← TFTC: A Bitcoin Podcast
TFTC: A Bitcoin Podcast
#679: Why Central Banks Are Panic Buying Gold at Any Price with Gary Brode
01:04:44
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- [00:07]
Gary Broad
You've had a dynamic where money's become freer than free.
- [00:11]
Marty Bent
If you talk about a Fed just gone nuts, all the central banks going nuts.
- [00:16]
Gary Broad
So it's all acting like safe haven. I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins. In the world of fiat currencies, Bitcoin is the victor. I mean, that's part of the bull case for Bitco.
- [00:32]
Marty Bent
If you're not paying attention, you probably should be.
- [00:34]
Gary Broad
Probably should be. Probably should be.
- [00:36]
Marty Bent
Gary Broad, it's been too long, sir. Welcome back to the show.
- [00:41]
Gary Broad
Thanks for having me back, Marty.
- [00:43]
Marty Bent
Well, we were just discussing before we hit record, the last time you're on, I believe remember, is in the midst of or right before the tariff tantrum. And regardless of whether it was right before or right during, I think your call was pretty prescient, is that this is going to take time to see the sort of ramifications of a shift in trade policy toward tariffs to play out. And so we've had about eight or not eight months, like six, seven months now of the implementation of the tariffs. What is your, what, what are your thoughts on how this has played out so far as it pertains to tariffs specifically?
- [01:31]
Gary Broad
So, you know, back when we had Independence Day, roughly six months ago, seven months ago, something like that, you know, what I said at the time was, this is not going to be the disaster people think it is. You had all these fiat economists screaming, oh no, we're going to have horrible inflation, it's going to crash the economy. And none of that has happened. And to their credit, some of them said, hey, you have to give it time. It takes a while for these things to work their way through the supply chains. But here we are, and we're now a day away from November, and we're just not seeing the kind of goods inflation that indicates any kind of disaster or, you know, any kind of massive slowdown. Regardless of that, I think, you know, there's a huge error in the academic models. You know, Porter's theory of competitive advantage, it makes sense in a classroom and I'm a free market guy myself, but the issue with this stuff is the United States has been outsourcing its manufacturing capacity to lower cost partners. You know, I use that word very guardedly, and that's been going on for about 40 years. And so what happens when we can no longer make our own pharmaceuticals, our own chips? You know, there are all sorts of aspects of our economy that we no longer have control over. And you know what happens when we get to the point where the only thing we export is dollars, so it's not a sustainable situation. And one of the things I really like about what President Trump is doing is he's bringing back manufacturing to the United States. We have trillions and trillions of dollars of companies saying we're going to build manufacturing capacity in the United States in order to avoid these tariffs. That to me is pretty good way around this.
- [03:26]
Marty Bent
And touching on the point of it's going to take time to really see the full ramifications of this policy shift. When do you think we'll be in the clear? Do you think we're in the clear now in terms of understanding the effects of tariffs? Is it going to be a 12 to 18 month window where it's like, okay, we're in this period where we're adjusting and we'll have clear information once we get a year, year and a half out, or is it safe to say now that this is moving in the right direction, we should be leaning in harder?
- [04:02]
Gary Broad
So I think we're leaning in the right direction. It'll be interesting to me to see if the fiat economists who are screaming that this will be a disaster, but saying it's going to take a little time, you know, we'll get CPI data and we'll get like PMI manufacturing data over the next couple of months. And it'll be interesting to me to see if there is no gigantic spike in goods inflation if they'll just admit we got it wrong. And if you take a look at, you know, the history on this stuff, one of the ways that the academic theories have gotten it wrong is people do substitute for different goods, but also when there are tariffs, you end up with an increase in domestic manufacturing. And that's exactly where we're heading. The thing that I'd be watching for right now is all the companies who have said we're going to build trillions of doll of production capacity in the United States, I want to see them follow through on it because that's, that's the long term win is to put Americans back to work building things, making things. And I get that I sound, you know, like in 1980s and 1990s, you know, Reagan commercial saying that. But there is something to it and outsourcing all of that, you know, to Asia or to Mexico, that's again not sustainable. It's not something that I want to see happening long term. You know, we're in a situation right now where China has just basically exercised influence over US Trade policy by threatening to withhold certain things that we need. Do we really want to be at their behest? I think that's not a good place for us to be.
- [05:41]
Marty Bent
Yeah. It's been a topic on the show for the last few weeks is the posturing between the US And China, particularly around rare earth metals. Obviously. Scott Besant, Trump meeting with Xi in his cabinet this week. Are you optimistic that something good can come out of these meetings?
- [06:02]
Gary Broad
Yes and no. I think short term. First of all, they've said we're going to come to an agreement. And the smart money was always on them coming to an agreement because it's in both sides interest to do that. The thing that I think this particular White House understands, and I wish more Americans understood, is China is viewing this as temporary. Right. The thing that they were using as leverage is access to rare earths, which we need for things like technology, auto manufacturing. You want EVs, we're going to need those. And a lot of our weapon systems require that. Advanced weapon systems, you need these kinds of things. So China, by saying you can't have these things that they have an almost a near monopoly on, you can take entire US industries offline. And that's, that's where we are. It's not an accident that China has such a monopoly on this. And you know, one of the things that will happen is if other places start to produce rare earths, you know, China can drop their price, they will lose money. They're willing to lose money in order to maintain market share or, or basically monopoly market share. This is not an accident. And so, you know, I think China views what's happening here. We'll have an agreement, but they view it as temporary while they continue to build strength in areas where we're going to need them. And if the United States doesn't understand that we need to build our own capacity again in rare earths and pharmaceuticals, in semiconductors, you know, these kinds of, of critical industries. Without that, we're going to be in trouble because what are we going to do when we don't have something to negotiate with?
- [07:50]
Marty Bent
Yeah, and that's China this year, particularly with the rare earths, the tariff saber rattling between the US and China. And then, I'm sure you've noticed, but the sort of shift towards this alternative settlement network by putting a lot of gold, registering a lot of gold on Warren at the Shanghai exchange and beginning to broker deals with, with other countries to settle trade deals in yuan that can easily be reconverted into gold. Because they're putting all this gold up. And so it seems like China is like moving their pieces on the chessboard to say, hey, us, we have a strong economy, number one. Number two, we're not happy with the way you guys are weaponizing the dollar system and are beginning to set up alternative rails to sort of hedge that exposure.
- [08:44]
Gary Broad
Yeah. That brings me to something where I've had multi year arguments with people. If we go back to, I think it was the first quarter of 2022 when the Biden administration basically stole hundreds of billions of dollars of Russian dollar denominated assets. And I said, this is a bad idea. And people got angry at me. They said, oh, no, you're supporting Russia? You like Putin? No, that's not it. I'm an American. I want what's best for the United States. And what we've just done is we've communicated to the rest of the world that the dollar is something you can rely on only as long as you stay in the good graces of Washington D.C. a place that switches leadership every two to six years. Right. I mean, we just made the dollar unreliable. By doing that, it didn't stop the Russian war machine, it didn't slow Putin down, but it did hurt the United States. On top of all of that, I've had this multi year debate with people where the BRICS coalition, Brazil, Russia, India, China, South Africa, now that group has grown to a couple dozen countries that encapsulate more than half the world's population. They're saying, we're going to come up with our own BRICS currency. And, you know, so we need to take this seriously. And people have, you know, they've argued with me on X, formerly Twitter, and said, you know, hey, they can't do it. Who will trust them that, you know, they don't really have the capacity, they're not coherent. Okay, fine, but we should be concerned about the fact that more than half the world's population is looking for an exit for the dollar. And you know, I've, I had never owned gold before 2020, but in 2020, I started buying it in size. I've never sold anyone. I've just held that position because you have a situation where the dollar is being debased at an increasing rate, the purchasing power of the dollar is declining. But also you have central banks all over the world that are saying, we want to sell dollars and buy gold and we're just going to hold it. And they're not price sensitive. Right. The central banks buying gold don't care if they're buying at $3,000 an ounce, $1,500 an ounce, where I first bought it at $4,000, it doesn't matter. They're just going to stick it in a vault.
- [11:09]
Marty Bent
Yeah, well, and that turns to domestic monetary policy here in the United States. And I think throughout the course of this year, it's been pretty clear that the Trump administration, particularly Scott Besant, wants to align the goals of the Federal Reserve with the goals of the treasury and begin to erode the perceived demarcation between the Fed and the treasury, the Fed's independence. And there's been a number of things that happened this year, but obviously we had a Fed meeting this week, and I believe it was last month's meeting, or maybe in Jackson Hole, Jerome Powell had to come and make an about face and acknowledge that tariffs weren't as inflationary as people thought they were. But in recent months, it's this idea or this theme that you have silver rates blowing out, you have the standing repo facility being tapped, and many people wondering if a liquidity crisis is on the horizon in the back end of the system. And yesterday cut 25 bips. And it looks like inflation is not screaming like the Fed thought it would, at least as it pertains to CPI inflation. What do you make of the Fed's decision this week? What's been happening in recent months, and this sort of quarreling between the treasury and the Fed?
- [12:36]
Gary Broad
Yeah, so I have a lot of thoughts on that, but first, I actually want to address something that you said. One of the reasons I love talking to you already was the way you said the perceived independence of the Fed. And again, like, this is a disagreement I've been having with people. You know, you have all these people saying, you know, the Trump administration is, you know, they're changing our norms. They're, you know, they're violating the independence of the Fed. Okay. Marty, you know as well as I do the Fed has never been an independent institution. For the first couple of decades, the chairman of the Fed and the Treasury Secretary were, by law, the same person. FDR used the Fed to finance his whole, you know, New Deal. Lyndon Johnson, you know, literally picked up Fed Chairman Arthur Burns and slammed him into a wall, literally, strong arming the guy into lower rates. President Nixon, he did the same thing. You know, he didn't slam anybody into a wall, but he, you know, he pressed for lower rates. Got it. And we had the inflation of the 70s. You know, this has been a constant feature, feature. You know, I'm on team and the Fed. But we have never had a politically independent Fed. And every president, whether Democratic or Republican, has always wanted a Federal Reserve that would give them easy money policies so they can juice the economy. Every president wants to point to lots of economic growth, even if it's meaningless. Nominal growth. Right. It's why Washington spends so much money right now. They can all say, you know, look, while they're stealing, they can, they can just say, you know, look, we have GDP growth. Well, you know, is it really, is it, is it really product or are you just, you know, wasting our money and counting it on your own scorecard? Right.
- [14:33]
Marty Bent
Every $1 snap benefits contributes $1.80 to GDP. If you knew that.
- [14:38]
Gary Broad
Yeah, great. Yeah, I'm glad to know that.
- [14:42]
Podcast Host/Announcer
Yeah.
- [14:42]
Gary Broad
The government multiplier, that is, you know, if you think about it, that is one of the most incredible examples of a psyop I've ever seen where the government, which even when it's effective is not efficient, is trying to convince us that every dollar they take from us, every dollar they take from the productive private economy and spend on their own prerogatives, somehow leads to more benefit for us than we would have produced ourselves. Right. Like literally the non productive part of the economy is taking from the productive part of the economy and saying we're producing a $80 of benefit for every dollar we steal from you or $5 or, you know, like guys like Krugman, you know, would make a living talking about the multiplier effect. It's. If you just think about it for a second, of course that doesn't make sense, but it's an incredible psyop that, you know, the newspapers reported and like, how stupid do we have to be to accept that as the truth?
- [15:44]
Marty Bent
I think people are waking up to it, though. I mean, that was the, I mean, that was, it seems like one of the road scripts that was handed to Democratic politicians last week at Tim Waltz, Keem Jeffries, I believe, tweeting it out like, hey, we need to turn snapback on because it's actually stimulative for the economy. It's like this doesn't really make sense.
- [16:07]
Gary Broad
One of the things I think is really interesting. Look, Marty, I know one of the things that you pay attention to is the Overton window. What are we really allowed to talk about? I have seen an incredible change in the last couple of weeks as we've come up on like, you know, the snap cliff. And previously, if we go back, you know, five or 10 or 15 years, it would have been unseemly to say, hey, I don't care about this program because we all said, oh no, you want people to be hungry, you want people to starve. And we couldn't have talked about it. My thread on X, my feed is full of people saying, wait, how many people are getting fed by the government? How many people are on benefits? Like there is this visceral anger from people who are working saying, wait, how many people am I feeding who aren't in my household? And this situation has actually ended up opening the Overton window wider where that's not what I would have expected to see. People are openly saying, we've got too many people who are on benefits.
- [17:15]
Marty Bent
Yeah, 40 million, 15% of the country. And to not come off as a sort of soulless, non empathetic individual. There are certainly people who may need some assistance, but if you look into the details, it's like you're supposed to be looking for a job. What you're allowed to spend the benefits on, you can buy any crap you want. It's becoming clear if you hop on TikTok and you find people talking about what people actually do with the benefits, there's a lot of people just selling them and just using as loophole to, to not have to work. And I think that's whether it's the SNAP benefits or the broader immigration conversation that's happening in the country right now, I think a lot of people are getting back to first principles. Wait a second, There should be rules. There is a rule of law. And if we don't, if we don't enforce the rules, whether it pertains to what you have to do to get these SNAP benefits or the rule of law of what you have to do to be here legally. As somebody who came from outside the country, people are saying, wait a second, like we're not following any of these rules and that can't happen anymore. You don't have a society. Why does the government exist if they're not enforcing any of these rules? That is the contract that we engage in as citizens with them is to enforce these pretty basic rules.
- [18:34]
Gary Broad
Yeah. And in fact, you know, one of the things people, you know, the conversation has to take place in this humane. We want what's best for people, we want to be kind. But I have more concern for my fellow Americans than I do for people who came here illegally. And one of the ways our government is harming our fellow countrymen is by taking people who came here illegally, giving them free housing, giving them these SNAP benefits, giving them food and basically covering their expenses. And what that means is that these people can work for below market rates. Rates, right? I mean, basically imagine, you know, you're, you're a blue collar worker and your job gets taken by somebody who, who's supported by the government, right? Who's like, yeah, I, I can work for lower rates, I can work for a lower wage because the government's covering my grocery bills and my rent. And that's, I, you know, why is it somehow wrong to express sympathy for our own people?
- [19:37]
Podcast Host/Announcer
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- [21:02]
Marty Bent
At the house too.
- [21:03]
Podcast Host/Announcer
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- [21:24]
Marty Bent
So go check it out. To your point, I think the Overture window is shifting. And that's what I what I wonder is, is there enough time between when these policies started getting implemented earlier this year and the midterms to really see immaterial effects that sort of gets regular Americans like you and I, maybe not like you and I, blue collar Americans specifically waking up and saying, oh, this actually did help me, I can get a job now. And when you think about immigration specifically as it pertains to rent and housing in all that, like pushing up the cost of real estate and exacerbating the housing affordability crisis, like if they're successfully able to cut the benefits of illegal immigrants and get them out of the housing, bring housing costs down, bring jobs back to market, bring consumer good costs down, then I think there's a good chance that people can say, oh, wow, this is actually working. We should lean into this harder.
- [22:26]
Gary Broad
Yeah. So one thing I think was lost in the data that we got earlier this year was you had a decrease in the number of jobs available, but you didn't have a decrease in the number of Americans working and wages went up. And you think, wait, how is that possible? These things shouldn't have existed together. And the obvious answer was you had people leaving, so you had fewer jobs available, but you had fewer people looking for those jobs, enabling Americans to hold onto their jobs and get wage increases. Right. They were no longer competing with illegal labor. And so what you had and Powell, he was careful the way you said it, but he talked about a labor market that was surprisingly imbalanced. This is a few months ago and some people may not remember, but I think people were surprised that you had so many things shifting all at once but remaining in balance. Now, one thing you and I should talk about is he had some other interesting comments in this week's press conference. But as long as we're talking about policy, it makes sense to reference what happened earlier. I think it was in the summer.
- [23:38]
Marty Bent
Yeah. What comments this week stuck out to you?
- [23:42]
Gary Broad
Well, you saw the market tank when Powell said that a December rate hike wasn't, you know, baked in. And I think, you know, people, anybody with a brain would have said, well, there's no universe where Powell would have actually said yeah, we're planning a rate cut for December as well. He was never going to say that, but I think it was the part where he said, far from it. Right. It was like this hawkish, hawkish message, like telling Wall street, don't, don't comment on this. You know, we, it may not be coming. And you know, people got really worried about a hawkish Fed. My take on it was very different. And I know you read the piece I put out on it, but my take on it was very different. You had the Fed cutting for the sixth time, you know, in this cycle with the CPI, which is understated, you know, at 3%, 50% above the 2% target, which itself is 2% too high. You know, what, what the Fed is basically doing, you know, they can talk about the employment market all they want, but you know, Americans would rather have 5% unemployment, which is, you know, 1% above that baseline and 0% inflation because inflation affects 99% of the country, whereas 1% of the country would be losing their jobs. And that's, you know, that's something that I think a lot of people are missing. But basically what the Fed has done is they've made it clear the 2% target is, it's gone. We now have a 3 or 4% target. And when you figure that the CPI is understated most, you know, most obviously in the difference between Case Shiller and ocr, the owner's equivalent rent, which makes the housing prices that people are seeing in CPI not reflect the reality, which is much more challenging unless you're selling a home. You know, what we really have now is a 5 or 6% inflation target. Right. And they just did that at the same time that they're saying, yeah, we're going to end quantitative tightening. Everybody was focused on Powell saying far from it, meaning we haven't decided on a December rate cut and got upset about it. But the reality is this was very dovish action by the Federal Reserve, right? You, you had the CPI going up, the CPI understated a Fed cut and the end of quantitative tighten. How much more damage is this Fed supposed to get?
- [26:18]
Marty Bent
Right, To Jerome Powell's credit, I guess. And to your point, what do people expect him to come out in November and basically tell you exactly what he's going to do in December? But you wrote it in your piece. The stock market is focused on, solely on expectations now, like forward looking expectations.
- [26:44]
Gary Broad
Yeah, and by the way, that's something that I find really, really strange. Right? So the, like, you know, last week the market was looking for a 3.1% CPI print. We got a 3% print. And so like let's talk about a 3% print means, right? You got a 2% target, which is just a made up number. It's literally. It was made up by a European. Yeah, like a guy from New Zealand is on a TV show, somebody asked him a question, he's like, you know, 1%, like he just made it up on the spot. But the Fed's mandate, as you know, is stable prices. That's a 0% inflation target that we should have. Okay, so they're going for the 2% target, which is not right. It's just made up. But fine. But we've been above that since the beginning of. It's been five years, right. Since early 2021, it's been five years. Right. And. And they cut. But you saw people the week before. When we get this CPI print, it's below expectations. And so instead of 3.1%, we got 3%. It's below expectations. Powell has to cut. Why? Why? The absolute number is still too high. Right? I mean it's. People are using buy now, paid later for their groceries because inflation is too high, because the cost of groceries is not up 1 or 2% like the Bureau of Labor Statistics tells us it is. Right. People aren't financing burritos because, you know, like it. They're doing it because a burrito and a Coke is $20 or $18. You know, whatever it is. Like people are suffering from inflation and the Fed just reduced rates. Right. And. And Wall street is saying they have to reduce because our expectations were 3.1%. You know, I follow the logic, but I don't agree with it.
- [28:39]
Marty Bent
Yeah. And excuse me coughing, number one. But number two, looking for. I forget it was the head of one, one of the banks. I thought it was Citibank, but I can't find the clip. But essentially he was. We're getting to the point where the bankers are admitting that because you have this dislocation between the stock market hovering around all time highs and the real economy, if you will. It was the first time I've ever heard a bank executive explicitly say I think people are flowing into equities to escape or outpace inflation. Equities are explicitly being used as an inflation hedge. They're not. People aren't going into index funds because I think the financials of the companies within that index are producing value and they're being productive companies making a profit and that may spit off dividends. It's like no, we need to escape this inflation. So we're just going to push all of our money into the stock market.
- [29:43]
Gary Broad
Yeah, so the stock market, Gold, silver, bitcoin, energy. Right. I mean, basically what this Federal Reserve has done is they are taking money from the 99% of people who are harmed by inflation and blowing up another asset bubble. So, you know, like, what are you going to do? I have a no black pill policy which I put into writing this week. Like I don't like it, but I'm not going to complain about it or whine about it or be upset about it. I'm just going to own the things that are going to benefit from more long term inflation.
- [30:24]
Marty Bent
Yeah, well, we're at this weird crossroads too where people escaping into equities to escape inflation. But then you have this sort of AI theme in the background too. And there's this idea that we need stimulus to be able to invest in the infrastructure that can manifest what many believe to be the holy grail, productivity gains. And not only that, but an arms race against China to be the dominant AI player in the world. And so you have that sort of external force implicitly begging for more liquidity so that they can go build out this infrastructure. And then not only that, but then you obviously have the effects of the productivity gains from artificial intelligence if they're real, which I think they are to an extent right now, and could grow stronger moving forward in that effect on the jobs market and the economy overall. It seems like an interesting variable that's been added to the mix in the last two years.
- [31:32]
Gary Broad
Yeah, look, first of all, I do think AI is going to be real. I do think there will be gains. I do think there's value to it. We're not there yet. You know, like my, my version of ChatGPT actually tried to send me to a place that was closed when, you know, I had a time sensitive situation and I said, why, why are you doing. I said verified information only. Why are you sending me to a place that was closed three years ago and it responded. I was just trying to maintain the momentum of the sit of the conversation.
- [32:07]
Marty Bent
Like what?
- [32:08]
Gary Broad
I, I'm not asking, like, I'm not looking to chat, I'm looking for information. Right. That said, I'm not buying the argument that we need lower rates, that we have to, you know, debase our currency in order to end up with AI leadership. And the reason for that is I'm going to give you two reasons, right. One is the idea here is that if we lower the fed funds rate, we'll have like a lower five year, lower 10 year. But that's not what happened. Right. The Fed cut. And what happened that same day, the, the 10 year yield was up 8 basis points. The next day was up 5 or 6 basis points. So you had increases. And the reason is the market is correctly baking in higher long term inflation. So we're getting higher bond rates. People have this weird idea that the Federal Reserve controls interest rates. They don't. The Federal Reserve controls the overnight rate. The bond market controls the rest of the yield curve. Right. So Federal Reserve, overnight, the bond market, everything from one day to 30 years. So the Fed doesn't have that much control. But the other thing. Yeah, that you, you got it right there. That was, that was on a rate cut. So, you know, I don't know about that. The other thing is AI spending is not being done by the general economy. You have half a dozen companies that are doing that. And those half dozen companies have fortress like balance sheets. They're doing this with the cash on the balance sheet. Google, Facebook, meta, whatever, Alphabet, Apple, Nvidia. These aren't companies that are going into the market to borrow and needing lower rates. If anything, higher rates bring them more income. Those companies have billions and billions of dollars on their balance sheets. Right. So the idea that if like lower rates just means their interest income is lower. So I'm not, I'm just not buying that answer. It sounds good, you know, at a cocktail party, but if you sort of look at anybody's balance sheet, it doesn't really hold up to scrutiny.
- [34:26]
Podcast Host/Announcer
Supremes.
- [34:27]
Marty Bent
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- [34:31]
Podcast Host/Announcer
They want to surveil more, they want to take more of your data, they want to follow you around the Internet.
- [34:34]
Marty Bent
As much as possible so they can.
- [34:36]
Podcast Host/Announcer
Control your speeds, control what you do. It's imperative in times like this to.
- [34:40]
Marty Bent
Make sure that you're running a VPN.
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Podcast Host/Announcer
As you're surfing the web, as we used to say back in the 90s. And it's more imperative that use the right VPN. A VPN that cannot log because of.
- [34:50]
Marty Bent
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- [34:52]
Podcast Host/Announcer
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Marty Bent
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Podcast Host/Announcer
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Marty Bent
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Podcast Host/Announcer
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- [35:34]
Marty Bent
Turn on Obscura, surf the web privately.
- [35:36]
Podcast Host/Announcer
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- [36:10]
Marty Bent
DFTC and so with all this in mind, how do you think people should be positioning themselves? Never doom. Do you think the ramifications of the Trump admins policies basically being able to get a track record and really get some teeth in terms of being deployed and having long term ramifications come to fruition, coupled with the AI narrative, whether you believe it's stimulative or not, if we're going to go after that, it could be really good for the economy. But tied to that AI narrative is energy, which we've been talking about for years. And if that is just an externality, a positive externality of the AI boom and that's all we get, I'd be happy with that is increased energy capacity expansion in the United States. And with that talking about overtime window shifts, it seems like the overtime window as it pertains to nuclear power specifically is completely been blown open and it looks like we're going to go after it.
- [37:19]
Gary Broad
Yeah, that's definitely where we're heading. I've been doing a lot of calls in that area and that's the way I'm playing the whole AI thing. And look, congratulations to the people who've owned Nvidia for the last few years. They've done incredibly well, but we're also at the point in the show where they're creating their own revenue, they're sending money to their customers that has to be used to buy their products. Right? And this is the kind of thing that, you know, you saw with Cisco 25 years ago. So, you know, that's, that's something that we're seeing right now. And you know, I think that's, that's a potential issue. You know, there's certainly huge demand for their products, but they're financing their own customers and that's a, that's a gigantic potential problem. The way I've been playing it is on the, the energy side because some of these individual contracts actually require that. Some of them require like, you know, 8 gigawatts of power or 10 gigawatts of power. And if that's the case, that's multiple Hoover dams worth of power worth of energy. Where is that going to come from? Because we don't have it. And so the way I've been playing this is, is on the energy side, I own huge amounts of uranium and that's, you know, because I'm a believer in nuclear. I own, you know, an smart company, small modular reactors. Like I think that's the direction all of this has to go. And you know, it takes 10 to 20 years to build a Gen 3 big nuclear reactor like you know, Homer Simpson works at on the Simpsons. But you know, these smarts can be built in factories and rolled out and, and you know, located very close to populations. There's no meltdown. You know, there's no kind of like Chernobyl or Three Mile island possibility. With these, you know, a core can be replaced when that has to be refueled, but there's no, there's no dangers, no radiation issues. So I think that's where all of this has to come from.
- [39:33]
Marty Bent
Yeah, and it's been interesting. I'm not sure if you've been following the announcements coming out of the Department of Energy, particularly as it pertains to FERC and demand response, but somebody has been paying attention to the US electricity grid and capacity expansion since 2018 when I got into bitcoin mining. It seems like with Chris Wright at the Department of Energy, who really understands this stuff, they're beginning to understand the problems and find unique solutions to expand capacity. So FERC came out and wants to fast track large load interconnection and basically use bitcoin miners or AI data centers to basically be like a buyer first resort for energy and wait for interconnect built, be built out. And I think that's another thing that's a good positive, is people actually understanding the true problem as it pertains to energy. We've had massive capacity expansion in the US Particularly in ERCOP and other parts of the country as well. But we've been lacking on transmission and interconnects. And I think the administration and the market more broadly is beginning to realize, like, okay, we are beginning to get our legs under us and remember how to build out an energy system and prioritize. And to your point about small modular reactors, I've literally been beating this drum for five years now, which is like, plop down the reactor, mine bitcoin with it, build out transmission, connect it to the grid, and then rinse and repeat. It seems like that is the express intent of this administration and organizations like FERC right now.
- [41:21]
Gary Broad
Yeah, I completely agree with you. And one of the things that's really interesting, at least as it relates to bitcoin mining and AI data centers, is we actually don't need to build transmission. Right? What, what I think what we're going to see is one of two things. Either individual companies like Google will. Will literally buy their own SMR and build a data center next to it, and they don't need to hook it up to the grid. Right? Just go from there. The other thing that we're seeing, like in Pennsylvania right now, is some of these big tech companies are buying power from the independent power producers and they're hooking in basically behind the meter. And so some of that is going to stop because it's getting expensive for Americans who just want to run an air conditioner. And they're saying, wait a minute, I'm competing with Facebook or Google for my power, and they can outbid me. And I don't like this. And it's going to lead to problems. But what can be done is because a lot of these places are already zoned for energy, and in some cases nuclear, you put an SMR on or near the site and just hook in behind the meter and you can go from there. The thing that I really like about what the Trump administration is doing here is, is they've correctly realized that the nrc, the Nuclear Regulatory Commission, basically, as soon as they took over in the mid-1970s, the United States stopped approving and building nuclear reactors. Over the last 50 years, we have closed more nuclear reactors than we've built. Right. And I think in the last, what we. What have we permitted and built to in the last 40 years? So the NRC, whether intentionally or not, serves to prevent any kind of actual building, right? It just. They require companies to submit millions of pages of paperwork and regulatory filings. And so what the Trump administration has done is they've started a, an accelerated program. They've got 10 companies enrolled in it where they can get accelerated review by the Department of Energy. And that, I think is phenomenal. And you know, there, by the way, there is a, an SMR company that's part of a terrestrial energy that just had their. They went through a de spacking. The ticker was H o n D. Now it's IMSR for Integral Molten Salt Reactor. But, you know, you've got these companies that are saying, wait a minute, let's do the accelerated DOE review and not get stuck for another 40 years not building power plants.
- [44:12]
Marty Bent
How profound is that in your mind? If we get a few of these SMR companies going through the accelerated review successfully, they begin plopping these down. How transformational do you think that could be for the energy sector in the.
- [44:30]
Gary Broad
U.S. i think it's enormous. Look, before the NRC, we built more nuclear plants than anybody in the world. And if you were somebody who wanted to stop the use of nuclear power in 1976, you couldn't have done better than to have a regulatory agency that somehow manages to never approve anything, right? That just somehow manages to never make it work. Now, the people there, are they dishonest? Are they not playing? But I don't know. You know, maybe they're just all worried that if they approve something without getting 2 million pages of documents and it goes wrong, you know, you don't want to be the person who approved the next Three Mile Island. So maybe, maybe they're not dishonest. Maybe they're just, you know, ridiculously cautious because from their point of view, you, you can turn everything down and say, I'm just being careful. The thing that I really love about the DOE review is if you can get this accelerated process done, that what can happen is that that process will then produce data that can be given to the nrc, and they can then be in a position where they're approving something that's up and running and working, and that may get things moving again. I also spoke with an expert in this area yesterday who said something really interesting. He said, look, the people at the NRC, you know, they're in their mid-60s. They've been there forever. You know, all they know is how to reject things. He said, you know, the younger generation of engineers coming up actually are in favor of nuclear power and want to see these things done. And so there may be kind of a changing of the guard along with more and better data that could allow some of this stuff to proceed. The unfortunate part of this is it's not going to happen in the next three years. And so I'm hoping, you know, whatever administration follows the Trump administration is in favor. Like they're, I want them to be pro energy as well, you know, and pro nuclear energy, because Gen 4 is safe, you know, and it's something that we should be taking advantage of, especially.
- [46:46]
Marty Bent
When you consider this chart. I think you just got to get this chart in front of anybody in the US Government, particularly the nrc, and say, we need to fix this problem, we need to bring down these prices. Energy is the base layer of our economy and we should be exploring any option that allows us to expand capacity generation and drive down these prices. Because I mean, at scale and that's the one thing that people will knock on a nuclear specifically, it's like, oh, it's not economical, it's too much of an upfront cost. But we haven't had the ability to really experiment with a wider implementation of this technology, which arguably over time should drive down costs.
- [47:30]
Gary Broad
Marty, I completely agree with you and would simply add that for the people who don't know it, there is a near 100% correlation between the energy a society uses and a good material quality of life. And if people want to say, hey, but you've got your health, your spiritual practice, your, you know, your connection, other people, yeah, those, those things will all determine whether you live a good life or not. But if we're looking at material quality of life, the R squared between that and energy usage is one.
- [48:06]
Marty Bent
Yeah. And that's why, I mean a lot, there's a lot of dooming out there right now. But I'm extremely optimistic. I'm not sure if you've been following the sort of industrial startup community it's forming in El Segundo. There's a lot of companies in Austin. There was just a metal fabrication startup that launched in Michigan. The young people, specifically the Zoomers, are fascinated by this trend of reindustrialization and really going out and starting companies. And I think that's interesting just watching the, the sort of psychological and sociological side of things where I think people, particularly millennials, Gen X boomers, have been conditioned to think it can never be re industrialized. This is just the way it is. But it's been extremely refreshing to observe younger generations, particularly in the startup community really lean into starting hard industrial companies over B2B SaaS products in recent years.
- [49:10]
Gary Broad
I completely agree with that. And in fact, one of the things about the Zoomers is they have figured out that you're better off right now being a 22 year old without a college education and with four years of experience as an electrician than you are being somebody who spent the last four years on a college campus. If you want to get a job and get paid.
- [49:37]
Marty Bent
Yeah. And it'll be really, it'll be really interesting to see if this is allowed to flourish. I really, I'm optimistic that it will be. But you have this political class, particularly in D.C. that seems to be filled with a bunch of Luddites, particularly on the left. I mean, everybody says don't get political, but I think it's objectively clear that the left has gone completely insane. We're seeing it with the shutdown, their inability to bargain over this spending bill. And I think they're falling on tactics that were tried and true in the past. They were successfully able to point at government shutdowns and blame it on Trump during his first term. But this term, you just look at the polls, people are basically figuring out like, oh, you're holding the U.S. economy hostage because you want to get your, your jibs passed and included in the spending bill.
- [50:44]
Gary Broad
Yeah, it's, there's no question that's been going on. You know, I also think Democratic messaging has been bad here. Like, I've seen them, they get on these shows and people ask them, you know, direct questions about it, and instead of answering the question, you can tell they go to the talking points that the Trump administration did this, this and this, and, you know, they're responsible for it. But anybody who's followed it has realized that there have been more than a dozen votes and Republicans are voting to reopen the government and Democrats are voting to keep it closed. And that's fine as far as I'm concerned. Go ahead and keep it closed. I actually like the government closed for one key reason. It's because it is a phenomenal message to Americans that we don't need them to manage our lives. Right. So I'm, I'm pro shut down. Like, if the Democrats listen, you know, you made the great point, like, let's not get partisan Senate. Get political. I am strongly in favor of the Democrats keeping the, the government closed. Right. Great job, Team Blue. Keep it up. Right. I'm on your side on this one. Right. And the reason is, like, think about it. The government is in every aspect of our lives. We've now had a month without the government open and there have got to be 300 million Americans saying, what do we need them for?
- [52:05]
Marty Bent
Yeah, right.
- [52:06]
Gary Broad
What, what is it they do? How do they help us? I'm sending tax money for what? Right. And great, because we've just had a one month experiment in them not running our lives and somehow we're managing. Let's, let's give it, you know, six months or a few years and see how it goes and check in and, you know, figure out if we need to reopen things.
- [52:28]
Marty Bent
I tweeted that out four days ago on the 27th. It was like, the government's been closed down for 27 days and I have not noticed any material degradation in the quality of my life. Let's keep this going. And yeah, how did I miss that? That's the funny thing too is the Democrats has made manifest their own demise. Because I was watching something that Peter St. Ange put out earlier this week, and apparently mechanically, if this goes on for long enough, you literally have to start firing the furloughed workers completely. So you could see at least one third of the federal government workforce get fired if this goes on, I believe past January.
- [53:11]
Gary Broad
And the thing I want to emphasize is those aren't temporary layoffs. That's not temporary. Those are permanent workforce reductions. And the amazing thing about this is a year ago I was saying I really hope Doge is successful, but I'm skeptical. I don't think anybody can shut down government spending. I just don't think it's possible. And Peter Thiel is right. Never bet against Elon Musk. And I was really hopeful, but it didn't surprise me when that didn't really cut a whole lot of spending. But this could be the thing that does it. This could be the Doge moment when we get a real reduction in government spending. And by the way, that's something that's really necessary. You and I were understandably and reasonably critical of Federal Reserve Chairman Powell in this conversation. And I've been critical of him for the last however many years. But let's also be honest here. There's nothing he can do. Inflation is being created by overspending out of Congress, and that is a bipartisan problem. Whether Washington has been controlled by Team Blue or Team Red or some combination of White House and Congress, no matter what the combination is, we only have increased spending. And that's the thing that's really causing inflation. It's something that I've talked about as counterintuitive inflation. Lyn Alden talks about it as fiscal dominance. But there's nothing Powell can do to stop that. There's nothing you can do to stop inflation. And so, you know, we should, we should throw him a bone on that. But this is really the fault of Congress. So if they're out of session, at least they can't spend more.
- [54:53]
Marty Bent
Yeah, it's cautiously optimistic because. Right, because I think, I mean, unless you're marching in a no Kings protest, I think most your average American is looking at this and saying what you said earlier, do we really need this? What are we paying for?
- [55:13]
Gary Broad
So Marty, you and I agree that it's the Democrats keeping the government closed. Should I post on X? Marty, Ben has just endorsed Democratic policies.
- [55:26]
Marty Bent
Yes, as long as not New York Democratic policies. If it's federal Democratic. Well that, I mean, and it's interesting, like we've got wins there, but then you have this sort of emerging sort of socialist populace, particularly in New York City with Mamdani coming to. It seems inevitable that it will become to power in a couple of weeks here. And it's this weird sort of manifestation of this overt democratic socialism in the financial hub of the world. And it is scary to be honest, that there are a number of lemmings out there who will take this guy's sort of campaign speeches hook line and sinker and think that they can actually impose socialism on the United States as largest city and have good outcomes. But I think that's something we need to keep an eye on moving forward. And that's what I've been thinking of, like how do you really cut through that narrative? Like this had never worked throughout history wherever tried to be implemented. We should not be doing that anywhere in the United States, particularly the financial hub of the world.
- [56:47]
Gary Broad
Well, you know, we've seen the same party and the same policies in every major city in the United States and living conditions in those cities continually gets worse. But the people there keep voting for the same policies. So, you know, the truth is anybody who knows any history knows that socialism or communism or redistribution, it doesn't work. And you know, everybody says, oh, you know, we just did. It wasn't real communism. Yes it was. It's. It doesn't work. It's not going to work. Unfortunately. You know, every generation needs to learn that lesson through hard experience. It's available in books, but that requires, you know, reading something longer than a TikTok video. And you know, people don't want to do that. Okay, you know, fine, then they're going to learn. And the thing that is really amazing to me, as somebody who lived in New York City, who lived in Manhattan and worked in finance for 25 years, you know, all these people who say, you know, the rich aren't paying their fair share. Hey, well, you know, one. Nobody ever defines fair share. The beauty of fair share is everybody's in favor of fair, but it's never specific. But more importantly, the. The tech space of New York is a very, very small number of people. The top 1 or 2% of taxpayers there are highly mobile. They run finance firms. They can pick up and leave. Right. All they have. And by the way, they don't have to move to Florida. They can. They don't have to. They can move to Connecticut, they can go to Greenwich, they can go to Westchester, they can go to Long island or New Jersey. Like, they don't have to pick up and have all of their employees move. They literally just need to go one county over in any direction. And New York has just lost its entire tax base.
- [58:38]
Podcast Host/Announcer
So.
- [58:41]
Gary Broad
None of this is going to work. I own a home in Connecticut. We're expecting a flood of refugees and much higher property prices.
- [58:52]
Marty Bent
And it looks like there's a good chance that New Jersey could get a Republican governor in a couple of weeks.
- [58:58]
Gary Broad
Look at how incredible that is, right? Virginia, New Jersey, people are. They're getting tired of seeing these policies. They're willing to try something different. The thing that worries me, Marty, is, you know, so we've been very critical of the left in this conversation, and reasonably so, rightfully so. Right. I endorse everything I said, everything I've said, I stand behind it. But one of the things that does worry me is Republicans run for office saying, we're the party of fiscal sanity, we're going to get things under control. We're not going to be the party of tax and spend, and we're going to do things that make more sense. We're the adults in the room. But they don't actually do it. They're lying. Republican Team Red, when they're in charge of Washington, they don't cut spending. They talk about it, but they don't actually do it. And so we correctly criticize Democrats as being horrible communists, but we should also criticize Republicans as being liars because they spend like Democrats. It's a bipartisan problem.
- [60:05]
Marty Bent
Yeah, it really is. And hopefully the government shut down doesn't give either of them the ability to lie.
- [60:13]
Gary Broad
I think. I think it's incredible that if we could get you elected to The Senate, you'd be voting with the Democrats right now.
- [60:21]
Marty Bent
This is fascinating. The. I'm very optimistic right now. And I guess to wrap this up, you have a deal for the listeners of the show for deep knowledge investing. I'll let you explain it.
- [60:41]
Gary Broad
Yeah. So if you go to deepknowledgeinvesting.com, there's a subscribe now button in the top right, if you're interested. So what we're doing there, I talk about macro stuff like this all the time. But, you know, I also have my own portfolio up there. And, you know, whenever I have a new idea, I write it up for subscribers and explain how I'm investing in why and because the important thing is, you know, you and I, we've just complained about a lot of stuff, but I'm investing in a way to take advantage of all these things that you and I don't like. And so for people who want to take advantage of that, just click, you know, the subscribe now button. And we have a coupon code for you, for your people, it's TFTC 21. And that gets you guys 21% off of a paid subscription, whether you do monthly or yearly.
- [61:30]
Marty Bent
Well, I appreciate you offering that to our audience. I mean, I think you're one of this audience's favorite recurring guest over the last couple years. The YouTube comments are always clamoring for me to bring you back on more consistently. And so I'm sorry it took us six months to catch up, but I'm glad we did. And not only that, it's on bitcoin white paper day. It's the 17th anniversary of Satoshi Nakamoto releasing the bitcoin white paper.
- [62:00]
Gary Broad
So, Marty, I'm going to tell you, Bitcoin is my largest position because I bought a medium sized position and then didn't sell. It just became huge. And the one change, the one change I made. So I bought in 2021. No, 2020, when it was 15,000, runs up to 64,000, comes back down to 15,000. I didn't get upset. I didn't lose sleep. I didn't worry. I just bought more.
- [62:32]
Marty Bent
I think we're sitting pretty now, hovering at 110.
- [62:36]
Gary Broad
Yeah. So, you know, I saw somebody, you know, saying, do you think it hits 100,000 first or 151st or, you know, is the next 10,000 or 20,000 up or down? And I don't know the answer to that, but somebody asked me the other day, do I think it'll hit a million and I said, yeah, absolutely. And a friend of mine said, I want to buy Bitcoin, but I think I missed it. And I said, you didn't miss it. He said, how do you know? And I said, well, do you think Congress is going to stop overspending? No. You think they're going to stop debasing the dollar? No. Then you're not too late.
- [63:07]
Marty Bent
We're all going to be billionaires one day. In dollar terms.
- [63:11]
Gary Broad
Well, yes. It's that Saturday Night Live Jimmy Carter thing, you know, like, wouldn't you like to have a $6,000 suit? You know, wouldn't you like to have $100 cigar? Right. Like, not really, no.
- [63:26]
Marty Bent
Gary.
- [63:26]
Gary Broad
No.
- [63:27]
Marty Bent
This has been a pleasure. Thank you for joining me on this Friday morning and I hope you have a great night in Tel Aviv.
- [63:33]
Gary Broad
Yeah. Marty, thank you so much. Really appreciate you having me. Always great talking with you. I enjoy these conversations. Looking forward to the next one as well.
- [63:41]
Marty Bent
Peace and love, freaks.
- [63:42]
Podcast Host/Announcer
Okay, thank you for listening to this episode of tftc. If you've made it this far, I imagine you got some value out of the episode. If so, please share it far and wide with your friends and family. We're looking to get the word out there. Also, wherever you're listening, whether that's YouTube, Apple, Spotify, make sure you like and subscribe to the show. And if you can, leave a rating on the podcasting platforms, that goes a long way. Last but not least, if you want to get these episodes a day early and ad free, make sure you download the Fountain podcasting app. You can go to Fountain FM to find that $5 a month get you every episode a day early. Ad free helps. The show gives you incredible value, so please consider subscribing via Fountain as well. Thank you for your time and until next time.