EMERGENCY EPISODE: Why This Financial Crisis Is WORSE Than 2008 | Balaji Srinivasan

the problems go all the way to the Bedrock of the financial system in terms of treasuries being the new toxic waste it's going to be at least as bad as 2008 but probably worse than that you spent a million dollars of your own money to raise the alarm to the fact that the government is printing trillions of dollars and what I want to know is how are you so sure that the U.S economy is in really uh bad shape what does Bitcoin have to do with this and how on Earth could you justify spending a million dollars of your own money to make people aware of this I do believe uh that we're in the middle of something or the beginning of something that is at least as serious as a 2008 crisis um the government is extremely good at kicking the can and like that's his primary skill in some ways so it's hard to know exactly when things will be formally acknowledged as such you know I've got I've got a bunch of slides that show that the economic situation is powerless a um B that uh you know the the degree of collapse across a number of different Industries a number of different weaknesses will probably necessitate some form of bailouts or printing even if it doesn't look exactly like 2008 um a lot of what the financial system does is it evolves to evade last times pattern recognition um and so it won't it may not look exactly like it used to despite what form it comes in um whether it's like treasury BuyBacks or the people's QV which are different ways of like injecting money into the system that don't look exactly like the 2008 bailouts I do believe an enormous amount of money is going to be printed just like Ray dalio just like a number of other people do and uh in such a case you want to have outside money whether that is uh gold whether that is a foreign fiat currency that you have faith in that's sort of outside the fed's control uh or whether that is Bitcoin or a cryptocurrency uh Bitcoin in particular is you know built to be difficult to seize uh I think that's that's part of the answer and it's not the only it's only not the only thing you want an allocation you want to think about other things in life like where you live your location again Dali also thinks of that as an important thing you know early to 2010s Janet Yellen incredibly reported as having known about the housing crisis having seen it and not raised the alarm and now I'm actually sort of finding like you know people don't want to hear you raise the alarm or whatever they're like oh my God you're a Doomer why are you saying this right the financial crisis was maybe officially acknowledged in September 2008 but of course it had been going on for years before then it was just something where it became undeniable at that point but I felt it was my responsibility having put together what I had seen to be like you know what it's a lot worse and people are saying it's not just uh like a single Bank crisis it's not even just a banking crisis it's a Central Banking crisis the problems go all the way to the Bedrock of the financial system in terms of treasuries being the new toxic waste and it's going to be at least as bad as 2008 but probably worse than that one thing I really want to I want the audience to understand why I become so obsessed with this and I've heard you say that the farther we get from the last deleveraging the more cautious people become and what I think people have the the subroutine that runs in the average American's mind for sure is that uh this hasn't ever happened not realizing what they mean is hasn't happened in my lifetime and they don't realize the hard truth which is that every single Empire and every Reserve currency all throughout all of recorded history have all collapsed they have all failed they have all gone through this massive deleveraging and deleveraging is a really polite way of saying everybody loses everything and it is a it is a bloodbath it is often as Ray dalio talks about it it is often marked by Blood literal blood in the streets this is when we go to war everybody's freaking out and so because it's been so long since um we've had a big war on a global scale because nobody alive uh in the Western World anyway is aware of a massive deleveraging they don't understand that a they do happen B that they have when they happen they happen fast and see when they happen it is catastrophic and so I'm like I don't want to be Chicken Little I am super optimistic but man the more I started getting into Financial content the more I was like whoa there's something going on here redalia says that every society every Empire goes through six stages stage six is absolute collapse and for people that don't know Rey he built the largest hedge fund in the world so this is somebody that literally puts their own money at stake much in the way that you have to say hey I think I know what's going on he's been right so many times that he's built the largest hedge fund ever and so what he's saying is okay there's six stages stage six is total collapse P.S the US is stage 5.5 so like that's that's not ideal so as people hear you talk the one thing you're a very metered guy but the one thing I want people to understand about why I'm obsessed with this content is um Sky's probably not falling today at least that's my take we'll get to the the sort of how impossible it is to predict the timing a little bit later but to really understand how these Cycles happen and they are Cycles where we're at in the cycle so that you understand what to do so if you don't mind walk us through the the rapidity with which this stuff happens because I know that you have uh some slides that walk through like it was three days from when SP BB collapses to when they're printing like that the the speed at which this stuff happens I think is really important for people to understand one other thing you might want to just kind of point out to your audience is um like you know I I am I'm younger than Rey uh but I've I've done some okay things in life so you called out uh what was going to happen with kovid that it was going to be serious everybody said you're out of your mind and you were like one of the first people to call it yeah and and I think I also gave a pretty detailed projection of what would happen and if you go and look at the you know the qts on that um it's one of those things that feels like somebody was treated like uh I nailed everything to such an extent that it that it seems less remarkable today because of you know it was um it's almost like reading back history there's like one thing I think I got wrong which was like you know that full face masks would be more common for longer but otherwise I think I played it out relatively well I'm an angel investor and so what I do is I look at long-term trends and I'm very early on them I'm early on genomics and Robotics and Ai and most of the time you want to identify those things that have a lot of positive upside right but Africa covered was the first time I was looking at someone's like I cannot I cannot figure out a way that this isn't bad you know what I mean like it was kind of like that I just was looking at chimney graphs too many charts and like you know this is the first time I've seen something you have to work back to that time which is now several years ago and I was like this is the first time I've ever had a Sinking Feeling where it's like down into the right you know um and that's mainly because I wasn't really looking at such graphs I wasn't I wasn't paying that much attention before the financial crisis um I was in Academia at that time I was just wasn't looking at markets or whatever but I've got that kind of feeling again let me let me actually show the slides and and maybe jump go there right perfect this concept of the Fiat crisis right uh one way of thinking about it is it's like okay how fast could you know things unwind how fast do they start printing trillions well it was two days from the collapse of Silicon Valley Bank to the printing of 300 billion dollars even if they didn't call it printing it was two weeks for 500 billion dollars to move out of local banks to money market funds and to uh you know big Banks and so and so forth for them to flee right um it was two months to go from patient zero the first patient being infected by covet in the U.S to lockdown um as January to March of 2020. it was two quarters from uh Bernanke declaring that it was a quote mild recession in April 2008 the full-blown financial crisis being acknowledged in uh September 2008 okay finally it was two years for the USSR to go from superpower in 1989 to Total collapse and non-existence in 1991 okay and so you know the lesson of that is that too slow is too late right that was you know two days two weeks took months two quarters two years too slow it's too late and meaning if you don't react quickly you're going to be too late you're going to be the one left holding the bag to get smashed by the freight train well yeah and then what does react mean and the thing about it is um Paul Graham actually has a good saying which is when something is exponential it always feels like you're reacting too early and the reason is because you don't have the normal social cues around you it's like um uh it's like it's like flying by instruments as opposed by opposed to flying by looking out the window right looking out the window you can see nothing is wrong but instruments show actually beep beep there's a big mountain in front so you should pull up right and you have to essentially trust your instruments at that point because nobody is saying anything everybody's calm and um that's like absolute Reckoning as opposed to relative Reckoning um and uh that's an unnatural way for humans to behave especially when it comes to doing something atypical um you have to have the you know that's what being an individual investor is like that's what being an investor is like I mean the whole point of course you've heard Buy Low sell high right um you know why it sounds oh yeah it's much harder than it sounds right because right if you're if you're buying low you're going against a crowd if you're selling high again you're going against a crowd buying low you know you're you're you're getting something when everybody else thinks it's a bad idea you're literally going opposite the crowd both times so it's trivial when you look at a graph oh I bought here and I sold air when you actually if you could have VR that would project the emotions of the moment and then you're hitting the buy button and at that time and as you say the time to buy as much blood in the streets or whatever right or you you know you get greedy with others or fearful fearful if you get VR that captured the emotions at the moment and being very contrary to the crowd um it feels very different you know anyway so so too slow is too late and many things are breaking okay so um there's the recent debt ceiling Showdown that was a near Miss but the uh it boosted uncertainty in U.S debt it felt like the conversation was different this year did you feel like that as well very much so and I reacted differently and moved my money differently and yeah it not only did it feel different when you look at the chart of How High the debt ceiling is now compared to what it was last year like it is a straight vertical line it's crazy yes that's right and what's happened is basically like um in a sense you know you can think of it as um the more people can deficit spend and borrow without apparent Consequence the more they do so it's as if you had a seemingly infinite credit card and there were no consequences for decades and uh you were like accelerating into the wall right because it just feels like nothing is happening hey we're such a superpower we're so Invincible even as the tide is going out even as it'll get to like you know Foreign Affairs now agrees it's a multi-polar world um China is like the number one car manufacturer out of nowhere they're becoming a plane manufacturer like all of these graphs a huge amount of essentially the US's scope around the world is narrowing very quickly and its domestic scope there's massive internal conflict and yet its Ambitions go to the sky even at State capacity is falling through the floor does that make sense right so um one thing I want to Anchor people around and I want to know if you think this is true that the the the collapse the big collapse begins with debt and if it I think that the story that we're going to go through at least in the beginning part of the interview is really a story of debt um do you agree with that it is it is debt but it's also um you know it's it's it's several different shocks at the same time um so uh you know dalio actually talks about um the and I'm deciding him because I think he came to similar conclusions but I actually have in some ways maybe a more hopeful take or or some of different takes in terms of similar inputs different outputs so yeah there's the economics where you have um essentially sovereign debt crisis not not just brewing underway with lots of smaller countries already defaulting but you know the big ones you have to come potentially but you also have massive internal political conflict in the U.S and you have massive external superpower conflict between the US and the dragon bear you know Russia plus China um and you also have um you know a couple other factors which are a huge consequent decline in the US's soft power globally and domestically so you know super majorities of Americans don't trust DC and abroad you have you know France Brazil um Israel even uh you know allies right that are trading in Yuan or declaring strategic autonomy or you know Brazil's is housing Iranian warships um and uh even Taiwan said it would shoot down you know U.S uh uh planes if they tried to bomb tsmc right and um and that was like a little Tempest in a teapot but it was clear that a lot of countries are kind of going their own way okay and then finally you've got the technological shocks um where uh you know the in a sense um you know for like the ABCs of economic apocalypse for blue America in particular are you know AI Bitcoin and China in the sense that AI takes their jobs and Bitcoin uh takes their power over money and China takes attention to their military power um because lots of the jobs especially like you know the Northeast are lawyer bureaucrat doctor like licensed jobs in some way where an AI might be able to do them better faster cheaper um and then finally you have um the uncensoring of social media and that is you know what alone is done with Twitter uh but it's also um you know YouTube is following suit they've they have reduced their level of censorship on certain things and then you also have things like Noster and forecast which are decentralized social media so that's like a digital glass nost to a company bitcoin's digital perestroika okay meaning um when the Soviet Union collapsed you had truly free speech which was uh you know like a glass dump honest and you also had free markets which is perestroika and we're having that in the west so you have like a lot of different shocks hitting at the same time it is not simply the economic shock it's in the context of everything else does that make sense all right so we have all these things colliding at the same times what I'll call a rogue wave phenomena yeah and let me kind of just show yeah like Rogue Wave right so but um Let me show what all these things are right so mentioned death ceiling was like a near miss that the boosted uncertainty in U.S debt um there's an ongoing banking crisis most U.S banks are quote technically near insolvency hundreds are already fully insolvent okay that's you know a guy who disagrees on many other things it's got a root beanie um you know is saying that there's a banking price at the time of you know uh in in um May June of 2023 we've seen through the largest through the four largest bank failures in in the last two months somebody uh this guy Bianco Jim Bianco Bianca research coined the term it's not a bank run it's a bank walk right deposits are leaving Banks regularly um they're not uh they're they're not moving um all at once digitally overnight they're moving pretty fast um and they're moving to places with higher interest rates they're moving out of regional Banks right hundreds of billions of dollars um and uh you know when you start something off with three of the large four bank failures in the last few months is that is that the end of something uh you know it's funny uh you know somebody observed um the reason the banking crisis is kind of operating in slow motion is we don't have um it's not like on a blockchain where you can see real-time financials for everything in Banks you have to sort of wait for the quarterly reports so it's a hurry up and wait kind of thing so every quarterly report that people look and they're like oh my God the losses are so big and then you know they act on it right um this is kind of a slow motion thing in some ways I'm not saying there aren't things that happen in between quarterly reports sometimes there are like obviously a bank run but but often quality reports kick off a whole new burst of activity moreover it's not just you know these these huge banks that have just filled um Stanford study reports there's 2.2 trillion dollars in unrealized losses that many U.S banks face the same risk of Broad and Silicon Valley Bank and fundamentally um what happened as it will get to is the the fed and the treasury um the FED basically devalued treasuries so the Bedrock of the financial system everybody who bought treasury because long-term treasuries in 2021 got completely destroyed in 2022 and some of those institutions started to collapse in 2023 and so the safest asset in the world became the risky assess in the world how did they undergrade in return this is an important idea how how does how did the government end up doing that let me give a few analogies first and then let me get more kind of technical or specific do you remember in 2008 when the banks uh sold AAA mortgage-backed Securities to each other but they really weren't AAA right and it was something where it was a combination of some of those guys relying to themselves some of them were lying to themselves so they could lie to others the ratings agency is rely like everybody was kind of uh you know a combination of it's like self-interested delusion right um where you know oh my God are you saying that these mortgages aren't aren't real that would mean a housing crash that would mean all these people are going to lose their homes that's anti-American right um that was the tone in 0607 what are you saying the housing market doesn't always go up you're crazy right you're a Doomer and uh you have to work back to that period of time but that is one of the reasons why this is allowed to go on for so long the the housing credit so I was able to get so bad is because people thought well real estate's the safe investment it's always going to go up when is that ever going to go down the government is backing it et cetera et cetera right and the AAA ratings um on mortgages or or mortgage-backed Securities is part of what allowed the crisis to get so bad and one of the issues was the rating agencies were not able to down rate those things um for a variety of reasons one is that they're paid by the the you know uh the the guys who they're they're rating okay but so that's a private issue but the second is later um for example in 2011 when an s p actually downgraded U.S debt from AAA you know what happens to them no no they got uh they got um you know a case from the US government and I believe like a senior official there this guy you know Sharma had to step down these government did not like um s p downgrading the debt and uh I'm pretty sure that you know the government would not have liked the ratings agency is downgrading the mortgage-backed Securities either in around 2008 because it bipartisan Thing by both Bush and Clinton was to get people into homes okay nyt has this article like you know the Bush Drive for home ownership fueled a housing bubble and then there's another one which was how the the Clinton era roots of the financial crisis okay in the Wall Street Journal so if you have sometimes binocular vision where you take the New York Times attacking Republicans in the Wall Street Journal that's attacking Democrats you put it together and you're like oh that was a bipartisan government caused housing crash did you know that part no okay that's actually pretty important right um it's important what follows because uh there's a bunch of movies that have been made on the housing crisis and uh there are some of them are good movies there's The Big Short uh which talks about you know The Outsiders and they're seeing the problems there is uh too big to fail which talks about like the government's vantage point on it um there's Margin Call which talks about the bank's vantage point on it there's inside job which is sort of like the activist point on it which is calling for more regulation but what there really hasn't been at least to my knowledge is one that shows the extent to which government policy pushed Banks to um you know again in the words of both the the times in the journal to um because they wanted to get people into houses because they wanted affordable housing goals ending redlining and so on and so forth both the journal and the times are publishing the truth on this around that time in the early 2010s so the government was nudging pushing Banks and if you didn't um uh if you didn't go and uh you know extend all these mortgages to people who probably couldn't pay well often you got acquired by a bank that did and that would kind of um you know override your decision making anyway so hold on I think it's important to understand why why they're doing that so are these ESG style goals where there's like a moral imperative that's driving it that's exactly right you know for example here's a quote December 21st 2008 again when the New York Times had an incentive to attack Bush over this um they said Bush Drive for home ownership fuel housing bubble quote we can put light where there's darkness and hope where there's despondency and part of it is working together as a nation to encourage folks to own their own home George only Bush October 15 2002 right so that is the approach which says oh we deregulated the market and you know push people and so and forth 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 in Impact Theory University join the thousands of students who have already accomplished amazing things tap now for a free trial and get started today yeah there's some truth to the idea that um they pushed lending standards to be low but that's not exactly the same as deregulation to actually use regulations to push Banks to hit certain uh whether you call them formal or informal quotas they were doing that then the other side of it is um the Clinton era roots of the financial crisis in uh you know Wall Street Journal article in 2013 and um that says affordable housing goals established in the 1990s led to a massive increase in Risky subprime mortgages right and uh you know there's a strong case the answer is going to be traced to September 12 1992 on that day presidential candidate Bill Clinton proposed using private Pension funds to invest in government priorities such as affordable housing sharing long-term broad-based economic benefits right and um so the point is if you add up these two articles again you start getting binocular vision have you heard that saying like uh you know there's there's a stupid party in the evil party and sometimes they get together and do something bipartisan and that's both stupid and evil have you heard that nice it's lovely it's good right okay so one thing I don't want to get lost in all this I really want people to understand why this stuff is happening so this is maybe you and I don't agree on this but I I am formulating a hypothesis the more that I get into this uh that the following is what's happening and this is this is actually me synthesizing you and dalio and a few other people like Rao Paul so you what ends up happening my thesis goes and please strike this down where you think I'm wrong is that uh you become the reserve currency you now have the ability to print money to cover up problems uh that begins to change the uh the way that people perceive money even at the governmental level so now all of a sudden people start trading what works in a free market sense of working that you spend a dollar you get to in return it exchanges that for I I think morally we ought to do this thing we do it it's not working meaning that we're losing money so you get the 2008 crisis but they're like what crisis we're just gonna pay for over it we're going to print money we're going to it was bad but it wasn't fall off a cliff bad and so they print over that and they they go oh look see that wasn't that bad and we were doing something good and we're trying to be moral actors because to be honest like this was the big Awakening that I went through I'm like this sounds awesome I love that you're ending redlining you're getting people onto the housing ladder that previously weren't like it all sounds amazing but then Thomas Soul comes along and he gives me this idea that then you start watching play out which is the last 30 years have been marked by exchanging what worked for what sounds good now when you tie that to debt because again my whole thesis is that the collapse begins with debt because if you don't have debt you can get away with some of this but the problem is you you end up getting into the moment that we're in now which is why you talk about all these problems happening at the same time the reason I think this becomes a that you're potentially about to walk off a cliff is because you have all this debt the government has a full GDP in debt uh U.S households have full GDP in debt corporations have full GDP in debt and so now all of a sudden the only way out of that debt is to either lower your interest rates which if you do that then you're going to have inflation uh to print money to cover some of your debts which again inflation and so if you have to print and you can't lower rates anymore now you're in trouble so they start raising rates the problem is everybody's got all this massive massive debt and this is where editors put back up that the debt ceiling picture where we see this huge spike in the last year where it is just mahusif the the amount of extra debt that we have right now is not a little it is it is unbelievable it's like 400 more than normal it's just absolutely astronomical so you have this massive amount of debt you can no longer lower interest rates in fact you have to start raising interest rates the FED gets everybody again this me quoting you the FED gets everybody to buy into the bonds treasuries like hey rates are going to be low for the foreseeable future all is good and then whatever six months later they take them to the moon the fastest rake height in in history or certainly recent memory and so now people like whoa whoa all these bonds that I just bought they're now toxic I can't get them off svb fails everybody's blaming them as if they did something crazy they put all their money in like the supposed safe ass it and so now you're in this game of like the only solution left is to print because you you can't lower interest rates uh because if you you can't lower interest rates because of inflation you can't raise interest rates because you will break the economy and more people aren't going to be able to pay their debts including the government itself and so now you're in a conundrum where all of your tools are gone except printing money and so the question that I'll ask you point blank is we've printed a lot of money and nothing bad has happened so why why now why why is it a problem now in short like the system is starting to Creak and you're starting to see uh what I'd call consumer failures like in the sense of in 2008 you know when you went to your ATM or something that didn't that that just continued to work um the failures didn't were like Enterprise failures in the sense that there were guys who were sweating in skyscrapers with piece of paper back and forth that weren't where they what they thought they were now you're having Banks Blow Up on uh on Main Street um you are having it it is becoming much harder to cover things up okay so we just talked about the fact that all these Banks blew up the fact that there was this near miss and the deaths in we've got people talking about debt again uh the fact that there's 2.2 trillion unrealized losses according to the Stanford study and I'll come back to what those are but we have commercial real estate crisis due to remote work due to all the crime in blue cities and and so on um commercial real estate prices could crash 40 from their peak in a worse disaster than the financial crisis Morgan Stanley Morgan's okay that alone is pretty bad all right um two uh it was the worst year for bonds evidently in recorded history um so it's a bond crisis not just to bank Christ and everybody buys bonds as we'll come back to that SEC that's actually at the core of a lot of this um and uh you know monster scene is a safe haven but now but they're actually Central to to this this crisis it's not like a um it's a crisis that's caused by governments just like 2008 but even more directly um Insurance remember AIG when they went down in 2008 like the guys who were supposed to backs up everybody you know so today insurers also bought a lot of bonds um and you know double digit percentage of their portfolio which are supposed to be safe are held in now essentially these unsafe assets are being devalued in a big way isn't it like 70 of their portfolio yeah exactly there's a graph here life insurers have like 70 percent and you can go to other kinds of insurers and the thing is life insurance you might say oh well that's different than real estate Insurance there's actually been a collapse in life expectancy in the US like this overnight huge collapse life insurers are paying out way more than they expected and um so lots of insurers are just getting um they have to pay when they didn't think they were gonna have to pay okay this insurance crisis there's a fiscal crisis 1.4 trillion in unfunded pensions there's auto loans spiking defaults in that trillion dollar plus sector their student loans payments uh May resume on 1.8 trillion in debt after this multi-year holiday due to covid and it's almost like the worst right if you if you just kept it or you'd forgiven it right both those you know would have been better than suspending it for three years and then resuming it because now what's happened is um people didn't sock away the cash for a rainy day right they didn't um didn't use it to pay down the debt they just expanded their spending and now suddenly it made them probably gamble that uh you know the the the um student loans go away forever right and uh because it got suspended now they're coming back they're like oh no and now they've got that on top of their rent payment or something like that so that's going to be it let's use this as an example so why then don't we just forgive that debt oh you I mean well first that's a that's a huge tug of war between two groups you're when you you know if one man's uh assets and every man's liability you are marking down a trillion dollars in someone else's books and they will fight to the nail to stop that from happening right um and uh so it's a zero-sum game it's like if you have the debt you want it to be marked down if you if you're the uh if you're the lender you don't because that's your Revenue stream right that's how you know maybe if you're in college that's how you pay your administrators or whatever right uh why doesn't the US government just pay that debt well it could and if it does do that then it's just printed a giant amount of money and uh then people say why don't you print the you know my mortgage as well not just my student loan debt why don't you print my car alone away right and once you've kind of broken the seal on that that's like the people's QE the people's quantitative easing where the money is printed not just to bail out bangs but to bail out everybody and you know what like At first people will some people will love that but that much introduction of money into the system starts actually devaluing the currency itself so you talk about student loans there's credit card debt almost a trillion dollars credit card debt record high okay um there is uh and there's yet more right globally there's Ukraine the Ukrainian crisis that's like at least 100 billion in it's a it's like 100 billion in direct costs for just the arms but that understands it it's it's easily a trillion indirect Europe alone paid like 800 billion in energy costs it's like a multi-trillion dollar War um you know people say Wars cause blood and treasure they I mean just think about it like you've seen obviously these bombs blowing up things in Ukraine or what have you think about how expensive a building is right it's like somebody's entire life to pay for like a like a house you know 30-year mortgage or whatever so now you have a bomb that blows up like a thousand percent of apartment building that's like a thousand economic lives wrecked right even if the people didn't get blown up it's like a thousand healthy working you know uh people's 10 years of their life or whatever is consumed if at current very high housing prices so when whole cities are leveled and stuff like that that's a lot of damage right and that's just within the country obviously outside the energy crisis is tremendous and of course the humanitarian crisis is tremendous um you also have so it's you know it's the Ukraine crisis you have the energy crisis in in Europe and some people are like oh well price are down Synergy price is over and it's like well what was the cost of that right you had demand destruction you had businesses that shut down because they couldn't afford the energy costs and then they stopped consuming energy and maybe you know that's that's why Energy prices are down because they're not consuming you know the the level of demand destruction that probably happened in Q4 of last year you need to see stats on it and a Q4 of 22.2 um then dedolarization uh this guy Stephen Jen who's not like uh he's not like a Zero Hedge guy um he says dedolarization's happening at a stunning pace and people did not um account for exchange rates and so on he's like by his calculations uh you know the dollar was down like you know in terms of its share of um assets but held by other countries like 19 last year and everything else is up you know southeast Asia um all those countries the 10 countries are using uh their own currency for trade Indonesia president said that Central Asia the ACU um they met they said they want to de-dollarize um you have uh you know South America Latin America Brazil saying they're using the one you're in France saying they want to use Iran you have Iraq in the Middle East trading oil for Yuan you have Russia trading role for Yuan um and uh you have Israel even holding you on and uh you know that's a lot of countries that's a lot of the world right there you know and um so de-dollarization if the dollar is no longer have to be used in an obligate way right if it's no longer um you know it's only the thing you have to use if you have options then that means you've got another rail to go on and one thing I should make clear by the way is I don't think um this is very different from dalio actually on this he thinks the dollar just gets replaced by China that's a clean kind of U.S China replacement I actually think that dedolarization is decentralization so the kind of clean statement is money is a store value meaning of exchange unit of account and sometimes in the cryptocurrency you might also include like a system of control and like a financial system okay so the store value um that you know from treasuries or you're just selling the dollar itself you may go to goal central banks for buying record amounts of gold or you may go to bitcoin uh or you may go to foreign Fiat so medium exchange you may use foreign Fiat currencies that you want you may use the repeat you may use local currency you may use cryptocurrencies um in roughly that order I think so you know um in terms of unit of count that may Remain the dollar for a while but that's like the last thing to flip you know basically you can just look up an exchange rate you know and flip that that's the easiest one um system of control is the most important in some ways it's not normally listed this is due to Andreas Antonopoulos he came up with this concept but system of control is who has root access over the currency you're using you know this was not necessarily quite an explicit Concept in the past but today it's very explicit is the Fed can literally hit a button and freeze accounts just like they did to the Canadian truckers just like they did to Russian assets you know the Kansas Bank uh you know banking system to debt and so system of control you know the Chinese Yuan the Indian rupee Bitcoin and ethereum those are outside the ability of the US Financial system to set down to shut down with one click okay um then there is the financial system and I think that's uh the Yuan and the repeat for the domestic economies that's maybe uh you know in the Middle East AED device currency is still pegged to the dollar maybe it gets unpegged uh you know there's a Singapore dollar and then of course there's ethereum and the Global Financial system that's built on on crypto um so you have essentially both What I Call Land and Cloud competitors to the dollar land being you know the sort of bricks and especially China you know currency and then Cloud being cryptocurrencies right and so once you start enumering all those then you add on top of that there's a huge development since 2008 which is um there's lots and lots of fintech and crypto people around the world okay and if you go to other countries um often their payment systems are more advanced than a Divas for example um like WeChat in China or UPI in India or you know even like you know grab pay in Southeast Asia or you know Pags to grow in Brazil and so like you know it's not that hard nowadays stand up a fintech or crypto company right and um by contrast you have ACH and so on within the US where it's like slow wire times and what have you you know what I'm talking about right like how uh payment technology is relatively lagging in the US yeah as soon as you get into crypto You Realize Real Fast uh how slow the Legacy system is so the point is that um the only thing the U.S financial system is going for it is its Legacy traction it's not technologically Superior it is not something which you choose from scratch because the US is no longer a major exporter of physical Goods relative to China China's the world's number one trade partner it's um it's not something that either your engineer in the U.S would pick or you're conservative in the US would pick or um you're you're much of the world would pick right so it's an incumbent that has incumbent advantages but if if it had to be adopted from scratch today it's not clear that it'd be adopted in that way does that make sense right so that's important that the rest of the world it it's much easier to launch currencies than to scale factories I've done both okay it's not trivial to launch currency but it's digital basically China is the number one trade partner for most of most of the world right yeah I think that's shocking to the average listener they they have no idea that's true see here's the graph right like essentially here's the US in the year 2000 here is China's you know trade and raise you know this is why it's amazing right and so the thing is that's that's only accelerated over the last three years right in a sense of course that's really terrifying this is where I I feel like um people aren't seeing how all these things are adding up in fact I wrote down what I think your thesis is because I'm again I I don't quite know if we compact fully agree so it's like you've got okay there's all the problems that we just went through all the debt all that stuff plus the lack of financial Innovation on behalf of the US is is leading to this moment where we are now weak to contenders and the most obvious Contender is China um how close am I getting to the stack of problems or the stack of issues that you think are creating what I referred to earlier as the rogue wave that seems prone to be uh the mark of the end of the US Empire I think the lack of financial donation is certainly a factor uh but it's it's really I mean the physical world is made abroad right like if you have to choose if you as I showed that graph countries don't want to choose but they have to choose um try to make sure your chairs and your screws right people think the competition with China is like a high-tech military competition in large part it's a low-tech economic competition China will screw you on the screws right they will literally just withhold the nuts bolt screws and so on you can't make things right terrifyingly during covid the medication and PPE masks and so on yep that that's right in fact actually there was there were there's Aid air lifted it wasn't wasn't made public or it was made public but wasn't emphasized Aid came from China to the U.S so August 6 2020 Rolling Stone the unraveling of America and essentially uh here's here's this thing he said he's like um basically for more than two For the First Time The International Community felt compelled to send uh disaster relief to Washington for more than two centuries reported the Irish Times the United States has stirred a very wide range of feelings in the rest of the world love and hatred fear and hope and being in contempt upon anger but as there's one emotion is never being directed towards the us until now which is pity it's American doctors and nurses eagerly awaited emergency airlifts of basic supplies from China the hinge of History opened to the Asian Century okay that's right now the thing about it is I actually somewhat discrew the quote in the sense of this is actually I'd say not for more than a two centuries it's really about like U.S World dominance actually relatively recent you know it is not it's not like an eternal fact it um there's this book by Stephen wertheim uh which is good which is um it's like called tomorrow the world uh the birth of U.S Global Supremacy okay do you call that do you mark that after World War II well it's actually in the lead up run up to World War II and the thing is I mean this is sort of obvious but you don't become number one by accident right it's like it's like it's kind of like um deciding to do a startup right you don't become Google by accident it's really hard to become Google you have to set out to become Google it's a it's a very difficult process and even those who set out to it don't don't come in the reason I say that is a lot of people just sort of think oh you know the U.S kind of just fell into this role and you know it it didn't it didn't you know I never wanted to be you know totally World dominant with embassies in every country in in military-based area or in a financial system everyone regulations after work no there were people in Washington DC who had a quote plan for world domination just like the Soviets did and uh you know the difference is that I think that from 1945 to 91 um the American version was better than the Soviet version and why is that it's because uh you know if you look at West Germany versus East Germany West Germany is better off South Korea versus North Korea South Korea is better off you look at um you know the uh Taiwan and uh and Hong Kong which are you know capitalists and the PRC that was Communist for for most of the Cold War um and and the the Western aligned countries were better off and so just looked at it in terms of that neutral ground the American American system with its flaws from 1945 to 1981 was better than the Soviet system if it was Court world domination was relatively benevolent world domination what I think happened after 1991 is um without the Soviet Czech uh you know as bad as the Soviets were and it's good that you know that is on the ashy of history and Eastern Europe is free and you know India's gone on capitalists and all of that is generally good even though it was tough for a lot of the former Soviets um what happened is the you know over time um at first US just helped Eastern Europe get back on its feet and it was occupied in making sure that the Soviet Union didn't totally blow up do you know for example that um or the post-soviet since do you know that the uh they shell the the Russian White House in 1993 do you know about that no yeah the like you heard a lot about TNN in 89 but you didn't hear about 1993 and Yeltsin ordering like the Russian White House to be shelled with tanks even though that's more of a like um you know Russia was at least within the Western Camp ish at that time ostensibly it's like a it's a new democracy and so on and so forth you've never heard about that most people have not heard about that but basically the the post-sovied era was a huge mess and the U.S to its credit like essentially supervised that mass and it's revealed later that you know the U.S was backing Yeltsin it wasn't like a complete organic thing that Yeltsin you know became Prima Center Paris um of course you know the CIA all these guys have an interest in loose nukes not making their way around so the US was all over that situation it's almost like um you're seeing a waiter they catch a bunch of balls that have fallen you know down from the air like it's like a bunch of plates go in there to go look at this and catch them you know so in the early 90s I think the US overall was doing a decent job not a great job in some ways than foreign policy Eastern Europe is way better off than it was Estonia is way better off than it was I'm not somebody who's just like oh the US is always evil and so forth not at all in fact I think the US has actually done a lot of amazing things what started happening in my view towards the end of the 90s and then especially in the 2000s is you started to get that Messianic crusading neocon slash Samantha power slash responsibility to protect kind of thing arguably starting with you know Kosovo and then going into you know like Iraq and all the Middle Eastern forever Wars and then onto the present day where you know we've got why is this why is this bad good question um the reason it's bad is that Wars are never clean you know they're always sold to the public on this clean line of like here's the bad guy here's a good guy and um they're very very rarely clean um like even even World War II you're talking about like the firebombing of Dresden you're talking about the nuking of Hiroshima doing lots of civilians and Innocents killed right and many other Wars are much more great than that a b is um like in general War should be a last resort absolute absolute Last Resort and usually you want to solve things with economics or some kind of political solution or something like that and uh the reason it was bad in the late 90s is um it's it's just unchecked power you know actually that's what am I think about if power corrupts absolute power corrupts absolutely have you heard that before right of course so um right so basically uh you know especially like Iraq has something I think we can have consensus on a country is totally blown up on totally false premises eight trillion dollars was wasted on these Middle Eastern Wars huge part of the debt by the way okay um Iraq Afghanistan and so on um Isis formed in the aftermath of that all these countries in the Middle East were destabilized and for what like there's no accountability a lot of the same people are still in power a lot of those neocons are still you know advised they're saying now war with Ukraine it's totally memoryless it's like a sociopathic serial killer at this point right and at best you'll get well we meant well and then move on why do we bring that up you know and why are you dwelling on the past okay well um I mean we're going back to 1619 but we can't go back to 2003 right like um you know people will selectively excavate aspects of History uh and and use them as a weapon in you know like uh the the current events but they they won't do the things that you know in your times was responsible for printing this false intelligence and uh but they want to go back 400 years to not to their own their own faults right so like if you notice like from 1945 to 1991 again like you can't defend everything that yours foreign policy did during that period um people say oh they're right-wing death squads and so on probably there were but you know what they were left-wing doubt squads the Communists killed 100 million people and they didn't play nice you know like the Winona decrypts have shown that uh you know that is v-e-n-o-n-a have you heard that before no not once okay Winona venona showed that um basically the Soviet Union had riddled the United States with Soviet spies uh in fact you read Sean mcmeekin's book Stalin's war and it makes a point that like you know this is not very well known about like World War II you know when the number one first of all he makes a point that World War II was actually not Hitler's store but Stalin's War because Stalin was actually on two fronts he had both an Asian front and European front and the second thing is you know the least just to digress in this for a second you know the least covered but perhaps most important theater in World War II no it's the Japanese Soviet okay I don't know why did you literally nothing about that Collision all right so isn't that interesting obviously you know about the Pacific War Between the US and the Japanese you know a lot about probably the European conflict between you know Germany and Russia and Germany and the US UK France but but isn't that interesting you do and you know about like Germany you know versus Russia in terms of stock whatever but why why didn't Japan and Russia fight because Vladivostok is there Russia has a huge you know Asian front white and Japan invaded from the East when uh Germany's invading for the West why did they not pincer attack right right why why did it happen in reverse and it turns out that actually getting Japan to fight the USA was um in Sean mcnikan's report and in a lot of documents that got Declassified getting Japan to fight the USA was like one of the number one goals of Soviet foreign policy do you know that I did not yeah so the reason is it goes all the way back you know in 1905 you can push back again further 1905 the Japanese just to digress on this Japanese um beat the Russians in the russo-japanese war 1904 to 1905. this was the first time a non-white power had beaten a quote European you know ancestry country in a war this had huge influence in terms of anti-colonialist movements around the world and in fact at the time the Japanese positioned themselves uh you know as friends of W.B DuBois and African-American movement in in in the US like what would later be called Civil Rights Movement that's over a lot most people don't know about uh there were Indians who were sympathetic to the Japanese because you know it's like oh wow non-white people can be free or whatever right um of course you know Japanese were you know like they committed terrible war crimes later but that's an aspect of history that people don't know about point is that um after that after 1905 uh that was a huge you know like black eye for the the Russian Empire and they took the Japanese seriously culturally after that and even after the Communist Revolution um even if the ideology changed dramatically from SARS own communism you know it didn't change the geography right the the territory is still abutting Japan right and uh so they still had gym elliptical rivalry with Japan they couldn't swap that part out right and uh and they couldn't you know their attempts to meet Japan Communists but you know they didn't succeed and so uh so essentially for for years and years and years Soviet foreign policy was focused on how do we get these other capitalist countries that's how they thought of it like the um how do we get these capitalist countries to fight amongst each other and so um you know there's guys like Harry Dexter white there were Soviet spies in the US and um they they helped turn Japan against the US and vice versa not saying that anybody here was like a good guy okay this goes to an idea of their second third fourth fifth order consequences to things and when you have a lot of things happening at once especially on a geopolitical stage this all plays into why in this unique moment we are standing so close to the precipice and why people aren't hearing you that we're standing this close so I want to I want to re-anchor everybody around this interview is born out of you spend a million dollars to get people to understand why we're printing so much money that's so crazy like there's no way that people understand that you're the only person I can conceive of that would ever do this I mean it's just it struck me as so bizarre when you first first um brought everybody's attention to this you were going to pay the million dollars to get attention I'm obsessed with getting people to say like what their thing is in a single sentence here's a single sentence uh the if in 2008 it was a banking crisis in um in a mortgage crisis in trade train three it's a Central Banking crisis and a currency crisis now the question becomes why why do these one why is it a Central Banking crisis and why then does it potentially mushroom into something bigger we are now in an inflationary environment uh that had been denied that inflation was going to happen for a decade do inflation uh because people have quote printed money from 2008 to 2020 and the only effect seemed to be on asset prices and home prices and all the things in financial markets but in the physical world you had deflation partly due to Tech bringing down prices you know um like Electronics became cheaper and so on um and uh so people thought if you go back to early 2021 that inflation's a quote right-wing conspiracy theory or it's not going to happen hasn't happened for 12 years you're so stupid for bringing it up and there's all these articles about that and so over the course of 2021 they're first saying inflation is going to happen so more stimulus is good we've proven inflation can happen they're saying oh maybe it's trans to inflation but they're still selling hundreds of billions of dollars in bonds during this period and uh then suddenly in you know as late as November 2021 they're still saying transfer inflation in December 2021 after Powell is renominated in November 22nd chapter 21. they hike start hiking interest rates very rapidly and everybody who was that deceit I think it was to see I've got actually an article on this called Too Fake to tell okay um which basically makes a case that Powell was aware uh at least at one point that um so so let me give an analogy here because it's a very technical sounding space and uh when you explain all this you know that Meme where the guy's like pointing at the the cork board and you know like there's all the lines connected to everything else and you look like the crazy guy yeah exactly see the thing is the financial system is set up to be intentionally opaque if you are the fed and you're saying hey guys by long duration bonds which will lock you into an interest rate um rates are going to be low forever so just take what you can get now take it out 10 years whatever all is going to be well we don't have any intention of raising the interest rates but you actually do plan to raise interest rates so then the problem is people put all their money into an asset that you are about to tank by raising the interest rates so they effectively get you to buy now I don't know I don't understand this well enough to say whether they did it on purpose or if this is just one of those things that's too hard to predict I don't know but that was the effect hey guys buy these bonds buy them long not gonna increase the the interest rates anytime soon and then people go buy them billions of dollars worth of them and then they raise the interest rates and so now the value of those bonds tank now your money is locked because when you bought them just so people understand how this works when they bought the bonds they thought they'd be able to sell them so they didn't think oh I'm going to be stuck with this for 10 years it that's that's the time to maturity but they thought that they would be able to sell them that the market would still be good because interest rates were going to stay low so it all hinges on this question did he know did the FED know they were going to raise rates because if they knew they were going to raise rates and they got the banks to buy in now you've got a problem and I've heard you say the phrase uh the FED lied and Banks died now that that Sinister if they knew they were going to raise the rates that's really gnarly can you see the screen there on page 193 of these minutes okay um the uh the Federal Reserve minutes here second I think we're a point of encouraging risk taking um meanwhile we look like we're blowing a fixed income duration bubble right across the credit spectrum that will result in big losses when rates come up down the road you can almost say that is our strategy okay so at least 10 years ago he was aware that how could you not be aware in his position but that if you sold a ton of bonds and then hydrates very very rapidly that you would devalue everything you just sold like the bond market is complicated so I came up with an analogy to kind of explain this right um imagine Apple told Best Buy and Target and Walmart that is only going to be selling iPhone 10s with a foreseeable future okay and so it sold them billions and billions and billions of dollars worth of iPhone 10s and um you know it said we're not going to be selling better iPhones for a long time buy these buy them in bulk and so on and so forth okay then after Apple sells all those billions of dollars in inventory suddenly it turns around and launches the iPhone 11 a better phone and thereby devalues everything it just sold by at least 10 or 20 percent and even though it's maybe a small depreciation it's across such a huge amount of inventory that Best Buy Target Walmart take massive losses and some of these are low margin businesses so it's like a huge huge hit to them and the thing is that you know whether Apple knew that it was going to launch the iPhone 11 which it probably did or even if it didn't know either way at the time it sold those old iPhones it was telling the buyers it's not going to launch a better model for a long time make sense right so had Apple done that had it committed to not launching a new phone and dumped a bunch of older phone inventory on um buyers and then suddenly devalued all of that you you know the buyers would have a case they'd call that fraud right Apple would have sold those assets on false representations regardless of whether they knew at the time that they were going to launch the iPhone 11 and frankly how could they have not okay but even if they just change their minds the commitment they gave to the guys who bought it at the time that they were selling it was we're not going to launch a new phone for a long time so feel free to buy tons of these that are our best model okay does that make sense you know and that's something that people can get their heads around okay as a bond buyer you have the same thing you think okay do I want to buy at today's interest rate or do I want to wait and maybe I'm sure it will be higher and I'd buy tomorrow especially because if I buy a bond today it gets depreciated if the interest rate is high tomorrow the treasury and the FED are different entities treasury is selling the bonds and then fed is uh effectively saying the price the bonds by setting interest rates if you think of as a unitary entity of the U.S government because they do act together in most most cases then it's like the US government sold all of these Banks hundreds of billions of dollars in assets that it then devalued one of the things that I find interesting is that value investing is really broken down for what like at least the last five years which leads to the question what the hell is going on and that's what you know that's what we're really dancing with here is the complexity of this problem but there there are so many signals that something's going on from all the things we listed I just want to recap some of the things we listed in in the beginning here so you've got debt ceiling is way up Market's estimating a record high probability of U.S Sovereign default most U.S banks are near insolvency or already technically insolvent three of the four largest bank failures in U.S history have happened in the last two months 2.2 trillion dollars in losses at banks have yet to be reconciled Morgan Stanley believes that the commercial real estate in sector is poised to be a worse disaster than the 2008 financial crisis 2022 was the worst year for Bonds in a long time D dollarization which you went through in detail is happening uh Sovereign defaults are at an all-time high we had 14 in the last three years versus 19 in the previous 20 years that's 4.7 per year now versus less than one per year previously that's an increase of almost 5x we have millionaire migration uh to the US has dropped by 86 percent in the last three years and central banks are buying a ton of gold a ton of gold the chart is ridiculous presumably because they see that something is coming so it's like okay you are the actually you know you've got a lot I cut out like 10. yeah so there's an insurance crisis there's the fiscal crisis blue states are bankrupt like California Illinois places like that they're they're losing a lot of there's the auto loans there's the student loans there's credit cards each of these are like trillion dollar problems that could crash the economy they're all happening essentially at the same time it is insane so I feel like we're standing on this really rickety thing you said that the you know the economy is beginning to Creak uh but I've heard you use an example before that I worry is more accurate now remember all I care about I want people to look at this neither of us have a crystal ball the one thing we are guaran to get wrong is timing I just want everyone to be very clear now the wins and losses all come around timing so of course like if I had a crystal ball I just shot The Showdown and just go make a lot of money so uh I have no idea when this is gonna happen so to to be very clear but you've used an example before that I think is absolutely brilliant and that is this is a Wily coyote moment yes what do you mean by that so you know Wiley Coyote if people haven't seen you can probably put up an image of it this character from Looney Tunes and they walk off the cliff and they're just you know merrily going in midair that one day they look down they're like oh my goodness and the markdown is digital in a sense right they just fall all the way straight down right and if you look at the graphs of some of these Bank stocks they're kind of like that where they're analog and they're just kind of floating through the air and then suddenly somebody actually looks at the financials they look down and they're just digital they die overnight that analogy is so apt because and this is why I I never know how to handle these moments because by talking about it you are getting people to look down and so in some ways you run the risk of speeding it up so you talked earlier about Janet Yellen she knew there was a problem but she didn't speak up now you've for people just listening he just made a face so we're gonna get to the face in a second but like you've got Janet Yellen who uh knows there's a problem but doesn't broadcast the problem but I don't know if I'm mad at her for not broadcasting the problem but at the same time I can't help myself out of a moral sense of obligation from telling people hey you might want to look 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 impact Tom bilyu 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 why do I make the face well the reason is that line of argument that talking about it is causing it is actually people throw that around I think it's false but it's false in an important and interesting way which is when you know when one of the things I've found that's I think a stupid kind of meme is you talk about this type of stuff people be like oh you're such a Doomer you're such a downer just look on the bright side man you know blah blah blah that kind of thing right and you know the goal is to be neither a pessimist nor an optimist but to be just a realist and if you're a realist then um you're not a Pollyanna right like it's not a doomor to say oh there's a wall in front you might as you might want to turn the car you know that's like that's just that's being smart right um just being realistic and the thing is that what happens when you talk about this stuff in the absence of another human being there the negative emotions that people have out of visualizing what a deleveraging actually is are projected on you oh you're causing oh my God you're causing a bank or Etc you know who caused it is Jerome Powell and the Federal Reserve and Janet Yellen and the U.S financial system but especially Powell he's a he's the chair of the Federal Reserve why does Powell hate America so much you know like that's actually the question why did he you know um devalue the treasuries that uh the government had sold in in 2021 why did he tell people that interest rates were going to be kept at zero before totally you know uh jacking them to the Moon why do you say that inflation was transitory when it wasn't right I have a slightly different hypothesis which is all the things you just said are true that the the mistake that the actions that are being taken are being taken by those people and those actions are creating the problem but my whole thing about it's it's the debt that causes this collapse I don't think any human any uh any group of people is a better way to think about it I don't think any group of people can stay emotionally sober for long once they've lost sight of the people who built the thing so once you've had enough people that have inherited the country working well you you now just it it is guaranteed to devolve into these choices that happen around debt because again we talked about this earlier this is a this is a it's coming from a beautiful place they wanna they want more people in housing they want to make things better for people they want to elevate people live people out of poverty make sure that you know nobody goes without like it really does like I understand the um what you call the the wokening I think the wokening of America the Great Awakening whoever came up with it I like get it I get the impulse to it but the problem is that you end up you get in this debt cycle of oh let's just let's let's inflate the currency let's print money so we're printing money we're inflating the currency and the yeah kind of cheeky it does devalue everybody's money but nobody feels it too badly like honestly that in 2008 I was like word like print money man if that's gonna help people that's amazing I got devalued obviously and then again svb I didn't have any money in svb but I was still like word yeah print so I'm just like wait is this much to do about nothing or is this the cycle that humans cannot get themselves out of and I'm as much of the problem as anybody else because I'm like yeah I don't want to see people suffer man if you can print like print I guess we all like take it okay but it's like when does it become a problem okay well so first is um there's something called the cantalin effect okay which is to say and I you know I think some people have been intuitive grass with this but but I'll explain it anyway um printing money is in a sense like official counterfeiting and the guy who is about the counterfeit a dollar first can spend that and get more of the purchasing power and then eventually it makes its way through the system and the entire money supply gets marked down and it's got less of its purchasing power with the 15th guy who's who's um got it okay and so printing is not Costless what printing just does is it's like basically inflation is taxation it's like um let's say you had I don't know 100 billion dollars okay in the economy as a whole and then the government prints another 100 billion dollars that's as if the government seized 50 of the wealth in the country does it make sense or at least 50 of the savings yes because yes I don't know how intuitively this comes to people but yes once you get it once the penny drops it's brutal yeah so in so inflation is taxation that is to say and printing when especially when you're putting a large percentage of money supply it is essentially centralized seizure of wealth the difference is it is um if you think about the difference between like uh like in your face Predator that's like communism you know or like a like a lion you can see it coming versus a stealth Predator it's camouflaged like a snake that's like keynesianism um communism they would just go to your house with a gun and they would just shoot you and take your farm and you know throw you know your your children in a Gul blog or whatever right um very direct I mean that was a lived experience that's a live experience of many people in Russia China Vietnam like all kinds of people that's what collect position was okay but keynesianism is it steals the money in a much more subtle way where a button is hit and it's like a mosquito you don't even feel it right the blood is sucked or it's like a camouflage snake or something like that your your dad are bankrupt or devalued at the end of the day but it's you might even feel it's helping you so for example let me show you in particular a very important graph did Republicans pay for 2008 so let's revisit first take a look at this graph okay have you seen this graph before Oh yes that's my friend I told you every grad very close okay all right well that's cool so there is a Wall Street Journal article that this comes from okay and um there's it's actually like an animated version so you could play the animated version that goes back and forth so you should do that point is what is this graph showing um basically it is showing congressional districts in the U.S by their uh real GDP okay inflation just a GDP and um what you can see is the the kind of solid line blue line and red line in 2008 uh Democrat and Republican congressional districts were were mostly evenly matched as to say both of them had Rich districts both of them had poor districts and the median wealth median real GDP in both the statistics was comparable okay Ten Years Later by 2018 the the distribution of uh Democrat you know districts had pulled away from the Republicans like the median GDP of Republicans was like 30 billion dollars in their congressional districts Democrats was like 50 billion or thereabouts and moreover all of the wealthiest congressional districts were suddenly Democrat so essentially in 10 years this massive Gap was opened up between the two parties and this is how you went from the uh like um suit and tie wearing Republicans of the early 2000s to the trucker hat proles of the late 2010s and that transformation happened over the life of most of the people who are watching this but I believe it happened in part because the printing went disproportionately to the coasts that's to say if you track the candle in effect if you track the floor print of money well it's a fad it buys these overpriced mortgages from Banks the banks now have extra assets from their books and they can spend it on financial assets and uh then those people have money into their bank accounts and then they can go and spend it on houses or Goods or whatever but that's disproportionately in um in the coast the money went to Washington DC it went to New York and then some of it made its way to Silicon Valley venture capital is actually a tiny fraction of the overall investment landscape it's like a few billion versus hundreds of billions of dollars but like a small review let of that printed money made its way out to Silicon Valley venture capital and that was probably like the most productive use of the money because you're talking about investing in businesses that are being built from scratch and um and that's a whole separate story as to what happened there but essentially the money made its way to the coast uh and uh and the guy in Oklahoma who's some cashier in Oklahoma got the printed dollar last and didn't even realize that they had been devalued and um that they had been essentially had a good chunk of their assets seized and their whole talented Heather asset sees um and the thing about this is the whole time as you just said people are like we're helping people the feds saved the world right well what it actually was I mean you know 2016 is a Democrat Administration perhaps it was just a coincidence that the Democrats became far richer than the Republicans in 10 years okay but it does seem like the cost of the print was imposed on the political opposition in a deniable and invisible way unconscious even to those doing the imposing who would actually say we saved the world we help people stimulus blah blah blah right and that's like a camouflage Predator where it's like anesthetizing its Target that doesn't even know the blood is being drained okay and it's being attacked it's like it's you know you know strikes like this right and that's actually better because you know a lion gets your fight and flight response up you know it's a predator mosquito doesn't it's done and you don't even maybe detect that it's happened right uh and so it's like we see that Evolution has selected for the camouflage predator and that's a lot about the financial system is um and and if you think about this by the way and you just start relating I mean think about how many times Banks try to get one over on you with fine print right fine print is not a tactic it's a strategy the whole point is to get somebody to sign a contract that they didn't fully read or they didn't they didn't understand and parse the league leaves and lock them into some adjustable rate mortgage um or some student loan where they're too naive to understand you know like how bad it is for the rest of their life when they're 18 and they don't they're not taught um interest rates they're not taught taxes and stuff in high school they're taught just a bunch of gibberish then they sign a student loan for the rest of their lives the system is sort of set up to get people into debt and to be clear I'm as capitalist as they come but I do believe there's asymmetric information information Arbitrage there and that which you've seen at an individual level that the financial system does is also something it does in my view at a collective level by the way there's somebody else who paid for 2008 you know what that was hmm no potentially the uh the Arab world and the reason is uh basically food price spikes helped trigger the Arab Spring right this exported to inflation remember the whole Arab Spring in the early 2010s right I do very much and this this is going back to your earlier thesis uh for everybody listening along uh as as you biology as you fractal into these ideas I want people to understand that there is an anchor there's something that triggers this for you but like the the second third fourth fifth order consequences in hindsight can be seen and so a big part of why I find your thinking so interesting is you're like hey Look Backwards understand what you're going to see going forwards basically once you understand that inflation is Taxation and that Republicans paid for 2008 and uh with their money and unfortunately a number of people in the Middle East paid for 2008 in part with their lives because you know people are like oh 2008 financial crisis it wasn't the end of the world well you know what for that the Arab Spring was the end of a lot of people's world right Libya was plunged into chaos that inflation did destabilize countries and even if you say it's only 20 the the cause because it's multiple causes another how did that happen I actually don't understand how so the inflation we didn't really feel it not in like a way that broke us but it caused actual instability in other countries what happened what's the mechanism so food prices are the often discussed mechanism that there was like a a fruit vendor who uh set themselves on fire um that helped uh you know Muhammad was easy right uh fruit vendor sentences on fire and that is thought of as what triggered the Arab Spring right like essentially you know um his his prices December 17 December 2010 would have been a normal day at the local um you know prices uh it's the prices hadn't changed right and um so the thing about this is uh like it's multifactorial there's a reason that the government you know and media covered it at that time and whatnot it was useful in the sense of um have you seen that clip from Wesley Clark where he talks about how even in the early 2000s uh like there's folks in the military industrial complex that decided to invade like seven Arab countries have you seen that one no um Leslie Clark's former four-star general right and uh you know pretty pretty senior guy before the Iraq invasion that um that the U.S plan to attack seven countries in in a few years and actually a lot of that came true right oh my God I did hear this and they asked him why and he said I have no idea there there were a bunch of these folks in like the project for a New American Century um who uh essentially thought that Islamic fundamentalism was a huge problem and they need to democratize the entire Arab world with like what they did to Germany and Japan right um that's like the good motives version of it but of course uh I mean good motives you know what I'm saying it's like let's let's call it that is probably what their internal mental model was like yes it's terrible that war exists but you know it was terrible that World War II happened in Japan and Germany are better off for it so we need to conquer the entire Middle East and democratize them so that their women are free and and whatnot that was a narrative of the early 2000s okay what happened of course was just absolute Mayhem and Chaos with Isis and many of these countries destabilized in Libya and Civil War and that would destabilize people that that that feels more direct I'm still trying to understand oh sure inflate the currency we don't have a blockchain where I can show a purchase B from C and so I mean markets are you know are complicated but um the US exports its inflation um in part because uh it is the consumer of all these products around the world and um you know the dollar is its major export and what is a small or tolerable Horizon prices in the US is intolerable abroad if somebody's like kind of living hand to mouth to get the you know what I could diagram out for you by the way is like the exact sequence where it goes from the FED buying an asset from a bank which then as a cash and can buy a stock which then puts money in the hands of an investor who can buy a house that's actually something where you can probably track it through the financial system to track exactly how uh the printed money is bidding up you know the you've ever heard the saying the price of tea in China right like what does it have to do the price of tea in China what does that have to do the price of grain in Libya okay to track it exactly you need access to several different databases that are not public you know so you have to kind of look at the aggregate's death and say okay here's how the U.S exports inflation um and then people will argue about that part of the point is that it's meant to be deniable right but um the concert of the U.S exporting inflation is certainly not my like Innovation or anything like that that's what a lot of folks have talked about so if you want to get mechanistic about it you probably have to go and pull data sets from I don't know several different grain vendors and so on you see okay this guy suddenly got a printed onion so he bit up X which bit up Y which bit of Z which bit of the prices of this guy in the Middle East right but that x y z A and B are hidden because they're not on chain does that make sense yeah right and that's actually that's actually part of the point the part of the point is the again the mosquito right the camouflage Predator the point is that you can't see it right the point is that that's not public I mean think about how much more coverage we um we've got of Kim Kardashian or whatever in the 2010s then where did all that printed money go hundreds of billions of dollars trillions of dollars where did all that go I mean how many articles have you seen is it is it a daily thing on that a breakdown of where the principle went if you know that inflation is taxation then um you know one option is you can just stay in the system like those Republicans like those people in the Middle East and those folks who are near the money spigot who can benefit from the cantalin effect do another print and they benefit again first right but if you see it coming and you get out first now you're not part of the base that is diluted if you get out to outside money you get out to Gold you get up to bitcoin you get out to maybe a foreign Fiat um now you have an asset where it's to go back to that example let's say there's a hundred billion dollars and the US government prints another 100 billion it seized 50 of of dollars essentially right but if there's 21 million Bitcoin the use government cannot print even one Bitcoin so can't seize the Bitcoin does that make sense yeah I'm not in the camp that Bitcoin is unseasonable I think no that's true you lock somebody up they're gonna real quick be like all right here it is yes but but basically it's not it's not easily sensually seasable you have to go back to Communism house and this is actually very important um Bitcoin and cryptocurrencies more generally increase the cost of seizure okay because like a SWAT team costs money you know it's like sure what are forty fifty thousand dollars or whatever right so now you have to actually look at the p l of going and kicking in somebody's door and beating them up and taking their private keys right and you have to have you first you have to find them you have to find uh you don't have to have you know like some legal authority to go in and beat them up take it and then you have to replicate that and that'll arouse resistance because now it's no longer the camouflage Predator it's it's the lion right it's something that you can actually see which I think is a big thing with the network State and all that but the the question I want to ask before we move on I think this is very important so uh chamath Holly hopatia polyhapatia sorry uh so I don't want to misrepresent his views but he is I think he's incredibly bright and uh he has said many times forgive me if I'm getting your um your idea wrong here but basically that the debt to GDP ratio is a big nothing burger and everybody gets their pennies in a Twist as that number gets uh bigger and you know we've got multiples of GDP in debt and he's like nothing's ever going to happen it doesn't matter there is no upper bound um what do you say to that is is there a Breaking Point or can we actually just keep printing money basically forever well you know Shabbat is a you know as a colleague and co-investor and uh being on all in a bit and I think we have a cordial relationship um is also said uh put one percent of your ass to bitcoin just in case because if everything else goes to zero then um you know what like they can't dilute that so uh you know if you if you asked him I don't know where he is at numerically on that but he probably I don't know if you'd say there's a hundred percent probability of no devaluation he's he's sophisticated investor who probably Hedges so that's that's a first counter argument many people I mean it's a point about not seeing something in one's life I mean let me make the point in some a different way um most of the 20th century um most people in the 20th century saw an economic Apocalypse of some kind it was communism in Russia in Eastern Europe in Vietnam in Korea in uh Cuba right it was um Islamic fundamentalism in for example Iran that was also asset seizures happen there that's actually why a lot of Persian people made their way to La a lot of the entrepreneurial class their assets were seized in that Revolution um there was socialism in India there was currency devaluations in Latin America all the kleptocracies and you know like uh Argentina was once a rich country and it became poor in part because of this these kind of currency crises um and uh and certainly there you know even even the UK had huge problems after World War II to pay for all of that and so the you know I think uh there are three countries uh Dalia talked about this there's only three countries that compounded through the 20th century without an economic apocalypse and those were the US Canada and Australia and so you have this interesting combination of three facts first economic apocalypse is actually fairly common second economic apocalypse is uncommon for Americans and third um economic apocalypse is uncommon in American Media and instead the one thing that we are aware of is um you know the potential for genocide on racial terms right that is definitely a threat that's something you should be aware of right um actually most of the conflict in the 20th century was not on the basis of just race it was on the base of class right um do you think Americans have to worry about that I do think so yes and the reason I think so is um if you're not like immunized against something I mean in many ways I think this century is seeing sort of a flipping okay where we're flipping where uh those countries that were on the capitalist right in 1991 and the Communists left in 1991 have essentially shifted sides where now uh they're on the cultural left and cultural right and um one of the consequences is all the countries that had suffered through socialism communism and so on in the 20th century even if they still call themselves Communists like Vietnam or or China they're done with that in a sense like you know they're not I mean there's there's bad things that you know the the CCP is doing but they aren't like fully abolishing capitalism and going back to maoism that that would make them to work what do you think they learned that made them flip that leaf generates power I mean that's like capitalism they like to be really blunt about it I mean basically you have an economic machine and um you can you know it turns out letting people self-organize generates more wealth and power than not right that's if you're just totally cynical about it right um and of course it is it also generates to more contentment among the population and eventually you can get from a position of totally enlightened self-interpress to okay it's more stable than the alternative the people are you know have a good standard living they're not going to protest you can run the government or whatever right um the by contrast if the other side if you have been born rich have you heard that you know saying like uh shirt sleeves to short sleeves in three generations I love it yeah you should be an old American can sing right so the current generation of the US has been born to wealth right they're born a lot of people who've come to majority have essentially inherited this giant superpower with the scaled economic system and so on they didn't have to work for it and fight for it fighting Warriors didn't have to earn it and so the memory of what it took to earn it has fallen off so it's the opposite of those you know who grew up under socialism under communism you're not you know like in India for example which is actually rising and doing quite well on balance nowadays um nobody's like romantic about 15 years ago it was much worse you know life is getting better there um infrastructure is improving technology is like a good thing capitalism is a good thing and in general you know now but that's ups and downs but things are generally up and to the right and by contrast in you know the West I think they've forgotten what's got them there and it's a combination of you know oh we can spend without having to produce you know you've heard the the concept of the resource curse you know what that is yes very much so yeah so like the resource curse it's like uh you know many countries that have oil actually find that people just end up fighting over the oil or the or the money you spent in a bad way and so on and so forth right it's like you don't have to earn it or what have you I'm not saying all like Norway used to seem to manage it the UAE is managing fairly well now and so on so it's not 100 but but it's like um it's something that can set you wrong and so there's a huge difference between founding and inheriting you know not just for an individual but at a country level you know George Washington you know founded like the US military right um and uh you know there was some you know like Hamilton founded like the ancestor what's the Federal Reserve those guys understood the constraints in the world as opposed to the 37th mayor of this or the 42nd president of that like those are folks who you know like um inherited something they just like they were named into a system that was going before them and then continues after them in the same way that like the 15th CEO of GM or something like that is so far distant from the founder sometimes you get somebody who's like Satya Nadella who's like uh who manages to make their way to the CEO position but has the DNA of a Founder that's a very unusual kind of person because to make your way to the CEO position you start to be a conformist and Rule follower and so on and then to actually to reinvent the whole organization you have to have the founder DNA so it's unusual that it happens it's not it's not you know it's on zero probability but right now you have a machine that's the opposite of like in India or China within living memory they were you know they were communist or socialists or very poor so you don't take it for granted whereas we will always see people saying in the US is of course for number one we'll always be number one we inherited being number one I can't believe you're saying we'd never be number one it's not hungry and by the way even you know like a great example is the response to super power competition remember Sputnik right so when Sputnik uh you know the the Soviets launched you know Sputnik the U.S response at the time wasn't oh the Soviets have demographic problems are going to go to zero uh you're you're a doom are you just repeating Soviet propaganda by talking about Sputnik you loser why don't you believe in America blah blah blah instead they're like oh boy these guys are ahead we need to get back ahead massive Math and Science you know uh effort we're gonna put a man in the moon in you know before then the decade like rising to the challenge and treating your competition and taking them seriously is actually how you win as opposed to the so the response to Soviets couldn't be more different than the response to China which is a combination of denial and actually stealth imitation so denial it's like oh you're saying you know China is going to go to zero day you know uh there obviously suck you know we have the Mississippi River and they don't so they're you know you don't talk about other people who argue these like uh again government against them but demographics on the way out it's done yeah exactly the demographics are done they have terrible geography uh they don't have a blue water Navy uh they can't feed themselves and so forth just to kind of go through these points because people will raise them a lot first on should I talk about that for a second right yeah this to me gets into why we're in trouble yeah so so first just looking at the graphs you know maybe put the graph of steel production okay and then insane it's insane right so you see this graph and uh what you can see is anybody who's making analogy to the Past saying oh you know it's just like the 1970s and U.S was in a malays but you know we pulled it out and so the US was making 10x the amount of Steel of China in in that period and now it's the other way around China's main biology why do you focus on that well it's just I mean you can look at tons of other stuff you can look at you look at basically every raw material or um not every raw material I should say every manufacturer thing a variety of different graphs look like this um and the reason I think wheel is interesting exactly it's emblematic these guys are playing to win and look I'm in California uh if I had to do the last three years over again I probably would not be in California there is there's just a growing sense of like um that trying to win is bad and that you shouldn't want to be competitive you should want everybody to win I'm like no I'm here to win a championship I want to be the best I want to play with people that want to be the best and so when you look at China and you're like ah they're going to collapse like you know we don't need to respond like we responded to Sputnik I'm like you're going to lose like you've got to be in this game to win now you do not need to love to crush your enemy and hear the Lamentations of their women you know as they're driven before you that's not my Vibe but my vibe is very much like the reason that steel is interesting is these guys are building things now are they building too many things they're building things they're gonna like knock down maybe but one thing I've heard you talk about which I think is is really insightful is that the that thing that man if you're of my age when you hear that idea of oh Pearl Harbor I think we awoke a sleeping giant and like you know this is like a fatal mistake and the U.S comes and just like manufactures and we do this unbelievable stuff we're able to build this Navy and army like unbelievable we end up doing what we do in World War II absolutely incredible amazing amazing but now like if we had that same moment now I don't think we'd be able to manufacture our way out of this we've outsourced all of that manufacturing and so now we're in this different period where culturally people don't want to be dominant they don't want to be aggressive like that scene is like bad mojo and oh it's toxic masculinity or whatever and I'm just like oh my God like I need to be around people that that want to go hard I want to be around people that want to win like I want I want to be around people and look this is going to be a little naive so please look past this is I'm just trying to explain like my spirit of competition I don't look at China and think oh I have to beat them and they're bad I look at China and I go all right China I see you I see what you're building I see that you can build a train station or whatever it was in in like a night not joking by the way it might have been 48 hours so yes yes it was so fast I was like this is insane and in the U.S California especially like you can't get a bathroom stall put in you've you've shown this like cutting the exactly for bathroom salts like guys what is happening and so getting back that energy of like I want to go against the best I want China to be as strong as possible as somebody who has read Mao the untold story I am so happy for them that they have moved away from that and that they're coming out I want a formidable opponent but I I want to be sharpened by that opponent I want to get better because they're trying to out-compete me and so I want to I'll compete like I want to rise and do better and look I don't want to go to war trust me when I say I don't want to see them impoverished that's not how I Envision this but when when I was a kid and it was like us versus Russia and it was like they were doing cool stuff and we were trying to do cool stuff it was like okay that felt good like it gave me a sense of pride in my team it gave me a reason to want to get in there and do well and because of the way that I'm wired I didn't want to crush my opponents I didn't want to see bad things happen to them but I did want to win and like that spirit is just going wait I already know that the the comments now to this section of the video people are going to be like oh this guy but I'm telling you man you need that spirit so there's a few things which I think of as cope whenever you mentioned in China that are worth addressing right one of them immediately would people will come with a psychological defense will be like oh China can only do that because they're a Communist dictatorship and we're a free country so that's why it's messy and that's why we're slow at building and so and so forth okay accept I mean you know if you believe that America was a democracy in the 1940s it could build a bomber in you know like a day right actually no here's stats what is it uh B2 bomber B-24 bomber The Source Ken Burns says 60 Minutes to build a p24 bomber okay which is crazy and um that is of course that's the average time right in terms of um you know how many were being built per day right B24 Liberator long-range bomber uh one came off the line every 63 minutes okay like now today it takes uh you know so double World War II America could make a B-24 bomber in 60 minutes 2022 America needs 20 years to reopen a bathroom Okay in San Francisco and the thing about this is um there's actually two different demographics because one demographic is the one you just mentioned which says that they don't want to win they want like all these environmental impact reports or what have you um but their demographic is one is like okay yeah we need to do industrial policy but they're sort of it's like LARPing right because they are trying to do it with Printing and spending they're like wow spending on factories this is up and to the right but you know what industrial policy is like venture capital and simply spending the money doesn't mean you'll get the returns it has to be done in a capital efficient fashion and I'm not seeing that right I'm just seeing money thrown around without constraint and without accountability without a CEO and uh sorry I'm not I'm very bearish on essentially industrial policy right now okay it's like it's like saying you're gonna do Venture Capital there's a difference you're doing it well coming back up a little bit the point is in in if if the US was democracy in the 1940s and China was Communist in 1970s it was much more communist and genocidal than and so if the argument is oh there are Communist dictatorship that's why they could do it well why weren't they they're even more communist then if you're if you're actually arguing that that gives them strength it doesn't because they were weaker 50 years ago right and the US was stronger and you'll argue it was still a democracy right so so that actually blows up in my view that kind of cope style argument that oh uh you know it's because they're you know evil that that's why they're strong there were actually much more evil arguably 50 years ago when they were killing millions of people during the Great Leap Forward and Cultural Revolution yeah and now I'm not saying anything against that I think that's Madness yeah so so I'm not saying they're good like in the sense of I don't like the social credit system and you know the the um the surveillance you know State they've built and so there's many legitimate critiques but they're not like they're not as murderous as undermount right there's actually an improvement you know like it's it's seemingly by a country mile but if everybody has a North star which is human flourishing I will say that yes I don't think humans will flourish as well even under the current um regime I just think that that social credit scores and things it just plays out in a way that breaks people's spirit I think that uh part of what allows for human flourishing is freedom but I am not deaf to Ray dalio's take which is look they are a different Society they have different values and so yes once you realize that the people could rise up at any point and they don't so there is something going on there it's not bad enough for them to drive them to revolt now maybe it would be if the U.S suddenly we woke up and we were like that there might be a lot more pushback so anyway I can simultaneously hold multiple ideas in my head I would not want to live there does not seem like the thing that's going to lead to maximal human flourishing but I agree with you very much having studied a limited amount but having done at least some studying of Chinese history it's like whoa it's a lot better than it was back in the 70s 60s 50s 40s just way way better yeah so one thing also by the way and this is controversial but I'm just going to bring up these two articles so that people can at least see them the thing is that it is true that China has a sum of charge that China is uh being very um either it's genocidal or it's cracking down or it's concentration camps or something on on uyghurs in western China that'd be the counter argument the thing is that the U.S was bombing you know Chinese weaker militants and um you know once jailed them and now defensive makes these articles from foreign policies so here's NBC News 2018 U.S targets Chinese weaker militants as well as Taliban fighters in Afghanistan U.S wants to jailbreakers now defensive you've been in foreign policy so the thing is that at one point the US and China that we're both thinking of what's going on there as counter-terrorism and there's a woman named Sheena greitens that has written about this right and then it's kind of totally switched sides right um and uh you know this is not to defend anything that's going on there um because I'm I'm sure it's quite brutal um but it's like Sheena greitens on understanding China's policies in xinjiang this is in uh you know the belforcenter.org okay and um essentially like she she's saying that China is talking about that as war on terror very similar to how the U.S Justified its interventions in the least um the reason I say this is it's like okay that's useful to know um because it is it's just not you know it's just not talked about um and you know one thing I find is um you know the the the all the the negativity towards Russia and China is uh there's something Merit there no doubt but um it's also something which some people think it's like of being supernationalistic and being super jingoistic and having a big war is just what the country needs to America needs to get back together you know a big war that'll bring us back together a common enemy you know I've actually seen people make this point have you heard that kind of thing before of course right so um the thing about that is that's not necessarily true because if there's a big war I mean if you think about covet or 9 11 like the war on terror or covet that didn't bring people together that's just you know immediately got politicized and you know if there's an alien invasion one side would would sign with the aliens almost certainly right like that's just the Dynamics of how polarized it is and um I think you know even though China is a bipartisan issue now it's questionable as to how long that lasts we'll see um and it's a bad thing by the way it's like you can't build America by hating China you need to like love America or love other Americans and you see my graph on like it's not one country it's two parties yes dude this is one of the most troubling things you say and I'm saying that in the context of I know you're saying that we are potentially facing Financial Armageddon but this so going back to my rogue wave interpretation of your thing and I should explain it to people so Rogue Wave happens when you have a bunch of big but not destructive waves they come together at once and somehow their amplitudes magnify and it will create this rogue wave that can topple an oil tanker and that feels like uh when you look at the collapse of an Empire it usually they do not die from without they suicide from within and so you need this High degree of tension inside the country so that you can't get everybody on the same page that everybody's just there's so much infighting so yeah walk us through because this really free freaks me out that we're we no longer make sense to think of us as Americans instead we should think of us how as Democrat and Republican or even better as one's own tribe you know some people will say republican or Texan or Christian or Bitcoin or something like that and um first is just to level set because you know like it's useful to quantify something right so if you look at this series of graphs right it's not one country it's two parties so basically this is Congress and an edge between two nodes is whether they voted together in 1951 there's lots of bipartisan stuff happening in Congress in 2011 it was just totally a bipartite graph and that's a long traded one this was 12 years ago how partisan had gone at the leadership level and it's even more aggressive than that right so this is a 70-year trend right where you can just see it gradually getting more it's like mitosis it's like a cell coming apart right for 70 years that's exactly what it looks like that's crazy and then it's visible at the individual level in a totally different kind of data set so the previous one was like voting this is social networks and this is and the previous one was leadership this is the masses this is from 2017 it's showing people friending each other following each other on social networks and red follows red and blue follows blue and this was six years ago okay it's gotten even more disjoint since then now blue has their own on Mastodon and red is on you know a gab or something and and uh so it's gotten even more disjoint in their own you know rooms right um this study says uh that it's not just that Democrats Republicans aren't friends with each other Democrats and Republicans don't marry each other 96 of Democrats are not married to Republicans so ideology becomes biology in one generation yeah the sunnis and Shiites this is like hearing us referred to in that way was very eye-opening for me yeah if you ever read the New York Times about a foreign country it'll be like in arid steps of so-and-so tribes have fought each other for Millennia you know they'll kind of like lava Gorillas in the Mist kind of thing right um but the level of conflict in the west now is uh is tribal it's Sunni Shiite it's hudutsi once you kind of start applying that filter um it's only partially ideological and one way of seeing that is during covid do you remember like there were like four flips for example at the beginning Republicans were worried about covid and Democrats said it was racist to talk about the China virus this is from like roughly January to March okay once Trump started acknowledging it and even saying something like oh you know the uh the viruses we should shut down testing or something like that like you know basically trying to downplay it at the time Democrats completely flipped and now they were saying it was a huge deal and then they flip two lockdowns and Republicans flicked flipped to libertarian and then Trump's vaccine Trump pushed you know operation warp speed and so on through and got the government out of the way for vaccine development and if you remember Kamala Harris said something like I'm not going to take a trump vaccine and so at the time it was the Democrat position was vaccine hesitancy this has been totally memory hold and then after the election uh the vaccine was actually um you know held back until after the election uh there's a this guy Eric topos talked about how I that was like there was a campaign or lobbying campaign like to keep the vaccine back so you know it wouldn't affect the election either way um then I flipped again and now a Democrats role for the vaccine okay and uh and then uh eventually it became something where Democrats kind of gave up on lockdown and then the whole thing has gotten just sort of like forgotten elections they forgotten about but memory holder not discussed so the point is that's like at least like two or three or four flips depending on how you count okay and you have flips like that it's Tribal not ideological each tribe is saying what they you know um there can be some rationalization for each tribe at any given point in time oh I didn't think it was serious than I thought it was Oh I thought it was serious and I realized it wasn't and maybe there's some truth to that on you know but it's also something where a is taking the position because it's the opposite of B and then vice versa because just stick a thumb in the other guy's eye does that make sense you know um and uh you know the the thing about that is why is that important it means um talking about the United States is it actually a misnomer it's a dis United States it's a it's um the individual states and it's Democrat and Republican and you know it's something where like the flag itself is a contested symbol where you'll find people saying you know in New York Times just like a year ago or something uh what did they say it's like the American I had a friend that put an American flag up on his house and I said oh that's going to get ripped down and he was like oh yeah okay I'm crazy ouch yeah Fourth of July symbol of unity that may no longer unite um people make assumptions so the flag is like a contested symbol okay and um that was like July 221 there's a point being that um you know I think the only thing that you can get Super majorities 99 of Americans to agree on is that they value the dollar not the flag that is actually the it's an economic Union like the EU where the dollar is last tattered piece of paper that's holding the thing together you know and um you know like the EU has the Euro right it's like an economic Union even though right so if there's like a serious currency crisis which I think is coming because we're already in a background of high inflation with all of these crashes they're going to have to print that's the high level version of why that printing will cause way more inflation and then you have something and you have options also right you have exits you have Alternatives you have um cryptocurrency and you have foreign currencies and you have other countries that are opting out and getting into gold or trading with China the thing is do you think that helps or hurts the pull apart well that's it I mean helps it accelerates in a sense right because a person can pass away without any successor but for a system to die it needs a successor or multiple successors like let's say for the Soviet Union to collapse people had to have an alternative system they'd look towards that they would copy and so people copy the U.S system right so when the Soviet Union went down India moved towards capitalism and so on China's only one that didn't right it kind of kept its own system at the time um not the only one there are five communist countries that seek Communists but China is a big one that almost everybody else went into the kind of capitalist liberal democracy Camp so right now what's happening what happened in March is really epocal because you had you had AI going vertical and that's a whole other massive storyline that's like an entire multiple podcast whatever the idea going vertical you had the banking crisis getting underway showing how important this devaluation of bonds was and you actually also had china going vertical which is is much more important than people realize do you know what I mean by that China going vertical in March no it's going to ask you this was just not covered in the western press it should have been blaring front page headlines and total focus on it China developed a new muscle that I'd not seen them Flex they had been kind of yelling and so on for the past few years they developed the muscle of diplomacy and they figured out how to get a peace treaty between Saudi and Iran which is a huge deal to get Saudi Yemen War to stop to essentially unify the Middle Eastern countries around Chinese like China being the hegemon coming in like um like for example they're forming like a unified Navy in the region with Chinese input as an OP as a character to the U.S Navy okay that's insane like totally different than what you think of as Middle East where everybody's boring they're like all unified with each other Saturday and Iran and China against the US U.S is Unified its enemies um you have even Iraq like trading a new one with China if the UAE training and you're going to China um you have Brazil sending a massive delegation um to China you have macron taking photo ops with Xi Jinping in China and part of that is because again everything is connected but the Ukraine war has has caused such huge energy costs and other costs to Western Europe that macron and France are dealing with like social unrest um you know they're the yellow vests a while ago and now there's people protesting pensions and things so he needs wealth for his country and you know what China's can export stuff and he can do economic deals with them so that's why he's kind of part of why he's reaching out the reason is he you know has always wanted to put strategic autonomy for you then you have southeast Asia which is another contested region between China and the U.S and the Asian countries are saying they're going to dollarize and they're taking they they have their own skepticism and part of China but they're taking money from China and on and on and on you know um you have like basically the fact that China learned diplomacy is uh and is bringing uh also a one more example the you know zielinski went and took a call with China and now Lincoln the secretary of state has said um China may be a partner for peace with Russia Ukraine okay dollarization I mean would basically how seriously I take it very seriously and the reason I take it seriously is uh there's actually this great article saying um China's uh you know unusual path to reserve currency status right and um what's it called the renminbi's unconventional route to reserve currency status and this was actually here's I'm pasting the link here in in chat and it was also written up in the um Financial Times and essentially uh the um the point they're making if you remember that graph would show that China traded with the rest of the world right um the terrorist that shows that yeah they've basically taken over most of the world yeah so a lot of people the US is so Finance heavy that people will point to the dollar share of reserves and say hey that's still really high therefore nothing is happening right but this is like pointing to in my view Soviet GDP the USS star posted its highest GDP with its fake stats and the year of his collapsed okay um the difference here is all these countries are trading with China so if you go away from thinking about in terms of finance and thinking about incentive in terms of trade all these countries that get hard goods from China will use who you want to buy those goods from China right so as you know he's kind of Back to the Future how did you know the Houstons start as a financial power it started as a manufacturing and Export and traded power right and in a sense go ahead right you see my point right so it's not that big a deal for those countries to flip over to paying China in its own currency and holding some of that currency to pay for their imports from China and those Imports just keep searching so so that's like the fundamental is I mean it's not trivial to replace a financial system but remember my points earlier on how fintech and crypto talents all around the world and people have launched currencies there's countless fintech and crypto companies payments companies right so that Talent is there in a way that it wasn't in 2008 people know how to do that from scratch okay I think it's it's really important to because what people are going to push back on there is they're going to say okay uh sure they're doing a lot of trade um in the Yuan but they're still reserving in dollars uh or storing value in dollars because they're doing that it's never going to lose its status as a reserve currency because of that we're going to be able to keep printing money and also and this will be big pushback and this really resonates with me and it's why I I would not be putting any of my money into Yuan I don't trust the Chinese government not to seize it so it's like I get that countries are going to um for sure for sure they're going to do more trade with China but if they're smart they're going to keep them at arm's length they're not going to overextend themselves they're going to stay in the most trusted uh currency which the question becomes will the most trusted currency be the US dollar given are very aggressive moves uh certainly sanctioning the life out of Russia that signaled to people that hey like we're not afraid to weaponize the dollar against people I think that's a terrible signal at a time where China is taking over a lot of the World Trade but I do have a feeling that people are going to be very hesitant to switch over from the dollar uh to the Yuan what say you to that yeah so so that's why I was saying dedolarization is decentralization um and so meetings so it's not going to break over to China Yuan it's going to go into Bitcoin as but one example or maybe just you forget about Bitcoin for a second right so I think it because it's a big world with eight billion people right so after this thing fractures you have you know a few hundred million people pick an option that's actually enough to to do quite a lot with it right so first let me just give some graphs to level set you see this graph which shows foreign Holdings of U.S treasuries as um as a percent total total debt yep right so that peaked in 2013 is declined quite a lot over the last 10 years right essentially massively what percentage drop is that do you know I mean we're from 34 to 24 it's like 10 absolute relative yeah sorry it's too small for me to read the numbers I can just see the arc oh yeah so it's 34 at the peak here four percent as of 22 it's probably dropped off quite a bit more in 2023. so um the point is that foreigners when they're saving money are not saving it in U.S Bonds in the same way they're reducing their bond Holdings Japan China Etc okay um for the most part this is a whole graph on foreign Holdings abuse Treasures so what are they buying instead uh they're buying gold so basically they're not saving so it's not just a chart right here tells you something like this this really is interesting to me now I look at this chart and I expect the price of gold to have skyrocketed but it hasn't has it well so that's an interesting point right so basically by the way if you take this chart in the previous one you can see as foreigners are buying less yes treasuries they're buying more gold right gold is a time-tested way of physical goal is timeless way of saving but you can just go in as a foreigner you can go and load in gold and get back you on and more importantly you can put a new on and get gold out okay if that is true China does have an open Capital account in gold okay and the thing is that not everything you know not everything is necessarily reported um have you heard my concept like pre-headline people and post headline people no it's to like a pre-headline person think about a like a CEO or a researcher or a reporter right the CEO knows a product is going to launch a researcher knows a study is going to be published a reporter knows the story is going to appear they know something is true before the headline appears makes sense right whereas a post headline person can only process something that has been officially acknowledged by an establishment okay yeah I talk a lot about this as an entrepreneur you cannot lead unless you understand the essence of the thing if you understand the essence of the thing now you can make predictions you can move in a way where you don't have to follow people uh that's a great Point can I quote instead of quoting Elon Musk on this point really fast you posted this tweet I thought this was absolutely brilliant so uh this is you like giving context for everything you're saying is going wrong and uh Elon Musk tweeted between Tesla starlink and Twitter I may have more real-time global economic data in one head than anyone ever and then he goes on to say fed data has too much latency mild recession is already here it's not like just the canary in the coal mine svb died one of the staunchest miners Credit Suisse died too and the cemetery is filling up fast so one just sort of closing the loop on on all the trouble and people seeing it but reinforcing that point that you're making that there are people that are able to accrue data to form a world view to have a hypothesis on where this goes and they're able to move differently yeah and the thing is there's a lot of people nowadays who are like regime apparatchics who are just incredibly literal and you know you know the term NPCs right like just basically yeah like anything that has not been published in an official Source um that they that they think like they're Pravda is a conspiracy theory where's the source citation needed and so and so forth like anybody uh you know if you don't have um that's why I said pre-headline versus post-headline people um they are so literal that they cannot make logical inferences right and so and that doesn't mean it's 100 but for example not every single currency deal that China has done has probably been announced uh people speculate that they may be doing gold deals behind the scenes with the Middle East where that is a well-known proven currency and you know where do I think gold physical gold lands come back to the gold price gold price is increasing right um but I think physical gold I think physical gold is something that probably returns as a state to state instrument um and maybe Indians in particular use it as an individual thing gold is still like a big thing in India at the individual level but the thing about gold is you know this overhead of verifying it and validating it and it can be spotted with the metal detector that they are ports and all that type of stuff right it's like a heart physically hard to carry it's not modern in that sense still as like a fire alarm like is something that you can go ring ring ring and everybody it runs out of a burning building and they converge on one spot that's like a proven spot before they go back to their homes or something Gold's a pretty good selling point it's one of several challenging points you know Bitcoin I think is another right um the point being that people who take like the very first shorter approach oh China doesn't have to open a capital account therefore and and certainly I wouldn't want to have a lot of Holdings and you want but people might keep a checking account and you want to pay for their imports from China and they have their savings account in gold or perhaps your local Fiat or Bitcoin that's what I mean by detailerizations decentralization does that make sense very much so now so we haven't talked a lot about Bitcoin and actually do want to get a better understanding of where you think this goes uh should we probably at this point need to get a peek into your future thing with America American Anarchy China control so on and so forth but sure um so one of the things that you really grab people's attention with is this idea that Bitcoin will go to a million dollars uh anybody holding Bitcoin sort of wants that to be true but if you're anything like me you also don't want it to be true because you know that it just the amount of brutality uh when you put out that tweet I said I'll be a hell of a lot richer if that actually does happen but oh my God I hope you're wrong so do you really see a path to bitcoin going to a million or is it just going to be one sort of small player in this decentralized fracturing of a whole bunch of different um whether it's coins or uh Sovereign Fiat that get a piece of the pie you see the India Atlantic the trillion dollar coin might be the least bad option why the legal scholar one of the great things the U.S mint can defuse and you see the United States of America one trillion dollars okay and this is now it wasn't actually pursued okay but the the fact that this was this got closer to to being done or discussed okay and it was defended by Krugman and it was only rejected from a optic slash uh tactical standpoint because why a trillion dollar coin whoa what oh you don't know about okay so basically because the debt ceiling evidently this was something that they had a rationale that this would be a workaround and the treasury could mint a coin of any denominations just um like they could they could just mint a coin and deposit it and you know via some magic you the debt ceiling wouldn't be a constraint anymore on government spending I'm I'm outright confused by this one so I see a trillion dollar coin I assume somebody's kidding and they're just talking about hyperinflation because it does make me immediately think about that oh you hadn't heard of this I'm sorry I thought I thought you had heard it if this is this is a meme like what have you heard of like modern monetary Theory I've heard of it but I couldn't tell you what it is basically it's a group of folks who believe that the only constraint on the US government's um you know ability to print is inflation and Taxation like that's to say they can and should print as much money as they want um you know it it is something which is just a legacy stupid constraint that we have a debt ceiling or whatever it's essentially like they wouldn't phrase it this way at all it's digital communism that says because the U.S has the government has guns you can see as much of your wealth as it needs to by printing money and it can force you to give it back at some point if you want so it can really just read all the wealth and so on and so forth okay so people which is true that it can digitally do that and then the question is whether that breaks the illusion and people move to some other currency here or whatever right at which point you get to difficult situation as I'll get to but this trillion dollar coin thing comes out of that school where uh they're like we don't want to negotiate with Republicans over the debt ceiling instead uh we will use this um you know thing in in uh you know legal code to Mint a trillion dollar coin and deposit it such that we don't have to negotiate with Republicans at all it's almost like an executive order right the point is though that this creation of money they're obsessed with it like a lot of these folks are like mint the coin mint the coin crookman has talked about it this guy on Bloomberg weisenthal has talked about it Rowan Grace talked about it's in the Atlantic it's taken seriously as a policy proposal and it's gotten closer and you know since the last debt crisis whether it actually happens or not it's symbolic uh go ahead so the trillion dollar coin would go in somebody's bank account and allow them to not a human not humans but in like in like the governance bank account and then it wouldn't need to um you know like raise the debt ceiling because it now has the money it wouldn't change anything is that they say it wouldn't have any inflationary impact I think I'm kidding just Google Google's really dark see that's the thing is okay so expression on your face go ahead yeah I want to make fun of them but I I want to pause before I do that I'm going to assume that they're smart well-meaning well-intentioned people but they really believe this is going to work and so one of us has the wrong base assumptions so here here is a law that I live by and I really believe this is true when two smart well-intentioned people think the other is stupid they have different base assumptions now our base assumption is your belief about how you are and how the world is and if now when you have a collision of values it's a totally separate thing and that's how you it's what you believe the world ought to be like versus how it actually is so I believe maybe your own is erroneously but when I hear a trillion dollar coin I have a base assumption that says if you print money you have what you're calling tax you have robbed people of the buying power because of something mechanistic not something philosophical something mechanistic that there is now more money but no additional goods and so the cost of the goods goes up because everybody's like so flush with cash that they will pay more for a finite pool of items and so the cost of those items necessarily goes up to match the number of people just like throwing money at them and so if you think like oh my God I just got a trillion dollars but now your loaf of bread costs a trillion dollars and so yes you have a trillion dollars but everything just costs more in proportion and so you haven't gotten rich like I will just tell you as somebody who went from normal money to rich in the refresh of a banking app because I sold a piece of my company like that moment where you outstrip inflation your life changes everything's different you can afford different everything everything it's just like it it's a really fascinating moment but if my rent like if somebody gives me a hundred million dollars but my rent moves up in proportion I may have 100 million dollars but I still have to live in the same apartment I still have to have the same car my gas proportionally has gone up Foods proportionally gone up so it it literally doesn't matter so what am I missing like if really take their stance for a second because I want to understand like they're not idiots they may be wrong right or I may be wrong but like okay so so there's a few different filters on it right I understand so first is you know conflict versus mistake it's like is this something where they're just making a mistake or is it something where they're a different tribe and you know the government tribe blue tribe wants to you know attack um Republican tribe or non-government tribe right um that's one filter the second filter is you know the 50 IQ 100 IQ 150 IQ meme uh yes and love it right but so like you said to make fun of something well yeah so 50 IQ guys like trillion dollar coin is stupid 100 IQ guys like no and then gives this whole Krugman gibberish on why you know like the trillion dollar coin won't be inflationary and so on and the 150 is like yeah it's stupid right so there's like this is kind of like cdos or AAA rated subprime mortgages a 50 IQ guy says uh these people can't um afford their house so why are you doing alone with them 100 IQ guy has all this stupid you know math or whatever that explains why you know that um that that house is good and then the 150 IQ guy can actually go into the math and rebut it and say actually when the default rate rises above X then you know your CDO crash the Y and your CDs increases so they can go in and plow through those abstractions and show why it actually collapses but but that's kind of what's in my view happening here now one thing I will say is um I I think a lot of the financial system is quote Smart in the sense of like playing a three-card model Auntie on people they'll go like this and the thing is that the trillion dollar coin is less clever than their usual kinds of Illusions you know when they do quantitative easing or the bank term funding program that is set up to be hard to understand it is like naturally selected and evolved to be understand you know I can prove that to you well you proved this I want to ask a very pointed question yeah do you think the people running the global because this seems like a global problem are the people running the Global Financial system evil um so it's a really difficult question I think some of them are evil I think some of them are stupid I think some of them have are like Soviet I think it's the close analogy is like Soviet apparatchics right um let's just go to 2008 for a second there's some mix of fraud some some error some like spin some tribalism some pseudoscience right and different people did different things at the same time right like the result was evil um some of the inputs were evil a lot of it was stupid like financiers thinking of everybody else is dumb and what have you it's a mix um you know this is a way of thinking about it you know which is good is helping somebody else without concern for yourself um smart is helping somebody else but also helping oneself uh evil is harming somebody else while helping themselves and stupid is harming somebody else while harming one's itself and I think a lot of the things the financial system does are it's evil in the short run and stupid in the long run like they have a short-term gain by harming somebody else but they spend down especially recently they spend on their trust so they harm everybody in the long run like a lot of stuff they do with sanctions or freezing de-platforming censoring that's not just a financial system but like the in the social system um it has a short run Advantage for for them um the institutions are doing this but it's a long-term disadvantage because it actually reduces their power but they're but they're so short-sighted or short term oriented they only see that I'm gonna sort of refute my my own Point here so um as you were saying that I really want to believe that people are well intentioned that they look at this incredibly um complex thing that is the economy they look at the Modern miracle that is the modern economy when you look back at I mean tens of thousands 20 000 years that you realize that for a long time the sort of capital markets that make capitalism work they didn't exist and so we've had this just Cambrian explosion of um betterment for the world with Innovation and all of that because we we really sort of Master this economic game now as Ray points out you unfortunately you are in the middle of these big cycles and when a de-leveraging happens it's really brutal but if you don't care about any one generation on the long Arc of History it's pretty amazing and I've heard you talk about these helixes so there is a sense of repetition in the way that societies move but we are also moving up and we are making progress and so that is um there's something very interesting there so anyway but when I look at that I do say to myself all of this makes a lot more sense once you know Nietzsche's Will To Power and I do sometimes chastise myself for my really wanting to believe that the way that the Global Financial system is set up is well-intentioned people who maybe have gotten out over their skis a little bit and they're really trying to do something wonderful and beautiful but I do worry what I know about the the nietzschean idea of we all crave power to be in control of Our Lives be in control of others uh to to be the one with our hands on the stick as it were because once I let my myself bring in that bit of darkness my predictive engine works better and that scares me there's stupid and evil there's also tribal and if you remember the thing about like it's not one country it's two parties you know um the thing is so okay if if you just imagine like a Japanese guy was in Beijing and he just started suddenly knifing uh you know five Chinese guys okay that would be a huge incident that would be something that'd be considered a crime by the Chinese government the Japanese government you gotta go to jail right be a huge thing if that happened 80 years ago right when Japanese were you know invading China that guy might get the Japanese guy might get a medal you know like bayonetting you know like Chinese soldiers who had never met um and uh the reason is that that was tribe on tribe tribal Warfare so um so that act that we consider evil when those tribes were not at War would in fact be considered laudable when the tribes are at War and that's like conflict versus mistake and so if you feel that the Republicans or the population at large or whatever is is evil then any deception or whatever I mean like you know obviously the Allies deceived the Nazis during World War II um and there's all kinds of spy versus spy deception sabotage Etc versus the Soviets you know if it's another tribe then people will do what they want to do and uh what they what they feel is right for their tribe they'll justify it that way right and a lot of that the trillion dollar coin stuff comes from make sure the Republicans Can't Hold Us hostage you know and in fact if you see this article death ceiling gimmicks this is exactly what I'm talking about in terms of the evolution of camouflage okay there were two courses of action that he's stating were equivalent minting a trillion dollar coin and premium bonds trillion dollar coins even somebody without any Finance or knowledge is just facially ridiculous it summons a visual over here premium bonds immediately people's eyes glaze over oh that sounds maybe good premium bonds right and now you need to go through a long explanation of what they are but notice he's agreeing that their equivalent in terms of their function but natural selection selected against the trillion dollar coin because it's too obvious and it's selected for the premium bond in his kind of thing over here does that make sense but what it it it does in that I understand the words coming out of your mouth but I don't yet understand why a premium bond is actually like a trillion dollar coin because presumably can you get give me the punchline quickly but first let me say for those that don't understand bonds so I'd be buying a bond because I think that it's backed by the US government I'm not going to lose my money if I hold it to maturity I add a minimum get my principal back and I may get uh some sort of return for buying that Bond so one percent you know in in a low environment so that seems okay because you're asking me to give you my money uh basically I'm gonna loan it to you I'm gonna buy that debt uh but you have to give me my money back whereas in a trillion dollar coin you're just making it up yeah but basically the thing the point is I can explain how premium bonds work and this article does but actually that gets us into the 100 IQ trap right where the whole point is that recruitment is admitting that the trillion dollar coin in the premium Bond are equivalent but the premium bond is harder to explain and that's why it's a more likely path and this is exactly how the camouflage evolves do you understand okay let me see if I understand yes I understand the camouflage part but let me understand why I'm going to take my best guess at why they are the same they are the same because the debt that they created they create out of thin air so I'm buying something that isn't real I'm in a Wily coyote moment of hey I said this is real you can give me money it's all good and I'm going to give you that money back and the reason I can guarantee it is because I will I will print the trillion dollar coin in order to be able to pay you back because I'm just printing the money to make sure yeah basically they're two different different ways to work around the debt ceiling and have arguments that you're not actually violating the debt ceiling thing but still essentially creating new money right and um so so that is that that's like how functionally they're equipped I mean I I you can read it like you know I can explain it but the point is getting yourself mired in that complexity I mean you can't okay what are they doing they're issuing a new note with an interest rate that's far above market and they're selling the debt instruments for more than their par value already it's like eye glazing you have to actually go and diagram this thing out and that's the point it's a vol camouflage to give you another example just to you see this video clip that I pasted in more Quebec Securities separate loans tranches basically for anybody watching the uh the or just listening to the podcast is basically that financial instruments are designed to confuse you yes this is a clip from The Big Short in a totally different context the point is you could headline it and you could say hey uh this number of people who got a mortgage like this have gotten bankrupted in the future I had to declare bankruptcy or they lost a lot of money or whatever because um this teaser rate is actually a terrible thing and uh your rates are going to go up and your payments are going to go up um or they could say look our teaser rate only 9.95 and they could just sell it right and so when you're set I mean the thing is Wall Street and finance as opposed to other sectors like um if you're producing I don't know bananas you're selling the bananas and you're trading are good right the other person is buying a banner for consumption value and utility value right but when you're buying a financial instrument um I'm not saying that it's always bad sometimes it's okay right uh but often at Wall Street it it's something which is zero sum you know for example stock and it's going to go up or down it goes up then the buyer is getting a better deal and it goes down then the seller is getting a better deal so each party you know there's a question which is like how are you screwing me right that is what the Wall Street guys ask each other you know you've probably heard that before I I haven't heard it said like that but that is not at all surprising yeah and the difference is that when you go and you buy a banana or whatever from the grocery like nobody's screwing anybody right that guy produced a good you gave some money and both parties are happier right that's gains from trade in the stock example I'm not again it's possible that you sell the stock and it goes up but you need liquidity at that time frame or good you know like I'm not saying I'm not pathologizing every single Financial interaction like that I am how we're saying that there's a greater degree of zero-sum behavior there a much greater degree right and um because of that that culture has evolved uh and the contracts evolved it's easily spotted okay if it's it's obvious how uh Bank a is screwing Bank B then Bank B spots it you see I'm saying if however it's camouflaged in such a way then Bank B doesn't see the fine print but Bank a can be like you agreed to xyw and Z we got you right so each party is kind of weaponizing the contract system to try to fool the other guy into getting a uh we're seeing you know this is dramatized in the movie Margin Call where you know the the guys were fooling their counter priorities into buying these assets when they were saying that they were more valuable AAA mortgages you remember that right um and so uh so let me come back so the point is the financial system is set up to deceive you as to what it's actually doing hence you know Bernanke for example years ago talked about how quantitative easing wasn't printing money but then more recently Powell admitted that it was right um just to show you those two clips I always I always try to have citations for everything I'm saying yeah man I have to say that's one thing like you're the way your brain works is terrifying I don't know how you remember all these things that they exist first of all and that B that you can find them as quickly as you can uh yeah I tweeted about that when I was researching I was like what the hell your memory is prodigious is that like a thing you you when you think about your own identity is is your memory being like freakishly robust part of your self-identity I I don't notice it um it's like I don't know it's like your ears just whatever something like that right um funny you should pick ears first of all I noticed my ears because they are so big and then second I I notice my memory because it is so shoddy when I yeah I when I look at how much you reference I have to believe that you you you remember a disproportionate amount of what you encounter or you have a time machine or something and you have more hours in the day I don't know but it is uh people always ask me oh my fire I just remember a little snippet it's like a little hash and then I can look it up right but um partly it's I've got it's kind of like I've got a story it's like a clothesline and then I can hang things off of that you know so it makes it's almost like a remembering song lyrics and you can um you can play it front to back but it's not necessarily Random Access you know prompted recall anyway here is uh Bernanke once again explains why QE is not money printing okay and then after so so lie or they'll disassemble or they'll convince themselves it's not money printing because we intend to do quantitative tightening later so we're not introducing into the system permanently and you don't understand you're not sophisticated right and of course this fiscated 150 iqbals and say well you're never going to be able to tighten this Ponzi economy when you started that's exactly the problem we're running into we have had 20 years of just abs absolutely systemic economic fakery okay just to give you some examples blankie talking about how the quote great moderation right means that macroeconomic volatility is over right meaning you know there's not going to be any more if I we've solved macroeconomics he was basically saying this in early 2000 all right Cheney saying that thing is then they really they really have gotten rid of that volatility so my my like central question is does it break at some point because they really have reduced the amount of volatility tremendously I disagree I mean like just the 2008 crisis or the 2020 covid that's significant macroeconomic volatility yes but compare that to 1929 man it's like it it was Devastation okay but like what he was talking about was there wouldn't be a financial crisis right that like he's like a solid macro there's no business cycle that's what he's talking about okay there's no business cycle that isn't true let me give the fatality of it the great moderation we've tamed macroeconomic volatility Cheney's saying deficits don't matter Bush and Clinton blew up the mortgage bubble in a bipartisan way I showed you those before in April 2008 Bernanke says we might see a mild recession five months before the collapse of Lehman and certainly in 2008 was not a mild recession right raisins agency in 2008 okay so he said this before the 2008 crisis yeah that's my point it could be a mild recession that's not what it was it was far far worse than that right right um yeah yeah yeah here the radiation in 2008 calling some yeah this thing the great moderation was before the financial crisis he was like I killed it I still think he has a point but fair so if he's saying that before when he's still like pounding his chest saying that there is no such thing as macro basically anymore he's basically saying we've saw macro it's all done it's a little bit like Rutherford saying we've solved physics there's nothing left before quantum mechanics it's like yeah yeah yeah but I would like to quote biology for a second so maybe you've heard of biology right uh so one an idea that you have that I think is is really brilliant is that uh okay so give me give me fiat currency and what I'm going to do is I'm going to rob from you constantly but just a little bit and by doing it I'm going to be able to keep I'm going to be able to keep it stable so I think that that what you're doing to the currency also applies to the macro economy so I think that 2008 in any other time period is is 10x that event that that I thought you were not saying that it wasn't difficult sometimes you know there's like you know an evolved function of something where people don't know exactly what that institution is doing and their verbal defenses of it are not actually but the function institutions it's like what does one of your organs do could you explain it preferably it just does that right it's kind of evolved to do that right and uh your point is you're actually citing me on this and it's true and I thought you might bring that up which is one way of thinking about Fiat is the dollar has had that long-term decline you know the decline we're talking about like the inflation cost of the dollar over time right it has a long-term decline in return for short-term stability right and um like essentially what's happening is they're borrowing from the future they're printing you have this long-term decline of purchasing power but it's like relatively smooth During the period so you can plan on a short-term basis right and the thing about it is that's actually sometimes a valuable property to have something that is flat and it's not going to oscillate that much in terms of purchasing power over the short run as opposed to something like cryptocurrency which goes up and down percentage or whatever each day right Bitcoin has the opposite set of trade-offs in a sense where it's appreciating over the long run but as a huge amount of volatility in the short run and um you can imagine that you could have uh some flat coin where you Embrace that as an engineering constraint and you had a basket of goods and you had a reserve a funds and you tried to maintain the price stability of that flat coin against a basket of goods which you couldn't initially do if there was a true shortage if you tried to maintain let's say the price of this you know flat coin against grain and so there's a grain shortage then no matter what you do financially in the physical world that Supply is gone so the price is going to rise right but point is though that yes under some conditions it's possible to have a long-term decline but short-term stability and a huge crash at the end right you know the concept of hormisis have you ever heard of that oh yes a little bit of bad does a little bit of good uh uh it's interesting I would not have expected you to bring up hormesis in this context so do tell how uh how we get there here um so this is kind of the graph you know like and so it's kind of like if you have too much volatility yeah you're dead right but if you have too little volatility well it's actually also worse than having some volatility that you can adapt to it's like exercise if you have too much exercise you're dead if you have too little then um your uh uh you know you're you're basically gonna Decline and die yeah that's right but in the middle is kind of the sweet spot right and so what a lot of the system has done is um and this is actually a broader point in many ways we have the Eternal Western present right blue America is holding on to the present while the tech Libertarians are in the future and the conservatives are in the past and uh the Chinese and and so on are both like the future in the past they think of themselves as like the Chinese Empire right so the Western president is hanging on with his fingernails and you can see it in the financial system where it's like bailing out GM and 400 something companies in the s p have no growth and they're all in Tech and they're trying to prop up these existing institutions but you can see it also outside the financial system where you have 70 and 80 roles running for president and you have all the Hollywood remakes and Top Gun infinity and uh oh we're gonna do a cold war again and it's all this stuff which is just referencing this increasingly distant Faded Glory and just trying to keep the current system together um and to keep the present going for as long as possible without adapting to the Future and then you get just the whole thing just snaps and breaks I think right and it just like you know gets washed away it's similar to in my view that I think the current situation is similar in some ways to before World War one where you know you had uh before World War one you had the Kings and the Nobles you had the monarchies and yeah there's concerts from monarchy but there's still absolute monarchies and that world seemed like it was eternal and it wasn't going away and maybe it was changing it was changing very slowly but under the hood all these political movements technological movements Industrial Revolution all this stuff was bubbling and then in a cataclysm like the modern world arose right and we kind of saw some of that during copen there was a lot of change that happened during covet in a year that became like the year that the internet it was the internet first right for example every meeting now you can do a remote meeting um digital currency Rose uh like you know all you know all kinds of things there's like civil conflict in the US I think in many ways 2020 was a preview of what we're going to see in terms of of um like just like 2008 it's like a preview of what we're going to see it's like an appetizer before I mean the course of a lot of change happening at once all right you have a very clear thesis on this what what is the change what does the future look like what does the future look like so I mean I have a teeth course look I could be wrong and so on but uh the and let me also give some optimism right over here so let me see if I can say in a few sentences optimism or whatever um all right so the um the few sentence thesis is uh G7 countries are actually running out of money um and uh will attempt asset seizure in the future whether through inflation or actual seizure that is so dark Nation where's where's my optimism okay okay that's terrifying I don't I don't know that people understand like how gnarly seizure is so first of all I have family in Cyprus and so watching this happen where the bank's just like we're taking your money now right crazy anyway keep going so there's going to be some kind of seizure agreed terrified but agreed so the reason whether it's via inflation or actually seizure I mean the reason is like um people didn't expect Dahlia's principles has changed world order it came out I think right before Ukraine and the rate hikes you know and it seemed obvious that the path they were going to take was just going to be printing a ton of money but sometimes the path they take is a non-obvious one and it may just be hiking raises the moon and you know just watching the system collapse and you know doing selective we don't know exactly how the thing will unwind sometimes things surprise you right it's probably likely it's gonna be printing point is though G7 countries are going to have a real problem and they're going to be harder for money and then a lot of the world hinges on whether or not um the G7 countries and China can seize digital assets if they can that's like one branch point in history it means that you have like total states in the cbdc and so on and so forth if they cannot uh then you have a different branch point in history where it means that communities can now uh basically have digital gold or cryptocurrency and crowdfund bits of territory where they can have their own startup societies and eventually what I call Network statements okay and then you'd go back to the future of something more like the 1800s where you could get a plot out of land and you could build a town or or something like that or even you know the Alaska purchased Louisiana Purchase things of that nature their sovereigns would sell land the real the branch point is fundamentally will asset seizure be possible in the digital world and uh the biggest risk factor for that is actually Apple Google and Microsoft because they have operating system access and um that's actually if I think about what I'm most concerned about it is the fact that Apple has software update and Google can you know get into your Google Drive and Microsoft you know has Windows and if ordered by the state in theory they could scan your hard drive for private keys and then pull your digital glasses that is to me one of the most important problems that's coming up in the next X number of years you might say well that sounds kind of crazy biology and let me see if I can motivate that a little bit um in 2010 you remember when we talked about the Arab Spring right in 2010 the Arab Spring had happened and you know people knew that Twitter and Facebook had been a component and literally like the overthrow of countries they had political appoint importance remember that oh yes yeah yet still in 2010 2011 if you had said in 10 years the most important political issue in the world or at least for a few days will be whether the president can tweet people who laughed right come on because they thought that social media's destabilizing political impact that it's political importance was something that happened elsewhere right that you know really wasn't a big deal at home we have a culture of free speech who cares tutors still calling themselves a free speech between the Free Speech party all that stuff is the early 2010s now what's happened over the last 10 years uh you know from basically let's say the 2010s is all politics became social media over the 2010s and in my video in the 2020s all politics becomes crypto tribalism why because again taking that true analogy just like you went from Twitter being acknowledged out of political importance to being the main event of all politics and every politician is on Twitter first and they think about Twitter first often as when they do something they do a bill and they're thinking about it for Twitter right I don't think it's that's an exaggeration to say that I mean Twitter didn't just it was the 2016 election also really wasn't about trump it was about Twitter Twitter was Upstream it elected trump it elected bolsonaro it got brexit through it was essentially a parallel media channel and that's why those elections flip that's also why there was a counter-attack on Twitter from 2016 to 2022 and it looked like the genie had been partially pushed back in the bottle but now along then free Twitter again and we have digital glasses okay so with that whole story where even as big as social media had gone to hundreds of millions of users billions of dollars public companies overthrowing governments in 2010 people still didn't think it was going to be the main thing for the president of the United States of America with me so far yep okay so in the same way in 2023 where cryptocurrency is is it's a trillion dollars it's hundreds of millions of users globally it's quite a few billionaires publicly traded companies and even perhaps more importantly every single Bank financier government in the world has heard of Bitcoin and many of them have launched cbdc programs in part or in whole motivated by the competitive threat of cryptocurrency okay and Elsa alvador has adopted Bitcoin as an actual currency in Panama and I think Central African Republic are considering it um and so it's kind of like the Arab Spring the sense of there there's like there's already a political proof point of cryptocurrency's importance you know there's the Wyoming Dow law there's the Tennessee Dow law there's Texas saying Bitcoin shall not being infringed there's um there's all you know Colorado accepts crypto for taxes blah blah blah there's all of this stuff that's happened and yet still if I said that in a few years one of the most important questions in the world will be does government have enough cryptocurrency to finance its operations that still seems unrealistic okay that's still something which seems distant oh the US government is going to count how much Bitcoin it has right the looming question though that I hope you'll address is some part of me is like yeah that sucks I want the government to be able to print more money so sure right right and and I the good news is I'm learning about this stuff so enough of me is like sort of old school that I still remember being blind to all of this and enjoying the magic trick and so it's just that it breaks at some point anyway go ahead today if you look at Ben Bernanke talking about gold or you hear anybody in the establishment talking about gold it's with an eye roll like oh stupid gold bugs right Bitcoin it's not taken seriously digital gold it's just not taken seriously it's thought of as maybe you know if they're against it they're against it because they think it's so maybe it's instability or something like that but they don't think of it as like a threat in the same way they thought of Christianity as a threat or or capitalism is a threat you know what I mean um or nationalism you know like those are things that they they think of as a threat gold is thought of as a stupid curiosity right not actually something that could disrupt the system that's not how it was in back in the day 90 years ago um doing like the most important thing in the world basically 1933 to 1935 like front page news like 911 or the financial crisis was the gold Clause cases okay so the Gold Class cases were essentially the question of whether or not the US government under FDR could essentially default on its obligations and say you know the goal Clause said the government will pay x amount of gold to somebody um if you know like like a bond it was basically a clause that was there to prevent inflation right I could ask for my payment and gold essentially okay and FDR passed um an executive order 6102 saying everybody had to surrender their gold so that seemed to be incompatible with bonds that had been signed well before that said the US government will pay you in Gold but FDR is saying I will see the gold okay so this went there's a bunch of cases of different kinds it all got collected went to the Supreme Court and these this was like the big event of like 1935 okay everybody cared about this uh it's about a forgotten chapter in um America's economic history okay and it was a huge deal at the time okay and the thing about it is gold was taken extremely extremely seriously um because they hadn't inherited the system they were trying to build a new one Fiat and gold were fighting at that time so the thing about this is when you go back and you you kind of read about that you're like whoa uh just the it's just all got into fully memory hold right um the emotions on it have have totally changed um nobody even remembers it right and um here I want to show you something hold on so yeah whenever you're pressing up on a hundred years on something the cultural memory is just not there nobody has emotions nobody's even grandparents have the emotion around that thing and so us trying to capture that it's not necessarily true because remember you know the Civil War remember World War II right yeah none of that has real resonance anymore like this is going back to your very statement about when you have to found it versus inherit it even though World War II we've got documentaries and stuff nobody has a sense of like the greatest Generation anymore nobody has a sense of what they gave up I don't know if you've seen that video of the World War II veteran crying because he's like the things we had to do the people that tried the things that we sacrificed it's all for nothing it's for nothing like that was heartbreaking to see that guy that's a guy with memory of what it means to go to war who watched the guy next to him get his brains blown out you know like imagine your friend next to you gets shot there's there's brain and blood in your mouth from your best friend like that is very real to you and so now all of a sudden like hey you know what happens when things go wrong so I do feel like that that is a big part of it to think that people from 1935 are going to have like some visceral sense of what it means when the government just like I'll I'll take your gold now and you know I know part of the punch line of this where it's like I'm going to take your gold I'm going to buy it back at whatever 70 cents on the dollar or I'm going to buy it from you at 70 cents on a dollar they literally just sees 30 of your wealth it's bananas that's right so I well yeah it's like a dilution of 70 and by one measure but yes the cases dominated the news throughout the period on January 13th Elliott Thurston you know wrote rarely if ever has a supreme court of the United States confronted issues of larger import 1935. on the morning after Physicians the New York Times ran five fun-page articles about them and they were the overwhelming focus of the news and business sections um for perspective the number of Articles devoted to them more closely resembles that of historic moments like the moon landing or 9 11 attacks than it did other major Supreme Court decisions such as Roe versus Wade okay the phrase gold Clause appeared in more times articles 49 on the day after than poultry minimum wage abortion combined on the days after Schechter West Coast in a row right academics also touted the case's magnitude and import right and so you know this is taken their place among the great landmarks of American constitutional history so this is remarkable dude I think we're about to live through this again I I don't know what you think about this but when I watch the the posture right now towards crypto this feels like Capital controls in the making uh that they're revving up I mean uh with the um this uh the requested freeze of binance Us's assets I don't know how that's going to play out but man that really starts to smack of like Hey we're doing it we're doing it to protect you don't worry but like PS we're gonna freeze your assets it's like what I'm sorry that's right so the thing is so the the one of the macro Frameworks I have is um well it's not exactly reassuring it is that history is running in reverse okay so if you think of 1950 as Peak centralization with One telephone company and two superpowers and three TV stations you go forwards in time to 1991 the internet Frontier opens backwards in time to 1890 the American frontier closes forwards in time you have covid-19 backwards in time Spanish Flu you go forwards in time you have the tech billionaires backwards of time you have the captain's industry the robber barons and so on and uh this is true there's lots and lots and lots of events like this I've got like 50 of them in the network State book and they get really amazing and detailed like for example you go forwards in time and China's a senior partner in the china-russia relationship you go backwards in time and the Soviets the Russians or the senior partner in the Russia China relationship you go forwards in time and you have an Indian origin and Pakistani origin guy debating the partition of the UK because a guy who's you know the the senior official in Scotland is a Pakistani origin guy and the British prime is is Indian you go backwards in time you have British origin guys debating the partition of India okay um you go forwards in time and you have the New York Times siding with Ukraine against Russia you go backwards in time you have the New York Times sighting we've had staliness Russia to choke out Ukraine with the Walter Durante articles where you know the New York Times covered up the Ukrainian famine right and um and that's like remarkable where some of the same hinge points in history so specific are occurring again but with the opposite outcome a major one that's happening uh is um you know there's actually a confrontation between journalists and Founders entrepreneurs and uh you know and and reporters in the early 20th century um that was like you know Ida Tarbell and all the quote muckrakers went and attacked Rockefeller and and all the captains of industry demonized them laid the groundwork for the trust busting and essentially the government to take over and quasi-nationalize a bunch of those companies with regulations and so on and so forth and uh so I had a Tarbell and the journalists beat Rockefeller and the founders in the early 20th century but now there is a similar Clash that happened from 2013 to 2021 between the media and Tech the tech Founders but now it looks like the founders won that battle on his Twitter and we have it all in podcast and we have um you know all of these sub stacks and so on and so forth right so we're seeing like some of the same um like like like uh confrontations or conflicts almost like uh you've seen these really complicated origami things and they fold and unfold but you see some of the same faces as they unfold and fold do you know what I'm talking about yep yep right so you know I look I can't understand it all this is such a huge thing that I can't pretend to understand this this whole way that the world folds and unfolds in this way I'm going to push you on that though because so I've heard you bring this up a lot and your punchline is always that there's something here but I don't know what it is so the two hypotheses that I think explain this are first that centralizing technology was Rising for hundreds of years going into a peak in 1950 and so that's like obviously the nation state itself um but I say obviously most people don't know I mean do you know what was there before Germany and before Italy and before France that's a mess that does not look it does not look rational or logical from the standpoint of a map and the reason is maps are actually like sophisticated Maps a relatively new technology that's to say they weren't there for thousands of years hundreds of years um you know a map is think about how hard it is to make a map you have to be able to travel long distances pretty quickly you need surveying technology um you know like a straight line on a map seems like a small thing but there's like mountains and swamps and all this crazy stuff in between them right it's like map making if you think about how you'd make a map and make it accurate it's actually a pretty non-trivial thing to do right so on a map this doesn't look you know like all that rational what is organized by was not on the base of the lands but the mines on the basis of communities of like mind what what I hear you saying is that we have this constant tendency to bundle unbundle bundle unbundle and so here we're looking at these different states that were unbundled for a long time we have had a moment of bundling and now as a part of the thesis around the network State we're going to see this re-unbundling now what do I wanna only in the West yeah mostly and I think the reason is um I think the future is to decentralized West in a centralized East like the East meaning Russia India China but especially India China and then you know a lot of countries have gone through social economy they're like on their state capacity increasing Arc things are getting better like roads are getting better highways are getting better infrastructure is getting better they're on their increasing Arc the closer you are sort of blue America and the G7 you're on like a declining Arc and so crazy man it's the opposite of the 20th century also that's the other part right so the first part is centralizing technology so just to continue my point right why why would we see this this history running in Reverse well going into 1950 um you had mass media you had mass production you had mechanized Warfare you basically had to control huge swaths of land and natural resources and you had to team up to uh not get beat up right and that's why Germany was all these like little small principalities but in part due to the Napoleonic Wars like basically uh you know the concept of roll up in business like you take a bunch of small things you roll them a bit more of course right that's what the nation state was it was basically like um you know they're all these different groups in like their vicinity of what we now call France and many of them didn't speak what we now call French and after the French Revolution they're all put together they were all educated in the same language they were unified in the same way and this is this is actually to you know they're bad parts of the French Revolution many bad parts and people have written about that namely the beheadings and so on but what people don't ask is uh why did the left how could it work in the sense of after all that internal chaos and Anarchy how could they generate a military that could just go and sweep over everything else right to the same extent like so you had a strong leader I'm very curious yeah what do you think because researching Napoleon and his rise to power this this is my thesis on history and people don't pay enough attention to history as a PSA uh when you have like the bundling as you were showing Germany I was like yeah the only way to bundle that mess is if you have a strong man that comes in and like starts throwing his weight around and he's more intimidating and he'll like he one he's creating order so let's not discount that so he's bringing order to something but I'm gonna guarantee that he's doing it in a way where some people are just getting their necks stepped on like even how Napoleon came to power it's like you won he was truly a military genius and so he could go in and bring the riches back and so people were like whoa maybe this guy's better than we thought and as soon as he started losing then he was ousted but if you're on a tear and you're able to intimidate back down your own people and go abroad steal riches win Wars man eat like now let's really get into the crazy stuff the fact that Hitler the rise and follow the Third Reich fascinating book everybody should read it the fact that he was able to talk um oh God what was it called checo Slovenia oh God I forget the original name of what is now the Czech Republic always for some reason uh he talked them out of their country he there was no shot fired he just literally talked them out of their country so anyway it it it it can be a pretty dark period when you unite the bundling process here is something that might complement this view on the like the the strong man part of it is definitely it's definitely a piece of it but this is actually something I feel the right has a blind spot on which is to say that uh and this is this is a broad generalizations right but typically the right things about things in terms of Heroes and individuals and the left thinks of things in terms of Institutions and ideologies so you don't just the thing is for something like you know Napoleon and at least my teeth on it look I'm not pulling on a course but what I think about it is it's not just that there's a strong man there was a strong ideology what I mean by that is Napoleon in a sense benefited from the fact that they the the the crazies of the French Revolution while they're being crazy they had unified France and their propaganda they had you know essentially rationalized this whole thing they'd smoothed it all out and everybody was under um you know the control of this centralized government and uh and so the the the base of all these people who had been propaganda I should go and like I'll double check you know all the things on this afterwards but but essentially that was something it's a little bit like um Mao did a lot of terrible things I shouldn't say but still are with things and unified China right so yeah there's a lot of things and unified time but true and he smoothed out all of these issues and and so on and so forth and then a right of Center person could come in and like ding Xiaoping is a capitalist and then take that unified thing and then you know Implement capitalism on top of it and you know it turns out that it's kind of hard to unify a gigantic swath of land without using both left and right tactics because on the right is like economics and you know the military but the left is like propaganda and ideology and even though it's not called this way of religion right um it's um it's like the software that all these people are running in their heads why do they think of themselves as being part of the same people well you educated them and you brainwashed them and you um you know you instructed them and you taught them and you made them do X and Y and Z and the thing is normally the the right libertarian thinks about everything in terms of okay here's a fair trade you pay me Ax and I'll pay DUI and so on but the left authoritarian thinks I'm not going to pay anybody anything they're just going to do it and you know what if you can pull it off it really really scales right like you have no unit cost everybody installs the same software in their head that they're all basically educated to do the same thing and they have to do it and you're not going to pay them and in fact they're going to pay you right if you can pull it off you can unify this absolutely gigantic swath of territory right and that's a really important component of it it's not just uh you know the the Warriors it's a priests it's um it's not just the swords it's the words you know you you need that kind of unifying ideology and uh I I recognize it's an idiosyncratic way of thinking about right and left I talk about this at length in the network State book but that's why it's not enough to just have a strong man what I mean by that just to take a reduction at absurdum I know it's not so much you mean it but if you just have a guy who comes out of a weight room he's a strong man why do people follow him right he has to actually be a leader in some sense he has to have um the ability to run an organization he has to have some motivating ideology you know this is also in the the kind of small version of this it's not that small but like somewhat small is like a Founder who's got a vision for changing the world as a company right yes they have the right aspects of you know hierarchy and capitalism and meritocracy or whatever you know like stereotypically right they also have the left aspects of omission and um like often an egalitarian dress code and we're all living it together against this you know oppositional kind of thing you know like a like an Insurgent or revolutionary movement right which would have historically been left things and so I think you kind of need both anyway coming back up so the point is that um for 500 years going into 1950 ish you had this centralizing tendency and um this was something where you had small city-states couldn't compete in fact one way of showing that the exception that proves the world you know this country called San Marino uh yes I've heard you talk about it yeah that was the protective like a guy who becomes king and then he like yeah wow you really keep there you really have done your research that's right yeah so um yeah so Garibaldi when he was unifying Italy um San Marino at least as the story has it gave him refuge and so he let them be Sovereign and so you can see like this duckbilled platypus you know this missing link that exists the present day San Marino is like a piece of what the past was okay and it's like surrounded by Italy it clearly is like it's like 30 000 people or something like that but it's maintained its sovereignty through the years and you're like oh why is that not just a piece of Italy it's like it's like a Tiny Town really you know in Italy it's a totally fine place or whatever right um and their un membership is very valuable to them and and whatnot but now you're like oh okay that's what the old world was before all got rolled up into these gigantic centralized nation states part of why did things get rolled up in position states is defense and production and scalability and so on all these centralizing Tendencies okay and and so what you got in 1950 was a very atypical thing for the whole world like you had this gigantic American Empire with hundreds of millions of people and you had the Soviet Empire with hundreds of millions of people the Chinese you know India these are just like a relatively few number of states and many of them were running like just two operating systems right capitalism and communism this is a very very centralized world with lots of the you know differences of different cultures and so on all just got steamrolled paved over and the best version of that was everybody watches I Love Lucy in the U.S at the same time on the same channel you know and they're all like just the same softwares and cylinder heads I Love Lucy you know like this right and the worst is you know um like Mal's Little Red Book or uh you know like Hitler or Stalin or something like that right that's like you know just the propagandizing right and so uh point is that right around that time what's interesting is sometimes at the very peak of something something's invented so transistor was independent right and so you go from transistor to the computer you know Mainframe and the personal computer and uh you have cable television and you have the internet of course and um the smartphone and cryptocurrency and for the last 70 odd years we've been in a decentralizing Arc that is faster in my view than the centralizing arc is the decentralizing arc is that is that pathological is it a breaking apart inappropriately or is there something good here because you have a picture of how this can become good but it feels like it's born out of rot if I'm completely honest it's it's both and right it is something where like um for example Blockbuster is an example of a company that was set up under a certain set of technological assumptions Like Home Video rentals and so on that turned out to just be a window in history that was in our lifetime and it Rose and it died right it Rose you know when it was a technological Pioneer on the basis of like home VHS when there was a breakthrough and then it fell once streaming became possible right we saw that within our lifetimes with me so far right yep so you think about the giant centralized State and it's like Blockbuster where there was a point at which it was writing the curve of technological innovation and it was just crushing everything in its path and now the technological wave is against it and those ideologies that seemed Unstoppable when the Technologies favored them those organizational structures uh you know for example Blockbuster had physical stores all around the country and it had late fee policies its entire business model its organizational culture was based on this DVD that you could come back home it had popcorn that it sold right all that stuff gone with Netflix Netflix doesn't sell popcorn Netflix doesn't have in-person stores Netflix just streams the video to you it doesn't have late fees all every aspect of the business model got just totally destroyed um by technology and we saw that in our lifetimes right and you just now have to take a wider lens and you think of that happening not just to companies but to countries and the thing is that we don't usually found that many countries um there actually have been quite a lot that have been founded over the last seven years that's a very encounterative thing there's an idea here that I find very interesting so so uh you have this Force working against us where or for or against us where we're centralizing decentralizing but what feels like at least in the um the example that I can think of certainly with the US uh maybe even with MAO definitely with Blockbuster is there there is a category error that's made and the category error blinds people to um the path to the next societal movement so take Mouse China take Blockbuster which I did not expect to be drawing a parallel between these two but I think the same thing is happening and then I'll bring it back to the U.S which is why what I'm really thinking about obviously because I live here so um I'll just can't jump in for a second the corporate analogies might the corporate analogies might seem trivial but they're not because they're some of the largest scale experiments we can run within our lifetimes you know you're talking about millions of people billions of dollars and they're founded they grow to maturity and they die over 10 to 20 to 30 years right um You you cannot run experiments that are much longer than that within one human lifetime that's why corporate history is actually very useful to study because it you can relate to it to a greater extent whereas history books are farther and more distant you know go ahead yeah and I think they're actually a really good example of the network State uh which for people if they're trying to grasp at what that is like imagine a corporation but instead of it being a corporation you're basically it's culture so you come together for cultural reasons all right let me let me finish this question I'll come back to that go ahead yes so all right so when you look at uh categorical errors I think they are the most dangerous error that you can make because it is to fundamentally misunderstand the nature of the thing and so if you're Blockbuster or Kodak and you think the nature of the thing is uh I'm selling you the experience of coming in and selecting a DVD and going home with it uh you're coming in you're buying popcorn Etc et cetera and you don't realize that the actual category of thing is I'm just entertaining you in the way that you want to be entertained or I'm removing friction from the entertainment process so instead of having to go to a movie theater you come here and you can pick whatever movie you don't have to worry about start times Etc et cetera so if they had understood that what their job was was to move remove the friction from the entertainment experience then they would have seen oh Netflix does that even better so there's even less friction you get you know in the beginning for kids that don't know it's like you used to ship the DVD back and forth in the mail but you could go online and say here are the next three or five depending on which thing you signed up for videos that I want as I send them back to you you send me the next one so you can watch whatever you wanted there was no more late fees et cetera et cetera okay so you take Mao Mao organizes everybody's steamrolls is the right word he steamrolls over everybody literally you can't imagine how Sinister and evil this guy was read Mao the untold story it is unimaginable that a human being could do that to other human beings absolutely insane so he galvanizes this group of people and he thinks that basically terror is the organizing principle now he does give them uh ideology to cling to but it's really Terror that works and you see him make these realizations throughout his life whereas the following regimes realize oh actually we can hold people together with ideology and by making them feel better now we're seeing sort of a flirtation with a return to the hammer and people can't let you step too far out of line but to your earlier point I don't think that they will make the category error of thinking oh you can just do the top-down Authority and you don't have to give them a better life because if if they're really understanding oh the nature the essence of running a government is you have to make people's lives better over time now their thesis is as long as you do it at the population level you can Crush some people use that the sort of crushing there to keep people in line but as long as on balance it's better for people and it continues to get better everything's going to be okay so they're focused ruthlessly me using your words ruthless execution so that they're they're really able to make your life better and because they're really able to make people's lives better because they have not misunderstood they have not made a categorical error okay so China gets the category thing right they do well Mao I think misunderstands it the new regimes get it better which is why they've had prosperity in a way that Mao has failed to do Blockbuster makes a category error Netflix does not Netflix ends up taking over okay us U.S is now beginning to break apart and the question becomes are they making a category error or is this just the the reality of the human now to take this idea and look at it through the lens of what's happening right now is people making a categorical error uh I think that it's it suddenly becomes easier to predict what's going on so when I look at when I combine two things the will to power which we talked about earlier where I said my prediction engine starts working better when I realize that people have a Will To Power they're not necessarily trying to be good bad or whatever but they are trying to be in control they want that will to power and then mix that with a category uh error that I think they're making which is that democracy is when a single party who is right has all the control and the category error there for me is that democracy works and creates a thriving society when and only when there is a respect of the tension between right and left and that this is where this is like the the fundamental category error that I think people make certainly in America maybe all across the West that we're seeing play out right now is that there is a right answer and that right answer is compassion and there is a wrong answer and that wrong answer is the right and I'm saying it's pathology on both sides and it is only the tension between the two that works and so people have to mistrust their own emotions because everybody thinks their worldview is right and so the right things are right the left thinks they're right not not disagreeing but let me give like a different lens to the situation one that's that I've thought about a lot actually which is um rebranding versus reinterpretation Okay so basically words like democracy capitalism communism Christianity are so capacious they can contain both X and its opposite for example Christianity um was in the times at the time of the Romans it was like the slave religions the Revolutionary religion that tore down the Roman Empire right and you know sooner a rich man can go through and I have a needle and get to have it then and the first shall be last and last shall be first and then after the Dark Ages and and so on suddenly Christianity was reinterpreted and not suddenly over time he was reinterpreted and fused with like a lot of the Germanic stuff as uh as what Nietzsche would call a master religion so now a Justified hierarchy now you had the oxymoronic concept of a Christian King which is like a left right Fusion right and you had things where you think about Christmas you have um Saint Nicholas Santa Claus and you have the manger you're seeing from Bethlehem if you think about it Santa Claus comes from like these like northern European like these snow myths and so on and Bethlehem is like the Middle East and that's confusion of two events that are like or two cultures that are five thousand miles apart you know right or whatever 3000 miles apart they're just totally different you know Santa Claus and and Bethlehem we think of them as being the same because they're like a fusion of ideologies that you don't usually give too much thought to um it's like it's like Fusion Cuisine or something like that I have a fusion ideology the point is Christianity contained both a revolutionary ideology and a hierarchical one which is just got reinterpreted and that's true of Communism which was you know the Revolutionary ideology of the 1800s and now where's the hammer and sickle flying the number one brand of Communism in the world is the Chinese Communist party you know Marx's You Know communist ideology of Northern Europe where is it most popular it's flying a flag on a warship in the South China Sea okay that's where the heroin sickle is just think about that right that Meme that ideology made its way all the way out there and it got totally inverted from a revolutionary thing into a hierarchical thing right uh think about capitalism like capitalism could be The Agrarian capitalism of the 1800s or the industrial capitalism of the 1900s or the uh you know the information Tech capitalism of today those are very different things even if there's some shared patterns you know um and then finally democracy right um you know democracy can mean like FDR style democracy where essentially you know he ruled for four he ruled till he died right basically another way of thinking about FDR is he was uh the least bad communist or socialist dictator okay and uh to to you know I know that sounds provocative but have you read the book uh three new deals basically three new deals reflection on Roosevelt's America Mussolini's Italy and Hitler's Germany how did he rule until he died he ruled for Fortune until he died isn't that interesting that similar to like Stalin and the other dictators of that period right um he was he was the least bad of them but he you know he turned the government on his opponents he launched audits of them uh he forced their fortunes into trust like he went after Andrew Mellon and Huey Long and so on um he ordered the gold seizures he obviously ordered the Japanese internment people do know about that uh you know before he took power um he had there's a thing the the gay entrapment uh Scandal um where basically um he you know this is a thing before I became a president where uh he had young men go and try to sleep with guys in the Navy to try to find people in the Navy were Gage to get them drummed out of the Navy the this MIT has written about the Sherry Zane has written about this right so he did a lot of crazy stuff right it wasn't he wasn't as bad as Mao in the sense of you know he didn't kill as many people domestically but he did order you know like the Japanese internment firebombing cold seizures he was pretty pretty nasty guy in many ways right so Henry Wallace was FDR's vice president uh and um Henry Wallace was a Soviet sympathizer he actually went and toured magadon which is like a Soviet Gulag and um was like hey this is great it's like the Tennessee Valley authard right and there was a very close race for the vice presidency in 1944 or because people knew that FDR was sick and there's a bunch of ballots and Harry Truman won on the last ballot and FDR just didn't fight it too much or whatever and Truman was just like a cipher but the entire world was extremely lucky that Henry Wallace didn't become president in 1945 because had he become president um he was like a Soviet sympathizer and he might have just handed over the entire I think to the Soviets and we'd all be under the Iron Curtain now do you bring up um FDR in this moment because he's an example of somebody who's reinterpreting uh like all of our Democratic Values but actually twisting them democracy meant FDR democracy man FDR rule to fully died democracy men FDR built a unit party remember that thing where it showed the uh the graph which had everybody voting together in 1950 and then they'd come apart much 2011 right yep so the counter argument to what you're saying is it's not that democracy works when right and left are balanced so actually works when FDR is turned into a a party with no real differences right he squashed all the difference it's like it's like the con it was like the Communist Party of China there's only one party right Republican Democrat or cosmetic-ish differences and then they became well you're saying that's an interpretation of this versus that's right what I would say to that is the reason that you're saying that it's good that the other guy didn't get elected is because it was already a perversion of democracy it was a reinterpretation that man you can people are malleable you can get them to buy just about anything go ahead well that's the thing is basically I mean were there elections there were elections did he happen to win every single one of those lectures he happens to win every single one of those elections right do you have been doing four terms right so it's only people say oh it wasn't a democracy then right people think it's continuously being our democracy I mean you know a similar character you know Lincoln suspended habeas corpus right Woodrow Wilson um you know like a lot of these guys a lot of the presidents were you know did things that were uh you know where they quote democracy um not by not by what most people would normally think today um but but they preserve the brand you know and it's I don't even call it cynical it's it's like sort of Beyonce it's like it's like Christianity as I said you know Christianity just has a long history and sometimes it means X and sometimes it means the opposite of X right and so in many ways today is ultra democracy right it's like real democracy it's not like a single party that has some internal you know disagreements it is oh the the form is becoming the substance the form of Elections is actually becoming the substance of Warring tribes does that make sense you know like it does um and so you know one way you know there's this guy uh who writes gray mirror this guy um Curtis Sherman and he talks about how like Washington and Lincoln and FDR were both all like resets where they just kind of reunified the whole thing after a fragmentation period and we're actually uh you know like um France is on its nth Republic right and in many ways the US is actually there was like the 1776 to 1789 then there's like America 2.0 which is the you know the the Bill of Rights era and to to the Lincoln era there's America like 3.0 and then we're now actually in America 4.0 and we need America 5.0 right 4.0 is like the FDR ERA with 10th Amendment getting repealed and so on repealed was central government just asserting its power over everything I think there's substitutes to this um I think uh what's interesting about this is it's not really specific to the person it was just a global technological Trend at that time that you know people could execute these Roll-Ups uh and the ideologies that worked in the 20th century were communism Fascism and uh fortunately Democratic capitalism which was certainly the least bad of the three but those were three that worked to roll up huge numbers of people into this Mass to this fighting force now today in the internet era I think we're gonna have different ideologies that are optimized for the network as opposed to the state we're already seeing some of them um locism is actually you know people have called book of some similar to Communism but you know focus them if communism starts on the factory floor and there's a strike and it's about Regional wealth wilkism starts on the internet and there's a cancellation and a redistribution of status okay and so it's like a network first ideology because most people don't have an experience many educated people even many working people don't have an experience of going to the factory floor and turning a crank and so on even working people are often like service workers or retail or something like that so the entire experience of being on a factory like an assembly line paradoxically that's that giving people the training to go in physically do something fold into a foreman that actually helped the union organizers organize strikes because people are used to doing mapreduce in the physical world right now today people are not used to doing that but you know what they are used to doing they're used to hitting keys on their phone or their laptop and so any ideology in the west has to start Network first it has to start with the keyboard and the laptop if it can't start with you know in it it has to be digital first because anything that's a 20th century throwback is simply not the experience the ideologies that worked in the training center are not the experienced people say the exception is China that still has huge amounts of factories so they can still do 20th century like things where they have these giant military marches and these giant parades and 20th Century industrialized gear and so on and so forth because a huge much larger percentage of their population as the current experience of living and working in a factory right um that is just not the case in the US and that and the reason I say this is these are like sort of technological societal substructures that underpin What ideologies are ideologies are even feasible okay so my question is when a 20th century machine like China that is still capable of the big marches and all that meets a network state that is more optimized around smaller ideologies not necessarily geographically bound who's going to win and and obviously I'm asking that in the context of we have a potential Collision on the horizon between America and China yeah so I have a different view on what I think is going to happen here and the short version is um and bullish on red America and Great America in the sense of the let's call it the conservatives and the tech Libertarians uh it's not exactly libertarian but it's roughly Tech I'm very bearish on Bloom America and what I actually think is we may see like a financial collapse in blue America that makes it difficult to wage a giant war against China a B is I don't actually even think that would be a competitive fight much less so than people think I think people think of the us as like the overdog versus China but I actually think if it if push came to Chicago in any conventional War China wins and especially in the medium run and the reason being because they just have the manufacturing plan it's like fighting your factory they'll screw you on the screws you know they just out produce it takes years and years and years I mean just like the nuclear subs and the August steel Australia UK US they're supposed to arrive in like 20 30 or 2040 or something like that it takes decades to do things in the US to build things physically and it's not like it just becomes magically faster or more cost effective and cost effect is very important by the way when it comes to military equipment staff 35 it's the Zumwalt the you know the Ford class uh aircraft carrier the um literal combat ship you know like look I'm not a military expert but from everything that I can see there's massive cost and time overruns in military equipment as there are in um in the public sector the 300 million dollar bus lands are you know the same kind of thing in the Pentagon there's a woman recently who's talking to John Stewart you can probably play that clip the deputy defendant secretary is Kathleen Hicks um saying wasn't a big deal the audit yeah the audit right they couldn't couldn't find a few trillion dollars I mean come on right like the thing is that um actually I was able to boil it down to two premises do you believe the US can print infinite money and do you believe the US has an invincible military do you believe a b both or neither okay and it actually turns out to my surprise so first of all uh just my audience alone do you know how many people said uh the US can neither put an infinite money without consequence nor has an invincible military what percentage of my audience do you think said no to both yeah more of them thought that was possible than either of us would have expected less actually 44 in my view 44 of the people who responded to my poll said they think the U.S neither can print in for money nor has a misp military so it means 55 of my audience did you didn't you expect your audience to to put that super high yes I I thought your audience would be way more sophisticated be like 90 are like no way can't do either yes U.S military not Invincible printing money can't do it correct so that means that if 55 of my audience thinks the US can either print in for the money or has Invincible military or both if that's 55 of my audience that's 95 or more of like the right so so what that means is um just to calibrate I recognize what I'm about to say is uh contrarian because it is not what what most people have been raised to believe they've been raised on Transformers and GI Joe and Independence Day right you know whether people think the US military is good or bad they do think of it as Invincible or all-powerful and that is intentional the movies portrayed that way the military collaborates with filmmakers on that to make it look cool both for recruiting purposes and intimidation purposes you know like all kinds of movies you know aliens attack the world and the decision goes to Mr President what should we do you know and you know that wouldn't work if it was the president of Bolivia you know you're not looking into the like that would have to be a plot point in the movie why are we looking to Bolivian president you know by default uh you know people will look to the secret Labs of the USA the secret CIA this even when the US is the bad guy like in The Bourne Supremacy or something they're uh they're the powerful one right that has just started to change with movies like don't look up okay if you compare contagion of 2010 to don't look up you see that movie don't look it up yes it's really worth watching because it is I think it is meant to be like a climate change Parable I took it as a coven Parable but really just a parable and steep capacity and it was an interesting transitional movie because it still portrayed the us as being to Global events in the sense of all the action about the meteors and stuff like that people are looking to the president and so on what to do but unlike contagion or many of the other movies to the silk it portrayed the us as a basically politically conflicted bumbling kind of thing that wasn't able to solve it at the end and the world did end okay very different than Independence Day or or even I mean the movie Contagion in 2010 in retrospect it actually got a lot right you know origin of the virus and so forth uh where it got wrong was that the CDC and the government were competent right and that they were like you know calm well-meaning apolitical civil servants as opposed to basically you know right what what happened and so that was actually the fictional part the fictional part was not the virus it was the competence of the US government the state capacity right so the reason I see all this is to protect the future of the world I actually think you can boil it back to those two premises do you think this can print infant amount without consequence do you think the U.S is Invincible military the reason is fiat currency is backed by women with guns okay Paul Krugman has admitted that and said that it's a lower quote he's like Fiat money is backed by members guns what he means by that is that um you know like uh the backing isn't like a bar of gold the backing is State Force it'll force you to accept the currency it'll you know it'll throw you in jail if you don't and all this type of stuff right but here's the thing um in general more people on the left will say the US can print infant money in general more people on the right will say the US has Invincible military but these are actually equivalent premises you know why because they're both fake well because if fiat currency is backed by them in with guns you can have a mathematical it's like an if and only if kind of thing it's like if you can print infinite money again without consequence you can buy whatever soldiers and guns you need whatever technology you need whatever bombs you need you can just buy infinite money no consequence conversely if you have an invincible military you can force people to accept your terrible currency no matter how devalued it is right so those are an if and only if a implies B and B implies a okay so um so these two things in a sense even if the left and right discreet each other they sort of prop each other up it's like vectors that oppose on this axis but some on this axis you know what I'm saying right so um the uh it's like you know the the the compassionate mother and Stern father visions of the state some in a vision of it as being omnipotent does that make sense okay it's like literally replacing god with gov okay like God replaced with the state God replaced the government and and people talk about this political Theology and so on Carlson has written about this I wrote about this in the network State book um it's it's basically what is the strongest force in the world is it almighty God is it the US military or is it encryption is it God stated or network and from that you drive her up a lot right and so a lot of these people who believe the US can print for money or that has an invincible military are literally people who think of the government is God they don't think it has limits they're secular they don't believe in a supernatural um they also don't believe in encryption and they don't believe in other states right like they are secular nationalists and the most comparable frankly to people in the late Soviet Union who also were secular they didn't have Christianity the network and capitalism you know they didn't didn't have that really they really believed in the state they've been raised in the state even if they were critical of the state they fundamentally thought you know the edits around the Communist system I think everybody has a god-sized hole that they have to fill what form can religion take that is the most useful or at least least damaging I think there's multiple solutions to this and so I don't think there's any one Forum per se you know like for example like um there are being there have been times when Christianity's done you know the Spanish Inquisition and there's times when it's built great Cathedrals and there's times when you know the Islamic world like the abbasids and Nomads have had you know amazing um you know art and and Science and other times when speaking you know less fortunate and you know same with Hinduism and same with every great religion right and so um even communism as as anti-communist as I am um you know as we mentioned before the word contained both X and it's opposite right um and today China's communist but it's producing a lot and a lot of people there who you know there's a lot of people that actually like it right you know I I maybe they don't have options but but um it's producing a lot and so so the question of you know religion here um it's it's basically an organizing principle and uh there's just many different possible it's sort of like saying and this is a trivial sounding example but um are you using uh the Google stack or the Microsoft stack for your company right and you can kind of be successful both and you can fail with both um and a lot of it is in the leadership and how it kind of uses that software that's not to say that every software if you had to predict then why one will go pathological at any one time is is it predictable based on uh other cultural forces or just not predictable at all I'm not saying religions are infinitely plastic you know but they're pretty plastic you can you can make them say as I said with X and the opposite of X and Y and Z I I do think that when a group is under threat especially if it's under threat economically or something like that it starts asserting okay we're poor but we're better you know like uh for example in the Soviet Union like oh yeah well may the capitalists have more money but we're caught we're purely communist and we're sharing and they're exploiting each other or whatever right and um you know you'd see in you know like um various places people would say well oh you know the westerners they may be wealthy but they lack Spirit you know like in India you know we we're you know we're more spiritual or that'd be a defense I would hear at times in the past and nowadays though you hear that kind of cope coming from the West which is sure everybody else is economically out executing Us in Asia or whatever but uh you know China's doing that because there are Communist dictatorship and you know we are we might be poor or we build slurpose because we're a democracy we're better morally right and as I mentioned like when the US was a democracy ostensibly at least in the mid-century it could build and when China was even more genocidally you know much more genocide that the Communists in the 70s it couldn't right so that Sonic's actually the active ingredient there so it's not a moral you know Salve or at least it's not in an obvious way if you have all four quadrants democracy that can build democracy that can't build communism that can't build communism that can then it doesn't seem like that's the active ingredient per se you know so I don't know I'd say it's in a sense um I mean it's kind of it's it's it's just what the leadership is that can take that ideology and shape it into something you know it has to have I if your ideology was Flat Earth ideology you probably couldn't shape it into something but the great religions have endured over a long period of time because they do have some way of organizing people right they do work they like they install in human brains and they have the right Hooks and so on to build communities and you know enforce laws and so and so forth and um you know all the all the groups that you read about in the Bible that got killed didn't have good enough operating systems to make it to the present day so basically just like you can have atheist monotheist polytheists with with God right like no Gods one God many gods right you know so like monotheist is like the abrahamic religions polytheists like Hinduism you could have atheist monotheist polytheists with States right the a status is like an anarchist whether they're a left-handerchist or an anarcho capitalist right um the uh monostatist is like you know America first or you know Chinese Nationalist and then policy this is like a digital Nomad a remote worker and so for example there's a difference between the person who believes in no States and the person who believes in many states um just like there's a difference in atheists and the polytheist right Hindu doesn't believe in no gods they believe in many gods even if they're Often equated by the monotheist right it's like somebody who jumps between countries and is remote working or digital Nomad is not against a state to maintain order they just want a choice of States they're very different than an anarchist does that make sense if they're often equated with that okay and then the third category in the network that is in some sense the newest in some sense the oldest but you know by the network today it's very literal like the internet but in the past you can think of this capitalism or peer-to-peer relationships and so on in fact this guy Jacob Burkhart who many many years ago way before the internet was invented and so on said you know the three great force is funny I found this just an old book and I was like amazed at it and I tweeted it's like the three great forces are um the state the church and then he called it culture but by culture he was talking about all peer-to-peer interactions and he essentially said it's everything that's not you know the state or the church or whatever right and so he was talking about God's State Network even then which is amazing someone else coming to a similar kind of thing okay this book I think is force and Freedom by Burkhardt anyway the network you could be an atheist uh monotheist and polytheist with respect to network so the for example the no coiner is somebody who doesn't believe in Bitcoin at all they're like an acorner right then a monocoiner is like a Bitcoin monotheist right a maximalist or an ethereum maximalist um and uh a poly coin or something holds multiple coins and of course this can apply to social networks as well but I think what's going to happen we're still in the transitional stage but social networks and cryptocurrencies and messaging apps and so it all become the same thing like every social network has a built-in cryptocurrency and it had like of a certain scale okay we're still like in the same sense that you might say we're early in the internet but these things are relatively young you know and um monetizing social networks becomes much easier with cryptocurrencies and and so on so I think that's always starting to happen with like for example forecasters native currencies like ethereum and um uh Noster is like you know it's got a Bitcoin community and Elon may add Doge or something like that to Twitter I have no information about that I think so um why do why does that end up happening what is what is the nature of the network state that makes that a function well this is not even the network state yet but it's just uh you know social networks will allow for communication they should allow for transaction right you can you can very complicated Communications on social networks if you think about it you can do a message to I can send a message to 900 000 people like this okay you know how hard it is to deliver like a piece of mail to 900 000 people it's like really expensive and time consuming and so on right if you go back I mean every individual jump um this is funny you know this is actually reconciling the Peter Thiel and Evan Will Williams School of technological innovation teal is like zero to one like have a huge jump right Evan Williams says everything is incremental Innovation just take what it is and make it faster better right the extra she reconcile in the following way where you go from physical mail to email in the late 80s early 90s and you still have to buy it you have to buy a big bulky computer somebody else has to have an internet connection with a modem they have to also have a bulky computer that's like thousands of dollars of setup and training cost versus just send a envelope right but you do get instant right you do get same day you know there and back right then you go from physical mail to email to uh group email with reply all and then so-called mime attachment so you now have attachments you can have photos and stuff and then you go to like a Facebook thread and each step is like you know incremental right it's like obviously continues with the previous one like a reply all with attachments is like a email group which is similar to a Facebook thread right where right but if you think about implementing a Facebook thread with physical mail what would you do you'd post a postcard of like some I don't know like um something we posted a a photo of uh some party or something like that or a wedding or whatever and they're going to send that to 900 people they're gonna print out that postcard send 900 people and all those people are going to make a remark on it LOL or great and they're going to send it to the other 900 people you know if you just think about how many broadcast messages that is right a Facebook thread that has that goes to 900 people and as 10 people comment has like 9 000 messages being sent back and forth I mean that would cost enormous amount of money in terms of postcards right so like what social networks have done in terms of communication relative to the world we grew up in the 80s is absolutely incalculable you know or it is not incal it's calculable but it's massive right like a Communications that would have cost you your entire year salary is completely free right with me so far so that is what's happening with cryptocurrency it's making I mean every form of cat everything you can think about with capital formation you could spool up an launching entity you could Finance it it could acquire something it could sell something it could have ai operated it could acquire another thing it could all be bought all capitalism becomes digital and Unchained like that's obviously the way things go because we're still in this transitional error where you have paper definitions of entities right and yet everything else about you know the business world is online but you have these paper documents that you know how do you know for example can you just run a script over your company to make sure you're in compliance with every contract does every contract have a machine readable thing which says how to pay this person and who pays it and who's the signatory and what is the constraints you need to be in like when we're thinking about a company is like a contract execution engine it's bound by a bunch of contracts in to receive why and so on it's like a lawyers way of thinking about if you've ever done a data room for a company's acquisition or or even a VC investment you have to compile all these contracts that bind the company this Employment contract that contract for delivery of this this debt contract and so on and so forth all that should and will be programmable and all that will happen on in integrated in my view into either social media or chat or some combination where you have a group of people they're not just chatting with each other you can not just do a group chat you can actually have a group not just a crowdfunding but like an economic vehicle like why can't you just instantly start a company with 10 other people and just start doing things and selling things right it's because the pain to go and set up a company and tear it down just like it used to be a pain to go and get a radio license but now I can just jump on a podcast right and um so so that's that's why uh like it's obvious to me that like on chain stuff that crypto is is going to be a big thing uh is a big thing but it's it's like like clearly obvious but um not everybody is there yet well the big question that I have is as we really begin to put a fine point on exactly what the phenomenon is that is the network state so you we were talking about the different forms that God takes and one of the forms is is crypto the network state so what is that organizing principle there's kind of two different things which are what's the scenario for the current world that's why I was on the unprintable money and so and so forth and then what is what I think is a piece of the next world not the only piece the starting currency is can we start new countries that's the constant Network State I wrote a book at the network c.com it's V1 it'll be updated um but you can go and read it there and I think it's decent the premises that start new countries is possible preferable and profitable so let's first talk about the possible part our new country's even possible so you know we know that we've started new companies like Google out of a garage uh and new communities like Facebook out of a dorm room and your currencies like Bitcoin off of white paper so could we start new countries right and as crazy as that sounds let me first give you a visual of what this might look like okay so this is a visual of a network State it's something which it's group people that has a population comparable to that of a legacy nation state but has an annual income and physical footprint also comparable to one the main difference is that it's physically distributed rather than concentrated in one place so might have the total land area of Estonia collectively owned by the people but just spread all over the world in ranches and subdivisions and towns and cul-de-sacs like imagine a Chinatown was actually collectively owned by the people and part of a Global Network of them okay and just to see how a network State could build out do you see this GIF on screen all right so I'm just going to play this this starts from one person in Tokyo okay if I play this you go from one person to Tokyo they're just making you know this is how a Founder could go from one to a million right one then 17 people 172. 1729 and 170 000 and so on this is how the network State builds it out okay and you essentially recruit people from around the world who have this Collective hallucination and they crowdfund larger and larger things until you start a new country as crazy as that is right yeah how would you actually go about doing that let me give a little bit more meat on the bone as you put it basically most countries are actually smaller countries most of the United Nations has less than 10 million people there's only 14 countries of more than 100 million people okay and not obviously we've actually seen a lot of new countries since the U.N never mind thinking about how 1950 was Peak centralization right the unusual thing about our period in my view is so if you look because the breakdown of the British Empire and the French Empire and then over here the Soviet Empire all these new countries arose and for the last 30 years we've been in a very unusual time of a unipolar world right with this hyper power and when that breaks down uh you know the number of new country type entities will go absolutely vertical just like you know this curve kind of looks like the number of new currencies as well as you go from like 50 something UN member countries to like 190 today it's almost like a 4X by the way you don't think of it as being we have 4X as many countries or UN members I mean that's a precise definition at least for today you don't think we have 4X as many UN members as we did in 1945. point is as this sort of it's like Adam's decomposing as these things fly into different directions now um you know the number of countries has been flat for a while but then so is it to Creation new currencies and then it spiked right so U.N membership has grown over time so if you forexed these things right um could we do more right so first premise then again is most countries are small countries second is lots of new countries have been founded okay actually we're gained un membership the third premise is that cryptocurrencies rank with Fiat currencies so here is um basically the you know it's a funny site called Fiat Market cap.com okay like coin market cap and the thing is that at the time of this you know screenshot or whatever Bitcoin was the 27th currency globally by market cap so question is could crypto countries rank with Fiat countries and how would that look well before we have a table of currencies now we would take the Wikipedia you know the table of countries and right over here something that has one million 729 314 people would Nestle right between Bahrain and Latvia okay and whereas this would be in Europe and this would be in Asia this is global and decentralized it breaks a fundamental assumption which says it has to be in one place that's what the internet allows allows us to this will this is one of several I think critical insights or critical insights let's say if you believe this it's an important insight the internet allows us to network enclaves so lots of fragmented pieces of territory and fragmented groups of people are much more useful than they were before so it's an opposite direction of the whole roll-up era of the nation state you have the fragmentation era and the network State rolls them up in a different way online so they're unified in the cloud but they're separated on the land right and not completely separated but they're in clusters and the thing is that if you look at most countries are not growing that much in population but the network state would or a network State because this is just an example of one would grow by immigration and reproduction and so if you want to solve the birth crisis or what have you you can't really do it necessarily with economic incentives like Singapore other places have tried that I think you kind of need to give type A personalities a Leaderboard on which they want to win okay and so you knock out you have 10 kids boom you just contributed like you can actually have personal contributions to this leaderboard over here and you gain status in society for doing that and that is actually the kind of thing if you want to quote fixed birth rates I think it's the kind of thing that would work right um so so crypto countries remain with Fiat countries and this is where a network sheet would would rank and of course you could have multiple of them all right and so one key concept here and this is the one that's the biggest ticking point for some people everybody's got a difference you compartment they're like why do you think you could become un recognized well the answer is sufficient traction results in diplomatic recognition how do we know that well tubaloo uh has done deals with GoDaddy okay so it's like a sovereign country has done you know basically the dot TV extension if you've ever seen like twitch.tv or something that's that's toovalu and GoDaddy have a deal Nevada the state is going to deal with Tesla for the geiger Factory El Salvador accepts Bitcoin as its National currency there's many more examples of this Colombia deal for the dot Co domain name um Virginia with Amazon for hq2 the mayors of Miami and New York except Bitcoin Wyoming and Tennessee have Dow laws so they're interfacing with ethereum so if you have companies and um uh currencies interfacing with cities and countries um the land is already negotiating with the cloud right that for for a sufficient scale of money in a sufficient you know let's say oomph and social impact um already today lots of politicians love to have a photo op with a prominent entrepreneur who has a large online to follow that's a huge thing today right especially if they're trying to recruit Tech or Founders to their region the endorsement of that founder is like a huge thing they bring Economic Development the only people who don't get this are in DC because they've taken it for granted forever right exit is the leverage where it's like oh you can't take those Founders entrepreneurs for granted you have to attract business to your area right only if you've inherited it can you take it for granted okay so sufficient traction equals diplomatic recognition so now number two starting new country says preferable right so why are new countries profitable it's about the push and a pull so first is that's like you know Sri Lanka and Venezuela and Panama there's a lot of instability in the world right now thanks to inflation thanks to you know like things like Ukraine and whatnot so um there's all these sovereign debt crises that are happening so powerless people now have an alternative to fail States okay so that's one side of it the other side is ambitious people now have an alternative in the form of Frontier societies okay so since humans expanded Out of Africa since people came to the US for the Statue of Liberty for the moon landing and so on you know they can come from our flooding but this is you know the the moon landing there's a there's something within the human spirit that it's pioneering that wants to push Frontiers right and that's actually present in every culture you know China had zhenghi even if you know they they pulled that back right obviously the Native Americans you know their ancestors made it across the Bering Strait and um you know Indians have their immigrant culture like everybody many cultures have something in them that's like okay we drive to push the frontier whether it's science or technology or the physical world right and what's funny is this Coalition of the powerless and the power user is actually the same as the crypto coalition crypto is not for buying coffee that's actually the middle class Normie use case but what crypto is for is for the powerless people who are just trying to hang on to a bank account and the power user is pushing the limits of what a bank account even is and uh and that's the same as what the network CS4 if you've got a decent upper middle class or middle class existence in a normal first world country you may not care but if your country is breaking down or you want to um break into the future and have the self-driving car city or the um lunchevity land where people are actually focused on you know transhumanism or human self-improvement you need to be able to change regulations the communities that you start here uh even if they look like this on the map they don't all have to try to go for diplomatic recognition right so they can have different levels of quote sovereignty or what have you the point is however that you can Network communities together all around the world you can find your people and live with them in crowdfund building skip okay so that's why Network states are possible here's why they're preferable finally profitable so last but not least like this is a fun graph which is our annual revenue per user of nation state social networks and network States so I've you know just to kind of um it's a fun equivalence but consider your tax revenue as being the revenue of a nation state from a person and your normal you know Revenue like ad revenue is the social network Revenue social networks are known to have the scale of hundreds of millions or even billions of users right this is meta WeChat Tick Tock LinkedIn Twitter Etc hundreds of millions of billions of users but their monetization per user is only in like the tens of dollars okay but if you make twenty dollars per person and you have four billion people that's 80 billion dollars a year it's amazing amount of money Jesus okay conversely the nation states um many of them are small they have much fewer people like one to five million people that's like Estonia Singapore Israel et cetera but the monetization per person is in the tens of thousands of dollars per okay then up over here here's the US and here's China and that's why they are the quote to superpowers because they have the highest combination of scale and monetization per person right they have enormous scale and modernization right and it's a log scale on this annexes okay a successful Network State though like a public company would be around here so they'd be lucrative enough crucially they could attract Venture Capital they could track financing and that's important because something like this the more people you can align behind something the more feasible of accounts so this shows I think because profitable becomes more economically feasible you're not going you know pushing down in a sense it's like a physical social network now I want to battle to the death on how real uh I think this is okay so I love this concept I think it's really interesting but every time I think about this my brain breaks a little because I have some core fundamental things that seem like they are Show Stoppers but I know you've thought a lot more about this than I have okay so uh the way that I see this is that the nation the the actual Nations that these reside within will fight this with everything they have and so I will give people exhibit a um so exhibit a is the U.S we we have become regulatory uh just oppressive when it comes to crypto and web3 and so when I see that posturing and I know that that creates opportunities it creates opportunities at the state level it creates opportunities at the national level but because you're going to have the the inter-jurisdictional Warfare even a country that opens itself up and is like okay this is going to be our differentiator how are they going to make their money for letting you be the nation-state so it's basically worst case you have a country that clamps down so the U.S right now is making no moves to let this happen they're they're taking the exact opposite tact in fact I've heard you say that the US is mimicking China and how they're locking down and everything or cracking down and everything us is not a it's not United anymore it's not unitary entity DC and and blue America is hostile to new stuff absolutely but red and purple America may not be number one number two is um the design of the network state is set up to be resistant to the nation state in the same way that Bitcoin is it's physically decentralized right so if you've got them let's have this debate so I don't I don't think Bitcoin is very resistant um disabuse me of this if you have I get that you can make it hard for me I get that you make it more expensive we talked about that earlier but dude I only have to destroy the lives of so many people before people either flee at which point I clamp down on you anyway and I'm going to Capital control the out of you and so you try to leave and I'm like yeah you're gonna pay what was it a hundred months of salary or whatever countries have done uh yeah right right like they're they are going to find ways to stop you from being Capital flight uh so this is going to be a huge fight I'm I'm not disagreeing with that um but I don't think that Legacy governments are going to win it and uh or rather they're not going to win it to a hundred percent okay okay and I'll give several Arguments for this the first is that in the centralizing arc upward you had you know the Brain Trust you ever heard of that FDR had all these smart guys you know there there was there was a period from the early 1930s to 1969 where you had Hoover Dam Manhattan Project Apollo were all the smart guys could no longer this is crucial they could no longer go and found they couldn't be Rockefeller and Carnegie and and so and so forth so they joined the government that's why you had all this Tech talent in the government that's an unusual thing all these you know genius scientists and so on and engineers after that period IQ and before that period the IQ drained out of the federal government like the federal government did not get the best people arguably in the exchange they were they were all building railroads and you know then later Automobiles and Aviation the early 20th century right um it was it was something which was in a bearing time and now today a lot of the IQ a lot of the intelligence has gone out of especially the U.S federal government okay if you have a perfect you know math sat and um you know you're really good with numbers but you can make a lot more money in being an AI engineer or an AI founder than you can as like some bureaucrat regulating it right um and then you know like and you have potentially more power as well in the sense of you can build entire thing from scratch you have more creative control right this is why you're seeing lots of professors leaving Stanford things to go and start companies that's why you're seeing journalists go to sub stack this is why you're seeing um you know people leave Wall Street to go to fintech or crypto like the East Coast establishment just doesn't have the pull that the frontier does right that's it so it's a lot of the Charisma and the IQ has been just drained out of the centralized state in the opposite of what the 20th century was okay so that alone by the way just you know saying Personnel is policy number two is um Foreign Affairs you know has admitted it's kind of lagging in here but they've admitted the world is now multiple which means that blue America has more power over fewer people you're they're seeing red America and purple America Breakaway at home you have States it's not just Sanctuary cities but it's like gun laws drug laws abortion laws education laws crypto laws all kinds of things make America States again like DeSantis has his own military the Florida state guard you know that the degree to which states are breaking away from the feds and simply just disobeying them and just doing what they want um is more similar to the pre-1933 and arguably the pre-1861 era and there's a huge tension between states and the FEDS there within the us then outside the U.S the Foreign Affairs point about the world being multi-polar as we talked about earlier you know Brazil and France and Saudi and Iran and China it's not just China Russia Iran anymore by the way on their own it's all these countries in the middle who are breaking away uh you know Fiona Hill who's this um National Security person actually admitted this in the Leonard Mary lecture that she gave like a few weeks ago um I'll just quote this one second um as you look that up one thing to have in the back of your mind this feels to me like it only works if there is catastrophic um fragmentation like even the states breaking back apart I doubt is going to be enough it feels like did you have you read the book infomocracy I've heard of it you remind me again oh my God this is like I'm surprised you didn't write it so this is a Sci-Fi book about the network State come to life and so like every block the rules change and you just get an update to your phone that's like okay you've entered this Zone and here are the rules you might want to know about and basically everybody gets to vote with their feet constantly and you're moving from one jurisdiction to another and if you like that jurisdiction you move in you stay and if you don't you leave and so people are constantly vying to get people to come to them and the the conceit of the book is basically that we got to that point but that that to me is like the miracle the miracle is that the states will let this go to that point the one thing I'll say is the reason that this idea is so interesting to me and the reason that I am so fascinated by how your mind works is you're the only one that goes yeah we probably are going to fall apart oh and by the way don't worry there's this other thing I think if there wasn't uh like if we didn't and begin the the first several hours of this conversation describing how we're standing at the precipice and we're about to fall off uh I I wouldn't buy into this idea at all I'd be like nice idea but it's geographically bound ultimately and it's never going to work but I do think that as El Salvador tries to use like oh my God like our currency is a mess we have to use the some of these ideas cryptography specifically in order to restabilize maybe Argentina starts to do the same thing maybe other countries are like hey wait a second this is actually pretty interesting if the U.S goes through a tremendous moment of Crisis which for reasons we have talked about I think borders on inevitable if I am right that you cannot just print infinite money but they're going to try and you're going to have a problem you you're at least I think in a break back into States that's my sort of thesis on that is that the state becomes the more dominant relationship between the federal government and the states yeah like like the I don't know you might call it provinces or something like a state state is unfortunately in the U.S means both Kentucky but it also means a a sovereign government without the disillusionment of the the um governmental entities that we have now you will just get a bizarre warring faction so I'm going to be in my network state but I'm only going to sort of be in my Network's take I'm still going to be beholden to some government even if it's a friendly government like Texas or Florida they still want theirs like they have a business model their business model is extracted from my taxes they're certainly not going to let go of that on some level they're going to get theirs and so now I'm I'm sort of paying Guild dues I guess to my thing but it's like if they can't give me more then I'm in trouble and I believe in your idea of the frontier but like I need to carve space away for the frontier to actually carry the benefits of an Asheville Frontier there's an aspect certainly of the current Financial system which is Wiley Coyote okay but my mental model is the transition that you're talking about or that we're talking about the fragment education is already happening in a huge way and the reason let me give you some examples like on this guy I'm sure I mispronounced his name is French guy gills babine he talks about transfer of sovereignty think about it postal mail has been replaced by email and taxi medallions transfer sovereignty to Uber and Lyft they're actually the taxi regulators and NASA has been replaced by SpaceX and on and on and on you go to functions of the centralized state that are being replaced by the decentralized network essentially by Tech Founders and you know you have things and I mentioned this like a few years just go pronounce even more explicit like a few years ago like David Cameron who was the head of uh you know 60 million something social network called the UK it's a joke but it's funny um had an audience with Zuckerberg who uh you know runs a 50x larger social network 3 billion people right and um and it was like Zuck was like everyone could say endorsing Cameron but simply appearing with him it actually gave Cameron and Zuck is able to communicate with more people on a daily basis than the president the prime minister of the United Kingdom or the or frankly any head of state right if Zuck wanted to buy a lot massive and if you think about it today Elon musk's endorsement by simply appearing alongside somebody is quite important for a DeSantis or a RFK junior or what have you a long run so he's the lord of the cloud as opposed to Lord of the land right and um it's clearly very politically important they that's a very important constituency Twitter may be the most important Battlefield in politics right now right so and that is run by entrepreneurs right um so in many ways like the state has already given up a lot of power to the network arguably you can say I mean there's different moments you could put it at but in you know people you you you stay or still say are the most powerful man in the world like about the US president you know they say that right um after you know Trump was de-platformed in early 2021 from Twitter Trump wasn't even the most powerful man in his own country astonishing yeah and that is a I mean because the CEOs of uh Google and Twitter and Facebook and so on and so forth as a Consortium plus others in the in the government and media basically made a decision that you know no Moss right and they apply for not just Trump but all the supporters okay that is one of several ways in which network is more powerful than state in some ways not every way but enough ways that's why the network state it works it's a phrase that works on several different levels um it identifies leviathans identifies a unifying thing that combines in San Francisco State identifies conflicts between them it's just like a pair of words that you can unpack in a lot of different and useful ways the point is though that basically once you realize network is already more powerful in the state in some ways um you know as I mentioned email I mentioned the tech Founders cryptocurrencies have more scale I mean Bitcoin ethereum are bigger than most national currencies um you know social networks are bigger in scaled in most countries uh Tech Founders are wealthier than most politicians and so on et cetera et cetera like there's already being a significant transfer of sovereignty not everywhere like China is actually um China has engineers in the federal government they're a federal government right or their national government and I think by the way that is like the key boundary line essentially your head of state needs to have the skills of a tech CEO a tech founder or a venture capitalist or will eventually lose power to someone with such skills won't they also lose power to somebody with guns like at some point because like right now Tesla's backed by men with guns right all of this ultimately is still nested within a government so when I think about the network State I get the the people that are geographically next to each other if somebody comes and puts them under attack physically they can defend each other but if you've got a guy that's part of I mean let's just take Mega the mega Network State a very unpopular Network State and so if you've got one guy that's isolated and he's isolated in Minneapolis like bro is in trouble so one of the thought exercises I was running as you were talking is okay if if the USSR collapsed now and we have all of these tools would network States arise in their stead and I thought what they're going to become is it's going to be protectorates so it's going to be like Mafia rule you're going to get groups of people and some of them I'm sure will be honorable et cetera et cetera but it will be it will stay largely geographically bound because you're going to need people to protect you and so I think it would add an interesting layer and that you could communicate what you stand for and all of that in a way that would be easier you'd recruiting people would be easier but at the end of the day if you're the satellite guy of an unpopular group in your physical area and there is a breakdown of rule of traditional law meaning people with guns your toast like they're going to come for you and batter you and so they're just gonna you're gonna reconsolidate geographically and once they have to reconsolidate reconsolidate geographically I'm like now the the traditional state has a way to fight back because you you can only sort of vote with your feet because you still have to Cluster and say a few things first is if the traditional State breaks up it's actually pretty hard to organize violence you know and so if it breaks up those marauding gangs or whatever are are um I mean there's a lot of intermediate between where the US was and where it is and like Brazil and then Venezuela and then like Somalia right like there's there's ton of intermediates on that continuum and um several points here right the first is um that you don't have to disclose you know like your membership in this community um for example when you walk down the street uh yeah some buildings have logos on them but you know who's living in what place do you have x-ray glasses like your augmented reality glasses don't necessarily give you information on who's there right people could be Christian they could be Mormon whatever right all the type of stuff so number one is these communities don't need to be perceptible or visible to everybody not everybody needs to be able to see the map or the full map maybe you need to hold an nft to see some of it maybe in some jurisdictions where one node of the network is persecuted it's invisible okay so invisibility is a big part of security okay like stealth just like a stealth bomber except it's uh still don't get involved that's it B is that um a big part of the physical security problem now especially in the US is because we're in this weird we'll see how long it lasts but this anarcho-tyrannical state where uh the state won't defend you but also won't let you defend yourself for example they're like throw somebody in jail for defending themselves right or you know you fire somebody for her I mean this is there's so many examples of this now but it's like the state is basically on the side of the criminals right de facto where uh you know this guy is in your case where this guy shot a robber but then he got charged with murder or something like that right that's that's like non-non um it's like fairly frequent and um that's an unusual State of Affairs which may not be able to last that long because people still need to respect and comply with the state for it to be able to go and throw somebody in jail and have that stick for people to kind of not shelter that person and and whatnot and um the uh that combination of Anarchy and tyranny you know San Francisco is like a perfect example of this where the working class Uber driver um you know they they're subject to tyranny and sense so they have this super expensive parking ticket for being on the side of the road for a second that just destroys their entire day's income but a crazy guy can smash the window and nothing happens to them right so that's that's a combination of the Anarchy and the Tyranny right and um this is uh this is something which I don't think we'll be able to be sustained indefinitely we'll see okay um the point being that if it flips either way and you have either pure Anarchy or you have like an actual civilized state in a state of pure Anarchy a rough order is just quickly restored like that that group you know like that marauding group gets beaten by a better group right and I know that sounds very Mad Max and whatever you know in the fall of the Soviet Union there were Oregon there was organized crime there were gangs and so on there were civil conflicts that may be the best model for what's happening but it wasn't everywhere in the world it was in the former Soviet Union right it was Focus there right so closer you are in some ways potentially to Blue America the worse off you are data by the way in my view is maybe the most surprising part of this whole thing it may be something like covid where you know early code most people were totally apathetic about it didn't wasn't existing and some people are like oh wow this could be really bad but the least obvious conclusion of all was this this will infect 700 million people kill seven million people including a million Americans dead from covet at least all the official numbers and then two years later people like yeah I wasn't that big a deal we lived right that to me is the most surprising thing of all that the world is essentially already largely decoupled from the US you saw that graph where all these countries are trading with China right and lots of world has already decoupled in a big way Russia was able to decouple from the US in the middle of a war and they're basically okay right there's just that we people taught their financial system would collapse they dropped the whole account of the us being the indispensable country is no longer true that's a non-obvious but it's a really important Point here's a let me show you two things this is why this seemingly dry International Affair stuff really matters like this thing see this thing where it says uh the global distribution of power it's it's like a weirdly phrased question but you see the thing on screen right like basically what they're asking this is foreign affairs which is like you know on this particular topic they'll be the absolute last to acknowledge it they're like the official you know publication the state department and so they're asking the global distribution of power today is closer to being unipolar than this being bipolar multiple so if you really agree with xenopolar you're here and if you really think it's uh bipolar or multipolar you're here right um that say you disagree that it's unipolar so you're over here okay so even the people that Foreign Affairs polls it might be 60 or 70 30. they're saying it's multipolar which means the US is no longer the DC is no longer in control of Affairs so lots of mental models are built on the idea that they've got an organized government they've got a powerful military they've got a well-respected currency they've got diplomatic oomph and if you start substituting the the government of don't look up in your head that's going to be closer I think to reality here is this lecture Leonard Mary lectured by Fiona Hill she's like a you know russiagate kind of person you know like very much a you know very very much like a state department official voice and Glenn Greenwald and I had the same reaction when we saw this uh this talk she basically said um Ukraine you know that that the US is kind of lost in narrative on it uh this has not become a proxy war between the us against Russia the war is the reverse right and basically she said the war in Ukraine's perhaps the event that makes the passing of pax Americana apparent to everyone right because for example do you know what percentage of the world actually sanctioned Russia I don't even have a guess it's 15 85 in the world did not sanction Russia wow okay that's that's why like wow okay wow opposite of the 1930s in your 1930s New York Times partnered with stalinist Ukraine and was he able to uh in 1930s the New York Times partnered with stalinist Russia and was able to effectively choke out Ukraine right like they they helped cause the Ukrainian fam and Durante wrote all those fake articles Jesus that that whole thing is crazy have you read the book The Red famine yes and also you know this I highly highly highly recommend if you like the thing is the New York Times will tell you about everybody else's crimes but their own okay and so get this book the great lady winked okay how and it goes through how um everything from you know the Ukrainian famine the Vietnam War uh uh you know like Cuban Revolution um you know basically every just like you know talking about how the tech Founders are now sort of endorsing politicians right and helping them level up right you know like with with Cameron or Elon the opposite happened in the 20th century like almost every communist dictator had a journalist backing them up for example uh Lennon had John Reed who wrote 10 days that shook the world Stalin had Walter Durante um Mao had the sky Edgar snow who wrote like red star rising over China uh Ho Chi Minh had David halberstam the New York Times who wrote These fake stories about uh Buddhists you know in in being persecuted in South Vietnam they're later admitted to be fake it was planted by like a North Vietnamese spy um you had guys like Owen Lattimore that you know assisted the Communists you had um Herbert Matthews again another New York Times who wrote this hydrographical article on Castro that helped him recruit for the Cuban Revolution and made him seem to be like ideologically mysterious when he was just a communist and on and on and on right like basically whether it's Lenin Stalin Mao Castro uh Ho Chi Minh there was a journalist there usually a western journalist backing them and writing propaganda for them and getting them distribution and influence many of the individual ukrainians and Russians are victims of this right but the New York Times was trying to team the Ukraine to sanction Russia but this time it didn't work so it's like history is running in Reverse with the opposite outcome this time right 85 of the world did not go along with the sanctions because of social media because of other things people had a contrary View and for various reasons other countries didn't you know they were neutral or whatever on on Russia you know versus Nato right at least that's how they saw it to be clear by the way one thing I just want to say about this is I you know like I know lots of Eastern Europeans lots of estonians lots of you know folks in the baltics many of those people don't want to be forcibly reintegrated to the Russian Empire like pune's Invasion killed tons of innocent people um you know even if like you know he thinks oh NATO had its guns there and so on there are a lot of other ways a lot of other things that could have been done other than this and so I'm very sympathetic to lots of folks in Poland or Estonia or Ukraine that don't want to be forcibly regulated to Russia after they just got their independence right so I get all of that um Fiona Hill is talking about is there's you know there's there's the Russian perspective the Ukrainian perspective there's the Eastern European protective there's the American perspective but there's also the Chinese perspective which is um you know which is one thing there's an Indian perspective which is why is India you know being asked to bankrupt itself for some European War we're just going to buy oil from wherever but you know we'll remain neutral there's the African perspective everybody's got a perspective on this I think the assumption that you may have of in a background way right of like a competent state that can organize stuff and that'll go after you and so and so forth like China has that you know for sure China is very very organ they're like lawful evil you know what I mean in a sense I mean they're not they're not I mean lots of Chinese people are good people and so on I'm not saying all and of course right but let's say if the Communist party wants to get you they're very very organized right whereas in in you know the US blue America you know the books are like chaotic evil it's BLM riots it's um setting things on fire it's um it's like cancellation it's disorganized it's chaotic it's sometimes effective but it's also got a very short attention span and so it'll surge up and it'll go away like an animal like you know looking and then it'll you know if if you're invisible it can be away from it right um and the advantage of I mean the disadvention of chaoticable is this very unpredictable in a certain way you know it's like surge or whatever advantages it doesn't have like a planning Horizon and it's in a sense less dangerous than lawfully the Lost level I think is um uh you know it's it's more concerning because it's more organized right most people as I said even only 45 of my audience believes that this can't print infinite money and doesn't have an invincible military and those are equivalent like Fiat currencies back in the middle of guns if neither of those things is true if the US can print money and if it doesn't have a mental military which and I think I think uh for the reasons I mentioned you know all the stuff on the fed and the treasury and credit card uh crisis and student loan all those things that we've talked about right like how bonds have been devalued that underpins can't print infinite money it's already an inflationary time they can't print on top of printing it'll just go out of control and why don't they have an invincible military because China has this manufacturing Goliath right and the US is terrible at building physical things it's all those it's not just the public works like La sombre the bus shade in LA or the you know the bathroom in San Francisco that took 20 years or the 300 million dollar bus lane but it's also there's a wallet in the F you know 35 and the you know aircraft carriers and the Ford class aircraft carrier and the in the literal combat chip and all these other things military has built so so those are the reasons of course these are unobservables maybe I'm completely wrong and and you know the the state is really good at kicking the can forever right so just decades the thing keeps grinding on but I have a kind of a feeling that even as the ability to print and the economic sphere of the US is declining they're pushing it harder and even as the US is becoming militarily weaker and more disorganized and less competent they're pushing it harder too apology you know why you're so interesting so Ray dalio is he's mapping out the six phases and you feel like when he's talking you're at a thirty thousandth of you it's very useful in terms of um how to organize your thoughts where you pick up the mantle is I'm zooming in on the territory and now I'm seeing the intricacies of how everything falls apart I'm able to start formulating a hypothesis on how this starts to build moving forward and because you're so tech savvy it really feels like you have the closest ability to predict the big arcs you've been very honest that of course you could be wrong and who knows sort of how this all goes and it's very complicated but you have the clearest vision for how the pieces get put together in a world where we have cryptocurrency we have cryptography we have the network effects of the internet and all that it's utterly mind-blowing I I can't believe that we've gotten this far I've so many other questions that um I could ask it's absolute bananas where can people keep up with you balajias.com maybe you can put that on screen I don't actually need subscription Revenue but what I do want to do is engage people on some of these things because unlike a lot of people I don't think oh collapse comes and then magically the next thing appears you need to start building the next thing before the collapse awesome brother the way your mind works is insane thank you for sharing it with us today it was uh amazing everybody at home 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 taking over check out this episode with Rao Paul I went down this journey that you're going down now in 2012. and that Journey led me to crypto

Channel: Tom Bilyeu

Views: 511,943

Keywords: Tom Bilyeu, Impact Theory, ImpactTheory, TomBilyeu, Inside Quest, InsideQuest, Tom Bilyou, Theory Impact, motivation, inspiration, talk show, interview, motivational speech, Balaji Srinivasan, Network State, tombilyeu, Conversations with Tom, Health Theory, mindset, podcasts, how to be successful, entrepreneur, financial crisis, China, inflation, war, global power, banking crisis, bitcoin, cryptocurrency, American politics

Id: l4fLax7S2Q0

Length: 270min 55sec (16255 seconds)

Published: Thu Jun 15 2023