← Coin Stories with Natalie Brunell
Coin Stories with Natalie Brunell
Luke Gromen: Dollar System is Breaking and Markets Aren't Ready
01:21:32
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- [00:00]
A
If you're counting on institutional investors to, like, sort of, you know, run it from 90 to, you know, 150 like that, if that's your plan, like, that's probably not going to happen without some major catalyst. That's not how institutional investors act. Those charts, they're going to sit there and just go, oh, wait. At the very least, that suggests there's a whole lot of wood to chop for Bitcoin, technically against both the dollar and against gold.
- [00:31]
B
Hey, everyone. We are so lucky to have Luke Grohman back with us on what's shaping up to be a crazy week. Already. It's January 19th. We're having some tariff turmoil because Trump wants to buy Greenland, and eight European nations came out saying that this is blackmail, basically. So he's threatening them with tariffs that would start on February 1st. So, Luke, thank you so much for joining me again. Let's just start with the news of the week. What's your reaction?
- [01:01]
A
You know, I think it's, I think it's par for the course or this time of the long cycle, right. This is, this is a fourth turning. I think there. I think it's a sign he's trying to throw his weight around as he does. He's playing the old Trump. You know, if you want a dog for Christmas, ask for a pony, right? So it's, hey, we're gonna tear, if you into oblivion. And, you know, we'll back, you know, back down to some sort of deal. I think it speaks to critical minerals vulnerabilities of the United States and lead times to that. Right, everyone? If I had a dime for everybody who told me rare earths aren't that rare, I would already be retired and that we have plenty of them here. And I said, yes. And it's, there's, there's also some lead times and permitting and complications. And rare earth actually might be the shortest lead time of all of it. So there's other critical minerals, and maybe they're easy to get in Greenland with a shorter lead time since nobody lives there. I think there's also some defense dynamics there. But something I've really been encouraging people to do, investors to do in recent weeks and months is to take the old Charlie Munger admonition, which is invert, always invert. Right. Why? So, you know, and I, I also added in, you know, look for the dogs that don't bark. Right. So if I'm being told on one hand Russia's a threat to invade Europe, and on the other hand, Russia's given away Land to China, allegedly on the east side. How can both of those both be true? And similarly, if the US has superior air defense missiles systems to everyone in the world, and it's not even close, as we were being told a couple of weeks ago, and as we've been told all along, why do we need Greenland and why didn't those missiles, you know, why are they over to stop in the Arashnik in Ukraine? Right. So I think there's a, I think there's a raw material component to Greenland. I think there is a national defense component in terms of, know, it's, it's a very strategically located piece of property and certainly Trump knows a lot about, about location, location, location as a real estate magnet. And then there's sort of the Arctic Circle dynamic around how much land Greenland has or access to the North Arctic Circle relative to say, what we have, what the Canadians have, you know, what the Russians have. And so, you know, I think it is, you know, I read a really interesting piece recently that suggested that the Russians staked their claim with the UN to the Arctic based on the borders of their country in 2001. And I think the Danish did it in like 04 and somebody else, maybe the Canadians did it in 06, the Americans while we were, you know, and, and here's the critical point. The UN takes these claims on an as you file them basis. So it's get in line and what have you. America being America, you know, we don't think about things as a country until it's like, you know, literally biting us in the rear end. We were distracted in our global war on terror. We didn't file any claims in the Arctic as it relates to, say, Alaska, etc. To like 2019. So like, like, we're like, you know, the kid who, like, doesn't do his homework, you know, was out all night drinking the night before and now we're like, showing up and threatening like, you know, the proctor of the exam that, hey, it's not fair and it's like the most American thing ever really, when you think about it, right? So I don't know. I feel very strongly that what we've seen year to date, 2026, is just a brief warm up of how 2026 is going to go. If you're exhausted by this, like, pace yourself. I think it's going to get a lot more interesting.
- [05:19]
B
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- [07:29]
A
Yeah, I think Robin Brooks from the I don't know if he's still at the iif, but he had a great post last week where he said Japan is the G10 country that's closest to a debt crisis right now. And I think that's exactly right. And I think it's really important in a world where, you know, we, you can get on X, you can spend 5 minutes on X and you can read chapter and verse about these different, you know, great power competitions. Right? Well, we're America. We can push the Dutch or the Danish around. Excuse me. And the Russians are trying to do this. And here's what happened in Ukraine. And the Chinese are doing this and the Chinese and Canadian. And, you know, two weeks ago it was, you know, hey, we have all the leverage. Look at that. We just grabbed in Venezuela, hell of Venezuela. And, you know, now we're going to tip over Iran and, and what have you. I mean, we probably tried to assassinate Putin at the end of December. And, and so like, wow, we're choking off China's oil. It was like, you know, just thumping, let's go. And there was no commentary about any countermeasures. Right. No one else can do anything against us. Well, now we've got. Two weeks later, we've got Canada signing a deal with, with, with China. Oh, we didn't see that. Common. And more importantly, the Japan thing, I think is just so overlooked, which is if you asked me to Red team the Chinese position around, okay, America comes out, probably tries to assassinate Putin at the end of December with this drone strike. The Russians were not amused. And again, you can agree with that. You can not agree with that. The Russians think it happened. We said it didn't happen. The truth is priced somewhere in between. Between. Then we do the Venezuela thing. Then we have Iran where we're trying to. Someone is trying to do some sort of regime change operation in Iran, at least as of last week, maybe. It looks like that's calmed down. And you say, okay, Luke, you're, you're, you're China. Red team. That. Okay? And red teaming for the uninitiated is just take the other side, play their, play their side of the chessboard. All right, well, I look at the setup and I go, I'm China, right? So I'm not going to just like, you know, put on a glove and punch you back in the face. That's not what the Chinese do. It's just culturally, it's not what they do. Strategically, it's not what they do. I look at Japan and I go, okay, well, Japan is the single biggest. China is the single biggest import trading partner to Japan. The Americans are bragging openly about how Japan is going to be our outsourced defense base. We're going to need them to move away from China. And I look at that debt load in Japan, I go, oh, okay. Well, and importantly, Japan imports way more from China than China imports from Japan. It's very uneven. So it's pretty simple. If you ask me to red team and I go, okay, I'm going to strengthen the yuan a bit. And sure enough, what's the yuan done? It's strengthened already year to date, pretty notably. Why does that matter? Stronger yuan is going to increase the cost of Chinese goods of the Japanese and put upward inflation pressure on their bond market. Then the other thing I would do that is, you know, it's not, you know, punch you back in the face, but it's a little more direct is I'm going to put an export ban on what I deem to be dual use goods. Anything I ship to you, Japan, that you could go into your military since everyone's bragging about how you're going to build weapons to face me down. Great. Not sending the stuff anymore. Well, according to some estimates of, of, of analysts that are very focused in that world, in the Asia, you know, trade world, that could be 40% of the stuff that China sends to Japan. And that's going to put a lot of upward inflationary pressure and supply chain pressure on the Japanese at a time when their bond market cannot afford upward pressure on inflation or interruptions to supply chains. And then I sit back and I just wait because it's going to put the JGB market will sell off, sell off. And it's going to put the Japanese into a decision point. Either you print the money to support your bond market cap yields and the yen really gets hit. But now, you know, again the yen falling against the dollars and help you because the Japanese need to import all their energy to make all their stuff. So that's only going to make it worse or I let the bond market crash. And quite frankly the yen probably crashes that way too. And really the only way out then for Japan is to go back to something that Putin hinted at in summer 2022, which was we are prepared to sell oil to non aggressor nations in their own currency. And so then the Japanese would probably be forced to prevent a really bad economic outcome to start to ditch the dollar to buy oil and gas in yen from who would ever sell it to them. And Russia would do so. And Russia's got the capacity. So you know, and that says nothing about the rub off effects of that. The JGB market has been a funding currency, that the yen has been a funding currency for 20, 30 years. We saw in the summer of 2024, yen gets too strong. Everything, you know, everything goes risk off. Yen gets Too weak. It's also a problem because that means the dollar is getting too strong. We've seen that multiple times over the last five years. So I think I'm discouraged by the complacency around most market participants and strategists where again, it's just this chest thumping of, you know, we have all the leverage and no one else can do anything. In the meantime, I'm watching them do something, right? And because, oh, by the way, the Chinese did do the dual use, dual use restrictions. The Chinese are strengthening the yuan, the JGB yields are going up basically every day. And you know, it's only a matter people say, well, oh well. Well, the oh, well is that's going to translate to the treasury market remarkably fast if it, whenever it hits a tipping point, the Japanese are going to sell Treasuries to raise dollars to buy yen or to defend the bond market. And now US yields are taken off. Then boot yield, German yields taken off, UK guilt yield, they're all taken off. And again, the bond market will do for the Chinese what it did for them in April of last year, seven days after Liberation Day, which is the Chinese don't have to do a thing. Compounding interest will do, you know, compounding interest is undefeated all time against empires. And then, you know, people like, well, we're America, it's different. Like, no, math is math, people. And the Chinese are going to stand back and let the math be the math. And the Japanese will be the first one to face this choice. But then it'll be probably, probably the Brits next, probably. But maybe the Americans, I don't know, the Europeans will probably run into that problem last, last of all of them, given, debt given, etc. But that's, I think the JGB thing is just so, so important and most financial market participants only watching it from sort of a strictly, hey, where are the yields at? They know it's not good, everybody knows it's not good. But I, I'm, you know, I'm completely, I'm not seeing anywhere, you know, this weaponization. Like everyone's talking about everything the US can do and everything, you know, and no, nothing about what you know, the other guy gets to say too, right? You want a trade war, you want a great power competition war. The other guy gets to say, China's a powerful country. They are, and they've got some levers they can pull. Into my eyes, they're pulling it. And so I think it, it sets up a really risky time for the next couple of months given the complacency around this. I mean there's just, you know, the complacency is astonishing and you can see it everywhere. The move bond volatility index is at lows. VIX is at lows. Credit spreads are at lows. To me, it's not a very attractive risk reward setup across most risk asset classes.
- [15:56]
B
Well, yeah, and you've basically written that we've already lost the great power competition to China. It just hasn't been marked to market yet. There is no consensus about that. The post 1971 USD Reserve Asset Status is unraveling. And what I was curious to hear your perspective on is I'm always confused about whether the administration knows the chess moves that they're actually playing or not. Like part of me feels like this is all a setup to increase the price of gold so that we can revalue it. And part of me feels like they're just acting kind of chaotically out of hubris and creating more volatility that doesn't need to be there. And I love the analogies that you make your movie analogies. Actually I'll pull one up because one of my favorite ones that you do recently is this one.
- [16:43]
A
What do you want? What do you want?
- [16:47]
B
It's not that simple.
- [16:48]
A
What do you want?
- [16:50]
B
What do you want? Can you tell me why you've made that analogy so many times in your writing? What does the US want?
- [17:00]
A
The US wants the poor farmer that she's in love with and she also wants all the money of the rich boy. All the rich boy. She wants to marry them both. Can I marry the rich guy's money and the poor guy's, you know, the poor guy's passion and unfortunately you have to choose right? And in this case the, the US wants to keep dollar reserve status as it's been structured and it also wants to reshore its defense industrial base. And you can't do both. You have the condition of the second is the condition of the. Of the post $71 reserve status structure is you got to offshore the defense industrial base because you got to create the deficits to supply the dollars and supply the risk free debt. You know, risk free debt treasuries, you know, it's nominally risk free certainly to the world as their reserve assets. That's the treasury as primary reserve asset of the world is the post 71 structure now. Doesn't mean the dollar can't be the reserve currency still and reshore the defense industrial base. But it does mean that the treasury has to lose as. As primary reserve asset of the world and be replaced by gold, at least in the short run. Right. And de facto, that looks like what that's happening. That requires a massively higher price of gold. I mean, way higher price of gold. Way higher. And you can see it happening. It has been happening. Central banks have been doing it. So I, you know, your question before, around, you know, are they. You know, is there really. There's. There's a great. There's a great quote by. I think it's Kierkegaard. I could be wrong, though. It's basically, you know, the. You know, a bunch of people. The theater caught on fire, and the clown came out from the back to warn everyone that the theater's on fire. And everybody laughed and thought it was funny and continued sitting there. And then he comes back out, he said, no, I'm serious. The theater's really on fire. And everyone laughs some more. And the phrase goes on to say, I think that's how the world will end. How the world will end. To the roars of laughter from a unsuspecting crowd. And I can't tell, I sometimes feel like where you're like, no, no, no, it's really on fire. Or if there's really a plan here. And I got to tell you, I go back and forth. If not, if not daily, then certainly weekly. Like, there's days where I'm like, oh, okay, this is all Kabuki theater. And everyone's playing their role. And the goal here is to basically trash the post World War II order. You got to get rid of NATO. You got to get rid of the Treasuries as primary reserve asset. You got to discredit them as primary reserve asset. You gotta get gold moving back to the people where. Where, you know, ahead of time to the big creditor nations. Then you gotta ramp up the gold price. And then eventually we can, you know, we can revalue the gold and pay down our debt or. Or recolateralize our debt and. And rebuild our defense industrial base. And there's days where I feel like, yeah, I can see that. I can see that. And then there's other days where, like, they're just mucking it up as they go along and. Yeah.
- [20:22]
B
Flying by the sea.
- [20:23]
A
Yeah. So I. I think, you know, I think the North Star to all of this is exactly the latter. Which are the former. Excuse me, which is. The system's changing. It is going back to a neutral reserve asset. The Chinese and the Russians have been very clear about that for Chinese for 17 years now they've been talking about it non stop. Putin has talked about it for over 10 years. The new part of course is the American side which is I think post Covid and then especially post the Russian invasion where you know, the Russians have out produced us four to one the entirety of NATO. According to the head of NATO, the recognition that this post doll, post $71 system is no longer in our interests. So suddenly it's in every, you know, the three major powers interest, U S, Russia, China, to, to move to this new neutral reserve asset system. And so I, I think there's some agreement around that. I really do. I think there are some main thrust things that have to happen. And you know, if you've, if you, if you've got, I don't know, Trump maybe trying to act like such a jerk that, you know, his girlfriend in Europe breaks up with him and finally leaves, you know, so we can get out of NATO. Or is this just Trump being Trump? I, I don't know. But you know, right.
- [22:00]
B
I mean some of it feels coordinated like this, this crazy chaotic plan. But it's, but it's meant to do what it's supposed to do and it's kind of working at the same time.
- [22:09]
A
It is kind of working. And yeah. So I think ultimately it's a thing that's really good for the US it's really good for the world. It's really, you know, it's, it's, it's inflationary as heck. It's a, you know, now it's really good for the US on net. It's really good for America the country. It's not really good for America the empire. And I think there's a lot of confusion, a lot of discussions around, well, you're anti American. Well, you know, there's a great. Ian Bremmer, the strategist, had something up this weekend. He said, okay, it's come to New York. And somebody wrote in spray paint on a New York subway, I don't want green, we don't want Greenland. We want healthcare. And that's like a perfect metaphor for, you know, look, maybe he wants Greenland because we're gonna pull the troops out of Europe, bring them home, cut the costs, get out of there. Not our problem. You deal with your problems. We need Greenland so that we still have some sort of forward operating base after we pull out of Europe more broadly and leave Europe to do what Europe wants to do. And that's good for America the country. That's not good for America the empire, but America the Empire is no longer in America's interest. And if we continue down the path of America the Empire, Mamdani in New York, just a warm up. California billionaire wealth, taxes, just a warm up. If you like what's happened in Minneapolis, you're going to get a lot more of it if we stay on America the Empire and it's going to get a lot more violent. If you read the history books, this is, you know, you read the Storm before the Storm by Mike Duncan. This is like chapter and verse of the late Roman Republic where it's just, you know, one side does something, then the other side does it more, then the other side does it more, then the other side does it more and then the killing starts. And so like, you know, we're into the other side does it more, maybe the second or third iteration now with some of this stuff, you know. So I'm just sitting here going, I really hope we're wiser as a country. We can, you know, strengthen America the country and forego America the Empire. Because if we, if we forego America, if we don't do that, like sadly we, I don't know exactly when it's gonna, what's coming, but I know what's coming and it's not pleasant.
- [24:20]
B
Well into the earlier analogy you have to wonder, it's like what, what do you want? Because you can't have both. And so if they're trying to execute on both at the same time, they're going to lose. So it's really a matter of what, what they're going to give up. I wanted to bring up this chart you had in your, your latest newsletter because I find it to be really interesting you mentioned that gold has already surpassed US Treasuries in foreign FX reserves. But I just wanted to take a look at this Fed balance sheet because you don't see gold on it at all. And so I, I believe that's because it's, it's actually at the Treasury. Right, but I mean the treasury holds its account with the Federal Reserve, doesn' Where, where is the gold on this? And, and you also mentioned that gold has been our biggest export. Like one of the reasons why we had a, a low trade deficit is because we exported gold to Switzerland, but that gold actually made it out to China and our other adversaries. So can you kind of break that down for us?
- [25:17]
A
Yeah. This chart is from Dan Oliver at Myrmican Capital. I, I use this this week with his permission. He's a friend of mine. It's a great chart and what it shows is the composition of the Fed's balance sheet from its creation to today. And when it was created it was all gold. And it was all gold and commercial bills up until World War II. And it's steadily, particularly after, call it 1965, a lot less gold. And you know, now it's entirely long duration bonds of a, of a bankrupt Congress, as he calls it in which I agree, and mortgage backed securities which are also very inflation sensitive. And the gold, yeah, it's really not there because technically treasury, treasury holds it. I also think it might just be a scaling issue because it's a, held at $42 an ounce and statutorily. And so 42 bucks an ounce on whatever 260 million ounces is, if my zeros are right, $11 billion and $11 billion on a $9 trillion balance sheet is, you know, it's really hard to see. So yeah, I think, you know, this, this go. The, you know, the Fed's balance sheet has gone from gold plated to you know, basically crap over the last hundred years.
- [26:56]
B
That's one way to put it.
- [26:58]
A
And you know, look, it's nominally money good. It's absolutely nominally money good. You know, the US government is not going to default on those. And you know, the U.S. government backs those mortgage backs. But it's a Ponzi scheme, right? Like the government borrows money, the Fed buys it and then guarantees the bonds. The Fed buys like great. Like you know, people are, you know, people are criticizing the, some of the AI financing schemes. Like those things are pikers compared to this. This is like the granddaddy of them all, you know, lending money to somebody who's guaranteeing the debt that you're holding that you lent them. Like, hey, awesome. So that's, you know, that's the message of that chart. You know, Oliver's takeaway was, look, just to get back to the long term average where gold made up I think a third to a half of the Fed's balance sheet. I think it was what, 8,300 to $13,000 an ounce would do the trick. And that assumes no other crises, no other balance sheet expansion, any of those things. So gold would have to double to triple just to get back to the long term average, you know, from here.
- [28:09]
B
Well, and I think that it puts a spotlight on this idea of the financial ledger becoming subordinate to the physical ledger. Right. I mean all the things that we really need, we can't print out of thin air the way that we can just print units in the system and dollars and liquidity. We need energy, we need industrial capacity. This is what you do such a great job writing about. And these are taking, you know, front and center importance. And this is why countries have been de dollariz. They're showing you that, well, if you can just print these dollars out of thin air, you can't print our commodities, you can't print factories, you can't print the skilled workers. And so that's what we're going to build up. And that's essentially why we're losing the great power competition. Right?
- [28:53]
A
That's exactly right. Is, is everyone wants to stop the whole great power competition in the financial realm. Well, we've got the reserve currency and so we have the trump card like that only allows you to take that to a certain thing. And I think that's in hindsight why I think the Russian invasion of Ukraine will be seen as such an important tipping point, which is, I think The Russians Absolutely, 150% knew that the Americans did not have the industrial capacity to support Ukraine. And I think it figured into their calculus is, well, we're going to expose them. We're going to. It's like, you know, it's like a football game, right? Like, we know the right defensive tackle is playing on a broken leg. And in the NFL, you don't go, oh, we're not going to run that way. No, you run the ball until his leg snaps in half, until you. Or until you have 70 points or until he's taken out of the game, like that's it. And I think, you know, and forget about what I think I know because I've read a number of different books around it. There is a very robust military science calculation around what's your gross steel production, what's your iron ore capacity, how much aluminum can your country produce? Where are you sourcing your titanium sponge? Where, you know, where are your rare earth coming from? And I, I have a very, very strong belief again, because I've read some of the scientific studies around it in, in publicly available books that I think they sat down and did the math and they're like, we're going to take a lot of losses here, no question. And it's going to be exposed to every American ally that they can't go to war. They can't, not with any great power and certainly not with the Chinese because that's where all their stuff's made. And we know that. And of course that's kind of come out since that is now a huge rallying cry. So that's sort of the first admitting you have a problem is the first step, right? And so, you know, we're in this. We admit we have a problem. You know, things. I routinely see people saying things in financial markets now that, you know, I was saying years ago, that's encouraging. And there's this sort of what a good friend of mine calls idea factory element still to it. We're optimistic as a country. That's how we are as Americans. And it's great, it's a wonderful trait. But in this case it's fatal. You sit there and say, well, great, now we've identified the problem. We're going to build factories. Woohoo. Okay, well, you got to run the wire. And before you run the wire, you need to build the generating capacity. And before you build the generating capacity, you got to have the copper. And before you build copper. Yeah. And oh, by the way, even to go get the or, once you have all those, you got to lay the railroad tracks. Once you lay the railroad tracks. And so there's this like, idea factory of like, okay, we're, we've got all this copper and rare earth out in the Rockies. We're going to go get it and it's only gonna take two years. Like what? Like. And so sort of the first admission of the problem, we've gotten there. Now the next admission of the problem will be, oh, and this is another, you know, this is another factor into what do you want? Which is, okay, if we want those things, we're gonna have to print the money and we're gonna have to support the price and we have to, you know, use the National Defense Production Act. We're gonna have to nationalize some of these things. We're basically have to go to a World War II footing light and inflation is going to go nuts. And then we're gonna have to cap the bond market. And that's like we've kind of got to the. Okay, well, we're gonna have to do World War II light, right? We're seeing that everywhere. You know, we basically just remove free markets from uranium two weeks ago. We've got price floors being discussed on various commodities. We've had silver in, in November declared by our government a critical mineral. The price of it since then has gone from what, like 45 to 90, 50 to 90 in two months. These are the types of inflation you're going to see as this happens. Silver is not an outlier. In this case. The bond market's kind of sitting there like Ralph Wiggums at the back of the bus going I'm in danger. And the 10 year is all of a sudden, if you look, the 10 year has diverged from oil, it's going up. It's been tracking with oil all through Besson's first year and now it's going up. The 10 year bond market's Ralph Wiggums on a real basis, he's going, oh, oh, you know, so the next part of this whole admission of what's going to happen is they're going to have to put in some form of capital control, yield curve control, something, I don't know what it's going to be called, you know, you know, we, I found a quote a couple weeks ago. The wisdom is seeing things for what they are, not what they're called. And so I don't care what they call it. I can see what's happening, I know what it is, I know what to do with it. You know, so that's this physical. We're moving in the right direction to sort of financial versus physical. But the financial world still is like yay, this is great. And the paper stuff's like Ralph Wiggums at the back of the bus. I'm in trouble.
- [34:21]
B
Well, it is fascinating to see because we keep seeing a new all time high for gold and yet gold is in very low percentages in anyone's portfolio today. Right. I mean, I mean almost no one owns it in the same way that not a lot of people own bitcoin. And it has been just fascinating to see some of these defense industry executives come out and say, yeah, we can't decouple from China entirely. Maybe we can de risk but the idea of decoupling, I mean that would take decades. We simply can't do it. We over rely on them and so that gives them so much leverage. But back to the gold, I wanted to better understand like why have we been exporting, exporting gold? Because I know you mentioned that it went to Switzerland, but then that's kind of like a stopover and it's really actually on the way to China and we don't even know how much China actually has because how can we believe the numbers? We can't look into their reserves and actually audit anything. Which is one of the frustrating things about the physicality of gold. But why would we be exporting any gold?
- [35:17]
A
It's a very good question. You know, it goes back to that invert, always invert. Or, or you know, ask about the dogs that don't bark. That's a dog that's not barking. I saw a lot of ink spilled about the massive, massive shrinking in the US trade deficit for. I guess that was October.
- [35:40]
B
October, I think.
- [35:41]
A
October, right. And historically a shrinking trade deficit. US Is going into recession, full stop. You know, we show that in our work now in the short run, it bolsters GDP mathematically and we're seeing that as well. And then when you dig into exports, the math was that of basically more than 100% of the exports were industrial exports in the month of October and more than 100% of the industrial exports in the month of October were the exports of non monetary gold and other precious metals. And.
- [36:27]
B
What does that mean, by the way, non monetary gold? Because in this case, isn't it monetary?
- [36:31]
A
Well, it's an important question. The tourist answer is non monetary gold must be reported for trade statistics. Per. I can't remember, it's the IMF or who mandates those rules. Monetary gold goes into a central bank or otherwise official, foreign official monetary authority and does not have to be reported for trade statistics. So non monetary gold exports technically are not going to an official, or at least they're not being classified as official, put it that way. Why is the US exporting so much gold? I think we are starting to.
- [37:28]
B
Move.
- [37:28]
A
Toward, you know, basically we're sending it when. Let me back up. The data show that we sent most of it to Switzerland. The Swiss are very precise with their records, which shows that most of that went to two places.
- [37:45]
B
China, China and the UK Right. Because London doesn't have enough gold, I'm assuming.
- [37:53]
A
Well, you know, and I didn't get into it before about red teaming China, but look, if. If I wanted to, another thing I would do with red teaming China is I would call up the Achilles heel of the dollar system, which is the London gold and silver markets, and I would say, give me more. I would empty it out till either the price skyrockets or until they declare force majeure. And now pricing is set in Asia. So it's interesting to me that one debtor country is sending a whole US is sending a whole bunch of trade debtor, a whole bunch of gold to another trade debtor country, the UK At a time when gold flows have been clearly leaving the UK and over the last couple of years and, and broadly speaking, going east with the exception of earlier this year when they came here. So that was interesting. But the China side, gold is trade settlement at the end of the day. Look, I think people need to open their minds to the possibility that one of these trade deals is that the Chinese said, okay, we will Restart rare earths. Not for dollars anymore. No more dollars. We'll take gold, we'll take silver, we'll take value for value. But you don't make anything else of value. We can't use your software, your chips. You're restricting like crazy. We don't want any of that stuff. We've actually said we've reduced our chips. We're coming up with our own aircraft. So we need, do need some Boeing parts still for the time being, but, you know, in another five years or three years or, you know, eight years, I don't know what it is, but China is going to make their own aircraft and throw Boeing out like they've done to everybody else so that we can't weaponize that against them. So, yeah, when we, you know, once you eliminate the impossible, you know, whatever remains, however improbable, must be the truth, right? Sir Arthur Conan Doyle. Why are we sending gold to China in the middle of a trade war when we've been restricting this and that? Well, A, it flies in the face of sort of the. Well, China's collapsing because you go back thousands of years. The countries that are buying gold are not the ones collapsing. It's the countries selling gold that are the ones that are having the fiscal problems. So look, I think that's probably, if you gun to my head, what is, why did, why did we send a bunch of gold to China? That's probably why is in the same way that in 1940, you know, we did this to our friends in 1940, to the Brits, they were the reserve currency. They'd been the reserve currency for 150, 200 years. Hey, we need equipment, America. Can you, can you lend us something? You know, we'll pay you, sure, but we're not taking sterling. We'll take dollars or we'll take gold. We don't trust the sterling. We don't want the sterling. You may lose. And so it's kind of the same setup, right? It's not a shooting war, but we've made it clear that we are trying to choke China out in a lot of different ways. The Chinese would have to be stupid to take printed dollars. You know, back to that, your point about that Fed balance sheet for some of these rare earths that we want to shape into weapons and point at them. So, you know, okay, you're going to have to pay value for value. So I suspect some version of that is what happened. I have no proof of that. It's purely speculative, just to be clear. But like I said, you eliminate the impossible. Whatever you have left is probably the truth.
- [41:12]
B
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A
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B
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- [43:36]
A
Yeah. All credit for that Capital rotation matrix goes to Northstar charts. I subscribe to their service. I'd encourage anyone to do so. I think they do great work and it shows that for the first time since 1930, 1972 and 2002, base a grid of 12 different markets, factors, monetary supply, bond markets, etc. They're all breaking down. They're all in bear markets against gold, which is a, what they call a capital rotation event. And you know, it makes perfect sense to me. I can see in other markets I track Bitcoin is, is gone into a bear market in gold terms, I think it's going to continue. I think part of that, you know, a, is, you know, Bitcoin has been trading like, you know, a high beta tech stock. And as much as I think it will ultimately trade as a neutral reserve asset, it isn't yet. And so it is, it is doing that. The other thing I think is, you know, I, in such a low trust world that we're in, you know, the Americans were sending a plane load of bullion to Riyadh to settle oil deficits with the Saudis, I believe until the 60s. Like a plane load a month. And it's, you know, it's my generation, one of my, my dating myself here. But you know, my, a friend of my dad's who was, you know, we'd always say, hey, no ticking a washi, right? It's an old phrase of like, hey, you don't show up with the claim check, you don't, you don't get your, you don't, you don't get your clothes right at the, at the laundromat. No ticking a washi, right? So like, look, it was a, a U.S. sending a plane load of gold a month to Riyadh was like, no tiki, no washi, right? Like we're you, you don't send the gold, we don't send the oil. And I think that's where things are going to go with gold, right? There ain't going to be auditing. It's going to be, we make this, you make that. We have a deficit. Send the stuff or we're done trading until you send the stuff. And is it efficient? Yes, but it's proof of work. You're expending energy to move a monetary asset from here to here. Is it as fast? No. Is it as efficient? No, but I think that's where things are going in the short run because I think we're just seeing the complete breakdown of trust amongst everybody right now. You know, it's like US and the Canadians. US and the Europeans. The Europeans and the Russians. The Russians and us, the Chinese and the US And. And I mean, it's just, you know, it's a goat rodeo. So. Yeah, unless you. Look, Stephen Miller, the chief of staff, last week, said, you don't hold it, you don't own it. That's what he said. I mean, he came out and said, denmark is a weak country, small, weak country, and they can't control it. So we'll just take it. Okay. If that's the world we're in. You know, then you look at things like genius. I guess the genius act has something where we can, like, burn coins or we can, you know, we can shut down, you know, the. You know, anyone we want, right. We know tether has been able to say, hey, that's not going to go. These are not things now. I know bitcoin is able to move without tether. I know it's able to move. You know, it is. It is trustless, it's permissionless. It's all these things. And most people probably don't know that. And, you know, countries aren't going to take that risk around those types of things. You know, they would just. I think people will fall back to what they know versus, hey, you know, taking that risk.
- [47:19]
B
Well, I know you've gotten a lot of flack for sharing that. You sold your Bitcoin at around, what, 23, 24 ounces of gold per coin? You expect for us to get that whoosh down and you're going to buy back lower. I wanted to kind of dig into this with you because I heard you say on another podcast that one of the reasons you sold, or what you did with it, is you ended up paying off another house, your lake house, where you get to watch the sunsets. I really enjoyed that. That interview, because you're right. Time is scarce, sunsets are scarce. But you mentioned that you got one of those low mortgage rates. I mean, everyone would kill for one of those right now. So, like, the idea of that even. Even to me, I think if I could get something where I pay back like 3, 4%, and Bitcoin's appreciating at at least 20% per year. That's a nice trade. I would love to have that mortgage rate. So why did you do that? And also, I was thinking about the capital gains tax. If you sell bitcoin, you have to pay taxes. So if it crashes to maybe 60, 70, you're not even really making that much on.
- [48:18]
A
Right.
- [48:18]
B
Like, can you break that down for us.
- [48:20]
A
Yeah, the mortgage thing was really a, that was a tough one a little bit for me. And you know, because I think, I think I had a 30 year fixed jumbo at 296, something like that.
- [48:36]
B
I mean, what are you doing, Luke? I, I would have taken that.
- [48:42]
A
Yeah, no, I ultimately I wrestled with it a lot. I wrestled with a lot.
- [48:50]
B
That was free money.
- [48:51]
A
It basically was free money. And against bitcoin at the time, it was. What's the whole bitcoin thing in theory, if I bought it with bitcoin, the old Coinbase commercial, The price of houses going down in bitcoin terms, the price of that has gone down a lot in bitcoin terms already and rates have adjusted somewhat to that. So there's some of that. But that's the end of the day. The real answer, the real reason for me is I am, I think, I think I've come to the conclusion that we are now completely off the reservation in terms of where we may end up going over the next couple years. And I just felt like I wanted to have no debt whatsoever and basically having that freedom of, hey, I have no debt, I can now take on a lot of debt to buy some other asset that's pretty attractive and there's some assets I have some eyes on already. I'm not going to talk about it here because it's, you know, it's still in the formation stages. You know, it's like three, four years out that I'm, you know, looking at maybe doing something three, four years out. So it was sort of clearing the decks for something potential like that. But the bigger part is just I, I, I don't know what, I don't know about what's going to happen the next two years around. Sort of everything, right? Like the geopolitical side, the monetary side, the AI side, all these things. And so for me I'm just like, you know what? I think we may go through just this huge disruptive period of time, this culmination of the fourth turning and I don't want to have any debt. And that was just sort of the calculus of. Because it gives me so much optionality. It lets me sleep better at night, it lets me enjoy, it lets me enjoy the lake house better. If there's not a note on it, as cheap as the note is, that was, that was really, you know, it is a, it's, you know, it's pro. It probably was the wrong thing to do from a financial standpoint, but it was the right thing to do from A. From a state of mind standpoint, just given the rising discomfort with what I'm seeing, and I would date that back. You know, let me be specific. When they shot Charlie Kirk, I think a lot of things changed. And I think that was where I started thinking differently about some of these sort of fourth turning, you know, the Overton window, about what could happen over the next two, three years. And my Overton window, which is I think usually wider than most people's anyway, blew apart entirely. Like, I think there is. And, and for me then just like, all right, well, in that world, you know, I took a couple of months. I was like, okay, I'm, you know, I was watching is watching to watch it. And then, you know, the, the. Some of the, you know, what do I do with. What do I do with. With. If I'm selling bitcoin, I don't want to sell bitcoin. You know, technically I sold bitcoin because for the reasons it's highlighted. But I don't ever want to put my money into something that is not bitcoin. Like, and so you look around and go, okay, I put some of it in gold. Some of I put in the cash just to kind of give me that optionality. So. But I, I didn't want to put it all, you know, I don't want to put all into gold. I didn't want to pull into cash. I wanted. What's the other bitcoin like thing? To me that was like really obvious, you know, for me it was, hey, lakefront lot, right? Lakefront lots. You know, bitcoin has not done against lakefront lots what bitcoin has done against the median home value. And so that was part of it too, was like, okay, you know, the financial engineering side, yeah, the mortgage rate, I'm like, I really wrestled with that. But that's, that's, you know, it's really about my Overton window of what could happen over the next couple, three, four or five years is way wider than I think sort of a lot of people's. And it's a bitcoin like asset. And you know, you can't go, you can't go broke not having any debt. I'm a very big freedom guy, right? At the end of the day, if I have no debt, I'm free.
- [53:39]
B
No, I totally understand. You know, on the bitcoin side, though, you predict this whoosh down. It feels like from when I, when I read your writing that it's, it's almost imminent. Like, like this year, next couple of quarters before this nuclear print comes. So I'm assuming you would maybe want to get back into bitcoin before the nuclear print and it really takes off, right? So like is that still the way you're thinking about it? Are you looking for a certain price like when everything crashes? I'm thinking back on the recent ones when we had you know, 20 or even during the COVID crash. Things went down temporarily and then bam, we hit these new all time highs that a lot of bitcoiners probably didn't expect to happen so quickly in a given year. And now we're on the other side of it. We're like, when is this going to go up? When is this going to go up? So do you have a plan? Are you waiting for a certain price to enter back in or are you really sitting out for the next couple of years potentially?
- [54:38]
A
No, I still have exposure there. I still own some bitcoin and I still have exposure through private equity investment that's in this space. So I still have exposure there. It's just, it was just my, my, my, it was such a big part of my liquid net worth relative to what was a falling conviction in the near term, you know, sort of clarity around a lot of sort of, you know, A, okay, it's not trading like a neutral reserve asset. It's trading like high beta tech. B high beta tech looks like it could have a really bad couple of, of months or quarters. C, the technicals look like absolute death and they've crossed over in a way that has 100% batting average, you know, bats a thousand and foreshadows a 60 to 70% drawdown for the entirety of bitcoin's life. And I just said okay, that's, you know, that's, that position is too big. Given that those realities, I, I, for me, I think, you know, I, I think I said to someone like, you know, bitcoiners will hardcore bitcoiners have forgotten more about the technology than I'll ever know. Where I feel like I have an advantage against a lot of bitcoiners is I've been advising institutional investors for 30 years and what those technos, when those charts break down on a long term basis, whether it's true strength index or whether it's moving average convergence divergence on a monthly chart, the way they have broken down emphatically, what I can tell you is that you know, if you're counting on institutional investors to like sort of, you know, run it from you know, 90 to you know, 150 like that if that's your plan, like that's probably not going to happen without some major catalyst. That's not how institutional investors act. Those charts, they're going to sit there and just go, I'll wait, I'll wait. There's at the very least that suggests there's a whole lot of wood to chop for Bitcoin technically against both the dollar and against gold. And so yeah, I think, you know, I think you'd easily go to 60. The the real for me. And again this is an issue of position sizing. When it was as big as it was, this was really uncomfortable. For now it's like, okay, if it happens, it happens. It's not the end of the world. What happens if we do get an all out trade war? What happens if Liberation Day doesn't get turned around right away? What happens if, you know, it's not like it's only Michael Saylor out there buying you know, money, you know, borrowing money and buying bitcoin. There's a whole lot of treasury companies now. And what happens if the world isolates the US for a time which is starting to look like it's happening by the way on some levels. What happened to those con, what happened to those, you know, if we go into a recession, which there's some metrics that looks like we're heading into it, what happens to the cash flows of those businesses? Do they have to turn seller? You know, do, do the treasure. Are the treasury companies of this cycle, are they, are they the sort of, you know, the forced seller like we saw around FTX in 2022. Right. The reason in my opinion why bitcoin went below its prior cycle high, remember in 2022 it's like, well don't worry. Bitcoin has never gone below its prior cycle high ever than it did. And why did it do that? I think it was because there was just blood in the streets. People had to liquidate around ftx. And like I bought a lot then because to me it was like crystal clear. That was like, okay, like this thing's, you know and then you get what's his name on Rogan saying it's going to zero. Like all the signs were there to me. I just like when I said my, my Overton window is a lot wider that I think than most people's most of the time. And I thing is almost wider than almost everyone's now is like what if that happens? And that's what I mean when I say that, like what, what if, what if? Look, the banks, the People that have loaned them the money own the bitcoin, not the treasury companies. At the end of the day, right, if, if we have a bond market rupture for three months, if the JGB market, I don't know, there's, there's a lot there that can happen. A risk where suddenly you wake up and go, oh, all right, 60, 70 on Bitcoin you could see that that's just normal bitcoin volatility. Most people laugh at that, at that. What if it goes to 40? What it goes to 30? It's not my base case, but I could see that happen. There's a lot of levered buyers that might have to sell and that's when you can get these types of unbelievable, you know, sell offs. So we got last time. So again, to be clear, I don't think that's going to happen. What I'm saying is my Overton window is like wide, wide, wide. And what I can tell you, one of the advantages having a lot of people follow you on X and a lot of them being bitcoiners is people like, oh, sentiment is so bad. I'm like, I can assure you sentiment is not bad because I literally have been like muting 25 people a day telling me that I am the biggest moron ever and it is about to go to 200. Like maybe I am and maybe it is, but like I just have a hard time believing that like you know, 30 randos a day telling me I'm the biggest moron ever is a sign that bitcoin sentiment is like washed out. Like those people will be crying in their beer like it's never going up again, like they were in 22, like they were in early 23, like they were in, you know, 18, you know, so I, I, you know, again, it's not my base case, but that sort of, I think frames why I was willing to take the capital gains hit. You know, it was like I, I, I, I look at the setup and go like, you know, to have a really big setup you got to have a lot of conviction in one way I've got that you've got, you know, in terms of just the sentiment you've got to have, you know, the, so the positioning and then you've got to have the leverage that's got to be unwound and the leverage is there. You know, then it really comes down to how, you know, comes down to a, a bet basically. How much pain will they take on the downside they, the policymakers before they have to Start printing money. But like, that's, I guess the last thing I would layer in there in terms of my, my Overton window being wider about all this is. Look at what we're looking at, what we were discussing before, which is the monetary, the inflation's picking up as this we have in a stagflationary type, readings of a lot of different things. And so look, if risk assets really get waylaid here for a time, are they going to be in a big hurry? If silver's at 120 and inflation's picking up and you know, are raw materials are rising in price, are they going to. What if they just take a little longer to show up with the money printing, with the nuclear print? No one's, no one's asking that question. And to me, I'm looking at that going, look, I don't know what the odds are for sure that they take longer to show up with the money, but what I'm seeing in all these commodities ripping while underlying is sort of suffering while physical activity is kind of like, eh, right? We're in an ism recession still. I know the chances aren't zero. And it seems like too many people are pricing the risk at zero that they sit on their hands. What if the Fed, now this added into it, right? The markets are interesting in that the bitcoin chart did what it did on some of these technicals against golden dollar and breaking down the way it did. Okay, whatever. A lot of times the pro. A lot of times, most of the times the price will show you concerns before they happen, right? You don't, you don't know sometimes what the concerns are. You just know the markets are seeing something. They're smarter than all of us and so they're seeing this. And now you have this Fed fight that breaks out. What if the Fed is like, screw you, we're gonna, we're gonna assert our independence. We don't like Trump. We're just gonna sit on our hands and we're gonna let this whole thing burn down. Nobody's pricing that. Is that a zero risk? No, not in my opinion. After last week, I think it's well above 0% risk. So like, these are the kinds of. And again, it's all in the context of at the right size bitcoin position, eh, who cares? At a big chunk of my liquid net worth. It wasn't an eh for me at least, you know, for some bitcoiners, hey, great. But for me, I just, you know, I know I'm wired. And then, you know, that kind of factors in some of the other things we talked about.
- [63:39]
B
Yeah, it's really interesting. So you're looking for more of a bottom signal that you have not seen yet. Well, I mean, I know a lot of people are watching what you do closely because you will be legendary if you're right on this. Right. I mean, because you sold at the top on the last cycle. 20, 21. Back on the low.
- [63:57]
A
I mean, I sold it 48 to 50 in, like, summer of 21. So to be clear, like, look, it went to 66. 66 in fall of 21. And, you know, I started buying some back there. I didn't buy a lot there, but, you know, I. I was sort of daily cost and pseudo daily cost averaging for a while, and then I really loaded up under 30. And even then that felt, you know, 30. Oh, this. What a deal. 28. What a deal. 24. What a deal. 20. Right. There were memes, you know, that were being done at, like, 19. That's never leaving 19. And, you know, it gets a 16. I'm like, you know, so, you know, I. I did fine the last time, but I. You know, it doesn't do anybody. You know, it was. It was. It was. I was. It was better than average. I wasn't. I wasn't perfect. But that's what you try. That's what you're trying to do in. In Marcus. Right. You're trying to capture the fat part of the middle. I did that okay. Last time. This time we'll see. Right? Like, I mean. I mean, and I should really preface as well, like, I'm not gonna jump on X and be like, hey, here's. I just changed my mind.
- [65:07]
B
No, you're not gonna let us know when you're coming.
- [65:10]
A
No, I'll say that to my clients, and then I'll wait, and then, you know, I'll. I wait an appropriate period of time for, you know, myself, then I'll do it. Then, you know, to Randos on X, I'll. I might say something. I mean, I'm sure I will eventually, but, like, I don't, you know, and my mind could change. Well, you saw how fast it changed. I saw those charts. I'm like, oh, yeah. Given everything else I was seeing, which was, why isn't this thing acting like a neutral reserve asset? Why is it acting like the NASDAQ with leverage? And I don't like the nasdaq if this isn't going to act like a neutral reserve asset? And then I saw those charts. It was like, oh, okay, boom, I changed my mind. Let clients know, wait, take action personally. Wait, disclose, then so, you know, just caveat emptor to anybody who's like, that's, that's, that's my M.O. so you know, I, I, it's always to the clients first. Wait an appropriate amount of time for compliance, even though it's a commodity. But anyway, wait an appropriate amount of time, clients take action personally, then maybe I'll talk about it to the general public, you know, maybe, probably. I don't know.
- [66:29]
B
Do you think you'll have an ego about it if you have to buy back at like 115, 120, 130.
- [66:36]
A
All I want to do is help clients make money. That's has nothing to do. Like, don't care if I'm wrong. I will be like, I'm wrong. Here's why I'm wrong. Here's why I think it's it here. And like to me, you can't have an ego about it because it just, this is a humbling business. Like is a very, very humbling, you know, very, very humbling business. So no, I, I absolutely won't. It'll just, I'll just change my mind.
- [67:05]
B
Fair enough. Well, I think you could be right, that it could drop, but I'm not trading it for one reason. Luke. I know the second I sell, we're hitting a new all time high. I'm telling you, I, I'm, I'm a top signal. So. Last topic I wanted to cover with you before we wrap up is AI. You talk a lot about the deflationary pressures on the labor market. Did you see that clip with Ben Affleck talking about writing? Some people have been commenting about it online how actually the writing is not that great. I have to be honest with you, sometimes I put in, I'm just curious because, you know, a lot of people are putting out articles and more long form today and I sometimes put it through an AI detection and it comes spits back out at me like 60% AI or 80% AI. And I'm like, this person didn't even write this. They're doing like an X competition for a million bucks. And I'm telling you, some of those were written actually by AI. So I wanted to get your thoughts because what Ben said is that the writing isn't great. You need humans because it kind of reverts to the mean and it's not even that good. But when I read your writing, it seems like AI is just so far ahead of us and it's going to be able to pretty much make everything from scratch on its own. So can you share your thoughts?
- [68:11]
A
I think for me it's more nuanced. I saw the Affleck thing, I thought it was very good. He's very bright and really understands things intuitively about it. For me it's less that it's going to take over all our jobs right away and it's more it's going to take the marginal job faster than people think. Because what Ben Affleck doesn't say because he's, you know, he's smart, he probably doesn't want that smoke is like again, inverted. What's the dog that doesn't bark? What percent of American white collar jobs that pay over $80,000 a year, let's say, could be done by that AI? That to me is the most important question, right? We know that it can do the job better than college graduates because college graduate unemployment right now is 25%. It's the highest it's ever been. It's the highest on record.
- [69:16]
B
Yeah.
- [69:19]
A
And so it's less about it's going to take all our jobs faster than we think and more it's going to take the marginal job faster than we think. And in a highly levered system, people are underestimating how fast that's going to blow up the banking system, right? It takes, it takes, you know, look, you get paid $100,000 a year to be a mortgage broker. Look, no disrespect to mortgage brokers, but giving money away to people isn't that hard, right? It's not that a machine can do that much more efficiently than a mortgage broker. They can read the data faster, they can come to a conclusion, all those things faster. They can find the list. You know, medical, claims processing, these types, right? Like these types of high paying white collar jobs, you know, commercial lenders. You had 10 commercial lenders. Why don't you have two and then do the rest with, you know, AI agents. AI, you know, you don't need the other eight. I mean, no, again, no disrespect. It's not that hard a job. You're giving money away, you know, you're just checking ratios and giving the money away. Machines can do that better. And so as these high paying, relatively high paying, good jobs that come with health care, you know, again, as you have a new it's line theory every year we got a new crop of graduates coming and now AI is crunching sort of that down so you end up with rising unemployment rates Check. You end up with wage deflation. Check. You end up with job losses. You end up with, you know, hey, you know, look to the left, look to the right. I mean, I was at a conference a year ago. They showed an app where, you know, take a picture of your skin. Boom. Cancerous. Not cancerous. Well, you know, done very highly accurate. And if it is, then you go in and see, well, what percentage of appointments of dermatologists are, you know, hey, cancerous or not cancerous. It's a good chunk. Now all of a sudden their revenues are down because a machine can do it for free. Okay, well, we don't need 10 dermatologists, we need six. What do the other four do? I don't know. How do they pay their school loans? I don't know. How do they pay their mortgages? I don't know. Okay, so what happens? Default ratios, they start ticking up like that's In a purely equity based system. This would be purely a social issue, purely a political issue. What do we do for these people in a debt based society? A debt based currency where everybody's levered to the max, you know, where the system's levered to the max. This thing will break. AI will break it so fast. And that's, you know, that's what he doesn't talk about. Right. There was an article a couple weeks, a couple weeks ago back in October. You know, it's not so much the writers, you know, in Hollywood, but they're talking about how like unemployment rates in Hollywood are stretching out because AI is helping this guy. He doesn't need five people, he only needs him and AI and you know, so now this guy's behind on his house payment. Like they literally were talking about this. It was a Wall Street Journal article from October of last year. So it's, it's not as with so much else, it's not the first derivative per se where I think there's a healthy. I think he raises very good points. I think there are things that there's going to be high level work and be very difficult to replace. But the question, I don't think anyone's asking because a, it's not polite, but again, I'm from Cleveland, so whatever. Like how many people that are employed in the US workforce are doing things that are that hard to do on a white collar side, you know, relative to the can the AI do it better? And I don't know what that number is, but in my opinion that number is way more than what people think. And then if I'm Right. Which I think I am. But if I'm right, then I know the analog. Right, because it's like, you know, I've heard some of the same thing. Right. Well, the Chinese will never be able to do the detailed skilled work that our, that our union guys will. How'd that go? Right. U. S manufacturer that China was just, was just AI productivity miracle 1.0. And manufacturing employment went down 35, 7 years, 20 in the first 2, 3 after China went into WTO. So I think there's too much complacency around. You know, again, it's partly because we're such an optimistic society. Like, like really, how hard are some of these white collar jobs on the margin? You know, do you really need 10 of them? Because if you only need six, holy cow. If you only need three and the AI does the rest, which I, you know, you probably can probably somewhere between three and six in some of these, you know, sort of mid level. How are they going to pay their mortgage? They're not. How they gonna pay their car? They're not. Student loans are what they are. But again, if there's no pressure from A.I. why did we just extend the A.I. or excuse me, why do we just extend the, the grace period on student loans? Again, Again, dog that didn't bark. If everything's so star spangled awesome, these people should be able to pay their, more their, their loans, no problem. Yet they're not. Those aren't really the problem because the government underwrote those anyway, so who cares? It's the private side, the consumer loans, mortgage, credit card cars. We know how that goes. And it doesn't take a lot of those, right? How many of those loans those banks have and what's the capital slice underlying them all? Doesn't take for 20, 30% of those to go bust. Takes less than that.
- [75:25]
B
It's so fascinating, Luke, because it seems like most of our labor market is trained for the financial economy rather than the material economy economy. Right? I mean, no one's going to school right now to become a welder or to learn how to smelt some of the industrial components we need. Meanwhile, I remember when I was an adjunct professor at USC, all my students wanted to be YouTube creators. They wanted to create stuff. And now have you seen those videos right? Where like, it's like a dude in Asia, but it's, it looks like a woman on.
- [75:53]
A
I saw one of those. I'm like, oh my God, like all of the, like all of the, the pornhub stuff is done, right? All of the all of the YouTube or the. What's it? OnlyFans, not porn. How the only fans. The only fans girls are done. They've been. Some of these girls were making a lot of money, and now it's some Indian dude who looks like one of them, which is.
- [76:14]
B
And it looks more and more realistic.
- [76:16]
A
It's great. It's crazy, I know, but it's.
- [76:20]
B
It's crazy. But it's also scary. It is like, what are. What is everyone going to do? Because all. A lot of these people got liberal arts degrees, and it's very hard to transition into another. And you talk about it in your writing. It's not just like the actual skill set, but like also mentally to go from thinking you're going to be the next, you know, creator on YouTube, so you have to go work in a factory to build something for industry. I mean, that. That's like impossible. Most people would say, absolutely not. Just give me something from the government, right? And. And then we see, like in Minnesota, all this fraud. You have 50 daycares. They may or may not have children, but they're like racking up seven figures from the government. I mean, what are. What world are we living in? I'm so confused.
- [77:01]
A
You know, I had a friend who emigrated here from Ukraine. Friend of my wife said she. She's like, this is very familiar with the Soviet Union in the 80s. A lot of this stuff that's happening here in the US I see. And I was like, you know, when you offshore, you know, when you offshore your industrial base, when you have rapid technological change that displaces a lot of people, people shift to the government, financialize. Like there's, you know, it's never one to one, but there's a lot, you know, people have talked about this financial nihilism. People like, hey, live for today. Or, you know, I mean, look, you can turn on, you know, just next turn on your TV and just pay attention. Get the Hulu thing with the ads in it. When your next NFL game you watch, what is it? It's gambling left and right, right? They. They want to get like. As a father of three sons, I think it's disgusting. They, like, they're basically trying to create gambling addicts among young men. And I. And, you know, it's terrible. Shame on them. Then they also have, you know, the athletes talking about all of these, you know, the athletes and then also the Schwab commercials, right? Hey, look, we can do all this stuff with like a virtual advisor, right, Sofi, or this. Like, you don't need what used to be a white collar team because it, you know, you can manage it. How can again what is that? AI is that robotics? That productivity? I don't know what you want to call it but I, it tells me there used to be you know one or two or three financial advisors that aren't needed there anymore. And of course you know it's America, right? So it's like 16,000 drug ads for all the boomers and for what have you. But like when I was, when I was a kid, you know the two minute warning was Alcoa's fantastic finishes. Right. Alcoa was a big enough corporate, you know the aluminum maker, you know co is fantastic finishes and it was like showing the, you know the great comebacks in NFL history. And you know if you're again I'm dating myself but you know people my age or older, they'll remember these and so yeah we've gone from in one lifetime, you know I'm 50 but I'm not, you know, 80. We've gone in 40 years. We've gone from alcohol's fantastic finishes to gamble on the game while the game is going on on your phone and you know hey you you know financial advisor or you know you only need your phone and, and hey you know here's a pill, you know that's, that's which kind of goes back to the beginning point of like great, but don't go to war because you can't go to war with gambling apps and stocks and pills. Especially when a lot of the ingredients are made in China by the way. Right? No one ever talks about that whole separate discussion.
- [79:53]
B
Yeah, it's crazy times, Luke. Funny story though. I actually visited an old Alcoa plant that was turned into a bitcoin mining facility. So we are repurposing some of those old factories and operations. All right, we're out of time. Luke, this has been so great. You're a wealth of knowledge. I love getting your newsletter. I recommend it to everybody. I'm going to link it in the show notes. Final thoughts.
- [80:15]
A
No, I think, I think pace yourself because the rapid pace to this year, I don't know. My gut tells me it's, it's going to be one of those years where it's, it's going to be rapid paced and accelerate. Maybe we'll get a little pause mid summer but then you know I think it's going to be pretty event packed year.
- [80:38]
B
I would imagine. So I hope you get to buy back in me too at a cheaper cost. Basis. I hope that for both of us, you know, it won't be bad. I'll scoop up some cheaper stats, too. But I think. I think we're going to do well this year. I guess we'll see. Luke, it's great to have you. Thank you so much. I'll see you soon.
- [80:54]
A
Great being here. Thanks for having me on.
- [80:55]
B
Natalie, thank you so much for checking out this episode of Coin Stories. Make sure you're subscribed to the show so you don't miss any new episodes. If you can, turn on those notifications and leave us a positive review, they really help the show grow organically with new listeners. We have a free weekly newsletter. You can sign up@thenewsblock.substack.com this show is for educational and entertainment purposes only. Nothing should constitute as financial investment advice, and you should always do your own research. I'm always open to feedback and guest suggestions, so please feel free to reach my team@infoalkingbitcoin.com I'll see you next time.