Greg Foss (5:42)

Well, I'm so excited to be back and I'm doing well. Thanks, Peter. Nice. Nice to have met you in person in Miami. It was really. It was really a great experience, dude.

Peter McCormack (5:51)

Miami was awesome. It was. Had such a good time. It was great to meet you, too. Dylan, first appearance on the show. How you feeling, brother?

Dylan LeClaire (5:59)

Feeling awesome. Thanks for having me on. Long time listener. So happy to make it on here.

Peter McCormack (6:05)

Well, listen, you wrote such a good article, we had to get you on. We had to talk about this. But also it's good to have Greg to join us. You both know the show. You both know the way I do things. I like to keep things, like, nice and simple for easy for people to understand. But this was great timing, your article, because I think it came after I'd watched Ray Dalio's video, probably for about the fifth time. But I'd seen it around the time you wrote this, because every time I'M like just trying to see where we're going or kind of understand what's going on. I go and watch that video and then I'm like, oh shit, we're absolutely fucked. But that video is brilliant. Your explanation is brilliant. I'm going to stick a link into the show notes so people go and check it out. It is called Conclusion of the Long Term Debt Cycle and the Rise of Bitcoin. And it appears that it appears we are coming to the conclusion of the long term debt cycle. But Dylan, look, just welcome yourself, explain to people who you are and then talk about why you approach this article. Because it's a bit of a beast.

Dylan LeClaire (7:01)

Yeah. So my name is Dylan LeClaire. I work for Bitcoin magazine. Started up with them like about five months ago. Didn't really start doing content, but more like media stuff. But yeah, started there. Dropped out of school about a year ago. Like have us have a business called 21st Paradigm where I kind of consult people about bitcoin and why it's important, why they need it. So yeah, it's been kind of a, kind of a crazy year. Life's changed a lot. But yeah, I think in around April I put out this, this piece called the Conclusion of the Long Term Debt Cycle and the Rise of Bitcoin. After reading a lot of Ray Dalio, his work, he has like a pretty long book which is kind of like lays this out. It's like kind of how he made his career, honestly. And I also have watched that 30 minute video multiple times. You'll probably learn more in that video than you will from a college economics degree, to be honest. So everyone should go watch that at the very least.

Peter McCormack (7:59)

Dude, I send that video to so many people I've stuck on Facebook, I've told my friends, listen, you need to watch this. You need to understand what's going on in the economy. I think I learned more about economics in that than the two years I did study in economics. Value level, I think. Absolutely fucking right. It's such an unbelievably condensed video of how the economy works. But I do want to ask you, could you. You said you dropped out of school. All the smartest people drop out of school. They realize it's for some reason. What were you studying and why did you drop out?

Dylan LeClaire (8:29)

Yeah, I was studying. I was studying business. Like been a numbers guy kind of my entire life, but was like, kind of had a focus on like finance and econ. It was like learning Keynesian economics. And at the same time I'm I'm listening to, you know, a bunch of podcasts and reading and. And doing all this stuff on the side for free. They sent us home because of COVID And it was like the contrast between, like, Zoom University, taught by a bunch of boomers, and, and like, you know, free podcast, like free podcasts and bitcoin Twitter, like, couldn't be more, you know, the contrast couldn't be more stark. So I dropped out and just, you know, picked up a job and to stack as many sats as I could. And, you know, about six, eight, and I think about nine months later, I landed a job here. So, you know, worked out.

Peter McCormack (9:15)

Worked out well, avoid all that college debt.

Dylan LeClaire (9:18)

Yeah, for sure.

Peter McCormack (9:20)

Good move, brother. Greg, you must love this video as well. You must know the Ray Dalio video.

Greg Foss (9:27)

Yes, sir, I do. And I followed Mr. Dalio's career. Shouldn't say follow it. We tried to mimic it at the hedge funds. I worked at, certainly his risk parity. His risk parity platform was brilliant. It actually doesn't work anymore. He knows it because interest rates don't go from 14 to 0 and then from 0 to minus 14%. Okay, so the 10 year over my career and his career, us 10 year went from 14% down to just under 1%. And that works great when you use bonds as a hedge against the volatility in equity markets. But mathematics, bonds are only mathematics, and the math doesn't work when you go below zero. Mr. Dalio knows that. And so most famous recently, most famously, he said, I'd rather own bitcoin than a bond. And Mr. Dalio shows that he understands math and he's trying to tell other people to study math, but unfortunately, they're stuck in the. They're looking backwards. They're driving in the rearview mirror. So. But can I add one thing? So I met Dylan down in. In Miami first time, and just before we went on stage, Dylan tells me, I go, why did you drop out of uvm? And he goes, because I was sick of the Keynesian brainwashing. And that. That. That. That line has stuck with me since I met you, Dylan, you know, because it is. It becomes. It becomes a bit of a. A brainwashing. Everyone accepts. Accepts the. The curriculum as being gospel. And the truth is no true academics have ever sat in a risk chair where they've traded risk as a career. And they'll quickly realize that what you learn in a textbook versus what you learn sitting in a risk chair like Mr. Dalio has done two very different lives. And there's theory there's practice. Sometimes the two intersect and sometimes they do not intersect. This is what makes life exciting. And if you sit in an academic chair like Steve Hanke does, I would suggest you just wrap his research in fish. Okay. Or the flip side, I wouldn't use his research to wrap fish, quite honestly. So take Mr. Dalio at face value. Take young kids like Dylan who've seen the, you know, who question the system and just want to say that that's what gives me strength, is meeting young men like Dylan who's decided to take, you know, to take his education under. Under his own wing and. And go with it. So proud to be here, boys.

Dylan LeClaire (12:07)

Appreciate the kind words.

Peter McCormack (12:09)

Yeah, good work, Dylan. I'm in the same challenge with my own children now. I've really come to question a lot about the education they're getting. And, you know, I try and teach them my own things and, like, we're making progress. Luckily, my. My son is an art student, so there's not too much propaganda involved in that, as long as he avoids some of the woke elite. But there's a. Interesting points you made that I want to touch on, actually, because one of the things I find really interesting about Ray Dalio, he seemed to not get bitcoin for quite some time. But, like, he put that tweet out that time. He said, you know what, I could be wrong about this. I might need to reconsider my position. He kind of put himself out there and admitted it and looked like he went and kind of changed position. And it feels like there's a lot of people out there who just don't want to do that. They've got this. It's almost like this sunk cost. I've been so against bitcoin, I've got to stay a bit against bitcoin. And someone like that that really sticks out is Hankey. I've been a bit of a reply guy for his for the last two weeks because he keeps tweeting about various countries. I think it's like Ethiopia and Lebanon and the currency crisis that happened. I just keep saying I don't understand how you don't understand bitcoin when you're posting this shit. It's almost like he feels like the solution is within the current system, but he refuses to accept that maybe bitcoin can be an answer. So he'll post about Ethiopia's inflation, or he'll post about Lebanon's inflation rate and currency collapse, and then the next post will be something very anti Bitcoin. I don't understand why he won't just even make an attempt to understand Bitcoin. It's a really strange position.

Dylan LeClaire (13:42)

Most ironic thing is that he has troubled currency project in his bio. That's one of the things he does. And he said, think about El Salvador. He said the most prudent thing they could do is elect a currency board. It's like, you know, I think you just have to take opinions, like, from, like, from guys like Hanky, just with a grain of salt at this point, just ignore them. You know, I mean, like being a reply guy's phone, I do it too.

Greg Foss (14:04)

But the truth is, guys, the best risk managers in the world, of which Ray Dalio is obviously one of them, they change their positions when the facts change. Right? Anybody who sticks to a position that's costing them money will get carried out on a gurney off the trading floor or out of the hedge fund business. Right? And this is what Hanke doesn't understand. It's what, you know, I don't want to bring up Peter Schiff's name, but, you know, it's like these people. You can see when conflict enters the situation or enters the discussion, meaning, you know, I'm a gold bug and I won't promote a better alternative. But then Mr. Dalio, as honest as the day is long, he says, I could be wrong. Well, so could all of us be wrong. At least admit that. Whereas other people who are dogmatically opposed to it because they've not their three hours of research on it, My goodness. You know, this isn't even funny. Matt Odell tweeted the other day, anybody who pretends they truly understand Bitcoin is either lying to themselves or lying to other people. And that's the truth. I mean, how long have you guys been studying it and continue to learn new things about it and see the network and the lightning layer two and all this stuff, you can't possibly claim to learn it after only studying it for five years, which I've been, excuse me, to be an expert in it for five years, which I've been doing, you know, it's impossible. You continue to learn new stuff. So people who categorically dismiss it as I looked at it for three hours, and this is not going to work.

Peter McCormack (15:38)

Too volatile.

Greg Foss (15:39)

You can't listen to people like that.

Peter McCormack (15:41)

Too volatile.

Greg Foss (15:42)

Well, that volatility is the. Is the price of return. You want volatility? As a trader, you love volatility. I don't get it. People just don't, you know, as if they put 3% in their portfolio and they forget about the other 97% of their portfolio. It's that 3% that's going to absolutely, you know, define their careers. That's exactly wrong. And that's what Mr. Dalio understands. And I wanted to point out one thing, Peter. I think at the beginning it would have been impossible for Bridgewater to embrace bitcoin before it got over, you know, a $500 billion market cap sort of thing. It's just not a big enough market for the size of the, for fund that Ray runs. And they need liquidity, they need long shorts. They need to be able to move in and, and, and amass a position. And you know, it's like anything sometimes when a, when a, a small cap company is just too small, it might be the best investment in the world. And their analysts might agree that it is. But to get a position size, that would mean that would matter in their portfolio. That, that just can't happen in many cases. So bitcoin is now in the big boys league. And you'll be surprised. I, I just got off the phone, or it was a zoom call two days ago with a very large family office in New Jersey, a kid I went to school with, 30 years he's been building his business and he's finally come around to realizing they need to consider bitcoin as a portfolio addition. And look, if they're doing it, I promise you, all other quantitatively inclined accounts are looking at it as well. And volatility is good. You got to understand volatility is the price of return.

Peter McCormack (17:24)

Well, I know, man, I know, I know, I know. I mean, look, it's probably for another show. There is an issue with volatility as someone like El Salvador accepts it as a medium exchange. People have to think about it. But it's, that's about, you know, risk management and teaching risk management. But like your other point reference to Matt O'Dell, listen, I am in some ways I am the luckiest bitcoiner in the, in the all of bitcoin because every week I get to speak to the smartest fucking people and I get to ask them all the questions that I want answered. And I still don't know shit. And I accept that. So listen, you make a really good point there. But listen, we're going to make you the star of the show today. Dylan. Me and Greg are the boot. We're the boomers that kind of get bitcoin a little bit. But you know, you're the youngster here. Your age probably starts with the two. You're still handsome. You probably kill it on Tinder. So listen, we're gonna rush, we're gonna go ahead with you. Let's work through this. There will be people who won't have watched the Ray Dalio video. We'll tell them to watch it and they still won't watch it. We'll put it in the show notes. They'll still, still won't watch it. So like, for those, we need to work through it anyway. Let's talk about this long term debt cycle, how we get there, etc. Etc. We're essentially talking about money. We borrow from ourselves.

Dylan LeClaire (18:36)

Yeah. So like many people think, when you think just like borrowing, right? People think like borrowing from someone else. But in the most basic sense, when you borrow money, you're borrowing from your future self. You're pulling productivity forward, right? So like, you know, whether at an individual level, right, you just, you know, you borrow a hundred dollars and you have to pay it back plus interest, you spend that money today or you invest it or whatever you do with the money, you have to pay that back with your future productivity. And many people don't think of it like that. But that, that, that holds true at an individual level. Like everybody can kind of grasp that, but it also holds true at a macroeconomic level. It, you know, whether it's an industry or a sector or a nation or the whole world, right? And so debt, because of that debt is cyclical. And so you see this play out over, you know, over eight to ten year periods and you also see this play out at over 80 to 100 year periods or around there. It's kind of a, kind of an estimate. But you know, and then these, these kind of cycles play out because debt is, is cyclical, right?

Peter McCormack (19:34)

So to help somebody understand that, when you're saying you're borrowing from yourself, it's because in the future, if you, if you borrow, if you're borrowing money now, say like to buy a car and then you've got to pay for that car back plus the interest. If you, a lot of people will do something based on the fact they think, look, my career is going to grow, I'm going to earn more money. You know, this is cool, this is fine, I'll be able to support it. But if your wages are stagnant through in that period, that's where it actually becomes difficult for yourself on an individual level because you suddenly become burdened with this debt. And that means your spending power of what you earn in the future is going to be decreased. So you're Putting a bit of pressure on yourself. Let's try and like extrapolate that out and think in terms of like the entire economy, why we get to these boom and bust cycles. And listen, when I grew up and I studied Keynesian economics, we'd study boom and bust cycles, right? But these bust cycles, like we had the 2008 crisis and now we've got what appears to be a bigger crisis. It feels like this whole, let's call it short term debt cycle moving into a long term debt cycle is becoming something like. It's going to get quite out of hand for me right now. I look at all the different points. It is in your articles, you raise the, the issue of the rise of populism, the wage differential, the fact that you will see uprising. And I only literally tweeted, I think yesterday, it feels like we've got a protest in every fucking country in the world right now.

Dylan LeClaire (20:58)

Yeah, I mean, that's not coincidence, right? I mean, so like you have these debt cycles and in the short term, right, because of, you're pulling demand forward on the upswing of a credit expansion, it's kind of like a self reinforcing, like upwards boom, right? You pull forward demand. If that debt is used for investment or it gets a positive return, that's a good thing. Debt isn't always a bad thing. If you use debt to increase your income, be it if you borrow some money and you hire a producer with money that you didn't have before, that's actually good and increases your productivity. But many people, especially during the later stage or the bubble phase of a debt cycle, they use that debt for unproductive things. I'm going to go use that debt and I'm going to buy a car because it's cool and it makes me feel good, or I'm going to go use that debt to, you know, whatever gamble, it could be anything. And that is bad debt. Yeah. And so kind of, and people, people in these upswings feel richer, right? You borrow money, you're, you're the asset value raised because, because you have more assets, you're more credit worthy, you have more collateral. And this, this kind of occurs, you know, at a national scale or a global scale. And so over the course of, you know, there's, there's, you know, these like people are kind of intuitively understand whether or not like they're an economist or not. They understand like the business cycle, right? Like, oh, times are good, you know, everyone's productive and you know, once every 10 years or back in 2008, there was a recession that maybe people don't really understand why or that it's driven by credit, but they understand that, you know, maybe once every 10 years, you know, there's good times and then there's bad times and there's a recession and things get a little hard. People don't really, you know, kind of understand the driving forces behind that. But, you know, in 2008, 2000 or 2020, we have these recessions. But over the course of the last 40 years, you know, interest rates have gone in the U.S. from 20% in or around there in 1981 to zero today.

Greg Foss (22:59)

Right.

Dylan LeClaire (23:00)

So anybody that's, that's holding an asset. You know, Greg talks about credit a lot. If you, if you hold the long bond from. Or, you know, you're just a Bond Investor from 1981 to 2020, you just sit on your hands, essentially. I mean, you know, there's, there's more to it than, than that, but, you know, the present value of all assets when interest rates go from 20% to zero, skyrocket. But who's left out of that equation? The wage earners. Right. Anybody that, that doesn't have, you know, a bag of assets is kind of getting pillaged. And so this is like a systematic thing. You know, there's not one person to blame. There's not, you know, it's not this person's fault or that person's fault. This is occurring at a global scale. And it's most, for the most part, because of the international monetary order. It's kind of driven by the US but it is a global thing, right? Everybody that, you know, the 1%, the rise of populism, all this stuff like red team versus blue team, Democrats versus Republicans, I mean, it's all just symptoms of a bigger problem here. And that's what, like, kind of a lot of people don't really understand.

Peter McCormack (24:01)

Greg, listen, I know we look a similar age, but I think you've got a few years on me. 20% interest rates, that was a thing.

Greg Foss (24:11)

That's when I started Money in the bank. 1982, when Volcker. Okay, so I was 20. So there you go. So to be exact, I was 19. But, yeah, 1982. I am 58, sir. So the good thing is, yes, it was 20% interest rates, and Volcker needed to snuff out inflation, and he succeeded. Now, you can do that mathematically when you don't have a debt burden that we have today. Okay, and so there's a. Dylan, I love the way you talk about pulling things forward. Look, all a bond is is a contractual obligation. And everyone said, oh my God, I made so much money in bonds on gains basis. But really, when interest rates go from 20 down to 1%, and let's say you cash in that 30 year bond when interest rates have gone from 20, so you have a coupon on your 30 year bond is a 20% coupon. And in 10 years you decide with 20 years remaining, I'm going to cash out that 30 year bond and it's gone up. It's trading like $160 of parity because that's only bond math. And in year 20 though, you take that coupon and rates have gone from 20% down to call it 12%. All you do is you pull forward those 20, those, the remaining 20 years of 20% coupons and then you now have a 12% return going forward. So that's the bond math of it. But you can bring it to the same context of borrowing money because ultimately that's all that a discount rate is is. It's a measure of, it sets the base level of risk. So if your government is borrowing at 12%, everything else is discounted on top of that. Right. So equities get discounted, let's say at 12% plus an equity premium, corporate bonds get discounted at 12% plus a corporate bond premium, et cetera. So we've gone from a 20% coupon down to an under in the 10 year down to an under 1% coupon. And then recently, the quintessential. Yeah, hold on, Peter, I want to say this. We had a 30 year bond in one year ago. They got issued at a one and a quarter percent coupon. Okay, it's now trading down 30 points, 30 bond points because interest rates in the 30 year went from one and a quarter percent. What's 30 points back up to two and a half?

Peter McCormack (26:50)

What does 30 points mean to 30 like to a layman?

Greg Foss (26:54)

Okay, you buy a bond, sure. You buy a bond at 100 cents on the dollar because that's generally when it gets issued, it gets issued at $0.100 on the dollar and it traded down to $0.70. This is supposed to be capital preservation in bonds. And you buy a bond one year ago at 100 cents on the dollar with a one and a quarter coupon on it in the 30 year. And now it's trading down 20 points or 25 points because interest rates have gone from one and a half, one and a quarter to two and a half and then back to 2% in the 30 year. It's all rounding errors from a basis points, Peter. But that's the real life impact on the price of your bond.

Peter McCormack (27:35)

Did I just see Australia sell $100 million of bonds? 10 year bonds or something at minus 1%?

Greg Foss (27:42)

You did, sir.

Peter McCormack (27:44)

It's laughable, okay?

Dylan LeClaire (27:46)

It's laughable.

Peter McCormack (27:46)

I mean I'm just trying to be. I'm trying to be rational here, but that sounds fucked up. Okay, so basically I'm trying to think why rationally would you do that? If you have an expectation inflation is going to be high, there's actually might be a good trade, right?

Greg Foss (28:04)

It's good for the seller. You know, the seller of bonds at a negative yield means it's turned into that liability from the seller is now an asset because they issue bonds at 100 cents on the dollar and they only have to pay 98 to eliminate the principal obligation. It's, you know, mathematics with yield. Any.

Peter McCormack (28:31)

Pardon me, but they found buyers, right?

Dylan LeClaire (28:33)

Greg, maybe you can speak more on this, but I imagine a lot of the buyers of those bonds are probably mandated to buy them. No.

Greg Foss (28:40)

Oh, they are mandated, guys. But it's a liability. It's no longer an asset. They are mandated to lose money. That's a contractual obligation to lose money before inflation expectations are even priced in. Peter, it's crazy. I know you get it. It's like I lent this guy 100 bucks and he's gonna give me 98 bucks back and I'm going to be happy about this. What the heck?

Peter McCormack (29:04)

Are you kidding me?

Greg Foss (29:06)

This is ridiculous.

Peter McCormack (29:07)

Look, I wrote down one line specifically from Dylan's article and it just makes me think of this. There is mathematically no way out of the current economic environment. It's just the signal is there that we are in some kind of absolute fucked position. And it's like, so what I care about is like, okay, look, we're all screwed. How's this going to play out? Is is limit is Lebanon. Is that like a lens into the future for us in Europe and the US or will Europe and the US have high inflation? But certainly not a situation like they've had there. Like I'm in my head, I'm trying to. I'm trying to think how this plays out. Because hyperinflationary events are things that happen in countries like Venezuela and Zimbabwe. They don't happen in the UK for me. Like I'm like, no, that's not going to happen. Of course it's not.

Greg Foss (29:57)

Like until what? Until they do.

Peter McCormack (29:59)

Until they do. But like I Don't know. Dylan, look, you've got it in your article. You know, this long term debt cycle is coming to end. How does it all end?

Dylan LeClaire (30:11)

Yeah, so I mean like how we got here, right, is like, you know, these short term debt cycles, it's like, you know, the eight to ten years like we talked about, it's essentially like debt to income ratios reach an unsustainable level. What happens? All of the mal investment, all of the misallocation of capital in a capitalistic system would get wiped out. Right, but what happens?

Peter McCormack (30:30)

Which is not a bad thing by the way.

Greg Foss (30:31)

No, it's a creative destruction. It's called creative destruction, guys. It's supposed to happen.

Dylan LeClaire (30:36)

Yeah, it's a great thing, right? It's just like, you know, it's just. But you have like I covered in the article, what we have now is, I mean in the U.S. you know, there's, there's a semblance of capitalism, right? But you know, 50% of every transaction is money. Right. And the price of money is centrally planned. The price of money is not. It's really, we haven't had capitalism. The price of money, interest rates has been centrally planned. So every time we kind of have or have started to have some sort of deleveraging where, you know, anybody that was kind of, you know, over, over leveraged or out of position, they would get wiped out. Well, what happens? Central banks come in, they lower the price of money. It's essentially, it's essentially a bailout. And it's happened at a greater and greater scale as these debt cycles come along. Right?

Greg Foss (31:21)

Socializing losses. Dylan, that's exactly what you call, you call it socializing losses. So Long Term Capital Management in 1998, a total example of Wall street getting bailed out using crony capitalism, socializing the losses and eventually that financial burden gets transferred to the burden of the balance sheets of the Fed, which ultimately is the citizens.

Peter McCormack (31:45)

Okay, Greg, all right. A couple of reasons why I think that might happen. Does that happen because, you know, it is crony capitalism or is it voter protection? Is it because we live in this short term, four year, presidential or prime minister cycle and therefore they're trying to protect their votes? They kick the can down the road, the next administration can deal with that, yada yada. Is that what's going on? Which one is it? Is it beautiful?

Greg Foss (32:11)

So I think it's both. Well, it's both. And here's I'm going to add to it though. This is cool. Dylan was totally right because it's only math. Peter, now it's only math. Before, there was a time when we could have bailed out the great financial crisis in 2008, 2009, the financial burden was transferred from the financial system to the balance sheet of the Fed. If we had been prudent, we, and I say we, because every single country was in the same situation. Ecb, the bank of Canada, if we had paid down that debt prudently, and it would have cost a, you know, an administration, their, their votes. Because you go into power and you say, yeah, you know what, guys? The prior administrations have pulled forward too much demand. So we're going to pay it down now and it's going to be hard. We're going to pay it down. Growth is going to suffer because we're not having the ever, ever expanding debt balloon to fund deficits, et cetera. We're going to pay it down, but we're going to be prudent for our children. You think the guy's going to be in power in the next four years after that? Not even close. All right, so they don't do it and they continue to kick the can down the road, like you said. And now, mathematically, as Dylan said, it is now impossible to reach a growth rate in the global economy that will service your debt and not allow that debt balloon just to expand organically because of the coupon on that debt. Dylan nailed it. It's math, guys. Very simple.

Peter McCormack (33:43)

Well, I got two more questions. I'll throw this one at you, Dylan, and then you can feel free to pass it back to Greg if you want. But should 2008, should that have been the end of the long term debt cycle? Because as I think I remember it, the bailout was around 800 million, which right now actually doesn't seem like that much money compared to what's happened. The trillions we're seeing printed right now. The 800 million doesn't seem like that big a bailout, but it feels like perhaps what happened in 2008, that was the end of the long term cycle.

Dylan LeClaire (34:17)

Yeah. So it's actually kind of funny when you watch Ray Dalio's video. He made that 30 minute video that we were talking about at the beginning. He made that in, I think 2011 or 12 or 13. He actually referred to that as kind of the end of the error, you know, the, the long term debt cycle, you know, like interest rates at zero. And he kind of walked through the, the logical path going forward. So like in Ray Dalio's book and he kind of talked about this in the video, there's like three types of monetary policy. First type of monetary policy is interest rate monetary policy. Like, that's the central banks, like bread and butter, right? That's what they use. It's essentially their lever to kind of control the economy and to control basically the cost of capital. And so over the last, I guess, 40 years, since 1981, it's essentially, you know, debt. Debt loads, debt to income levels get too high. What they do, they lower the cost of capital. There's another, you know, eight to 10 years, we coast by. And it happens again. And it happens again. Well, in 2008, interest rates had zero. It's kind of like a hard floor. And so what do they do? Well, in order to recapitalize the banking system, in order to stimulate the economy, they move to the second monetary policy, which is, which is qe. So they essentially go into. They essentially go into the bond market with freshly printed cash, and they'll tell you, they'll say, oh, it's not printing money because we're just replacing a dollar of assets with a dollar of cash. But, you know, that's not, that's not really. I don't really. I think that's kind of wrong. I don't think that's. Yeah, it's wrong, but it nice, you know, because it's putting a bid in the credit market. It's. That wouldn't actually exist. It's adding liquidity to the system. That wouldn't actually exist. And so what they did is they had those tarp, the TARP bailout. They essentially took a bunch of junk assets off, off the balance sheets of the banks and they went in and they essentially, you know, they weren't doing it to the extent they are today, but they're essentially helped to monetize the deficit. They're essentially giving. Giving the government, you know, loans at, at an interest rate that they wouldn't actually get. And so quantitative easing, you know, when, during a liquidity crunch, during kind of a recession, at the beginning of it, it actually, there is some benefit. I mean, it. You can, we can argue the merits of it, but when there is this like an illiquidity in the bond market, it actually, there is, there's a benefit to it, but with each marginal dollar that is printed with each marginal dollar, that's kind of stuff in the system, QE becomes less and less and less beneficial or has less and less of an effect. And so Ray Dalio.

Peter McCormack (36:52)

Sorry to interrupt you, Dylan. Is that why now we're seeing levels of essential money printing right now, which like a vastly higher than what happened in 2008. Is that why it's like trillions now?

Dylan LeClaire (37:06)

Yeah, because you know, like the 600 billion that they did, you know, the TARP bailouts and all that in 08.

Peter McCormack (37:13)

I said 800 million earlier. That should have been 800 billion by the way.

Dylan LeClaire (37:17)

Yeah, that's a drop in the bucket. I mean they're doing $120 billion a month, 40 billion in mortgage backed securities and 80 billion in treasuries. And that's just the Fed, the ECB, the BOJ, they're all doing it. And that's just kind of like the logical conclusion or the logical path forward for a central bank. That's kind of how a debt cycle goes on. And they can, and they, and they really don't have a choice because we're in a, we're in a purely fiat system. Like back in, in 1929 there was, there was this big private debt bubble after the Roaring twenties, but we were on a gold peg, so, so they couldn't, they really couldn't go in and just essentially, you know, for, for bet like for lack of a better term print money because there was a gold backing that all of that, that, that huge debt bubble could collapse back onto a gold Peggy. Right. Gold was kind of that bare instrument that everything that all the malinvestment and all the bad debt could collapse back onto. Well now we're in a fiat system and you know, Greg talks about it and he nails it. He knows, he knows the math better than I do. But fiat is created through lending and it's destroyed through default or repayment. Right. So when I, when I lend you or Greg 100 bucks plus interest, I now have $100, $105 asset. Greg has the cash and a liability that actually create commercial bank lending, creates money. And so when that money can't be repaid back, it all collapses down. The asset I thought I had, well, it's not there anymore, Greg, whatever he did with the money, you know, and so all, all of this, it just kind of collapses down my asset. I don't have it. I'm not as credit worthy. I can't go, I can't go lend because, or I can't go borrow any money because I don't have any assets. And, and it just kind of spirals all the way down literally to zero. I mean maybe that's an over exaggeration, but they can't let it unwind. It's just, it's Number one, it's not politically feasible. Right. You're not going to get elected. You're not going to go up as a central banker and let everything collapse around you. But two, literally the system can't. Credit has to expand or else everything goes to all hell.

Greg Foss (39:16)

Again, it's mathematics. Dylan nails it. It's beautiful. I just want to add one thing. The fiat currency is now the error term that solves the growth in the numerator, which is your total global debt versus the denominator, which is total global gdp. And we have reached a point of no return where the numerator is going to grow outstrip the growth of the denominator under any plausible scenario. Which means you need to print money to solve that debt spiral. Again, Peter, it's only mathematics. Gosh, grade 11 math students would understand this if they actually were taught in school. But you don't teach this in school because it exposes the fiat. Ponzi.

Dylan LeClaire (40:03)

Yeah. Like there's four ways out of a big debt crisis. There's. And Dalio lays this out and for me this is kind of a light bulb moment. Like I was, I was reading his book last March and it was really like whoa, that's kind of when I realized there's no alternative to Bitcoin. It was like there's four. There's four ways out of a long term debt cycle or a big debt crisis. Austerity, so spending less money. Debt defaults or restructurings, transfers of money and credit from. From the haves to the have nots or printing money essentially. Quantitative easing, printing money, whatever you want to call it. Bank recapitalization.

Peter McCormack (40:36)

The first three are hugely unpopular with immediate effect. The last one is, the last one is like. Is the, is the kick in the can down the road.

Dylan LeClaire (40:45)

Yeah. The last one is. It makes asset holders feel good. And Ray Dalio, when he lays out a three different types of monetary policy. The third one is stimulus checks. You know, basically money to the people. You can call it, you know now it's called UBI or I guess MMT may fall in this bucket. Right. You know, you can, you can get more create, you know, quote unquote, create more jobs or do you know, do like the theories of Stephanie Kelton and all this.

Peter McCormack (41:11)

I was just about this about to say the school of Stephanie Kelton. I've had her on the show, man. And like it was a. I tried to hold my.

Dylan LeClaire (41:17)

Listened to that episode. It was pretty brutal. I can't lie.

Peter McCormack (41:19)

Yeah, I like, I think I did okay. I just I was like, I couldn't get her on the same page as me and I was like willing to give her the time, but I was like, look, you're living in a fucking dream world.

Dylan LeClaire (41:29)

Yeah, no, no, it is, right, it's, it's living in a dream world with that. It's not capitalism. And so, you know, these first three kind of like ways out of a debt crisis just aren't going to happen. What's going to happen, it's going to.

Peter McCormack (41:42)

Be, well, Elizabeth Warren's talked about the wealth tax.

Dylan LeClaire (41:45)

Well, have fun taxing my bitcoin that I keep in my head.

Peter McCormack (41:51)

Well played, brother, well played.

Greg Foss (41:53)

But also, listen, even you can raise taxes, there would be a point of diminishing returns, right? You raise your tax rate high enough, the diminishing marginal return in the tax base because more of the economy goes underground, et cetera. One of the things that Stephanie Kelton obviously doesn't understand is mathematics. Again, we just have to look at the simplistic size of the debt balloon versus the ability of the economy to, to produce enough growth to keep up with the growth of the interest coupon your debt service obligation. It doesn't work. Therefore you have to keep printing money to solve the, the, the circularity of this, it's like an error. It's the, I call it the error term, but think of it as circular value. You remember in Lotus 1 2, 3. You probably don't, but they used to, if you formulated a, reformatted a cell and you built a cell on top of itself, they would give you an error in the bottom left hand corner. Circular logic. Well, that's what MMT is, it's circular logic. It does not friggin work. Okay?

Peter McCormack (43:00)

Lotus 1, 2, 3.

Greg Foss (43:01)

Do you remember Lotus 12 3?

Peter McCormack (43:06)

Isn't that like pre Excel?

Greg Foss (43:07)

It was, it was brilliant. It was pre Excel, but then Microsoft, you know, took the code and combined it with WordPerfect, which was, there was Lotus 1, 2, 3 and WordPerfect, and now there's Word and Excel and they're both in the Microsoft suite and they talk to each other perfectly. And all of a sudden Lotus one two three was like, okay, done. But there was a day when you programmed in Lotus one two three because that was the spreadsheet language. I sort of was okay at it, but that was, that's dating me because it was pre 2000, right? So. But this is neat. Dylan. Dylan's right. Think about this. It's all about collateral values. A bank can lend against collateral. That's appreciating in value. Because a bank is so levered itself, it needs to see appreciating collateral values in the economy in order to increase its lending base as well. So, Dylan, you're nailing it on all fronts. I love it. I wanted to say one term that we're using. We're throwing out tarp. TARP stands for Troubled Asset Relief Program. And you're right, Peter. It was $600 billion in 2008. And we did it to bail out the financial system, essentially transferring leverage or bad assets from the financial system onto the balance sheets of the Fed. If we had paid that down without any QE taper tantrums because they were looking at the equity market. Oh my God, now the equity market's gonna puke again. We got to stop this QE tapering. We have to continue it. And they became, they wanted to stop the debt cycle. Okay. They wanted to stop the credit cycle, which is a periodic, periodic cleansing of the economy. They have decided there's going to be no periodic cleansing of the economy. We're going to keep, we're going to eliminate the business cycle altogether. And if you want to do that. Yeah. The value of your currency will accelerate to the downside.

Peter McCormack (45:05)

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Dylan LeClaire (49:05)

Yeah, 100%. Especially after we came off the Bretton woods system 1971. In 1944, basically after World War II, we agreed, okay, the US holds all the gold. We won the war, we'll back the dollar with gold. Everyone else will back their currencies with the dollar. Well, that kind of unraveled because game theory, they were kind of cheating the US and other countries as well. So starting in 1973, it was just. The whole, whole entire world was free float fiat. We came off in 1971, but they tried to maintain a peg after that. In 1973, it was just free open market fiat currencies. Well, the incentive there, there's kind of a perverse incentive where if you debase your currency or, you know, in this case, like lower interest rates, well, what do you do? You, you make your exports far more attractive. You, you suck in a ton of capital into your domestic economy. And so, you know, you'll see a lot of, a lot of, like developing nations especially, you'll see them like over, over the last 40 years, you know, if you were a developing nation, what you could do is you could make, you could basically debase your currency. You are incentivized to do it and you, and you spur your, spur your economy, right? And so, like, there's no incentive to just jack up interest rates, you know, to make, you know, to pay down your debt, because that would destroy your local economy. It's kind of like a race down to zero. That's what, that's what the global fiat game is. This. It's just everybody kind of racing to zero the fastest.

Greg Foss (50:32)

It is actually called. There's a term for it. And Rick Santelli said this famously on tv, on cnbc. Rick Santelli. Santelli being one of the few CNBC reporters that has a spine, that can go out and call out the government for stuff like this. He calls it beggar thy neighbor. Okay? You depreciate the value of your currency so that your exports, which is in is. Is your global balancing, your foreign exchange trade is what balances C plus I plus G. You know, your economic formula. If you increase your FX trade by debasing your currency or beggaring thy neighbor, it's a short term solution to your deficits, okay? And that's the terminology. Dylan, you hit on something that I wanted that you didn't call it out, but the. You did in an article, a prior, an article after your excellent paper, you call it implicit versus explicit default. 1971 was an implicit default of the United States. All right, well, you got to call it like it is, guys. They default.

Peter McCormack (51:42)

Tell me what happened in 1971.

Greg Foss (51:44)

Well, yeah, what the fuck happened in 1971?

Peter McCormack (51:46)

Well, I mean, I know what the fuck happened in 19. So you're talking about coming off the gold standard to pay for Vietnam. Nixon wanted.

Greg Foss (51:53)

That's right. That was a default. That was a default. That was a default. Let's call it what it was.

Peter McCormack (51:58)

It was a default. I'd never thought about it like that. But it was a default because Nixon wanted to pay for Vietnam War, came off the gold standard and allowed him to print money devalued. Okay, I get it, I get it.

Dylan LeClaire (52:11)

Yeah. So an implicit versus an explicit default. Greg has this long paper about credit default swaps and valuing Bitcoin off of it and all this. But you know, in a fiat environment there, the US government or really any nation that, that, you know, has access to their own printing press is never going to explicitly default. Meaning like, you know, if you're a corporate, corporate borrower or whatever, you know, if you don't have enough cash flow or you don't, you just, you know, you go bankrupt, you're defaulting on your debt. Well, the US is never going to default on their debt. They're going to go the route of Kelton, right? They're going to, they're going to print money. There's going to.

Greg Foss (52:46)

And so, or though, if I could interrupt, though, this is important. What happened in Venezuela, they shovel that currency to the, to the curve. Is that a default? Yeah. Yes, that gets thrown to the garbage.

Peter McCormack (52:59)

Well, Lynn, Odin talks about this. She talks about the fact that the way, you know, she talks about the various ways you can get out of this situation. One of them she talks about is that because she talks about the 130% debt to GDP ratio. She calls it the event horizon. Like of 51, of 52 nations who've been in that position, 51 have defaulted. The only one that didn't is Japan. And she says the way they get out of this situation is they print themselves away. So the bondholders are getting paid the nominal amount, but they're losing their purchasing power.

Greg Foss (53:31)

Yes, except if she adds all debt in the world. With all due respect to Lyn, she's brilliant. It's actually 400%. Okay. Because you need to add all that.

Peter McCormack (53:41)

Oh, she's talking about individual nation.

Greg Foss (53:42)

Because if you have interest.

Dylan LeClaire (53:43)

Yeah, she's talking about public debt. GDP doesn't matter.

Greg Foss (53:45)

You add it all together in the globe and even in the usa. She's only taking federal debt. You need to add state government, local, corporate, unfunded liabilities on top of that. Don't even get to me, don't even let me get into that. The point is it's four times. It's 400%. It is not 130%. Okay? It's gone. It's over mathematically. Full stop.

Dylan LeClaire (54:10)

Hyper bitcoinization, essentially, like the next decade. You know, this is, this is the largest wealth transfer ever. And it's going to be from, from creditors, right? Anybody that's a bondholder, your wealth is going to be transferred to bitcoiners, essentially. I mean, you know, there's, there's a lot of nuance and like, you know, a lot of things going down there. But if you're a bondholder, you are transferring, not in nominal terms, but in real terms all of your value to bitcoin holders over the next Dec. Well.

Peter McCormack (54:38)

Let'S quote you again. A great debt jubilee is coming. And it would later be known as hyper bitcoinization. That's how you put it. I think that was like, Was that your final line on the whole paper?

Dylan LeClaire (54:48)

Yeah, and that's, I mean that's kind of, you know, just another way to say what I just said is that. So like the only way out from here is just, is just to continue to make lower, lower and lower real yields. Right. Like CPI just came in at 5% or 6% or whatever it was. Well, what's the, what's the 10 year treasury? What's the 30 year?

Greg Foss (55:07)

Right.

Dylan LeClaire (55:08)

It's like the real yield on those, on Those securities is minus 4%.

Peter McCormack (55:12)

Let me ask.

Dylan LeClaire (55:13)

So the only way, the only way.

Peter McCormack (55:15)

Forward is it just bitcoin as though. But like, let's try and. Let's try and balance out and be fair. What about gold holders? What about people who own property? What about people who like other. Is it all hard assets?

Greg Foss (55:25)

Yes. It's not your house going up in value, Peter. It's the fact that the unit of account is going down in value. Right. So everyone's saying, I'm making so much money on my house. No, no, no. If you measure your house price in gold, it hasn't moved. If you measure equity returns in gold, they've been flat over the last 20 years, but everyone thinks they're going up because the unit of account of what you're printing more and more of and it's being debased. That unit of account makes things look like your house is going up in price. It's weird, but it's circular logic. Again, it's a circular error. If you measured in bitcoin, well, it's not even close, right? I mean, everything looks horrible measured in bitcoin except bitcoin, which one bitcoin equals one bitcoin. So, you know, Dylan, you're hitting it all the points again. Yes, it will be bonds, because when you lend someone, Peter, a bond, you lend $100 for 10 years, the US will pay you that $100 back in 10 years. The problem is in purchasing power. 10 years later, it's worth like 65 cents. Hey, that's a great trade, isn't it? A fiat contract. It's good for the lender, it's horrible for the. Excuse me. It's good for the borrower. It's horrible for the lender. Anybody who owns bonds, people are buying these bonds, pension funds who are mandated. It's in their investment committee guidelines. They have to own X amount of their assets in bonds. It's there written in corporate law.

Peter McCormack (56:50)

They should mandate them to own bitcoin.

Greg Foss (56:52)

They don't move that fast, Peter, and by the time they do, bitcoin will be, you know, currently, as I always say, bitcoin price right now is still a rounding error. When Bitcoin hits 250,000 bucks, and it's still wicked cheap at 250,000 bucks, a few of these investment committees may get their heads out of their, you know, what's. And they'll say, okay, now it's time for us to own it. And meanwhile, El Salvador, the world will start to be learning Spanish because we better learn Spanish because they are so far ahead of the game.

Peter McCormack (57:20)

Do you know, it makes me think of that thing. I think it's Preston Pisch who says it like, bitcoin is a game of musical chairs and when the music stops, you want to hold as many chairs as you can.

Greg Foss (57:28)

Okay.

Peter McCormack (57:29)

Basically, I think. I mean, I might have not got the quote exactly right. Someone's going to come back in the comments on YouTube. Go, you fucking idiot. Preston said it different, but like, I know it was something like that. Let's work through this, okay? Because it's not like there's like a point of no return. We've already gone past that. Right. There's not like there's going to be one cataclysmic event. So how does this play out? Yeah, I mean, I'll start with you.

Greg Foss (57:56)

D. There could be one cataclysmic event. Can I just say, there could be a cataclysmic event. Everyone assumes the contagion. What if Argentina defaults again? Which they're going to. And that will make four times in my life that Argentina has defaulted. In my 30 years of trading risk, Argentina will have held the record of defaulting four times.

Peter McCormack (58:19)

Yeah, but we won't be surprised by that.

Greg Foss (58:21)

It's a G20 country, though. It's G20, Canada's G7.

Peter McCormack (58:25)

But Greg, I've got this mate, right? I'm not going to name him. He always borrows money off me, right, and like pays me back sometimes, but most of the time he never pays me back. He's a fucking idiot. Right? That's who. Argentina. Argentina. Let's call him Dave. Argentina is my mate, Dave, who never pays me back and I'm like, used to it. So let's not worry about Argentina. Let's talk about. Let's talk about who's the idiot, Peter.

Greg Foss (58:45)

With all due respect? Him who comes to you that keeps lending him money, or you me lending him the money? I got to say, I like having.

Peter McCormack (58:52)

A drink with him. I like Argentina and I like going there and having a steak and some Malbec. But I mean, I'm not going to be like surprised by like. If I read tomorrow Argentina's defaulted again. I'm not going to be surprised if I read tomorrow that. I don't know. I don't.

Greg Foss (59:09)

How about Canada? What if Canada defaults? Would you be okay? We're in not good shape, okay, Peter? And we're a G7 country and we happen to be one of the United States largest trading partners. We used to be. If we're not first still, we're second. The. The funny thing is, if we default, what would the people in the US Say, oh, well, that's sort of weird because we always thought of Canada as being part of the United States almost. And by the way, they can't pay any of their bills. So all the stuff that we're exporting to Canada was full.

Peter McCormack (59:40)

Stop.

Greg Foss (59:40)

That, that's got to stop. And all of a sudden people in the US Go, and why is Canada any different than the United States?

Peter McCormack (59:45)

So what you're saying is we, Good.

Greg Foss (59:46)

Lord, why do I own bonds?

Peter McCormack (59:48)

You're saying, great, we could have like a. Like a Black Monday event.

Greg Foss (59:51)

Contagion, contagion, contagion. You see it all the time. Contagion is the crisis of confidence in the ability of the system to continue. We needed to rescue the financial system in 2008 and 2009, and the Fed did the right thing. The thing they didn't do correctly was pay it down. When they rescued the system, they continued to pretend that they could skate their way and eliminated that cycle. Okay, they did the right thing because the world was ending. I was sitting in that chair and there were times when I went to work on March 2009 saying to myself, wow, this really could be it. And I promise you, unless you've sat in that chair, you have no idea what it feels like when all you want to do is sell anything you can because your clients are redeeming you and there's no price.

Peter McCormack (60:44)

Is this a bit like at the end of the big. You know, you know, the big short, right? Is this like the moment in that where, like, everyone's trying to sell their shit, they realize the game's up?

Greg Foss (60:53)

I love you, man. Exactly. That's exactly what it is. Hence, credit default swap pricing on sovereign nations. Before it was CDS pricing on financial institutions. I'm just taking it up a level. CDS pricing on sovereign nations is exactly the same as CDS pricing on Lehman Brothers. When Lehman, where the fire started, was in the credit default swap market, and everyone else was like, no, this is fine. The Fed's going to cut rates, the Fed's going to cut rates. And then kaboom.

Peter McCormack (61:22)

So all the smart people are basically doing the same with Bitcoin at the moment. They get rid of their dollar.

Greg Foss (61:28)

No, they're not. No, they are not.

Dylan LeClaire (61:31)

Greg, Greg, we're the smart people.

Peter McCormack (61:33)

I'm saying the smart people.

Greg Foss (61:35)

Okay, how about this? But the smart people that understand credit default swap markets are still stuck in their little. Okay, I better figure out how this works. But they haven't done the work on Bitcoin. That's what I'm saying. Nobody has studied it, Greg.

Peter McCormack (61:48)

Not those fucking idiots. I'm saying all the people who understand bitcoin, right? This is what we're doing. This is the moment at the end of the big short where they're trying to sell. They'll say, I take 30 cents on the dollars, whatever. We're doing the same. I'll just take the bitcoin. I can get like, get rid of my dollars, I'll get rid of my pounds. Give me that bitcoin. Because we don't. There might be one big kind of Black Monday. There might be multiple Black Mondays. There might be a series of events, events, small events. But either way, over the next however many years, we're going to see some form of debt jubilee. It's inevitable. The great reset.

Dylan LeClaire (62:25)

Yeah, I mean like that, that movie is pretty awesome. Like when Michael Burry is sitting there and he's writing down, he's on his whiteboard and he just keeps marking down more and more losses. Like, I mean that's kind of what being a bitcoin holder feels like over the short term, right? It's like I'm right. I know I'm right, but the market's telling me I'm wrong. But at the moment, like the entire, like the mortgage backed securities, all that junk in the big short, that's like the entire fiat system and the credit default swap is like bitcoin.

Greg Foss (62:52)

Hallelujah. Hallelujah. And here's the neat thing, that was a movie. Guys, sit in the chair, okay? Your sphincter is tight as a fucking nut, okay? You can't even breathe. You're sitting there, you're sweating, you're like fucking. My life is over. Everything I have invested in this system, in this business I'm trying to create and I have a good track record, but the world is blowing up and you cannot even breathe. And I promise you that doesn't come out in a movie. You need to sit in the chair. You need to manage risk, you need to sweat your fucking ass off because you think the world is going to end.

Peter McCormack (63:27)

Well, this is the point I keep trying to make. So like, obviously over the last year, especially last six months, I've had people come to me and they're saying, look, tell me about this bitcoin thing. Why should I be buying it? And then the last three months, it's a tougher conversation because people are saying, yeah, but like it went up to 64 and now it's down to 32,000. I'm saying, listen, you're buying bitcoin for when you need it, you're buying it for that point where this stuff, when the shit hits the fan, if the price has dropped to 32 grand, that's a bonus. You can still buy cheap because you're not meant to be selling your bitcoin now. You might be selling it five years or 10 years or when, when you need it. So every time you see a price drop, that's a bonus. Like, you know bitcoin, Bitcoin insurance, you hold drop in value.

Dylan LeClaire (64:09)

Bitcoin is like house insurance. And the house is on fire. And the agency just called you up and like, hey, your premium just got cut by 50%. And you're looking at them like, why do you just cut it 50%? The cost of insurance. Just beautiful.

Greg Foss (64:20)

Hallelujah. And when do you buy default insurance? Excuse me? When do you buy fire insurance, Peter? Real fire insurance on your house? Right now. Not when your house is on fire. You buy it before your house is on fire because no one will sell it to you. Rational people will not sell it to you when your house is already on fire. Except people don't understand that the house is already on fire. Dylan is exactly right. You're getting cheap insurance.

Peter McCormack (64:45)

Do you want to hear a funny story about that? So my house was literally on fire about three months ago. I was down the gym with my son and my neighbor phones me and they said, hey, Pete, your house is on fire. I was like, what? He said, there's a fire at your house. So I come home, right? And my next door neighbor, he's basically emptied his chiminea 24 hours after, like, lighting it, he's put all the ashes into the bin thinking he's fine. After 24 hours, something sparked. There's been a fire, the bin's caught on fire. The side of his house is on fire where there's a door. So, like, the fire's gone into his house. My side is burnt down, all the fence and my bikes. Luckily for me, there's no doors and windows on that side of the house. So anyway, he gets in touch and he's like, oh, I need your insurance details because you have to claim in yours. My insurance company will pay you. So anyway, I got to phone my insurance company and like, I get in contact and they're like, oh, yeah, you cancelled your insurance eight months ago. So basically my house was on fire and I didn't have insurance. How funny is that?

Dylan LeClaire (65:42)

Could have been worse.

Peter McCormack (65:44)

Dude, dude, I tell you, I was lucky. I didn't have a window or door that side and my house would have burned down. But anyway, I have house insurance now. What a fucking idiot. Anyway, that was a, that was a.

Greg Foss (65:54)

So can I, can I just. So going back to the Michael Burry, big short Michael Burry was right because he's mathematically inclined. Okay? The truth is the financial system is always over levered and it's leverage unwinds that cause the ultimate pain. Okay? You're sitting there thinking the world's going to end if you're short, meaning you own insurance, you're short the markets, you're still nervous because you don't know if you'll be able to collect because the guys that owe you all this money, they may go out of business. Like what if you owned insurance on Lehman Brothers but you had bought it from Bear Stearns? Geez, you're like, I better go and buy some insurance on Bear Stearns because they're going down as well. So that circularity contagion expands and then you realize bitcoin has no counterparty risk. Nobody has to guarantee this insurance policy to me because it's called bitcoin and it can survive a nuclear war maybe. Look, who knows? Let's not go that far. It can survive anything. We've seen it survived over time. And it's antifragile. It is a thing of beauty and it has no counterparty risk. That is what you want in an insurance product. Okay.

Dylan LeClaire (67:15)

And yeah, I mean I think about a lot and especially after reading the Ray Dalio's, Ray Dalio's books and all that about you know like past debt crises and whatnot, the solution to it in the past, you know, the past centuries was, was always gold, right? It was, it was in, you know, when, when you're at this point in the long term debt cycle, you know, you want to protect yourself from a couple different things. You want to protect yourself from the Monet, like the central bank monetization where basically if you're holding bonds, if you're holding cash, you're getting diluted, you're getting, you're, you're getting your wealth inflated away. But you also, you want to protect yourself from the counterparty risk that's, you know, that comes with, with deflation, with contagion what Greg's talking about. You don't want to hold anything inside of the banking system because the banks, you know, the banks or any financial institution might go bust.

Greg Foss (67:59)

Right?

Dylan LeClaire (68:00)

So you don't want to have any sort of counterparty risk. And I think about a lot, I'm like, if bitcoin wasn't around, like, God, would I be a gold bug? And like, you know, I probably would. I probably would hold like a fair amount of gold. Like, it's kind of depressing to think about, but you know, bitcoin is just, is just that, that monetary asset, you know, that that bearer asset that has a production cost that has no counterparty risk. But for the digital age, for, for the 21st century, that's Bitcoin. And you know, regardless of if there's inflation, deflation, contagion, there's always going to be because of that proof of work algorithm and because of the protocol, there's a production cost to producing bitcoin. You cannot dilute my wealth. And unlike gold, the terminal inflation rate of bitcoin is zero.

Peter McCormack (68:42)

Well, let's dig into that point again. I'm going to quote you again. The great debt jubilee is coming and it will later be known as hyperbitcoinization. Let's dig straight into that. I think it's a good place to finish off because people listen to this. It's a range of people. We're going to have absolute bitcoin heads who put all their money in and crazy psycho bitcoiners. And they get it right. They're it. And we got some people who've maybe been in for like a couple of years and maybe they got like a good chunk of bitcoin and they're like, oh, but it went up to 60 and it's come down to 30. I'm a bit worried. And then we've got the people who are just brand new. They, they, they're basically underwater with their bitcoin right now. And they think, what the fuck have I done? I should have bought dogecoin. Like, let's kind of like set the record straight here. Explain Dylan, what this great debt jubilee is like, how it's going to play out, how you think it may play out, and why bitcoin is the answer.

Dylan LeClaire (69:32)

Yeah, so I mean, there's a couple of different ways it plays out or could play out. There could be, like Greg said, this large contagion event deleveraging. And there will be. But the thing that you have to think about is how does it play out after that? And in my opinion, it probably plays out with central banks, governments around the world monetizing everything. Like the Fed balance sheet in 2030, who knows? It might be $100 trillion. And so, so a great debt jubilee essentially is, is creditors getting their wealth wiped out in real terms. Right. Like you're going to get paid back on your 30 year or your 10 year government treasury. But, but what is that value going to be worth? Well, I don't know. But in my opinion, and mathematically speaking, it's most likely, most definitely a lot, lot less. And so as a bitcoin holder, as someone that, that buys every day regardless of price, I know because of how network effects work, because of the protocol, because I can run my own node and I have complete assurance of 21 million. I know that honestly, the volatility of bitcoin for me is zero. Bitcoin's my unit of account. Volatility doesn't matter to me. And so obviously that's a tough mental switch to have. But hyper bitcoinization is essentially that process happening around the globe. And it happens one by one, one. And you know, day to day, it can almost, it's like, almost like painful sometimes. Like it's happening slow, slow. Or like, why, like, you know, why can't people get it? But over time, you know, there's just kind of the shelling point where people realize that bitcoin is the best monetary asset the world's ever seen. And one by one, people are realizing that, you know, you'll have your hankies, you'll have your peter shifts, you'll have people with, with ego problems that get upset by this. I missed the boat. And they'll think they missed the boat for year after year after year. But there's just kind of this empirical reality that bitcoin is the best money the world has ever seen. You just, you had a great episode with Parker Lewis the other day. Like, you know, Parker's, Parker's the man. And he articulates it, you know, as good as anybody. But bitcoin is just this like. Is bitcoin the best monetary asset the world has ever seen because of its assurances? Yes. Well, I mean, essentially you can almost end the conversation there. There's a lot more to it. There's a lot of nuance. And how does this play out? Well, you can understand that or think you understand that or not, but the reality is that bitcoin will outcompete every other money going forward. And so, you know, if you're just accumulating bitcoin on, you know, in cold storage or on your balance sheet, you're going to be okay. And your real wealth over the long term is going to be protected. And at this point during the monetization process is going to increase 10, 100, you know, 500 fold.

Peter McCormack (72:07)

Maybe I need more bitcoin brother. Every time I have a conversation like.

Greg Foss (72:12)

This, I'm like, here's a neat thing from a boomer, okay? So I'm the boomer. I'm the boomer. You need to understand firstly that the boomers have all the money still, all right? And when I say boomers, it's the guys that manage the big wealth, sovereign wealth funds and pension funds around the world that they have not even begun to invest in this asset class, okay? They don't understand it. They haven't done the work. And when they do do the work, they look and they look to their left and they say, dang, I don't want to be the guy that goes out on the limb and says that I'm doing this because nobody else is doing this. So it's called the theory of agents. They try and stay within their own lane because everyone's doing the same thing. But it's going to come where they own more than zero, Peter. But not 100% of their wealth or their fund. They cannot possibly do that. But what is the right number? According to Yale University, the right number for anybody who owns bonds and equities is to own 6 to 8% of your asset allocation in Bitcoin. That's a huge amount of money that needs to flow into Bitcoin to achieve the optimal portfolio allocation as a function of its volatility and its return potential. Okay? Perfect. Most of these guys are at zero. If they were smart, it's been halved in price. It's come from 60 to 30, and it's still a rounding error based on where it's going to go. They just got to get that through their head. Bitcoin is not digital gold. Yeah, it is digital energy. And everything, every single thing in human history has been based on improvements of energy and energy productivity. Well, Bitcoin is the purest form, as Michael Sailor says, of digital monetary store of value ever created by humans. Okay, let's talk in 20 years. 20 years. Not 20 days, 20 weeks, 20 years. Because that's when the, the horizons of most pension fund allocators are. And that's what they need to focus on. It's empirically reality or empirical reality, quote, unquote. Dylan Leclaire, sub 20 year old. Are you 20 yet, Dylan? I think you were 19 when I last met you.

Dylan LeClaire (74:22)

So, yeah, 20 years old.

Greg Foss (74:23)

Okay, buddy, I'm three times your age. Okay? I'm three times your age. And you're three times smarter than me. You are three times smarter than me, and I love you. Because you are going to rescue the world. Because my generation is the most selfish generation ever put on earth. Because we're too afraid to take a loss and we need to be coddled. And God forbid we ever had to go fight a war right now I don't even know whether we'd be able to get an army together. And Canada used to have it's fucking boomers is right. Bunch of lazy, sappy, fucking spineless squids, okay? And I'm one of those. And I'm one of them.

Peter McCormack (75:01)

Dylan, this is why you can't afford a house, because of this guy. Listen, you're twice my age and about 48 times smarter than me. And it's, it's impressive to hear.

Dylan LeClaire (75:11)

Appreciate it. Yeah, I mean I don't think it's, it's much about me. More about like, like I'm here. Like I kind of fell down the rabbit hole because of like the incentives, right? Like, like bitcoin pulls everybody in and you figure it out. Like the curious and the people that are willing to drop their ego are going to figure it out and that's just like the incentives of adopting a harder money. Also kind of wanted to comment a little bit on what you were talking about, Greg. With portfolio allocation, a lot of people, what they don't understand with bitcoin is if an equity doubles, right? No earning increase or whatever, and an equity doubles or triples or quadruples in price, it becomes more and more and more risky, right? The higher the P E ratio, the riskier it becomes. Bitcoin, when bitcoin doubles in price, when Bitcoin 10x's in price over a four year period, it becomes less risky to allocate to. And that's what like a ton of people don't understand. As bitcoin increases in liquidity and size and global dominance, it becomes a less risky add to your portfolio. And you can think about that in you know, risk adjusted returns or volatility or all this thing. But you know, bitcoin at a trillion dollars is a lot less risky to allocate to than it is at a billion or 10 million, right? Like, and so you know, like all of the big money as bitcoin like as Bitcoin goes from 32 to 64 to 128, you know, it's just like naturally it's going to become a bigger and bigger, you know, part of the people's like asset, you know, the right side of their balance sheet. It's going to, it's going to naturally become A larger, you know, of people's holdings around the world. And. And, you know, the big money can allocate a little bit later. They can afford to. For me, I'm 20 years old. Like, I'm putting 100 of my disposable income into bitcoin and not thinking twice about it, like, I don't care if it gets cut in half, you know, like, that's just kind of my, Like, I guess, like, you know, I guess if you want to call it, like, risk profile, like, I, again, I don't perceive it as risky. And. And I'm fine with it getting, like, send it to 10k. I'm still allocating like, I'm nothing. The thesis is unchanged. Like, you know, and so, yeah, I think, you know, it's just gonna. It's a process. But bitcoin, as it becomes bigger and bigger and bigger. A lot of people haven't adjusted to that.

Greg Foss (77:15)

Can I add this, too? And that's beautiful. Dylan. Peter. I was lucky enough to get involved in bitcoin. You call it lucky. I tend to think I did some work. It was under $1,000 US Bitcoin's a better investment now at its current price than it was when I got involved at under $1,000 U.S. all right? The five years that the system has proven itself, the network has grown, the talent in the network has grown, the protocol is more robust, the layer two is real life. Layer three is coming. Bitcoin could be. The layer three on Bitcoin could absorb all the successful defi apps that are currently living on other blockchains. Okay? It's just unbelievable what this could cause in growth. It doesn't matter. The base layer right now is better value than when I got involved six years ago and the price was under US$1,000 per coin. I am more excited about the return profile of bitcoin today than when it was under $1,000. Very simply because it is the network effect. The value of bitcoin is the network. And that network is growing with use cases growing every day. And then if you want an intru. An intuitive value, Bitcoin is default insurance on every single idiot fiat nation out there. Okay? Which is pretty good insurance to own because they proven over time that they are a bunch of buffoons. And if you want to keep your money managed by buffoons, go ahead then. Who is the buffoon? Maybe it's Peter who keeps lending his money to his friend Dave who never pays him back.

Peter McCormack (78:56)

Listen, Dave, if you went out for a beer with Dave, you'd Lend him money. He's good value.

Greg Foss (79:02)

I. Then I would. But then I wouldn't lend him money. I would just give it to him. I'd say, dave, here's some money. And maybe that's what the governments are doing to us now. Hey, Foss, here's some money. And I'm like, I don't want your money, because every time you give it to me, you'll fuck it up.

Peter McCormack (79:15)

I'm giving Dave stimulus checks, really, aren't I?

Greg Foss (79:18)

You may well be Dave.

Peter McCormack (79:21)

All right, listen, look, this is.

Greg Foss (79:23)

I love Dave. I don't know Dave, but I love Dave.

Peter McCormack (79:25)

He's not actually called Dave. I'm not going to give his real name. Why? She doesn't. Because he doesn't get bitcoin. All right, listen, look, this has been awesome. I tell you how I want to close this out. I want to close this out quite differently. It's been a great show, Dylan. Great to have you on, man. You're smart as shit. I'd love to have you back on the show again in the future. But, Dylan, I'm massively, massively fascinated by the fact that you quit college. You've built your education up. You've become very, very smart and educated around bitcoin and how the economy works. Just for anyone listening who's in a position, they're thinking, shit, I like what this Dylan guy is saying. Point them in the direction of some of the things you've read. You've mentioned the Ray Dalio book. What are the things you've read? What are the things you would say go and check out. Go and listen to. Go and read.

Dylan LeClaire (80:07)

Yeah. I mean, so, like, I kind of started stumbling upon podcasts. Your podcast, Preston's podcast, a bunch of others read the bitcoin standard, like the bullish case for bitcoin, the Nakamoto Institute, all that stuff, and my decision of dropping out of school. It's totally not for everybody. If you want to go be a doctor or anything that actually requires a degree, I'm not telling you to go drop out. But I would just say, especially once you come to understand bitcoin. For me, it was about measuring opportunity costs. In Bitcoin, it was. Bitcoin was $6,000. And I was sitting there in March or April clawing my eyeballs out and saying, like, what am I doing here? I need some sats. I need some bitcoin. So I would just say, the opportunity cost is real. Going to college, none of these decisions occur in a vacuum. And just for anyone that's 18, 19, 20 years old. Education is. And I was really inspired by Jeff Booth's book as well. Education is free. Information is free and abundant. And so, you know, don't discredit that. You know, a lot of things can happen and the Internet is a wonderful place. I've made so many awesome connections over Twitter, YouTube, you know, everyone else just by sharing my thoughts, asking questions, hitting people up in DMs. You know, don't think that you have to go to a university or get all this, you know, credentials and all that nonsense to be someone or something or make it because it's not the world we live in. And the sooner that people figure that out, the better.

Peter McCormack (81:35)

Love it, man. Listen, Dylan, if people want to follow you, where do they find you?

Dylan LeClaire (81:38)

Yeah, you can find me on Twitter. TCization. Bitcoinization. My name's Dylan LeClaire. Yeah, just reach out, hit me on DMs. Happy to connect.

Peter McCormack (81:49)

Brilliant. Well, listen, I'd love having you on. Come back on soon, brother. If you work on another thesis or idea you want to do, like, you've got an open invite to come back. I've loved this. And Greg, any final closing notes from you, my man?

Greg Foss (82:00)

Very simply, I love the young guns. Okay, I'm going to shout out to Jack Mallers, shout out to Dylan. I want you guys. I know you wouldn't take this job, but I want you guys to run.

Peter McCormack (82:11)

I'm still young. What the fuck?

Greg Foss (82:13)

Okay, dude, but you're young. You're beautiful, but you're just not quite as young as you need to be. Okay? So I want these young guns to run the world. And you're gonna someday. Whether that's an aspiration or not, I want to make 1 final 2 final call outs to the young people changing the world. The kids in Guatemala again, I mentioned them in Miami. The Guatemala, the ibex exchange. It's beautiful what they're doing. And now they got called into El Salvador. It's like the SWAT team because they get the Lightning network. This is exciting. And then the final call out. So that's ibex, that's Jose and it's Mario and it's Carlos. Here's a final shout out to you, Peter, and this is important. Some young man from London, England. Oxford to be exact. Now, I don't know if he goes to Oxford University. He called me the other day on Zoom and he goes, I'm doing this bitcoin exam and I want to help teach the world using an online bitcoin exam. And I'm like, dude, this is brilliant. Yes. And he ran me through the beta test and everything and I gave him some impact, you know, some viewpoints that I had. But what I see is another young man who's 20 years old. His name is Stefan Allen. He might have, if I'm not mistaken, 25 Twitter followers, Peter, and he lives in your backyard. And he has developed this bitcoin exam that is brilliant to allow people to understand, do they need to study more? Because it's not a simple exam and there could be different layers. You could be beginner, intermediate or expert. The point is this. It's about, like Dylan said, education around the world. So a shout out to you young guns, okay? I hope to be around for the next 20 years and I hope to talk to you in 20 years. So we can create notes or compare notes. But what I will say is my three kids will be around in 20 years and I promise you they're going to be comparing notes, okay? Bitcoin is not for my generation. We fucked it up. Bitcoin is my generation. To make it work so we can pass something to future generations with value and store of wealth. Amen to people like Dylan and the young guns. And amen to you, Peter, for having a platform that the world listens to. Okay, so thanks for having me on and I look forward to the successes and I look forward to the next talking. And again, 20 years.

Dylan LeClaire (84:34)

Yo, Pete, can I plug one more thing? Yeah, sure, I do. With Bitcoin magazine, I've been doing a newsletter with like, it's called the Deep Dive. I just put out my thoughts every day on working with them on like macroeconomics, on chain, like kind of derivatives, like what's happening in the bitcoin market. I know, I believe Greg has a sub there, but that's just, that's what I've been working on lately. So yeah, I just wanted to give that a shill.

Greg Foss (85:00)

And it's brilliant. It's brilliant.

Peter McCormack (85:03)

Greg, do you know this Stefan Allen is on Twitter? I want to find him and follow him.

Greg Foss (85:07)

Okay, I have his. Give me. Okay, if I lose you here, I'll DM you because I'm in neophyte with this new technology called a computer.

Peter McCormack (85:15)

Okay, So I got listen to him.

Greg Foss (85:19)

I am a boomer, buddy.

Dylan LeClaire (85:21)

I love it.

Peter McCormack (85:21)

Now I'm gonna follow him. I'm gonna go here. I want to follow you gotta follow him.

Greg Foss (85:25)

And I swear to God, I want this to succeed. I actually want it to be done in Spanish too. So I, I, I, I reached out to the boys down in, in Guatemala and they sent me a beautiful response email today and they go, you should see all the great things that are happening in, in Guatemala and El Salvador, by the way. So that's a real life update from Boots on the Ground. Okay, so Steph and Alan, hold on.

Peter McCormack (85:52)

Well, listen, look, we're gonna bore the listeners. You can ping that out to me. Love talking to you, Dylan. Anything you need, you reach out to me, brother Greg, same as ever. I love you, brother. Hopefully I will come and hang out with you at some point when Canada opens up. If it's anytime in the next decade. Peace out. Thanks for coming on.

Dylan LeClaire (86:08)

Yes.

Peter McCormack (86:10)

All right. What did you make of that one? I was blown away by Dylan's perspective on bitcoin's role in what seems to be the end of the long term deck cycle. Now imagine dropping out of school, just learning all this shit on your own. I wish I'd done it. I'm such a waster. And this kid's so smart. He's absolutely crushed it. And go read his article as well. Give, give Dylan some support. Follow him up on Twitter. He killed it, man. I'm gonna get him back on the show. I'm probably gonna give him an open invite. Whenever he's got something new he wants to come and talk about, he can come on now. Greg, as always, brings a fire. I always feel like I want to buy more bitcoin after talking to Greg. What a cool dude. Anyway, if you anything you want to feedback on the show, you know you can hit me up. My email address is hellohatbitcoindeer.com or you can hit me up on my telegram group. Outside of that, if you want to support the show. I only ever want you to do one thing. Just head over to Apple Podcasts, leave me a review. Hopefully you think the show deserves five stars. Anyway, love you all. I'm burnt. I got to go and get some work done. I will see you all on Wednesday.