Raoul Pal: The #Bitcoin Life Raft

hi i'm raoul powell the ceo and co-founder of real vision today i'm talking to you as the founder and ceo of global macro investor my institutional research business i'm recording from my home here in little cayman on a sunday night i decided to do this what i think is one of the more important pieces i've ever put together because i put out a series of tweets that went viral and i could see that a lot of people were interested in my thought process about the future of digital currencies and particularly the central bank digital coins and where that was all going to go and i think the moment is now and it's one of the more important pieces so bear with me before i start that i just want to do a bit of housekeeping this piece is part of real vision crypto those of you on real vision watching this now you know that this is our standalone crypto tier that all members enjoy for free but i think this piece is very important i want to release it to the public too so i'm going to do that at the same time it is also part of real vision crypto as i mentioned before which has been stealth launched within real vision from members to kind of beat a test and we're going to be rolling it out globally in mid-november now something unique about real vision crypto is it's going to be free we've done that because we really believe in democratizing the greatest financial intelligence and the rise of digital assets is something so important something i'm so passionate about that we thought everybody needs to get it and we've done it incredibly with a group of consortium partners some of the biggest players in the industry who share our vision of democratizing this information so it's going to be free it's going to be brought to you by partners and it's really exciting so watch this space you'll see more news on it in the coming weeks and it's going to be a big launch probably the biggest launch in crypto media in the world and hopefully you'll all be part of it it's there for everybody now it's not just about bitcoin it's not just about d5 it's not just about ethereum it's about the entire digital asset space and we welcome everybody to come and join the in-depth analysis that real vision is famous for and really get to grips with what's going on anyway back to this piece there is an extraordinary change going on in the world and it's something that i've been flagging since about 2012. you see i was living in europe at the time and if you remember that was the european crisis we just had the financial crisis 2008 2009 and the european crisis was yet another one it was a banking crisis again and it looked like the whole european union was going to fall apart it was a really scary time for us living in europe and particularly in spain and at that time i'd obviously been writing about it and predicted large parts of it for global macro investor but it made me think about the future where is this all going to go to at one point i thought about setting up the world's safest bank and a few of us from global macro investor got together and researched into it became extremely hard to do and we kind of gave up and one of the core reasons i gave up on that is somebody came to me and said well you need to look at bitcoin properly and i'd looked at it a bit i'd seen the headlines i didn't really know what to make of it but on sitting down with them and again these were gmi subscribers who had been involved from the very very early days of bitcoin had been miners and set up a bitcoin exchange i realized that maybe this was the answer this was the lifeboat we were all looking for as the financial system came to the end of its logical conclusion now it sounds dramatic but it's probably not an instant event it's one of these events that happens over time the great reset as i've called it the other thing that really influenced my thinking was neil howe and william strauss's book the fourth turning that made me realize that demographics had a part to play not only in the disinflationary cycle that i've talked about a lot but also in the fact that this generational change this fourth turning that's coming was probably going to change the system that we operated in and as things developed these two sorry for interrupting your video but i have a very important message to share [Music] at real vision we pride ourselves on providing the very best in-depth expert analysis available to help you understand the complex world of finance business and the global economy so if you like what you see on the real vision youtube channel that's just the tip of the iceberg you should come to realvision.com and see how we're not leaving any stone unturned from publishing more in-depth videos live discussions written reports and our latest feature the exchange where you get a chance to engage with experts fellow subscribers and learn from everyone's experience which can't be wrapped in a video it's an experience which you live and learn from so if you go to the link in the description or go to realvision.com it costs you just one dollar to get a month's access to this incredible content i don't think it's something you could afford to be without that this generational change this fourth turning that's coming was probably going to change the system that we operated in and as things developed these two hypotheses of mine became stronger and stronger obviously we've all seen the rise of bitcoin and we've all seen the political shifts that are going on in the world today it all looks like we're reaching this point and i've said this is where macro crypto politics everything comes into the same big bucket it's all concentrated in our pure focus right now so we know that bitcoin plays a part in this we know that gold plays a part to this we know that there's too much debt we know that there's problems with demographics we know there's a disinflationary world where wages are deflating so it makes prices look like that inflate it's a really complicated messy ugly place and people feel disenfranchised people realize something bad is happening and they don't know what it means for them i'm going to try and help you with some of that you see the news is starting to come out that central banks are going to adopt digital currencies if you remember this started getting floated by i think facebook libra was one of the first they came up with this idea of creating a global basket of currencies that were digital and they would have this foundation in switzerland and that global basket would be a new world currency which could be used for the internet to interact on the central banks looked at that and said no you're not doing this because this really is redefining the rules of currency and what you're going to create it was basically a a stable coin but what you're going to create is something that's out of our control now they kind of don't mind bitcoin yet we'll come on to that later they've observed it they've seen it and they're learning from it but libra was too groundbreaking mark carney then raised it last year the bis had written some things about digital currencies and some other governments had looked at it too but mark carney put the shot across the bow at jackson hole last year where he said that what libra was doing was probably the future that this system where something like 79 of all transactions on earth are in dollars yet the us is only 25 percent of global gdp how does that work this leads to these dollar shortages these problems problems where countries like south africa are beholden to the us dollar or brazil or argentina when really their trading partners may be elsewhere but the dollar rules all it is so all-encompassing so powerful as as a reserve currency that it's breaking the very system we're in we've got problems where a dollar abroad the offshore dollar the euro dollar is non-fungible with a dollar in the u.s so the federal reserve if it tries to accommodate companies that have borrowed dollars in the international markets have no way of doing it they can have swap lines that go to the existing banks in these other countries but there's no guarantee the banks will lend to the corporates who need it you see that these problems are everywhere we've also then hit covid and covert was like that 2008 moment or the european moment 2012 where everything stopped and all of the trends hyper-accelerated the trend i'm more interested in was really the trend of governments having to use central banks to backstop them to create enormous fiscal stimulus so we've seen the largest fiscal stimulus by any measure the world has ever seen and basically the central banks have printed money to allow it to happen now most of us knew this was coming but the scale of it has been shocking and it's not finished yet i think covert is around for a lot longer than people realize and the situation in europe is only going to get worse and i think the u.s will too and it's going to require more and more stimulus i'm not entirely sure how the europeans going to keep hold of their banking system in the middle of this and i feared for a long time it may end up getting nationalized but against that backdrop of this extreme situation where governments really can't print more money because they just have constraints within their parliamentary systems and yet central banks are telling them they need to do more and we'll try and backstop you this is an awkward situation that nobody knows how to deal with but the central banks are pushing to say we need more so then we start getting the ecb talking about a central bank digital currency a digital euro or e-euro well that's interesting why are they doing that next was the imf out this week papers about digital currencies then we've seen it from the department of justice in the us we've seen it from the agreement in the us for certain banks to custody bitcoin and other digital assets allowing them to come into the system we've seen a whole bunch of these things and the imf to tomorrow on monday so by the time you see this we'll have had a speech about this a whole panel including jay powell the cleveland fed has written about it and many others people are talking about it everywhere the drum beat is getting louder they're going towards central bank digital currencies so what does that mean surely currency is digital now anyway i mean you could pay with your credit card you could transfer money well this is very different right now to transfer money you go through the banking system digital currencies are the central banks operating directly to you so you have an account with a digital wallet with the central bank so why do you need banks do you ask well i'll come on to that in a bit too it's a complicated world and we don't quite know where it's going but okay so we've got the central bank digital currency and if you see the nice fluffy way the imf have dressed it up it's well we've got a cross-border payments platform so you don't have to use those awful wire transfer systems yes but it also means that people don't need the swift transfer system which is what creates the backbone of the us dollar now i i'm not dollar bearish yet and i think it will morph into that actually still extremely dollar bullish we'll come on to the dollar a bit more into course as well but when we look at this they're trying to create payment rails so they say and that's great we need to be able to just instantly transfer from our mobile phone from one person to another i can send money to my mom in spain she gets it instantaneously like it works for bitcoin beautiful but that's not the only reason as i said swift is another big reason the reason why people like china want to get off the swift payment system and the global monetary system based around the us dollar but before that comes this idea of central banks and fiscal policy we've run out of monetary policy rates are zero or negative in most countries i believe rates will go negative in the u.s by the end of this coved recession i think it goes on longer than people expect people are familiar with my unfolding thesis where i think we go into a insolvency phase as growth doesn't materialize as people expect even with some stimulus coming after the election you see central banks want to be able to give people money directly direct monetization they can't do that right now right now they print money it goes into the banking system the banks hoard it because we're going through a credit crunch so that's very typical action they keep their reserves higher than normal and the money doesn't get into the system so only the best creditors get access to the money which doesn't help when you've got a lick a solvency problem when people who don't act get all the credit who can't issue bonds let's say they're not a giant corporation they can't issue bonds they can't get credit they go to the wall so if you remember the government started giving direct payments there's twelve hundred dollars and other such payments to corporates and loans but it's clunky to go through government we've seen some of the payments didn't happen it was slow slow to go off the ground there was no easy way to do it so the central banks think huh we've got no monetary policy left so why don't we do the fiscal so in times of crisis and this how it'll get sold we can do it directly we can serve convince everybody put it straight on our balance sheets and give you money you in need of it directly money that's a great thing so you're a restauranteur you're out of business right now you've got a solvency problem because you can't pay your rent you've laid off your staff and you can't reopen so you're stuck do you just lose your business you've had for over the last decade or two or do you somehow sit it out the bank won't give you money the government gave you some sort of loan but what else is coming how do you survive this well the central bank could give you money directly that kind of stimulus is what they want to do it's also a way for them to kick start universal basic income because the central bank can under can underpin the poorer parts of society by giving them money directly it doesn't go on the government balance sheet now central banks now believe they're omnipotent that they can continue to expand balance sheets forever mmt seems to be the prevalent thought and this is just an extension of this this is kind of keynesian keynesianism gone mad but it could work for a period of time you see this could be a really really good way to solve many of the world's problems it solves the swift problem it solves the euro dollar funding markets problems it solves the problems of getting money to people who need it central banks can also change entirely the structure of how money and monetary policy works and fiscal policy because they can give it to different people in different ways so they can credit the restauranteur but then penalize with negative interest rates the baby boomer saver because they want to release their money back into the economy they can give students a positive interest rates to help them save they can change everything this is the rise of behavioral economics and incentive systems so governments essentially using big data can find who they need to stimulate at any time and adjust accordingly they can do it dynamically this is a a structural massive shift to everything we understand about economics particularly macroeconomics nobody's prepared for this none of us know what this means it means and it will be sold on a load of good things and i think there's a lot of good things that come from this i think it is an elegant solution to some of our problems but elegant solutions in governments and central banks lead to unintended consequences the issue is here is to have this new system you're going to give up your freedom you are going to have every transaction you've ever done and ever will do recorded there is no cash there is no way of tipping the gardener unless it goes by cash it means that they can tax you at every transaction level now that's great we could get rid of the irs and all of the tax collection agencies because it could be done directly that's good but again you've lost your freedom to transact in anonymity that cash gives you most of us really don't have that freedom i mean let's face it behavioral economics we've seen the rise of facebook and google and they manipulate us all day and all night for their own economic ends or for the ends of their advertisers and governments well they do the same they've used an adopted behavioral economics and will do more and more so and we don't really have a lot of anonymity from them so there is a big pro and a big con to this but it's coming and it's going to change everything now the problem is is if you are trapped in a system now where there is no way out then how do you avoid some of the other bad outcomes you see what the imf are talking about is a bretton woods agreement an agreement amongst nations again it's something i've talked about for a long time whether it ends up being a debt jubilee or a different event it looks like it's morphing into something like a currency agreement it won't come quickly but the currency agreement is likely to be let's say a trade weighted global basket so that means or maybe there's an oil commodity producers basket as well so people can have different baskets of currencies that moves away from the need for the swift payment system it moves away from the us dollar issues it just changes how currencies are transaction and the imf have made it very clear it means that it can agree on mass for countries to stimulate or central banks at the same time so then everybody can print money at the same time so not we don't get these big currency dislocations sounds kind of cute right but what it does is debase the entire fiat currency system and we've seen that i've been tracking the price of gold against 27 world currencies and gold does its job extremely well as more and more money gets printed more the more gold goes up relative those currencies and bitcoin even more so so we've got this enormous debasement coming they've made it clear it's one way out of the debt debase your currency inflate your way out whether you create structural inflation or monetary debasement they're different things and i'm not going to debate all of the nuances of the inflations i don't think it's the cost of goods inflation you're going to say i think technology demographics and debt destroys a lot of that but i do think it's going to create some big structural issues so there's no avoidance of this for us outside of thinking about something like bitcoin bitcoin and gold offer us a life raft a way out of this particular conundrum where every transaction is monitored where we can be taxed immediately and we have no freedoms and again it can be a very good system so i'm not actually against it per se because it's going to come in some way shape or form the end of our current regime so let's talk about the end of the regime before we go on to the future of bitcoin and and other digital currencies so the most likely outcome for me is we are still in this insolvency phase that tends to push the dollar higher i think the dollar goes significantly higher i've said this for a period of time i think the euro goes a lot lower and many other currencies do particularly in this debt phase of the cycle but at the end of it that's only going to make it more and more important for these countries to get together whether it's the imf the bis or all of them plus maybe the g10 to decide on how to do something about it a kind of plaza report called and bretton woods all rolled into one and that is when the dollar starts losing its attraction and massively so and i think that's to come but a stronger dollar is actually something to fear more right now because it creates disinflationary problems and it creates a relative increase in the price of debt debt plus deflation is a ticket to bankruptcy so i'm very worried about that because it can cause an emerging market crisis it can cause corporate debt defaults and it can cause a number of other issues so let's keep our eye on that situation but i think the dollar is the thing that will get sacrificed in the end but not before it goes up a lot the central bank digital currencies i think will come over the next two years i think we're already seeing in china we're already seeing in sweden singapore's ready to launch a number are and they'll go slowly so you'll be able to open a wallet with a central bank you'll be able to make some transactions and then you'll be slowly forced into the system and then the whole system will be upon us so i think by three years there'll be mass adoption by five years there'll be no cash so that's essentially how it'll work and then you can make the real structure of changes first you have to get everybody into the system then you make the big changes so this is kind of a five-year view and so when you're looking for the life raft okay how do i avoid this the debasement of currencies forget the freedom stuff because i just don't think that exists in our world but i'm more worried about the debasement of my savings we all work hard for our money and we don't want to get screwed by the system and everybody has a feeling we're getting screwed somewhere whether it's negative interest rates or zero interest rates on our savings or being forced into the most expensive equities of all time because there's nothing else to buy and our pension funds are doing it right when people are trying to retire all the craziness of the world right now it just feels wrong and it feels like there is going to be political change and there's going to be massive structural change so bitcoin is my answer to that i own gold and i own a lot more bitcoin i think bitcoin works on a number of levels and i'm not going to go into it now because there's plenty of pieces from me on why i think bitcoin is a reserve asset and probably the world's most pristine reserve asset it's the only hard asset that has a fixed supply that eventually runs out and demand is increasing and as the world is turning towards bitcoin and its price goes up its market cap is only 200 billion it's noise right now it's like a mid cap s p stock but i think it's going to overtake gold in size gold is about 10 or 11 trillion i think bitcoin goes much bigger than that over time too but that's where it's headed because for this modern digital world it is the payment system that we all want but it's also more importantly it's the store of value we need so the central banks are going to compete at payments level so that's probably the end of stable coins and i think the central banks will force those out of the system but bitcoin as a pristine reserve asset is something different it's like collateral for a new system and i think other governments will begin to adopt it first it won't be the big governments but some nation will be sick and tired of currency crisis and we'll just adopt bitcoin as its currency they'll probably first stop putting it into their central bank reserves because it's a harder currency and a game theory plays out many people suggest to me well the governments are going to ban bitcoin the imf bis they're all going to get together and get rid of this well at 200 billion they don't care tap me on the shoulder it's a 10 trillion dollars we'll talk again so there's plenty of upside to pay for play for before it starts to become something we need to worry about they probably will give it a go they've tried to ban gold last thing i've checked has been working for about six millennia as a currency so it didn't really work did it and in this world of a distributed ledger which is owned by everybody known by nobody there's almost no chance unless you shut down the internet entirely to get rid of bitcoin it's impossible it's a cockroach in finance something you can never kill and you see that has its power and that's what makes it so incredible that's what makes it such a great reserve asset and this very hardness of it so i think they may try but in a globalized world of regulatory arbitrage somebody else will adopt it and somebody will allow you to use it i know countries like the cayman islands where i live i mean i came to the cayman islands kind of i kind of knew where the world was going many years ago and i made a distinct move to move to a jurisdiction like cayman which i thought would offer me some freedoms over others it also i don't pay tax here well like you do you pay tax on import duty but not on other forms of tax and as a brit i'm able to do that and become a resident here permanent resident here and eventually a citizen and that's a good thing cayman's a different way of doing it uh it's not the cheapest place to live so it's not an answer for everybody but it's a way out of the system and i doubt that they're going to not allow the use of bitcoin they just don't have the infrastructure for it sure the imf may try and stop them the regulators might try and stop them but somebody will allow it and capital finds a way it always does so i'm not concerned by that and i think that's a story when bitcoin is worth a million bucks but there's a long way between here and there now some people say well if the central banks have got this digital currency why do we need bitcoin two different things again remember payment system and bitcoin does that extremely well a bit slower than it could do but the lightning layer and all of the development can mean that but nothing is a reserve asset like bitcoin literally nothing not even gold it is truly extraordinary and it's so innovative we have no idea where it's going and when we talk about bitcoin we can also look at the other parts of the digital asset ecosystem that is not going away the genie is out of the bottle ethereum is not going away digital assets tokenization it's all coming and it's all going to slot in to these new digital uh currencies brought by the central banks so payment systems and rails and everything are going to change massively everything we understand it's going to be as big a revolution of money that the internet was for everything from email to video to shopping to everything to commerce it just changed the world we live in that's the size of what this is and this central bank digital currency is part of that narrative and it is positive i think if you own bitcoin it is positive i think if you own gold i i think gold has that place for those concerned about the future of bitcoin but i will take that risk in bitcoin i will say i think it goes a lot higher before i have to worry about that and i do think bitcoin is the cockroach that can't be killed i think it is something too powerful for even governments to overcome and i think it is our life raft on our way out so i just wanted to bring everybody's attention to what's really going on how big this situation of central bank digital currencies is it really is a game changer and be careful of what's going to happen to your money within this i don't think they're going to sell it that they're going to use it to use negative interest rates but they can go negative 10 they're not going to sell it that now governments can say well we're not going into debt so they meet their political objectives but the central banks who are not voted on by anybody can do whatever they want so all it means is they can do more of the same and it'll get dressed up with all of the benefit statements that come with this new idea now obviously we could do all of this without a central bank digital currency and without the money printing that would be bitcoin maybe that's where it's all going in the end how far down the track that is is a lot further than macro forecasting dares to go it becomes philosophical by nature but in macro forecasting terms it's clear where this is going it's clear that as anthony pompliano pomp says short the banks long bitcoin the banks in europe sounds like we're not going to need them soon we don't need a banking system richard werner has talked about this too the central banks are going to eat the banking system and this is all part of how technology is eating the world and i've talked about how before that cryptocurrencies are eating finance decentralized finance and fintech get rid of banks they've all been picking at the carcass of the banking system banks will have to adapt or die so this is a really really interesting time now banks go it to be naturalized and then basically becoming part of the central bank i think somewhere towards that i got a crystal ball but that's the direction we're headed in and it feels a bit like communism where everything is decided at a central level and that was the kind of the asian model as well we saw that in in china and we've seen it in japan as well in the earlier days where everything was decided at government level who would get what money and why and again that has benefits but it also has huge downsides and that all of the downsides make golden bitcoin incredibly attractive so keep pilled in this space watch real vision crypto and watch this entire world unfold it really is going to be life-changing for many of us and i think it is the chance for the little guy to make his fortune as i've said we're at a 200 billion dollar market cap in bitcoin right now and as more people come into the space the more the price goes up the more the market cap goes up the more it attracts people it's going to create a soros style reflexive loop of which we've never seen before that's my view here because i know what's coming they've just allowed custody of bitcoin that means it's code word for prime broking for hedge funds so that's coming so paul tudor jones was right michael saylor and square putting it into their treasury that means more treasurers are coming over time slowly but surely these were the first steps i don't think there's going to be a giant rush but i'd be bloody surprised in five years time if apple microsoft and others don't have cash in bitcoin then we've got the coming etf it is coming it will come we know because we can see the regulators slowly but surely approving everything and when it comes when they've cleaned up the the kind of bad actors given all the fines out got everybody regulated it's coming that will bring in the raa space the registered investment advisors and the and the financial advisors and those guys are going to start piling in for their clients seeing the portfolio value of this i think that's incredibly positive then we've already seen the family offices in the space people like fidelity with their custody now the rise of these banks like avanti and kraken's new bank this makes it easier for people to custody to get access to this system it's a really positive step the family officers are coming they're usually early adopters because they want to protect wealth and they want to make money the endowments they have a long time horizon they can take the risk they're in this space already and they're coming more and more and then the pension system it offers many answers for the pension system it also offers huge answers to the millennial population the people who can't really save in their 401k and keep buying tesla at all-time record high valuations and all the nonsense that's going on crypto when it starts moving is going to suck them all in and rightly so it has the best lopsided risk reward of any asset class i've ever seen so i think there's huge opportunities and then we'll see people like you know arca have got their incredible um digital asset fund but long short tokens this is a new world there's huge amounts of alpha to come out of these new markets it's going to be complicated markets more complicated even than the derivative markets we know now because when you've got markets with with multiple smart contracts trying to see value of one versus the other that's a really complicated exciting world where value investors technology high frequency trading everything can come together and try and figure this world out but it will generate alpha so it is an exciting world it's an exciting world for many of us but you need to take a step first before it's too late take a step learn about bitcoin buy some gold and then watch what goes on and see what unfolds and watch real vision crypto and understand what it means for you and all of the opportunities it's going to give you thanks so much thank you for watching this video now this is just a taste of what we do at real vision to learn more about the complex world of finance business and the global economy click on the membership link in the description it only costs one dollar for a month's access this will be the best dollar you ever invest

Channel: Real Vision

Views: 493,220

Keywords: Finance, Markets, Economy, Stock Market, Investing, Trading, Education, Financial Literacy, Recession, Interview, Conversation, Strategy, Insight, Analysis, Facts, Data, Fraud, Entertainment, Thesis, Short Seller, Real Vision, Equities, real vision finance, real vision tv, raoul pal, real vision bitcoin, raoul pal bitcoin, monetary policy, fiscal policy, monetary and fiscal policy, central bank digital currency, central bank digital currency explained, bitcoin, crypto, cryptocurrency

Id: qL2LfVRl3J0

Length: 34min 52sec (2092 seconds)

Published: Mon Oct 19 2020