of the esoteric risks for the entire Western system is the issue of money so there's probably groups of people who are given things to try and if you can see the new system maybe they've tried 100 of these and just one succeeded we don't know but it would make sense because that's what they do this kind of stuff so one of these took off and so I think it's always been I don't think it's a coincidence that came out the financial crisis I don't think it's a coincidence that that the halving cycle and all of this is all related it is the solution always always has been the solution you just can't go there tomorrow so all you need to do is let it happen slowly and manage that transition you'll be okay there'll be times where it speeds up because we've got something bad going on and there's times when it slows down but if you and that's why I think the US government regulation is trying to do they don't want to ban crypto just slow this down because if all the deposits leave the banking system it's game over if they don't set up a way of collecting taxes because everybody's living in crypto land and they have to ask your honesty and what trades you've done that's not going to work for them because they can't pay the bills so I think it's they're trying to catch up um I think that the UK will have a cbdc I think the Europeans will it's all coming relatively so relatively to the next five years three years four years and they'll feel more in control of the system that they've got because they need to pay the interest payments because if not and the eight the benefits the Aging benefits you know all of the Social Security is a problem with such an old population So speaking of managing this transition well how bad do you think the banking crisis gets before it stabilizes so feels that we're in the kind of Summer phase of we know it's bad but nothing extra is happening but meanwhile the deposits keep leaving the system because the fed and whistling past the graveyard going la la la I can't hear you the problem is interest rates are too damn High which is the same problem I said they need basically to get back to zero again and it's leaving the system so there's two phases of this one is the banks will start getting worse again we'll see the use the kre ETF which is the Regional Bank ETF it's easy you can look at that get it on Yahoo finance wherever you see the price of it going down that's telling you it's kicking off again and the outcome will be to keep bailing out these Banks whether they force them into mergers which was how the banking crisis in 2008 started and then eventually it's like [ __ ] we need to give money and sort this out so we will see that we know that the banking system can't go to a full-blown reset because we've already had that I think it'll bring down one of the big Banks before it gets really serious and which one is that I don't know Bank of America something like that their share price doesn't look great the longest the structure of it but in the end the Federal Reserve will come with their magic illusion bullet the magic money and that money magic money will will will solve all of this and we will all get neutralized because the asset prices will go up and we won't own enough of them and we will get poorer so that is coming the commercial real estate the so the quick one is the deposit flight the FED need to cut rates the yield curve which is the value of money in the future of interest rates in the future has to be higher than currently it's the opposite right now so that needs to happen and then in 2024 and 2025 it will all be about the commercial real estate because all of these like real Vision has offices in New York for 65 people and three people go to the office the moment we can get out of our lease we'll get out of our lease as is everybody and all this stuff's going to be empty so I think that's um that will all end up on the FED balance sheet so the the banking crisis will continue it'll make it harder for the average person to get a loan and the Federal Reserve will see this as the economy goes into recession and eventually they'll start cutting rates and eventually The More Cowbell comes back and as I like to say it is written we kind of know there's no other as we as we go deeper into recession so if we're already in recession all that happens we go deeper into recession it's already written we know the outcome yeah I mean Jesus uh who heavy okay so I want to go back to cbdc's um I've heard you say if I'm not misquoting that you have a contrarian position here that you think maybe they're not all bad they're not bad because firstly I do not buy the arguments that well they've got control of your money if you do this you're signing out to the devil I'm like you guys signed over to the Devil by having a bank account all of your funds are available and if you telling me Oh well they're going to force us not to use cash and you're telling me you're using cash for anything apart from tipping the valet guy at the restaurant and buying weed you're lying nobody uses cash nobody uses cash and uses cash for my weed Ral I live in California no exactly so nobody uses cash so that's a it's a lie and so they're using their credit cards they're using their PayPal or their venmo they're then on social media they've got Google Everything Is accessible by the government that your privacy was the story 30 years ago not today maybe it's gone so a cbdc means that the government can become more well they can even stop money now you've seen it you know either Russian suddenly you don't have the money right so all of that is always still there now so yes they can penalize you but I also think you can do good with it so I think there's a lot of bad outcomes and governments will abuse it fact I also think there's some really amazing outcomes for economics I've heard you say that but I don't understand how that would work I think so let's say you have Hurricane Katrina devastating people aren't insured it's a con it's a catastrophe so how it happens now is the federal government makes a payment to Louisiana and blah blah and there's all these middlemen and everybody grabs its stuff and it doesn't get to the people you could give three million people in New Orleans instant payment in seconds you cannot give economic stimulus to wealthy people you can give it to poor people you can penalize people who have excess savings versus the people who who don't have enough savings so I you can give poorer people a 15 interest rate to to lend that I.E to get on deposit okay that's all that's interesting and maybe they can borrow money at One Price versus another you can do a lot of Behavioral economics and changing the system and behavioral economics everyone's like well that's the Chinese government they've got spy cameras everywhere I mean look the US government knows everything what you do I mean every time I come into the country I just stare at I stare at the global entry recognizes my face I don't even show my passport to anybody I'm into the country I'm then into an Uber everyone knows where I'm going my Apple Maps clocks me I mean look forget about it they're all the governments are the same so I just think economically speaking we could do interesting things we don't have to be so Luddite about how we use fiscal stimulus and that we just said we can create incentives good good incentives if dealt with well if dealt with well yes uh you said something all governments are the same that uh uh oh yes violently disagree with what it's just the main it's just the main you're all what governments stand for We Stand For Freedom we stand for that it's all a meme they're all the same they all control their people in a certain way and dress it up in a different manner one says we're protecting you that one says the enemies outside the others they're all the same then how do you hold a society of large numbers of people together you create different ways of doing it and it's it people it pisses me off when people say us good then bad by whose judgment what because 1.4 billion people in China live their life differently than the 350 million Americans they're bad we're good because they don't follow our system that's insanity and Americans would suggest that they're pressed up against the window desperate to get out of China because they hate it they go there they don't hate it why would the Japanese want such a regulated Society because it works for them so we just have to drop our own lens of who is good and who is bad and I'm you know I've traveled to 120 countries I've lived in several I'm just very open-minded about different people choose different systems that suits them but most governments in the end try to help their people but will also abuse them in the process and it's just different ways it's interesting um so I don't know that I disagree with the that at a very high level in that everybody is doing something uh you didn't say nefarious but I will say nefarious and it just comes down to the flavor of that's power writing power power is just different flavors of power yes however having read a Trilogy of books that I will recommend to anybody the specifics of how different moments in different societies will rear the dangerous head it does seem to me that you want to imbue the populace with a certain mentality that will keep the government in check and so I think the thing I'm pushing back on are the moments where the humans because ultimately all of us could rise up and and stop our governments um but when you look at Mao's China or Hitler's Germany or Stalin and Lenin's Russia they they are terrifying to a level that I don't think modern people have availed themselves of to realize how wrong this can go and so when I look at the cbdcs um I don't I don't have a lot of wisdom here I want to be very clear that I'm now thinking through something out loud for the first time but uh reading the red famine for instance which is not part of the the trilogy of books just because I alluded to it I'll say it uh Gulag archipelago which is about Stalin's Russia um the rise and fall of the Third Reich which is about Hitler's Germany uh and Mao the untold story which is about Mouse China they they all illustrate a level of um human evil that is is just unimaginable then there's a fourth book which is um the red famine which is about the Ukraine in the 1920s if I remember correctly when they went in to the Ukrainian farmers and said um all of you cool locks who are basically you're you're out producing other farmers and therefore you must be stealing from people and so they killed imprisoned them all this stuff and and because you just killed your best Farmers basically all of the farmers start starving to death because the government is just seizing all of their grain and so you kill the best and then you seize everything from everybody and there is a a moment in the book where a woman eats her own seven-year-old daughter and I was like I'm out like it is things can go so wrong and I worry that we we've had such a period of stability that we forget that there is this Darkness that is present in the human animal uh as uh Soldier knitson said the guy that wrote the gulag archipelago who by the way was in the gulags uh he said the line between good and evil runs through the center of every human heart and so I worry that we we have to eternally protect ourselves from how wrong things can go and so I do look at a cbdc with a little bit of hesitation as you map it out and say I'm already doing everything I had to laugh out of anxiety because you're right I don't use cash for anything uh so a hundred percent no big change to you I think you'll fearing the wrong thing I think the fear is right what do you say what you think I'm fearing Central Bank digital currencies I think are of distraction what is actually happening is you've already got Capital controls in the United States it's hard for U.S citizen to move the money around you can't even get rid of your damn passport you're stuck in their state you can't even leave your state you pay tax everywhere in the world nobody else does I think there's three countries in the world that pay tax that force their citizens to pay tax if they live outside of their country I don't know what it is but I would fear the US going to war with China it's fine to be at economic War it's fine to be very cautious of of another Rising power but if they go to war the outcome is terrible that is a much bigger risk than the Central Bank digital currency it is as you said there's something goes wrong with power that can lead to these outcomes when humans over extend it and hubris is one of the risks and that power to control the world that that to me is a bigger risk there may be another risk the Enemy Within I.E the country collapses on itself can happen too this there's a number of ways your leaders can let you down and you should always be vigilant so I do agree but I think the cbdc war was lost a long time ago the Privacy from your government war is not going away because of Technology because Elon Musk has got you know he's putting 40 000 satellites in the sky every GPS can see you and everything so that all went so you just need to make sure your government is not going to abuse that because that's when it gets really bad hmm yeah that that's actually my biggest sense it's abuse of power not monetary abuse as much as raw abuse of power my biggest existential threat is do not go to war with China because that was the outcome for Hitler for the economic collapse there were reasons people go to war and the outcome and the end result is not good so I'd be worried about more of that stuff but the US is kind of warmongering like crazy right now rattling its saber it's like against China or in the Ukraine it's against China and it's it's okay to not like China's system because it's different to your own it's okay to feel threatened because China has economic um Power increasing and that's threatening your system that's all okay just don't go too far yeah it's interesting the thing that uh so you can have a bar fight but if you pull out a gun you're [ __ ] stupid hmm and it's not because the U.S wins or loses it's because everybody loses yeah I think the thing that I fear more so I think it was 70 million people died in World War II it's certainly not more than that so let's say 70 million Mao's China killed over a hundred million looks estimates vary but that seems pretty plausible um yeah it is uh it's that worries me so my thesis was because I I very much agree with you that the capital controls isn't the thing I'm not specifically saying Capital controls is the thing I fear what I'm saying is I think that you want the populist to have a healthy skepticism when the government wants more control because the government taking more and more and more and more and more control ends up in a really dark place and so my thesis around that and and going back to what started this whole conversation is the reason that I got into Finance content in the first place is it was me trying to understand how the world actually works and this is why and I'm sure it drives my audience crazy sometimes why I will I will circle around a single point until I really understand it because if I can understand its nature then I know how to protect myself I can do novel things in fact everybody listening please hear me when I say you can only follow until you understand something's nature because you're following people that do understand the essence of that thing but once I understand the essence of money this is why your everything code is so important I mean it hit me so hard is it it gives me a framework with which I can understand the entire system and so instead of looking at one thing I'm looking at the entire system so as I say to be somewhat skeptical of the government taking more and more power is to understand the essence of government uh is that it will continue to ratchet up it will continue to seek more power it it is it is part of its Essence and so when you look at the the U.S experiment which I think is the right way to look at it it was an experiment in how do we um put the power in the hands of the people as much as humanly possible how do we recognize that people tend towards tyranny how do we put systems in place that basically Trend towards stalemate instead of trending towards Rapid change because when read the rise and fall of the Third Reich it is one of the most startling books I've ever read in my life as as the guys going through it and he's talking to people about Hitler Hitler was able to talk uh the what's now the Czech Republic I forget the original name checko something Czechoslovakia Czechoslovakia thank you uh he was able to talk them out of their country dude there was not a single fire uh single shot fired he he got them to sign over their country and I'm just like God damn like the the way that he just slowly eroded the country until he was made fewer and was like nobody can challenge my power now it it is crazy and when you watch it step by step unfolding it's just like hey somebody needs to check this power now the fact that Hitler came up earlier in this conversation because of monetary sanctions and that this all to your point about the everything code it all comes back to a dead cycle which is crazy but as you begin to understand how all of this how even the debt cycle is just a response to him nature and so now it's like okay as you begin to understand the essence of things now you can understand what to be wary of so I I seed the point can see the point that overly focusing on a cbdc isn't the right move because I've already given up all those Capital controls and all that what I want to remind myself to be aware of and other people is that man unchecked grabs for power they end badly every single time and they can be even more catastrophic than a World War so let's just come full circle again just to top all these Loose Ends when things are bad and people are angry governments get more extreme we've seen this right the volatility of government it's got more left more right and they just I think they do more bad things the left becomes overly restrictive um you know too much regulation too much the right does other things and it's it's just not good the the and if you carry on like this and economic growth continues to slow you will have all whether it's Civil War or state-sponsored War you will so this is why you need to have this productivity miracle there is no other outcome and I know people get pissed about what the Europeans are doing with forcing ESG the green energy side of the equation they're not stupid they know what they have to do so you have to change the energy side the US is not that Keen on it there's two sides here because the US is the largest supplier of all so the largest has the most amount of oil in the world so it wants to keep hold of that system but also this new system for the productivity that that has to happen if not you will get down to your danger zone because in spoon times nobody goes to war what do you think about as as they go to ESG though um because I get that and I've heard you say something which I think is really smart which is America's energy independent so of course they're not as worried as switching over to Renewables whereas Europe is not and so for them it really becomes a far more important issue my beef and and again I would like to acknowledge is not an area I've thought a lot about but I've thought about it enough to this is how I'm looking at it I love the idea of going to Renewables but the way that we're doing it the speed to your point about sometimes you just need to slow things down the speed at which you're trying to make a change necessitates from what I can tell uh getting into nuclear energy and the fact that they're issuing that becomes problematic when you look at whether you're trying to enforce this uh globally did you hear a Constantine kissin's whole uh Oxford debate on this topic no he's basically like look uh England I think was what he was talking specifically accounts for like four percent of carbon emissions so it's like even if they drop to zero it has absolutely no impact so you this really becomes a question about wealth accumulation and so you have to understand how it impacts the poorest countries you were never going to get the poorest countries to say okay we don't care about energy we'll just stay poor and we'll keep burning wood inside of our huts and people are dying from inhaling the smoke from that whereas if the approach were okay cool we can't screw over the poor uh we need to transition as quickly as we can we need to not have a um a sort of philosophical we draw a line again something like nuclear energy we need updates it needs to be better all of that but the not being able to debate it feels like the problem versus we want to go ESG so right idea wrong execution is coming it's coming I mean finland's already just started yeah it'll all come because there's no way of solving the equation but they do need to already try and get the Reliance of fossil fuels down nuclear power plants take time to build it will come so I don't worry about that it's how fast this happens Europe's going fast there's an argument from people in the Commodities markets it's going to happen too fast therefore there's going to be a massive Supply shock because there's not enough oil around and because you're stopping people doing it that's yet to be proven oil will go up as will copper in the next economic upcycle because it always does because it's cyclical would it go to some super cycle that people talk about I don't know yet to be proven um but I think it's the right thing to do to move as fast as possible I also think it's the right thing to do to move towards uh nuclear there's new sources of nuclear a much smaller much more interested and when you get actually further down the the understanding of nuclear you're now getting small nuclear that you could have cars running from nuclear you could have your house running from nuclear and you can have a decentralized grid okay that's very powerful to have a decentralized grid where you're generating your own power all of that technology is possible it's not scaled it's not you know finalized but it's possible so you know where is the world going in 20 years time it's going towards a more decentralized grid Europe decentralized grid all the green energy stuff decentralization of the grid is a good thing it's much more robust because it can't be struck by another sovereign state and these are fragilities and we talk about this the hacking of the US power infrastructure because the it's so out of date that the Russians or whoever whoever it is could bring it down we we need to decentralize it there's so much there's stuff we need to do we've got different threats and we haven't knew what to deal with I mean cyber threat and something that whole conversation to have um but the read a book called This Is How They tell you the world will end by New York Times journalists about cyber mind-blowing it's terrifying yeah we're kind of worried about the wrong energy we're worried about The Wrong Enemy half the time [Music] um who knows in a digital world we have very different enemies all right we've talked today about two life rafts that I think are really potent that will help us escape this um cycle technology we talked about a lot uh and then crypto there's one thing on crypto that maybe web3 is a better way to categorize this that I want to talk about which is um tied to this idea that I mentioned earlier that I wanted to get to which is why the 80s felt so awesome um I was too young to really be aware of what's happening I know you've looked at that so I'm curious is it accurate to say that the Boom in the 80s while I think ultimately problematic uh was the financialization of everything and am I right to draw a parallel and this is one thing that again I am the most Ardent web3 person you can imagine but I also like looking at the potential downsides I do worry about the financialization of everything via web3 so walk us through the 80s is that characterization accurate and are we just going to see the same problem with web3 so firstly the 80s was kicked off by a collapse in interest rates and an end of that inflation Beast driven by demographics so it automatically felt better there was an era of deregulation which was the Reagan Thatcher years but we started a massive Monumental debt cycle and I think it was Margaret Thatcher that started it personally because she did something magical and this is politicians and their abuse of power and this is as ever probably an unattended consequence they're good ideas and bad ideas Nobody Knows the outcomes so in the UK what you would call housing projects in the United States are called Council houses and Council houses were free accommodation for people who didn't have the means to buy accommodation and so it was easy to live there the government gave it out it was part of the structure of the post-world War II repairing a broken Society and then Margaret Thatcher came along and said well these people showed up economic participation much like we're talking about with crypto you can participate in the growth of the economy not get left behind very good well said Margaret her idea is we'll sell them the housing for cheap so that they're in because they become conservative voters the probability of being conservative voter if you're a house owner versus a non-house owner were massive at the time so she's winning votes but actually give people economic participation great so they get the council houses but they all become debtors these are creditors these people didn't have debts they don't get mortgages turned millions of people into debtors overnight and then Stow the hamster wheel starts of debt and they start building up debt in the U.S deregulated a lot of stuff at the same time based around Margaret Thatcher's ideals and so this was where if you can think about it the 80s so the average baby boomer is now 30. 35 years old they're into the workforce the inflation is behind them now interest rates are coming lower their wages don't go up so what they do is like borrow some money interest rates have gone down and that massive debt cycle starts so the 80s felt great because everyone had money that wasn't real and that's why the financial system got ahead of itself 87 crash was part of that and then it just took off again because the answer to the financial system getting ahead of itself was to cut interest rates and allow even more financialization so I've argued like you that humans are humans and we will create leverage in every system that we do and we will create leverage within and we've done it already and blown up um in the crypto markets so you create some fragilities that exist in the in the financial system everything is financialized I.E the tokenization of everything via web3 I think everything has value anyway we're just bring it to exchange does it become a crazy boom bust Wild West world of degenerate gamblers probably because that's what humans are um but also but the stock market's the same right why restrict One Market versus the other why restrict the market for you know all goods and services have had have a price so I think price Discovery Works everything else I think the reason price Discovery doesn't work in crypto so well or it becomes so boom bust is because it's it's still restricted it's small it's just a small market so too much capital in a small Market in and out creates outsized outcomes markets bigger so if you put a trillion dollars into crypto it would more than double because of even though the size of crypto is a trillion is because everyone's holding stuff there's not enough liquidity and before you know it it's a huge price but trillion dollars into the U.S stock market yeah my God twenty percent fifty percent what's the crypto Market with a trillion dollars I don't know 100x so it's just a function of it's a function of that and I I do think the ability to access freely Access Capital within the web 3 world is a game changer for people capital is restricted right now I've got to remember that and yeah we're seeing the ugly ugliness of of mean coins and scams and crappy nft stuff we're seeing the ugly side of it but free access to Capital I hadn't seen that before you need to be a regular regulated type of investor you don't get access to Capital the system is against you so I think access to Capital is a very very powerful thing that can happen through web3 do you think that people will just get savvier because what's happened so far is you've had some really amazing legitimate things happen and then you've had some super rapid scams I mean there was at one point the nft thing where the guy what'd he say like uh later fools or a later oh God I forget what the meme was but later nerds or something like that and so he literally just took people's money and then was like bye um so you have two paths before three make it illegal regulate it or expect people to get smarter um which do you think happens or some combination thereof so have you ever had any friend or anybody you've come across take money from you and never return it yes yes is that regulated no is you lending your uncle up money because he wants to buy cars that regulated or unregulated unregulated but it is tax like I have to declare it yeah so you should declare crypto but once are you able to go and you know if you're a 21 year old are you able to take your entire paycheck to a casino and blow it in one go yes so why the hell should access the capital to grow businesses and do stuff be regulated in this same way I don't understand the logic it is protective of the system it is not protective of the people you know we can all lose money sorry I it feels to me like a nanny State thing so even gambling you can only do it in the US you can only do it in certain areas you can't just gamble blanketly here but you can go to Vegas do what the [ __ ] you want with as much money as you want and nobody can ask a damn question but hey you want to go to coinbase and buy you know some token that's not listed in you know you're in trouble or you're not allowed to do it so why one thing and not the other and I think it's because access to Capital makes some people extremely rich and to be the tap provider to the capital which is the banking system you get to have the capital and you don't or a VC or a private Equity Firm you get it you get it you don't why don't you get it because I don't like you that's that's not right but in every other economic transaction a private transaction there is no protection outside of a contract so if you give it to your uncle and you get them to sign a piece of paper to say I will promise to pay you back okay you've now got a contract so as long as there's some contracts some general ground for how we can interact with each other that's okay but to say good bad Vegas good Capital markets bad it's just I think that's an abuse of power and it's abuse of power particularly in the US because of the system of money and power and the lobby groups who pays for power in the US is not like Europe it doesn't happen in Europe in the same way um it's it's always shocks everybody the U.S political system and how it's driven by money the food outcomes medicine outcomes you know the everything is driven by these superpowers the corporations how's it kept out of Europe you just can't make donations you can't Lobby yeah we just don't have such I don't know the exact structure but I don't think you can actually run elections with based on money so it just doesn't work in the same way where you can raise a Super PAC with a gazillion dollars and therefore you can do that and by the way I'll buy those votes yes of course there's horse trading and invested interests and there is no perfection in any politics it all stinks but it's just not as as abused okay so let's play out the scenario so if you were to let people uh and I don't know if you're saying truly unregulated but if you're if you let web3 go without putting in the kind of Regulation that we see around uh equities now what do you think happens do you think we just we have like a five or ten year period where a ton of people get burned and then it people begin to get um they right size they get skeptical and it it sort of comes out in the washes people self-educate or do you think that it will just be a flywheel for abuse yeah look I I I'm a Believer in regulation I just believe that don't accessibly regulate that that gives outcomes that are unfair on others so I think there's there's regulation you know I don't think there's an issue with a kyc AML elements to stuff I don't think there's an element for prosecuting fraud I don't think there's an issue with that you just need to Define what the rule book is um it shouldn't be all that bad all this good it should be you know is what contract is enforceable here is a societal contract or is it a physical contract if somebody steals money from you should they be prosecuted yes should you say everybody who uses this system is is doing so illegally that is wrong so I do believe in regulation I just think I'm I just like a more pragmatic approach to life in general I I think just being a pragmatist helps and don't be an idealist or an ideologue just be practical and pragmatic and solutions are much easier than people expect people tie themselves to ideologies too much and I think ideologies are dangerous preach it's all right to have a a general a general ideology is fine but imposing your ideology on others not fine all right brother as always this is amazing I know you have a new event going on tell people about it yeah look if you want to know more about AI I mean real vision is an amazing resource for everything all of these kind of conversations um but we've have a specific kind of Festival of learning about Ai and it's free so just use realvision.com forward slash Tom use that get your free trial um and I don't know when the festival learning starts next week the week after all right everybody thank you so much for joining us if you haven't already be sure to subscribe and until next time my friends be legendary take care peace if you want to learn why crypto is the future check out this episode with Michael Saylor bitcoin's the best performing asset for the past decade and it's you know it's 100x better than gold and it's 10x better than uh Equity portfolios so the volatility is the price you pay

Channel: Tom Bilyeu

Views: 1,200,432

Keywords: Tom Bilyeu, Impact Theory, ImpactTheory, TomBilyeu, Inside Quest, InsideQuest, Tom Bilyou, Theory Impact, motivation, inspiration, talk show, interview, motivational speech, Raoul Pal, Real Vision, tombilyeu, Conversations with Tom, Health Theory, mindset, podcasts, how to be successful, entrepreneur, banking collapse, economy, financial collapse, recession, bitcoin, ai, artificial intelligence, technology

Id: 9UzMNewP5pc

Length: 153min 12sec (9192 seconds)

Published: Thu Jun 08 2023