← TFTC: A Bitcoin Podcast
TFTC: A Bitcoin Podcast
#707 The Yen Carry Trade Unwind Could Crash U.S. Markets with Infranomics
01:19:52
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- [00:07]
A
You've had a dynamic where money's become freer than free. If you talk about a Fed just gone nuts, all, all the central banks going nuts. So it's all acting like safe haven.
- [00:19]
B
I believe that in a world where central bankers are tripping over themselves to.
- [00:23]
A
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 Bitcoin.
- [00:32]
B
If you're not paying attention, you probably should be.
- [00:34]
A
Probably should be.
- [00:35]
B
Probably should be. Robert. Welcome back to the show, sir.
- [00:39]
A
Good to be back.
- [00:41]
B
Good to have you back. Like I was telling, I was binging your channel earlier this morning, playing some catch up. You put out a lot of content, so it's hard to keep up if you don't have enough time in the day. But I think for this conversation, let's start in Japan. Obviously that's been a big topic of discussion this week. Japanese yield curve screaming right now. And I think a couple of the videos they put out the last week really dive into it, sort of the nuance of their yield curve where a lot of the debt exists in different durations and what is actually happening. And I think this was incited, correct me if I'm wrong, from a tax policy. They were going to eliminate a sales tax or something and that sent the yield curve screaming because people were worried they're not gonna be able to, to service their debt.
- [01:32]
A
Yeah, food tax, sales tax on food, I believe. And yeah, that sent long end rates moving pretty sharply higher. I mean we had 35 basis point move in the long end rate there in a single day. So it's, it is basically, I mean, on par with like the Liz Truss moment over in Great Britain where their bond market just completely imploded. It was kind of on par with, that was kind of on par arguably with what happened in the US in April with Liberation Day and all of that chaos. So it was pretty, it was pretty historic what we saw over there. I just, but you know, for the nuance of, of I think what's important when it comes to Japan that a lot of the people I follow don't seem to talk about is number one, they run a very large current account surplus four and a half percent of gdp. And they've ran that for a long time. That's part of how they've accumulated so many dollar denominated assets. So they've run a very large current account. When you look at where the debt is actually being issued, it's Very similar to the US where they issue the majority of their debt in notes and bills. So short duration 5 year and under is definitely a majority. I think 5 year and under represents 65ish percent of the debt and the third year only represents 2, 3, 4%. Like very low single digits when it comes to the amount of debt that is actually out there. Also when you look at like the average duration on their debt, it's quite long at I think it was nine, ten years. So different than the U.S. not quite as long as Great Britain where their average duration is, is close to 15 years. So quite a buffer when it comes to kind of, you know, flexibility I guess you could say, or, or resistance to the fiscal dominance. Short term, short term rate volatility that like for example, we're, we're starting to kind of get a picture of here in the US So large current account surplus, most of the debt is issued in the short end. And then you know, they, they basically have a pretty decent buffer when it comes to, when it comes to the duration on their debt. So yeah, they're, they're, you know, when it comes to the ownership of all of their debt, which is definitely high. You know, I, I hear a lot of people talk about 240% debt to GDP. You know, know the, the, the sky high amount of outstanding debt which is totally 100% accurate. But when you look at who actually owns all that debt, the vast majority, well, majority is the bank of Japan themselves. So they hold about 50% of the debt, meaning that all the interest payments just get recycled back to the Ministry of Finance. So after operational expense for the bank of Japan, that interest expense just gets recycled back to the Ministry of Finance. They have very low external debt to GDP. Only about 12% of the total debt that is outstanding is owned by foreigners. So low external debt, high, you know, large current account surplus, most of the debt being issued at the short end of the old curve. Yeah, I don't think that it's necessarily an imminent sign of you know, Japan completely imploding most of the interest from higher rates. Again they have that nine year average duration. So that's a buffer to kind of short term fluctuations. Much less so than like what we see in the US with so much issuance in the front end. So they have more of a buffer, large current account surplus, most of the debt is issued in short term bills. The bank of Japan themselves own 50% of the total outstanding debt and they have low external debt. Only about 12% of the of that debt is owned by external, you know, people outside of Japan. So yeah, those are all points that you don't necessarily hear a lot of the like macro fintwit type people on X talking about. But there's, you know, there are indications that maybe Japan is a little bit more resilient to withstanding. Now look like pension funds, banks, insurers over there in Japan, you know they're sitting much like it was in the US where we had regional banks sitting on, you know, know TLT basically, you know, long, long duration debt and that, that debt fell 50% in, in value. Then there was a run on deposits and you know, they didn't have enough liquidity to come up with it. So we had three of the four largest bank failures much like that happened here in the US you know a similar sort of situation could, could, could come out of Japan. But yeah, kind of like broadly speaking in general doesn't to be, you know, the end of the world sort of catastrophe. I would argue it's even probably worse. What's going on over there is probably worse for the U.S. if anything, that's.
- [06:46]
B
Exactly what I was going to segue to because earlier this week with World Economic Forum going on, obviously a lot of political rhetoric around Greenland, specifically markets, markets took a bit of a dive and many people were pointing at the Greenland tension saying oh look, Trump's getting us in trouble. And then Scott Bessant came out and said it's not Greenland, it's the job. Japanese yield curves exploding, that's why markets are down. So he explicitly sort of highlighted the Japanese yield curve as an input to the, the bad, the bad run that markets had earlier this week it was.
- [07:25]
A
A 6, 6 standard deviation move like it was a 6 Sigma event. So yeah, it was, it was definitely major. Yeah.
- [07:34]
B
And so why, why does this potentially have a more negative consequences for the US as opposed to Japan itself?
- [07:42]
A
So for a number of reasons. So that current account surplus that they've ran for decades, 30 years, 40 years, that means that they've accumulated, they've become, they've been a creditor by, by definition to the rest of the world. The US being, you know, the primary beneficiary of that credit. Japan used to be before the Cayman island repo nonsense base trade stuff. Before that Japan was the largest holder of U.S. treasury debt. And so what could eventually happen is, you know, the part of the reason that so much capital from Japan flowed into US Treasuries was due to the fact that Japan was in the lost decade. They had, you know, negative wage Growth, they had negative gdp, their economy was contracting, they had deflation, they were, I mean it was pretty bad. And it didn't, you know, it wasn't a short lived thing that we're talking, you know, 20 years of this sort of poor growth. And you know, in response to that, the bank of Japan, you know, the QE yield curve control, negative interest rate policy, 10 year JGB was only yielding, you know, zero basically. I mean there was no yield in Japan. You know, different points at different times had had different rates but you could basically think of the 10 year JGB as yielding 0. So in order to get yield, what, what you know, domestic institutions would do, you know, an insurer, pension fund, something like that is they would sell the yen, buy the dollar. This is part of why the, the yen has weakened so much and then that once they had the dollars they would buy US Treasuries. And the difference between the interest rate differential, the difference between yield on a 10 year JGB and a 10 year US treasury at the peak was 4%. Meaning you got 4% more yield in US treasury in a 10 year US treasury than you did in a 10 year JGB. Not only that, but the dollar was strengthening versus the yen. So you're picking up extra carry there. And so that trade, you know, this is kind of like what the yen carry trade generally was, you know, borrow in yen at basically free, you know, zero interest rates, sell the yen to buy the dollar, to buy U.S. treasuries to pick up yield. They would also go into, you know, US stocks, Mag 7, you know, tech stocks were another beneficiary of this sort of yen carry trade. And so what could happen is, is with higher rates in Japan, some of that money could look at the higher rates in Japan and go Well I got 0% five years ago, 10 years ago, but now there's yield. Finally I'm going to bring some of that money back home. Well, the order of operations would be the exact opposite of what putting on a yen carry trade sort of thing would be, which is sell the US treasury downward pressure on the bond, upward pressure on the yield and then sell the dollar to buy the yen. So there is going to be an equilibrium point. Japan was kind of like a beach ball that was held underwater. The yen carry trade and low rates, QE old curve control, nirp, all of that was a large marginal driver of liquidity. And so now that that's kind of that beach ball has been let above water, you know, it's going to drag rates higher all over the world in the US I see as probably being the most affected in that sort of thing.
- [11:19]
B
Yeah, it's rather interesting, especially considering Trump's move a couple weeks ago to prevent institutional investors from buying single family real estate. And then on top of that announcing a $200 billion mortgage bond buying spree in attempt to bring down mortgage rates. And rather quickly this Japanese Six Sigma event happens and sort of throws a wrench in that plan. And so the reason to bring that up, it just seems like things are chaotic. You mentioned beach ball underwater finally release. We'll find equilibrium somewhere. And that's the question I have in my mind is does anybody who's quote unquote in control or beyond behind the helm of economic policy, monetary policy, understand where that equilibrium is?
- [12:09]
A
I don't think so. I personally think the yen weakening here obviously with populist Prime Minister. Look, it was one thing to have Abenomics where you have super dovish kind of easy money, easy fiscal policy, easy monetary policy. That's one thing when you're in the last decades, it's a whole other thing when inflation is 3%, wage growth is 3, 3% or so, when your economy finally gets some heat in it, it's a totally different thing to have super dovish monetary and fiscal policy. So the long end of the old curve is indicating that, that if you're going to continue this uber dovish monetary and fiscal policy with heat in the economy finally, then we're going to demand a higher rate, especially out at the long end. So yeah, I think that eventually maybe bank of Japan hikes right now very low odds that they hike here in a couple days. I think that's mispriced. I think there is a chance given what is going on with the yen, kind of approaching that like 159 level on dollar yen. And what just happened at the long end of the yield curve. You know, this is Besant was pushing maybe a month ago, two months ago, was pushing the bank of Japan to hike rates. And the reason he was doing that was for exactly what we're talking about, which is, you know, he, he comes from a, you know, macro back background with you know, Soros and Druckenmiller and some of the greats. And he recognizes that, you know, the long end of the yield curve, if it gets too out of control over there, could cause major issues over here. And so he was pushing the bank of Japan to hike interest rates. I think this is like a month or two ago where he was making kind of unusual comments for A Treasury Secretary to make about a foreign monetary decision, monetary policy decision. So I think that there's a chance that they hike rates here at this next meeting. Definitely this year we're going to see bank of Japan hikes. I think that'll help stabilize the yen and I think that also it'll help stabilize long end rates which are moving higher in response to kind of too loose monetary and fiscal policy. Well, if they start hiking rates, they'd be one of the only developed countries to be in a hiking cycle. Maybe that gets a bit into the yen. Hopefully you would hope it would calm down the long end which is worried about inflation and worried about fiscal concerns. So I think that it would be a step in the right direction. But yeah, like dollar yen, the, the purchasing power parity like fair fundamental value is 110, 115 on dollar yen last I checked according to the IMF. So you know, there's, there's, there's room for it to appreciate for sure just on a fundamental basis. And yeah, where that equilibrium point is, no one really knows. It certainly dragged rates higher not just in the U.S. but all over the world. I mean Great Britain, France, Germany, you know, their long end rates look even worse than the U.S. you know, we're, we're kind of brushing up against like that 490 level on, on the 30 year. But yeah, Great Britain's even worse. So you know, as Japanese rates move higher, eventually you know, that's going to drag all rates higher and currencies, you know, we could see significant volatility in the FX market I think this year. And yeah, eventually there's an equilibrium point where it all calms down. I haven't heard anyone that's able to give a level or you know, say exactly where that's going to be. But there, but there is always an equilibrium point. There's always a release valve. You know, they kind of had the choice to like let the currency go or let the bond market go and it appears they've kind of let the bond market go but you know, they've also talked about currency intervention. So yeah, if we get one of those or if we get a Bank of Japan hike, I think you could see the yen start to appreciate quite rapidly and it's not expected by the market, at least the bank of Japan hike at this next meeting. So just like we saw in summer 2024, all this kind of stuff can cause significant volatility for risk assets. Like we saw with the NASDAQ and S&P 500 last year or 2024.
- [16:36]
B
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- [18:43]
A
Yeah. So I think one of the most under discussed data points that's come in recently when it comes to that, when it comes to economic data is the trade deficit. So the trade deficit shrank to the lowest level going all the way back to 2009 and the third lowest reading going back all the way to 2001, which was when China was admitted into the World Trade Organization. The China shock. So the other way of saying that, you know, we've gone from, I think it was at its peak in April, $140 billion per month trade deficit. We've gone from $140 billion of worth of dollar exports to the rest of the world, exporting of the dollar to now 39 billion. I think it came in at. Uh. So yeah, the amount of dollars that the US is now exporting to the rest of the world is, is dramatically reduced compared to what it was the current account last I checked over the prior four quarters right now is running at about $1.3 trillion. But that's going to shrink if as the trade deficit starts to get reflected in, in the current account data. So yeah, that, that is a pretty stunning reversal for what it implies when it comes to the dollar. When it comes to Triffin's Dilemma, which Triffin's Dilemma, you know, at the end of the day you got to. Eventually you're going to have to pick between domestic needs and international obligation of being the reserve currency issuer. That's Triffin's Dilemma. And it appears that they've picked domestic needs, reindustrialization and tariffs and you know, maga. They've chosen that over international obligation of being the reserve currency issuer. And I think that all the trade tensions that we've, that you mentioned with the EU and Greenland and all this kind of thing, I think it's indicating that the US is stepping away from that sort of obligation that we had for decades to run ever larger trade deficits to get the dollars out to the rest of the world. That's the mechanism by which you get dollars to other countries. It's by running a large trade deficit. I think that they've chosen, I think that there's been a clear regime shift when it comes to, you know, what, what role the US would like to play. I think that we've so thoroughly hollowed out our industrial base. We've so thoroughly become reliant on our adversary. At worst our enemy for critical components go into our, you know, our milled Our, our, our defense systems, you know, our, our weapons systems. We can't even, we can't even make enough artillery and missiles and you know, interceptors to, to protect our own homeland. We rely on our enemy for about 85% of active pharmaceutical ingredients to keep our people alive. So yeah, I think that things got a little bit too stretched and I think that this administration at least is choosing the domestic needs over the international obligation of being the reserve currency issuer. And I think that the gold market is waking up to that. You see the gold price just going parabolic, but you don't really hear it being like discussed when it comes to the real implications, what that really means not just for gold, not just for Bitcoin, but kind of broadly speaking. I mean, that is a once in a generation sort of reordering of the monetary order and global trading order. So yeah, I think that it's really significant to have President Trump say, you know, trade deficit is going to zero our trade balance. We're going to run balance trade because what that means is we are not going to export you dollars anymore. And what's interesting is the dollar hasn't really rallied on that news. You would expect, if dollar milkshake theory was correct, you would expect there to be the short squeeze in the dollar. But we didn't see that you would also expect a bid into the dollar. With the Greenland EU tariff geopolitical tension. You would expect a bid into US Treasuries and into the dollar. We saw the exact opposite. We saw, you know, selling of the dollar, selling of Treasuries and selling of, of US Equities. So yeah, that's, that's a, that's an important signpost. It didn't just pop up. You know, recently this has been apparent going all the way back to like early 2020 or early last year. You could see indications of that where, you know, in risk off sort of environments, you know, not see the dollar get bid or US Treasuries per se. You would see the Swiss franc, the euro and the yen were taking the place already before Liberation Day even came around and before CNBC woke up to this, it was already happening. So I think that there's a recognition that, you know, if you look at the, the FX holding, FX reserves when it comes to gold versus US Treasuries, gold has already overtaken US Treasuries. So, you know, I think that there's some pretty important monumental shifts going on under the surface. It's not an overnight thing. You know, we're not going to wake up tomorrow. And the dollar is just not used by anyone in global trade and it's worthless toilet paper. It doesn't happen overnight. You know, these things take a long period of time to play out. But yeah, I think that the US is vulnerable given the fact that we've let ourselves fall on the other side of Triffin's Dilemma for so long. Right. Where we prioritized international needs, the, the needs of people outside of the U.S. we prioritized that, you know, we both parties chose globalism over nationalism and caring about domestic, you know, needs first and foremost. And the consequence of that is our net international investment position accumulated up to negative 95% of GDP. I think at the peak right now, I think it's about negative 90% of GDP, which is still historic in the history of the world. That, that we haven't seen that sort of, that, that negative of a net international investment position, which, you know, on, on a gross basis, foreigners own about 65 trillion of US dollar denominated assets. So we're incredibly vulnerable with that, with that negative nip 90% of GDP. We're very vulnerable to that. You know, shifting back to the US and prioritizing, you know, domestic needs over international, you know, we're, we're very vulnerable to upsetting the rest of the world who owns a huge amount of US Treasuries, US equities, real estate. Right. We could see another version of early April where you basically had the reserve currency in the very early stage of a bounce of payments crisis for that first five days. If you saw a concerted dumping of dollar denominated assets, it could put us in a very, very tough position, one that generally you only see in emerging markets. So, yeah, I would say, you know, it's going to be difficult to balance, to, to try to extricate ourselves from Triffin's Dilemma without so thoroughly, you know, angering the rest of the world that we get it ourselves into that sort of situation again. It's going to be really delicate to try to balance that. Looks like with Greenland, maybe we dodged a bullet. Maybe there's a deal, maybe everything's good. Who knows? Too early to tell. But you know, yeah, we're, we're, we're definitely vulnerable. I mean, arguably, you know, you look at Japan going back to Japan, their interest expense as a share of GDP is only like 1.4, 1.5%. You look at us, it's like 3.94%. So yeah, the, the fiscal situation going on in the U.S. yeah, we might be, you know, trade deficit might be coming in, but the fiscal, it's improved for sure. You know, it's come from 7% GDP to 6. So there we have seen some improvement in the fiscal deficit, but interest expense right now is growing at about 15 to 16% year over year. And so they got to get that down. Otherwise the deficit, there's going to be continued pressure there. Social Security, Medicare, Medicaid and defense still eats up a huge portion of the budget. So you can't really cut, you know, discretionary items and easily address the fiscal deficit. And the reason that's important is that we've relied on the rest of the world to buy our debt. And if, if you're balancing trade, right, and the trade deficit is shrinking to the degree that it is, but your fiscal deficit is shrinking, but much less quickly, then what that is essentially saying is that you're relying on, you know, other buyers of your debt, right, instead of foreigners who were buying your debt, recycling trade deficits into your debt instead of that, now you're going to have to rely on your domestic institutions and individuals to absorb all that $1.7 trillion of new U.S. treasury debt issued every year.
- [27:56]
B
Yeah, a lot to respond to there. But it is funny, Dear mentioned, we got to balance this. It's like the art of politic and threading the needle. And I thought this week it's funny because I think we both understand the sort of structural, the lack of structural integrity behind the system because of all the debts that's been built up over years. But you look at what happened in Davos this week and letting it come out first, globalism has failed. We're expressing a lot of what you just described. We're beholden to supply chains outside of our borders when it comes to healthcare defense. We need to fix that. Dissent comes out, shits on Gavin Newsom and basically says, yes, we're America first. Come work with us. Go, baby, go. Then Trump obviously gave his two hour speech, which really was just a flaming a roast of globalism and its effects over the last five decades. And signaling to that crowd in Davos, America's going a different way. You can come with us or not. And as an American citizen, I think we've had this conversation a couple times now on this show about the silent depression and because of the hollowing out of the manufacturing base and Triffin's dilemma's effect on United States citizens over five decades. And I looked at what happened this week and I was like, yes, we need to get this message out There it is. Time to make this phase shift. But it's funny, it's like depending on your perspective, do you want to continue the globalist agenda and keep going down that path, or do you want to really pack it in and be America first and revitalize America's industrial base and domestic economy? It's like you're watching two different movies. The reactions to all these speeches at Davos this week were polar opposites, depending on what lens you were looking at this through. And I think that's a big question, like how many countries are actually going to be inspired by the, the sort of posture that this administration's taking in the United States and say, hey, this is actually a good idea. And I think that the narrative part of it and the sort of buy in from a critical mass of foreign nations is going to be critical to land this plane.
- [30:12]
A
Yeah, I mean, Japan already has. Takaichi was not at all expected to win. It was quite the shock. And so Japan's definitely going the kind of populist, nationalist route. Keir Starmer, I think it was out of the uk made comments. This is, I don't know, a year ago maybe about globalization failing the, the, the median Brit. And so you're starting to see a recognition that globalization really, look, it worked great for certain people. The problem was those certain people were the top 1%. Right. It was a small share of the overall population. The vast majority of the people didn't really benefit. Look, you got to buy cheap a Bluetooth speaker on, on Alibaba, right. But your good paying middle class job that didn't need a high school diploma is gone. You know, and your country and your, your, your state, your city is completely hollowed out and called the Rust Belt because everything is a bucket of rust. You know, your, your deaths of despair triple the rate that they were during the Great Depression. You're, you know, addicted to fentanyl. So yeah, I think that, I think that's pretty clear that the, the MAGA right, which is not conservative, is not old school Republican. It is not really, you could call it right wing, I guess, but it's definitely not like Republican. It's the opposite of the Republicans back in the 90s, early 2000s who were the prime advocate of globalization because it was going to boost corporate profits and make them all rich and therefore boost corporate, corporate profits. You boost stock market. Right. Valuations and who owns all the equities? The top 10% own 92% of, of equities. So yeah, like it's kind of an Inversion that we've seen. I kind of suspect that we might see here in the US a return from our left back to what they used to be during the 90s and 2000s, speaking out against globalization. We could even see kind of momentum start to, or continue to build in, in kind of much more the nationalist populist sort of direction. Because I mean it was, you know, the, the left back in the, in the 90s that Pro protested, you know, the World Trade Organization in Seattle, Battle of Seattle, the imf, I believe it was in Miami. Right. Like all those huge protests, they were all like global anti globalization. And they were all coming from the left wing at the time and the Democrats at the time. I mean there's like endless comments from Schumer, Pelosi. I remember Dennis Kucinich was like, you know, one, one of them that I remember, you know, all the, Bernie, Bernie Sanders, they were all talking about globalization. It's going to suppress blue collar wages, it's going to widen wealth inequality, it's going to, going to hollow out our industrial base. All things that happen. So you know, like my question has always been like, why aren't they taking a victory lap? You know, like you, it's such a layout, a layup to, to, to take a victory lap on that. Because they were right, they were 100% right in what ended up happening. And I would encourage people to go look up, you know, some of those comments which are, you know, public. You would think that they might return to that. And if we get a return to that, then I think it's a durable trend. I think it, the damage so called is already done. I think the trend is all, you know, I think the, the entropy has been built and the critical mass has been achieved and I think the pendulum is going to, to, to swing. I've been saying, I think, you know, peak globalization, we've already reached it, you know, and I still, I still stand by that. So I think that whether it's, you know, the right wing continuing with this kind of anti globalist push or whether the left starts to kind of, you know, reinvigorate what they used to believe, not sure if anything changed or they just, you know, you know, have to criticize the other party kind of thing. But yeah, I could see it, you know, even gaining momentum here in the US if, if, if, you know, we see in 2028, you know, the pendulum swing to the other side, we might even see a more concerted effort to reverse some of the kind of ill effects of globalization. And I think that that's a, you know, pretty critical signpost when it comes to, you know, the impact that that's going to have on kind of the monetary order, how trade is settled, neutral reserve assets. Right. Does how bitcoin kind of fits into all of it. So yeah, I think, I think it, it, it, I think it's the critical mass has already been achieved, but I think it could, we can even gain momentum in. If you see a resurgence of kind of what the left used to believe not too long ago, there are cracks.
- [35:16]
B
In the foundations of your money. Governments around the world are managing record debt the same way they always have by debasing their currencies. And the effects are already showing up across markets. In his report the Debasement Trade, James Lavish explains why the shift is reshaping portfolios, why gold tends to act first, and why Bitcoin often follows as the implications become clearer. On January 28, James joins Unchained Live for the Age of Debasement, A presentation and Q and A expanding on that research and exploring what this environment means for long term investors. If the playbook no longer explains what you're seeing, this event helps put the pieces together. Register now and get early access to the report@ Unchained.com TFTC that's Unchained.com TFTC sup freaks? This rip is brought to you by good friends at Silent. Silent creates everyday Faraday gear that protects your hardware. We're in Bitcoin. We have a lot of hardware that we need to secure your wallet, emit signals that can leave you vulnerable. You want to pick up silence gear, put your hardware in that. I have a tap signer right here. I got the silent cardholder, replaced my wallet. I was using Ridge wallet because it secured against RFID signal jacking silent. The cardholder does the same thing. It's much sleeker, fits in my pocket much easier. I also have the Faraday phone sleeve which you can put a hardware wallet in. We're actually using it for our keys at the house too. There's been a lot of robberies. They have essential Faraday slings, Faraday backpacks. It's a bitcoin company. They're running on a bitcoin standard. They have a Bitcoin treasury. They accept bitcoin via strike. So go to slnt.comtftc to get 15% off anything or simply just use the code TFTC when shopping@slnt.com Patented technology Special operations approved. It has free shipping as well. So go check it out. We'll get to bitcoin gold in the monetary order in a bit. But I completely agree. And that would actually be. I would welcome that with open arms if we can get some sane sort of bringing back. Bringing both parties back from the polar ends of the spectrum towards the middle to really rally around American dominance and domestic economic policy. But I mean, bringing back to the deficit. And one thing I would worry about if, even if the Democrats were to get more moderate and begin becoming more nationalist to an extent, is the spending, the federal programs, particularly Medicaid, Medicare. And I think that's a topic I want to cover with you is obviously we have this problem. We have all the spending, we have this interest expense on the debt going up. We have to manage that. But as we've come to know over the last year and more specifically over the last two months, like the. The federal spending is wrought with fraud, potentially 50% or more of federal spending is being, being. It's being laid bare that a lot of it is overt fraud. And so that's my question, like, is it possible, and I talked about this with Darkside earlier this week, is it possible to have an actual Doge come in and cut spending without collapsing the system? Does this fraud just sort of heroin that's being injected into the system because it needs it to sustain itself?
- [38:21]
A
Yeah, I mean, I agree that spending $5 billion on a Elmo program, Sesame street program for Iraqi children, it's kind of like not the best use of taxpayer dollars. Totally agree with that. I like, you know, cutting waste, fraud and abuse. But I always point out that, like, you know, just because, just because one person might ascribe that descriptor, that adjective to it on an economic, you know, pure, purely removing politics and just purely looking at it from an economic standpoint, you know, one man's fraud is another man's income. So someone on the other end of that fraud is getting however much money, if it's half of, of the deficit or half of spending, that's a lot of money. And those people have mortgages, they have car loans, they have, you know, they go out to the movies, they buy groceries, all that kind of stuff. So, yeah, you start cutting too much and you get, you know, a contraction of gdp. If we were to bounce the budget overnight, like with a magic wand and just wave that magic wand and we have a perfectly balanced fiscal budget, it would result in a GDP contraction worse than 2020, worse than 2008. So, yeah, like, it would be great to cut a lot of spending. The problem is we have become so kind of strung out on that drug that yeah, it's difficult to do quickly without collapsing the system. And once you start talking about a GDP contraction, well, the deficit goes up during a recession, during an economic contraction. So now we go from a 6% deficit to a 14 or 15% deficit. And how does the bond market reply in the face of that sort of increase in, in supply, in bond supply, yields might go up. And this went from being kind of a kooky, you know, theory to now like even Jeffrey Gunlock and some pretty well respected people are talking about the fact that yields might go up in the next recession. And then you're talking about a debt doom loop. So yeah, I think it's difficult to, I think it's difficult to extricate ourselves from the, the two kind of dueling conundrums that we've gotten ourselves into. Both on the kind of current account side with the trade deficit, but also on the fiscal side. Both of them are kind of difficult to, to fix overnight and difficult to fix without tolerating some economic pain. So yeah, it could, you know, if, if there was a way to balance the budget, it would be pretty ugly. We would have to tolerate a significant amount of pain for, you know, in the short term. But like I fall into the camp that okay, so, so what? Right, like recession is part of the normal business cycle. We've basically like outlawed recessions. Well, you know, just like a fire is necessary for forest to regrow, you know, in a healthy way, you need a rinse of leverage and malinvestment needs to be flushed out and we need to have, you know, the moral hazard that has been imposed over the past, I don't know, 20 years is pretty incredible. And I think it's led to some second and third order effects in our society that are pretty, pretty negative. So yeah, I think it'd be good. You know, the problem is politically how do you get elected on hey, I'm going to bring pain. You know, people kind of always bring this up. I make the point that the twin deficit, the only thing we can accumulate as a twin deficit nation is debt. Well, that's not sustainable. Especially when you rely on creditors overseas to, to, to finance that. That's not sustainable. The only thing you can accumulate is debt is, is just blatantly unsustainable. But the problem becomes, you know, like when you tell someone the US over consumes as a, as a, you know, by nature of running a twin deficit when you tell them, well, the US over consumes we by definition in the aggregate over consume. They look at you like, well you're, you're saying, you know, communist, you know, you're saying something no different than Mao Zedong, you know, and it's, it's just, it's just economic reality. It, you know, it's just math. Like we have to address the fact that the US over consumes. And the way that we are allowed to over consume is through debt, the accumulation of debt. Whether, you know, in the aggregate. That is the only way the US is able to run a sustained twin deficit of the size that we've been able to. Now. The reserve currency status kind of, you know, helped bolster that ability, but as that fades, so will our ability to overconsume.
- [43:27]
B
And a lot of that overconsumption is unearned over consumption with the fraud as well. Yeah, it is this conundrum we find ourselves in trying to grapple with this. And obviously percent was in there like, go baby, go, grow baby, grow. I think that's his mindset is like, we just need to get productivity up to a point. And I don't know if this is his expressed opinion, but let's get people, let's re industrialize, let's get the domestic economy back up and running. Let's get a lot of growth in the real economy, not the fraudulent sort of fiscal dominated side of the economy. And then maybe at some point in the future when things are stable and we're on a good growth trajectory, we begin to peel off the, the fraud, waste and abuse by, by cutting the budget in certain areas.
- [44:13]
A
Yeah, and we, we have really high productivity. I mean, Q2 came in really, really hot. At 3.3, the expectation for Q2 productivity was 2.3, 2.4. So Q2 came in quite hot. No one really talked about it. Then Q3 came in even hotter. I mean we're looking at like 4.9% productivity now. The problem is who benefits from that. We know that real wages diverge from real product from productivity, you know, back in the early 1970s with Nixon shock. So you know, high productivity is great from. If you're the government and you're talking about, you know, fiscal health and sustainability, productivity gains are great for them. But the question becomes, you know, who actually benefits from all these productivity gains? And I think that that could set up, you know, quite a significant societal and political issue over the next decade as AI and robot, you know, not just AI, but eventually robotics, as all these kind of productivity enhancements come, we know from history, we know from the data that those productivity benefits don't flow to the median American. They flow the top 1%. They flow to corporates and equity holders of those corporates who are all the top 1%, top 10%. So, yeah, like you could get into a situation and a lot of people are kind of talking about this, you know, the meme of like, you know, you have four years to accumulate as much capital before you're in the permanent underclass sort of kind of meme. Well, there's a, you know, there's a real chance that there's some truth to that, you know, and, you know, does it lead to ubi? What does it look like? I'm not really sure. But I do think that it'll be one of the major turning points when it comes to political and societal kind of turning points will be this productivity boom, but then the people getting even more upset as productivity is going up. You're going to have people getting more and more and more unhappy, and eventually that'll have to come to a head and resolve somehow. I'm not sure how it will, but that, that's, I think, a theme. These productivity gains are great for the government and they're great for kind of debt sustainability and fiscal solvency and all that kind of thing. But they could be setting up an even more dangerous situation when it comes to thinking of it politically and societally because we already know the median Americans already crushed and, you know, the, the middle class if you're under 30 is gone. There is no middle class if you're under 30. So. And don't own a home already. So I think that that's probably a theme. Maybe productivity continues to come in hot. Maybe they extricate themselves from the debt situation through those productivity gains which are legitimately coming in quite hot. But then you might be setting up arguably an even worse situation, which is the people are going to get to a breaking point, and I don't want to see that.
- [47:19]
B
Neither do I. And I've been saying this the last few weeks on shows that I've been doing and some talking head videos, but I think the productivity gains need to be paired with the hard currency if you're going to have insane productivity gains that accrue predominantly to the top 10 top 1%, whatever it may be. I mean, you have to throw the lower classes of bone by at least using hard money that they can work a menial job, make a modest wage, but have the fruits of their labor saved in a currency that could increase in purchasing power over time.
- [47:53]
A
Yeah, I mean, you know, home prices in gold terms are basically at an all time low. So the whole housing affordability story, I think, is a major one. And once you, once you look, once you realize that the issue is not that homes are overvalued, you, if anything, homes are, are cheap in real terms. The issue is the purchasing power of the dollar and the fact that the denominator that we've used our whole lives is failing. As I've been saying for a couple of years now, the denominator is failing. Yeah, for decades we'd have to worry about the denominator like you would in Argentina. Right. You go to Argentina, Lebanon, Turkey, they, they worry about the denominator. They spend, you know, half their day trying to set up a carry trade and. Right. Figure out how to. That their denominator is melting at a rapid rate. But we haven't needed to do that here in the US And I think that the past five years people are waking up to that reality. And this is kind of the gold and silver story. Eventually you would hope that some of that flows into bitcoin eventually, but we've underperformed gold by a lot. Summer 2021, this is the, the way I think of it, the framework I use that Luke Groman's also mentioned. In the summer 2021, you had Bitcoin at like 35K and in ounces of gold, it was 18 ounces of gold per Bitcoin. Well, now we're at 90K in dollar terms and we're at 18 ounces of gold per bitcoin. So like, I really want to see that start to pick up. You know, the fact that we've held even with gold is not a bad, you know, it's, it's not an indictment. Right. You're not. If we were holding even in dollar terms, that would be an indictment of bitcoin holding even with, with gold over those four years, five years. Not necessarily that horrible of a thing. But yeah, I, my bet is that the young people especially who are much more kind of digitally native here in the U.S. you know, the young people I know, they all know what bitcoin is. They, you know, they know about gold, but the vast majority of them don't hold any gold. You know, they're not going out to buy gold bullion. So I think that, you know, I think I'm still very bullish bitcoin. But, you know, I think that if we're going to, if, if we as bitcoiners, kind of our whole premise is the Denominator is breaking. The denominator being the dollar, you know, and there's issues there with, with denominating your life in fiat. Well then we need to stop talking about the bitcoin price in, in, in dollar terms. We need to start talk terms. And I think that that's going to be important. But whether or not we go to a hard money standard, I think it's pretty unlikely. But I do think that increasingly over the next decade you will see average Americans kind of wake up to these issues that we've been talking. Some bitcoin has been talking about for 15 years or whatever. I do think that there's kind of a growing appetite. The problem is most, you know that the median Americans got less than $1,000 in savings. Right. Like the people I know are working three jobs living paycheck to paycheck. They don't have $1,000 a month to put into bitcoin. So that's kind of another issue that we have is, you know, maybe, maybe people would like to save and hard money, gold, bitcoin, whatever. But you know, if you're working three, three jobs and living paycheck to paycheck, how are you going to contribute anything meaningful? I think that's another issue. I'm very bullish bitcoin. I've been buying here in the 80s when everyone else is giga bearish.
- [51:45]
B
So here's a bitcoin and gold chart. Here's the Hopium for people looking at a rebound here from the lows. And this chart actually doesn't look bad if you ask me. Yeah.
- [52:01]
A
The part of me that is way more allocated to bitcoin rather than gold, I do have gold. I kind of wish it was more. But that part of me is looking at the bitcoin gold performance over the past couple years and like it's not great. But if I remove my kind of very long, very high conviction bed of bitcoin, my personal position, if I remove that from the equation and look at it just as a trader, I look at that as a reversal for, for a contrarian trade, right. You could put a pair trade, you know, short, short gold, long bitcoin for a reversal there. Because yeah, has been stretched. I mean if you look over the past 12 months, it's, it's just plummeted relative to gold. That's painful for bitcoin holders like, like me and a lot of, a lot of folks. But just remember that like that is not usually how markets operate. Right. They things don't go up or down forever. And contrarian trading is a thing for a reason, you know, so reversals happen. They happen when you least expect them most often. And you know, who knows what kind of catalyst we can get. I mean, I think that growth is looking pretty good like in the aggregate for, for the US economy for 2026. I think you have a fiscal impulse coming from the one big beautiful bill and probably future additional fiscal impulse from populist measures, stimmy checks or something due to the midterms. I think that global growth is picking up and I think that on the fiscal side we're not seeing a dramatic fiscal contraction by any means. Productivity quite decent tech has been underperforming going back to late October and bitcoin trades off, you know, the Nasdaq unfortunately. But yeah, all those trends, I think, you know, especially in a run a hot environment where they're trying to get negative real rates, I think that, you know, I've been buying here in the 80s and kind of low 90s, I've been buying here. I think that over the next year, I think that we could now whether or not we outperform gold, you know, that, that might be a different equation. But gold's had a significant run already. Gold generally front runs, you know, monetary easing. We have the Fed printing, you know, 50 billion, 60 billion a month. That's going to probably go up over the, over the year and you know, negative real rates on the horizon. You have, you have Trump talking about, you know, Trump and Lutnick talking about the Fed funds being hundreds of basis points too high. So we're going to get negative real rates. That's going to be incredibly bullish for assets in general, but probably assets scarce kind of debasement trade sort of assets like gold and bitcoin. So yeah, I'm bullish. It's legitimately a bit of pain that I know a lot of people in bitcoin land are looking at gold, looking at silver and feeling quite a bit of FOMO or pain from that. But, but yeah, I'm, I'm bullish. Bitcoin, is there a chance that we get some sort of black swan out of nowhere? Right, because by definition you can't foresee one happening 100%. There's always that risk. There's always the risk of economic contraction. Some sort of financial crisis causes, you know, kind of a var. Shock sort of phenomenon. But generally like I'm, I'm, I'm pretty bullish for the next, definitely for the next five to 10 years. I think it all comes down to time horizon. Right. A lot of people have a short time horizon, a high time preference. And I think that, you know, the more that you can zoom out and look at the longer trends, look at the megatrend, I think that the better you'll do.
- [55:57]
B
Completely agree. And speaking of mega trends and taking a sort of step back from the individual's balance sheet, getting into hard assets to preserve purchasing power. In terms of the monetary order and the reshuffling which we've discussed, obviously percent coming in before Trump was even elected was talking about it. I think the national security strategy that was released and all the speeches that were given this week, Davos particularly point to the fact that like, hey, we're shifting things pretty tectonically in terms of geopolitical and by extension the monetary order. How do you think that looks on the other side of whatever's happening right now?
- [56:40]
A
I think it's very bullish for gold and eventually very bullish for Bitcoin. I think that unfortunately the market looks at bitcoin generally overall, in the aggregate, looks at Bitcoin as a 3x NASDAQ, you know, tech, tech stock beta. But you know, I think that over the next five years, 10 years, you talk about like gold becoming the major neutral reserve asset. I think that like as a net settlement layer, gold can work. But there's, you know, downside to it. You have to worry about storage, you have to worry about transport. You know, gold is not perfect. Gold is been centuries old money, you know, and it, and fulfills a particular purpose. Well, I like gold, I own it. I'm bullish. Gold, I would add on any dips, but, but yeah, I think that bitcoin, the properties that you need. Bitcoin fulfills those properties better than gold. It's more verifiable, it's more transportable, it's more divisible. I would argue it's more secure. So yeah, I think that, you know, of course without the whole quantum discussion, it's a whole other, whole other thing. But, but generally, you know, it's very secure, uses what like 1% of the global electricity, the network. Right. So yeah, I think that, I think that bitcoin has a place and I think that the market will wake up to the fact that it's not a 3x NASDAQ. You know, it's a, it's a scarce asset that, that anyone can own, that's uncensorable, that's decentralized. You know, so long as you're talking real bitcoin and I Think that, yeah, I think that, you know, it might take a year, might take two, might take three. But I think that in a shifting kind of global monetary regime, where you go from the US treasury being the primary reserve asset to gold, I think that bitcoin eventually will start to, to, to take a place. If I had to bet, I would, I would venture to bet that like some major nation states have already started mining. If I had to bet. So I think it's already happening.
- [58:58]
B
I don't think you have to bet. I mean Russia's talked about it. Venezuela historically has been doing a. Bhutan, not a major nation state, but they're doing. Ethiopia is in the game. Argentina's talking about it. It's there.
- [59:08]
A
Yeah, yeah. And I think that adoption will, will, it might, again, it might take some time though because you know, the shift from U.S. treasury to gold, you're talking a once in a generation, you know, 70 year sort of trend reversing. It's not going to happen overnight. And for Bitcoin, smaller asset class, newer asset class for Bitcoin to start to benefit from that will take time on top of that, if that makes sense. So I think that as long as people are patient, I don't see any reason, you know, so long as, you know, certain issues can, can be addressed and the market is able to feel reassured with particular risks. You know, the one that everyone's talking about being quantum but you know, other, any other risk. Right. The security budget and all that kind of stuff. As long as like the general market starts to become assured that, that those risks are. Yeah, this is my thought. So like, yeah, you Gold, Gold will not last forever as, as this primary reserve asset due to exactly that.
- [60:19]
B
Well, and that's like, I'm just, I wanted to pull this up because we're talking about obviously quantum is the big fud of fud de jour, if you will, about bitcoin. And I thought Grubel's tweet here was, I mean just to put things in the context and this, I think this is objectively true. There's more progress instantiating gold molecules out of thin air than there is for quantum computers being able to attack Bitcoin.
- [60:42]
A
Well, the higher that gold goes, the more of an incentive there is to find out how to do that. Yeah, how to print gold.
- [60:51]
B
Yeah, yeah, and I completely agree. Adding to some of your points there, I've written about this and talked about in the last couple weeks too. Like I, the fact that people are butthurt about gold and silver having banner Years and bitcoin being relatively flat to down. It's just mind boggling because we had an 8x between November 2022 and October of last year and between 2009 and up until 2024, Bitcoin was having all those gains. Gold and silver bugs were sitting on the sidelines. We were making fun of them. So the fact that they have one banner year performance, which is well deserved. The thesis, I think is pretty sound and they're being rewarded for that. It's like you can't get butt hurt. Like you said, it's a long term game and it's objective. There's a familiarity with gold as a reserve asset going back millennia. And there's a structural aspect to it too, where bitcoin's only at a $1.85 trillion market cap. If you wanted to rotate funds and rotate flows out of assets that you deem risky, particularly government bonds, and into a hard asset structurally like gold and silver. Just easier to do that without a ton of slippage.
- [62:07]
A
Yeah, yeah. And this is where the upside would come with bitcoin. Part of why I'm young, I have a lot to catch up in terms of where I want to be in terms of kind of like wealth or net worth or whatever. So I'm willing to take more risk. But that's where the upside comes from is the fact that it is a much newer, younger, smaller asset class. And you know, I just. In the past three years, Bitcoin's up 320%. And if you go back just to when the ETFs were approved, we're up, you know, 3, 280, 290%, basically. So yeah, like I think that perspective is important because yeah, like it's easy to get stuck in the drawdown, but in focus on that, but 100, 120% since the ETF. Yeah, it's easy to get, you know, upset. We were at all time highs, you know, just what, a quarter ago basically. And it's easy to feel the pain of a 30% drawdown. I think that if we had this 30% drawdown, but gold and silver were going, we're going nowhere. I think the sentiment on like Twitter would be much different. I think that it's mainly the fact you pair the two of them where you have a 30% drawdown from an all time high that we literally like just hit. You pair that with the fact that gold and silver are going parabolic. I think the two of them combined is what make is making sentiment so bad. But but yeah, I like when sentiment's really bad that that's the best time to buy something. Generally you're going to get a pretty, pretty gnarly reversal. So.
- [63:52]
B
Completely agree. And to your point about younger generations getting bitcoin and simply being able to access it easier, actually I've been giving a Bitcoin 101 presentation at a local high school. I mean, I moved back to Philadelphia recently, so it's local to me now. But I was doing it remotely for the last two years and I gave the presentation yesterday and the amount of good questions I got after and the amount of sort of enthusiasm in the room was palpable. A number of kids, one kid raised his hand and asked, can I get a, I have a job with a direct deposit. Am I able to direct deposit that in the bitcoin? Like if so, what apps should I use? I was like, yeah, you can do that with Strike cash, app, fold, whatever. And so to your point, that's actually one of the other questions I got from one of the kids was why, why don't you think bitcoin adoption's been, been as strong as many would like it to be? And I said, because you guys don't have enough money yet. Because I think yeah, once, once you're in the job market, you're making money. If you get a job, hopefully you do. Smart gentleman here who's an all boys school, you'll get bitcoin. It's going to be much easier for you to spin up a bitcoin wallet and receive and send bitcoin as opposed to a bank account. And I think you're more tech savvy. And this is something that's native to the Internet, which is native to your life. You've never lived without the Internet. And I think just naturally your generation will connect with a native digital currency.
- [65:24]
A
Yeah. And the sentiment will shift on a dime. If we just envision a rally back to, I don't know, 105 on Bitcoin, the sentiment will come back. People will be super bullish. Oh, now we're going to 300K. These, you know, are, are they shift on a dime and, and it doesn't take much to get people bullish again. My, my worry is like when it comes to the younger generations and you know, people my age, it's like, you know, if we're falling further and further behind, how much, how much of a, of a decision dynamic is being made where, you know, people are thinking to themselves, well, you know, bitcoin could double right from Here, maybe it goes to 160, maybe it does a 3x, but, you know, I need a 20x because the further, the longer that it goes, longer time goes on, the more ground I have to make up, especially in kind of the environment I see coming over the next couple of years with negative real rates and fiscal dominance. So, yeah, there's like kind of a concern I have a bit where, you know, I worry that there might be even more gambling, even more risk taking, and that bitcoin is going to not be able to be seen the way that it was in the early days where there was huge upside and, you know, early adopters were rewarded handsomely, that sort of thing. Right. So, like, I see the rise of gambling and Kalshi and, you know, I figured because I talk about this stuff all the time, I needed to set up a Kalshi account and like, do it, have some experience. So I did. And I was like, you can bet in an afternoon and 12x your money, like, you know what I mean? It's wild. And so you have that where you can 12x your money in an afternoon. You know, you got zoomers that are so far behind, for example, to buy a home. How much are they going to. That's my concern. As the young fall further and further behind, how much is the risk appetite going to grow beyond what Bitcoin seems to provide? That's, I think, another concern to be wary of. I don't do that. I trade, but it's 1% of my total net worth and any profits I basically just put back into bitcoin. But yeah, that, that, that risk taking, I think, is going to be increasing as kind of financial nihilism grows. The other thing I would say too, when it comes to like a potential catalyst that is positive for bitcoin is like, not to be political, but what we're seeing in the US Starting to develop is kind of like scary in terms of a potential for some really ugly sort of political dynamics and violence here in the U.S. domestically, that's characteristic of a fourth turning. Well, some kind of violence. Right. Either international or domestic. But yeah, I'm kind of like coming around to this view that the risk of a domestic conflict here in the US is growing significantly faster by the day than I thought it would. How do you know when you're talking about a world where people are maybe not able to cross state lines, maybe, you know, there's people that look at what might start to happen and start to flee the country and all those sorts of things, you look at like, well, what is the single best way to store wealth in that sort of environment? My opinion is bitcoin, by a long shot. Like, you can't. If you have any, you know, any. Any decent amount of wealth, can't even do it in gold, you know, so. Because you would be fleeing through, you know, maybe checkpoint. I mean, I'm not trying to be doomer, but like, you know, it could get pretty ugly here in the US and what is the single best way to transport your wealth? You know, memorize 12 words and no one knows. You know, they're not searching you and finding gold bars, and you're not, you know, so I think that's another thing that I've been thinking about more and more recently. Seeing what's going on just kind of in the societal pulse, I guess. And I know that the Internet's not, you know, real life and stuff, but you're seeing all these sort of escalating tensions out of Minnesota with insurrection act. And, you know, kind of some of the scenes coming out of there are a little sketchy and kind of concerning. So. Yeah, like, it's. Yeah. You know, in a world where you might not feel super safe to walk around your neighborhood because your political views, that's a different America than we've grown up in. You know, I live in L. A And, you know, envisioning a world where, you know, you have to watch what you. What clothing items you wear, you know, for fear of a mob of, you know, people attacking you for perceived political opinions. I mean, we're seeing all that kind of stuff that, like, it's characteristic of a four turning. It was kind of predicted it would happen, but, like, it's kind of scary when you really take a couple steps back and look at how that picture is looking like it's developing. And yeah, in my opinion, that could be, you know, in a positive way at least, a bullish indicator for. For bitcoin. Because, yeah, you know, I'm kind of putting myself in that position, you know, thinking that through over the next 10 years. Right. Preparing for a possible situation where these sorts of things start to happen. And the asset I keep coming back to is bitcoin. That's what I want to own in a world of kind of. Especially when you talk about even if it doesn't get violent, even if it's just kind of hyper political pendulum swinging back and forth to extreme to extreme. Well, they can't seize bitcoin on the blockchain. Right. Like, if you envision, you know, a socialist Taking power and going full blown socialist. They can't. They can seize your stocks, they can seize your house. I don't think they would, but they could definitely seize stock, they could definitely seize bonds. And if you own gold in the wrong way, not self custody buried in your backyard, they could seize that too. What can't they seize? Like, the only thing they can't seize is 12 words out of your head. So I think thinking about that sort of thing, it's ugly and it's not what we want for our country. But when it comes to potential bullish catalysts for bitcoin, it's one that I'm kind of increasingly coming around to, if that makes sense.
- [72:19]
B
Yeah, I mean, I was reading something this morning about a hospital in New York City that refused to operate on plainclothes NYPD officers because they thought they were ICE agents. And I mean, you're getting to that point where you're absconding the, the Hippocratic oath because of your political views, which is not a good social environment to be living in.
- [72:45]
A
Yeah, it's pretty ugly out there. Like again, you know, Internet's not real life and we, we see some of the most extreme stuff right on the Internet and hopefully we can avoid, you know, domestic violence, you know, violence within, within the domestic polit. But I don't know, I. Seeing the way things are developing and seeing how like deranged people are when it comes to politics nowadays, like, you know, it's just, it's concerning, you know, it like I'm starting to think like I want to, you know, buy a house, want to start a family. You know, I'm thinking about like, okay, well, I need to figure out like, where to, to live. Right. Where you live could determine whether or not you live or die like over the next decade. And that's a scary thought. There's huge consequence to, you know, you have to look at the fiscal health of the city you're going to live in. You have to look at the fiscal health of the state. Because as much as we talk about the fiscal health of the feds, like California here, you know, they're, they're about to go into like a fiscal crisis within the next couple years. If nothing improves, they're trying to tax their way out of it, like the uk, but we know that doesn't work. You know, tax revenue as a share of GDP plummeted over the past couple of quarters. In uk, you had, you know, historic amount of wealth flee. So you can't tax your way out. Right? So like you're trying to think, okay, well, cities are, you know, they have these huge pension funds that are underfunded. The state, a lot of like blue states mainly have these enormous state budget deficits. So you have to, like, you have to worry about that. And then you have to worry about like the, you know, geographics of, you know, God forbid there's ever potential conflict within our country, like, where do you want to be, all that sort of thing. Like, my parents never had to think about any of that, you know. But I think that if, if we're being honest with ourselves, like, these are conversations that I think, you know, a lot of people are going to have to have over the next decade because I don't see political polarization and all that kind of vitriol and just derangement. I don't, I don't see it getting better, you know, and, and then you come to the next logical question, which is how do these people co, like, how do you coexist with people like that? You know, and like all these nasty sort of, you know, implications from that. And yeah, like, it's just all ugly, you know, and, and I think about when it comes to assets, when it comes to like, financial markets, it's not good for equities to, to, to go into a world of increasing populism, increasing political polarization and potential, you know, full blown socialism. And, and you look, even with maga, we're nationalizing, you know, the, the federal government's nationalizing companies. Right. Even MAGA is not free market capitalism. And that's, you know, you're suspending buybacks, right. You're, you're, you're capping salaries at the defense company. Yeah. Capping credit card rate, all this stuff. Right. So it's like, do I want to own equities? When they're talking about like a windfall tax on the MAG7 to fund electricity, you know, power generation, like, I don't know, equities just for a number of reasons don't look good. Bonds certainly don't look good on that.
- [76:09]
B
Windfall taxes. Like we fought this battle in bitcoin mining in the United States two years ago when I forget it was the EPA or whatever sent out the survey to basically identify energy source to try to tax them more. And it's like, oh, interesting. And we're doing this now.
- [76:27]
A
Yeah. What do you want to own in a world that looks like that, where you have, look, I'll point out that the last time we really had a massive impulse when it comes to fiscal spending and populism. Back from 1965 to 1982, the S&P 500 collapsed 92% in gold terms. So, yeah, in dollar terms, you went nowhere. In dollar terms, you got back all the dollars you were owed, but in gold terms, you lost 92% of the real value that you had in equity exposure. So I think that those sorts of things. And again, what we see, the government and this is the, like, free market party, right? This is the conservatives or whatever you want to call it. Right. That's doing it. What is it going to look like when it's president aoc? You know, it's going to be even worse. And like, ask. Ask yourself, well, do you really want to own equities in that sort of landscape where it's all centralized and, you know. Yeah, there's a number of issues I see with equities where I don't want to store my wealth in them. Of course, bonds, like, you know, bonds could not be worse when it comes to the way I see things over the next 10 years. And really, kind of the only thing I keep coming back to is, like, gold, silver, and bitcoin. I bought. I was buying a lot of gold and Silver in 22, 23, 24, and I plan to hold that. I would like to add some. A little bit. You know, I'm still heavily, primarily, vast majority is in bitcoin, but. But those are the only two assets that. But really, when I take, like, 10 steps back and look at the political setup, the societal setup, the fiscal setup, the international kind of global trade setup, it's pretty clear that, like, the only thing I'm, like, super bullish on is gold, some degree silver, and definitely bitcoin. Definitely Bitcoin. At $89,000 per Bitcoin, I'm definitely bullish here.
- [78:25]
B
Me as well. And I want to be respectful of your time because I know you got to run here. But I really appreciate you taking the time this morning to catch up. It was, as always, incredibly intellectually stimulating and a high signal. So thank you for the work that you're doing, sir.
- [78:39]
A
Yeah, thank you. I appreciate that.
- [78:42]
B
We'll have to do it again soon. We should keep on this cadence, once a quarter catching up.
- [78:46]
A
Yeah, absolutely. It's always a good time.
- [78:49]
B
All right. Peace and love, freaks. 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. Okay.