Emergency Episode: Why This Financial Crisis Is Worse Than 2008 | Balaji Srinivasan Pt 1 (Fan Fav)

Summary

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Podcast Summary: "Emergency Episode: Why This Financial Crisis Is Worse Than 2008 | Balaji Srinivasan Pt 1"

Podcast: Tom Bilyeu’s Impact Theory
Guest: Balaji Srinivasan
Date: January 2, 2026
Host: Tom Bilyeu

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Episode Overview

In this urgent and far-reaching conversation, Tom Bilyeu sits down with tech visionary and former CTO of Coinbase, Balaji Srinivasan, to unpack the threats facing the global financial system in 2026. Balaji stakes the case that the world is staring down a financial crisis not just as severe as 2008 but potentially far worse—with a "central banking crisis and a currency crisis" standing at its core. The discussion dismantles mainstream narratives, challenges debunked optimism about the U.S. dollar’s supremacy, and explores what’s really driving cycles of collapse—from government policy to shifting geopolitics, technology, and the irresistible temptation to print money. If you want to understand what’s really happening beneath the headlines, this is essential listening.

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Key Discussion Points & Insights

1. Warning Signs: From Bank Failures to Treasuries as “Toxic Waste”

[01:50, 02:25, 19:44, 57:10]

• Balaji argues the current crisis is systemic: “The problems go all the way to the bedrock of the financial system in terms of treasuries being the new toxic waste. It's going to be at least as bad as 2008, but probably worse.” ([01:50])
• 3 of the 4 largest bank failures in US history have occurred in the last 2 months (from Spring 2023). Hundreds of banks are technically near-insolvent, with $2.2 trillion in unrealized losses from exposure to government bonds.
• The 2023 crisis is different from 2008: “If in 2008 it was a banking crisis and a mortgage crisis, in 2023 it's a central banking crisis and a currency crisis.” ([57:10])
• Government and central banks now find themselves out of conventional tools: “You can't lower interest rates without causing more inflation. You can't raise them without breaking the economy. So the only solution left is to print.”

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2. Cycle of Debt and the Illusion of Money Printing

[02:25, 14:20, 30:20, 32:03, 65:55]

• Government intervention since 2008 has relied on printing money, covering up economic weaknesses and building up sovereign, corporate, and household debt—each at record-high “one full GDP” levels.
• Analogy: Each time trouble arises, the response isn’t to deal with root causes but to paper over with more debt. As Tom summarizes, referencing Ray Dalio: “Every single empire and every reserve currency...have all collapsed. They have all failed. They have all gone through this massive deleveraging. And deleveraging is a really polite way of saying everybody loses everything.” ([04:54])
• Today, the speed of collapse is blindingly fast. Balaji illustrates: Silicon Valley Bank collapsed; it took just two days for the government to print $300 billion in response. “Too slow is too late.” ([09:48])

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3. De-Dollarization and Shrinking U.S. Global Reach

[35:00, 40:55, 44:07, 57:28]

• For the first time, countries are actively shifting away from the U.S. dollar. Balaji: “De-dollarization is happening at a stunning pace... In terms of assets held by other countries, the dollar was down 19% last year. All of Southeast Asia is using their own currency for trade. Even France and Israel are holding yuan.” ([35:00])
• China is now the world’s #1 trade partner, not the U.S. Most of the world's physical goods are made abroad, and the dollar’s only remaining advantage is inertia, not innovation or industrial production.
• Balaji diverges from Ray Dalio: “De-dollarization is decentralization, not just a shift from the U.S. to China.”

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4. The Root Cause: Government Policy, Moral Imperative, and the Cantillon Effect

[24:38, 26:19, 30:20, 71:47, 73:00]

• 2008 was not just Wall Street greed; bipartisan U.S. government policy forced banks into risky lending, leveraging “moral imperatives” (i.e. getting everyone into homes) but ignoring risk.
• These moral calls—what Tom calls “the last 30 years… marked by exchanging what worked for what sounds good”—created systemic, unsustainable debt.
• The Cantillon Effect: Money printing benefits those closest to the spigot (coasts, the already wealthy), draining the savings of those farthest (Middle America, the Middle East):

  “Printing money… is like official counterfeiting. The first guy who gets the counterfeited dollar can spend it… By the time it gets to the 15th guy, the value is already diluted.”

• Inflation is a hidden, stealthy tax—a “camouflaged predator.” “Communism is an overt predator. Keynesianism is stealth… it's like a mosquito; you don't even feel it, but the blood is gone.” ([73:00])

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5. Unraveling at Home and Abroad: Insurance, Real Estate, Student Loans, and Global Geopolitics

[32:03, 35:00, 46:08]

• Each sector now carries “trillion-dollar problems”: unfunded pensions, commercial real estate collapse, auto and student loans, insurance portfolios wrecked by bond losses and unexpected payouts (e.g. declining life expectancy).
• America’s soft power and geopolitical reach are eroding. Countries are pursuing autonomy and alternative alliances; even allies are hedging with other currencies and local manufacturing.
• U.S. world dominance, Balaji notes, is relatively recent and historically contingent: “You don't become number one by accident… There were people with a plan for world domination. The American version was better than the Soviet one—until absolute power corrupted absolutely after 1991.”

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6. Systemic Opacity and the Fed’s Role

[59:31, 61:07]

• The U.S. financial system is designed to be opaque, making it impossible for most people to see these slow-motion bank runs or anticipate crisis.
• Balaji emphasizes, with evidence from Fed meeting minutes, that central bankers knew their actions would devalue bank portfolios:

  “…we look like we are blowing a fixed income duration bubble right across the credit spectrum that will result in big losses when rates come up down the road. You can almost say that is our strategy.” (Fed, 2013, cited at [61:07])

• The “Fed lied, banks died” moment: The central bank assured markets that rates would stay low, encouraging massive purchases of long-dated bonds—then rapidly jacked up rates, vaporizing the value of those bonds and triggering bank failures.

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Notable Quotes & Memorable Moments

• On the Speed of Collapse:

  “Two days from the collapse of Silicon Valley bank to the printing of $300 billion... too slow is too late.”
  — Balaji Srinivasan ([09:48])

• On Systemic Crisis:

  “If in 2008 it was a banking crisis and a mortgage crisis, in 2023 it's a central banking crisis and a currency crisis.”
  — Balaji Srinivasan ([57:10])

• On De-dollarization:

  “The only thing the US financial system has going for it is its legacy traction. It's not technologically superior. It's not something you would choose from scratch today.”
  — Balaji Srinivasan ([41:00])

• On Moral Imperatives and Debt:

  “The last 30 years have been marked by exchanging what worked for what sounds good.”
  — Tom Bilyeu ([26:20])

• On Hidden Taxation:

  “Inflation is taxation. Printing is essentially a centralized seizure of wealth.”
  — Balaji Srinivasan ([73:00])

• On Denial of Collapse:

  “It's a Wile E. Coyote moment. They're walking off a cliff, in midair, and as soon as you look down, all value is gone.”
  — Balaji Srinivasan ([66:59])

• On the Futility of Predicting Timing:

  “The one thing we are guaranteed to get wrong is timing... if I had a crystal ball, I'd just shut the show down and go make a lot of money.”
  — Tom Bilyeu ([66:16])

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Important Timestamps and Segments

• [01:50] | Treasuries as "toxic waste"—systemic financial risks
• [02:25] | Why the 2026 crisis is “at least as serious as 2008”
• [05:00–10:44] | How fast collapse happens: SVB, COVID, USSR
• [14:20] | Debt cycles as the heart of collapse
• [19:44] | Analogy to 2008: “Treasure-rated mortgage backed securities” & government policy
• [32:03] | Insurance, real estate, student loans—“trillion-dollar” crises
• [35:00–44:07] | Global de-dollarization, China’s rise, U.S. decline
• [57:10] | Single sentence thesis: “A central banking crisis and a currency crisis”
• [61:07] | Fed minutes and intentionality behind the 2023 crisis
• [66:59] | The “Wile E. Coyote moment”
• [71:47] | The Cantillon Effect—how inflation and money printing redistribute wealth
• [74:08] | Hidden financial predation and political realignment post-2008

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Tone and Style

The conversation is urgent, sharp, and data-driven. Balaji balances detailed technical explanation—with slides and analogies—with historical perspective and explicit warnings. Tom Bilyeu’s approach is intensely curious and occasionally personal, admitting his own prior beliefs and the evolution of his thinking in light of hard data. Both aim not to be doomsayers, but to force listeners to confront the reality of financial cycles and their historic inevitability.

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Conclusion

This episode serves as both an alarm bell and a masterclass on the drivers and societal impacts of financial crises. By dissecting the connections between government policy, unintended consequences, and the devaluation of money, Balaji and Tom explain why the system’s cracks are now visible to all—and why cycles of denial, rapid collapse, and long-term decline may prove inescapable without a fundamental realignment of incentives and accountability. For listeners, the message is clear: in times of rapid change and opaque systems, understanding what’s real—without denial or blind optimism—is an indispensable asset.

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Note:
All timestamps given (MM:SS) correspond to the beginning of an answer or key topic shift. Quotes are attributed verbatim as spoken. Intro, ads, and outros have been skipped for clarity.

Transcript

[Balaji Srinivasan]

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[Tom Bilyeu]

what's up guys? Get ready for part one of an incredible three part episode where we delve into the controversial, thought provoking and sometimes almost scandalous viewpoints with the man who burned 1 million doll to raise awareness about the trillions of dollars being printed. The one and only Balaji, Srinivasan Balaji who predicted the response to Covid and the civil unrest that followed on Twitter before basically anybody else is joining us now to talk about the precarious state of the economy, possible banking collapse worse in 2008, and the catastrophic consequences you'll need to be prepared for. Get your mental armor ready and brace yourself for part one of this very powerful conversation. First, did you know Impact Theory is now available on Amazon Music? Head over to the Amazon Music app to hear more Impact Theory episodes like this, the hard conversations that really matter. Don't wait guys. Subscribe to Impact Theory now on Amazon Music and be legendary. I'm Tom Bilyeu and welcome to Impact Theory.

[Balaji Srinivasan]

The problems go all the way to the bedrock of the financial system. In terms of treasuries being the new toxic waste, it's going to be at least as bad as 2008, but probably worse than that.

[Tom Bilyeu]

You spent a million dollars of your own money to raise the alarm to the fact that the government is printing trillions of dollars. And what I want to know is how are you so sure that the US Economy is in really bad shape? What does bitcoin have to do with this? And how on earth could you justify spending a million dollars of your own money to make people aware of this?

[Balaji Srinivasan]

I do believe that we're in the middle of something, or at the beginning of something that is at least as serious as the 2008. The government is extremely good at kicking the can and like that's its primary skill in some ways. So it's hard to know exactly when things will be formally acknowledged as such. You know, I've got, I've got a bunch of slides that show that the economic situation is parlous, A B, that, you know, the, the degree of collapse across a number of different industries, a number of different weaknesses, will probably necessitate some form of bailouts or printing. Even if it doesn't look exactly like 2000, a lot of what the financial system does is it evolves to evade last time's pattern recognition. And so it may not look exactly like it used to, despite what form it comes in, whether it's like treasury buybacks or the people's qe, which are different ways of like, injecting money into the system that don't look exactly like the 2008 bailouts. I do believe an enormous amount of money is going to be printed just like Ray Dalio, just like a number of other people do. And in such a case, you want to have, quote, outside money, whether that is gold, whether that is a foreign fiat currency that you have faith in, that's sort of outside the Fed's control, or whether that is Bitcoin or a cryptocurrency. Bitcoin in particular is, you know, built to be difficult to seize. I think that's, that's part of the answer. And it's not the only, it's not the only thing you want allocation. You want to think about other things in life, like where you live, your location. Again, Dalio also thinks of that as an important thing thing. You know, the early 2000 and tens, Janet Yellen was credibly reported as having known about the housing crisis, having seen it and not raised the alarm. And now I'm actually sort of finding like, you know, people, quote, don't want to hear you raise the alarm or whatever. They'll be like, oh my God, you're a doomer. Why are you saying this? Right? The financial crisis was maybe officially acknowledged in September 2008, but of course it had been going on for years before then. It was just something where it became undeniable at that point. But I felt it was my responsibility having what I had seen to be like, you know what? This is a lot worse than people are saying. It's not just like a single bank crisis, it's not even just a banking crisis. It's a central banking crisis. The problems go all the way to the bedrock of the financial system in terms of treasuries being the new toxic waste. And it's going to be at least as bad as 2008. But probably worse than that.

[Tom Bilyeu]

One thing I really want to. I want the audience to understand why I've become so obsessed with this. And I've heard you say that the farther we get from the last deleveraging, the more incautious people become. And what I think people have, the. The subroutine that runs in the average American's mind for sure, is that this hasn't ever happened. Not realizing what they mean is, hasn't happened in my lifetime. And they don't realize the hard truth, which is that every single empire and every reserve currency all throughout all of recorded history have all collapsed. They have all failed. They have all gone through this massive deleveraging. And deleveraging is a really polite way of saying everybody loses everything. And it. It is a. It is a bloodbath. It is often, as Ray Dalio talks about it, is often marked by blood, literal blood in the streets. This is when we go to war, Everybody's freaking out. And so, because it's been so long since we've had a big war on a global scale, because nobody alive in the Western world anyway is aware of a massive deleveraging, they don't understand that, A, they do happen, but B, that they ha. When they happen, they happen fast. And C, when they happen, it is catastrophic. And so I'm like, I don't want to be Chicken Little. I am super optimistic. But, man, the more I started getting into financial content, the more I was like, whoa, there's something going on here. Ray Dalio says that every society, every empire goes through six stages. Stage six is absolute collapse. For people that don't know Ray, he built the largest hedge fund in the world. So this is somebody that literally puts their own money at stake, much in the way that you have to say, hey, I think I know what's going on. He's been right so many times that he's built the largest hedge fund ever. And so what he's saying is, okay, there's six stages. Stage six is total collapse. P.S. the U.S. is stage 5.5. So, like, that's. That's not ideal. So as people hear you talk, the one thing. You're a very metered guy, but the one thing I want people to understand about why I'm obsessed with this content is, sky's probably not falling today. At least that's my take. We'll get to the. The sort of how impossible it is to predict the timing a little bit later, but to really understand how these cycles happen. And they are cycles where we're at in the cycle so that you understand what to do. Um, so if you don't mind, walk us through the, the rapidity with which this stuff happens. Because I know that you have some slides that walk through like it was three days from when SVB collapses to when they're printing like that. The speed at which this stuff happens, I think is really important for people to understand.

[Balaji Srinivasan]

One other thing you might want to just kind of point out to your audience is like, you know, I am, I'm younger than Ray, but I've. I've done some okay things in life.

[Tom Bilyeu]

So you called out what was going to happen with COVID that it was going to be serious. Everybody said, you're out of your mind. And you were like one of the first people to call it.

[Balaji Srinivasan]

Yeah, and I think I also gave a pretty detailed projection of what would happen. And if you go and look at the, you know, the QTS on that, it's one of those things that feels like somebody has tweeted, like I nailed everything to such an extent that it, that it seems less remarkable today because of, you know, it was. It's almost like reading back history. There's like one thing I think I got wrong, which was like, you know, that full face masks would be more common for longer. But otherwise I think I played it out relatively well. I'm an angel investor and so what I do is I look at long term trends and I'm very early on them. I'm early on genomics and robotics and AI. And most of the time you want to identify those things that have a lot of positive upside. Right? But after Covid, Covid was the first time I was looking at something. I was like, I cannot, I cannot figure out a way that this isn't bad. You know what I mean? Like, it was, it was kind of like that. I just was looking at too many graphs, too many charts. I'm like, you know, this is the first time I've seen something. You have to work back to that time, which is now several years ago. And I was like, this is the first time I've ever had a sinking feeling where it's like down into the right, you know, and that's mainly because I wasn't really looking at such graphs. I wasn't, I wasn't paying that much attention before the financial crisis. I was in academia at that time. I just wasn't looking at markets or whatever, but I've got that kind of feeling again. Let me, let me actually show the slides and then maybe we can Jump, go to there, right? That'd be perfect. This concept of the fiat crisis, right? One way of thinking about it is it's like okay, how fast could things unwind? How fast could they start printing trillions? Well, it was two days from the collapse of Silicon Valley bank to the printing of $300 billion. Even if they didn't call it printing, it was two weeks for $500 billion to move out of local banks to money market funds and to big banks and so on and so forth for them to flee. Right? It was two months to go from patient zero, the first patient being infected by Covid in the US to lockdown as January to March of 2020. It was two quarters from Bernanke declaring that it was a quote, mild recession in April 2008 to the full blown financial crisis being acknowledged in September 2008. O finally it was two years for the USSR to go from superpower in 1989 to total collapse and non existence in 1991. Okay. And so you know, the lesson of that is that too slow is too late, right? That was, you know, two days, two weeks, two months, two quarters, two years too slow is too late.

[Tom Bilyeu]

And meaning if you don't react quickly, you're going to be too late. You're going to be the one left holding the bag that gets smashed by the freight train.

[Balaji Srinivasan]

Well, yeah. And then what does react mean? And the thing about it is Paul Graham actually has a good saying, which is when something is exponential, it always feels like you're reacting too early. And the reason is because you don't have the normal social cues around you. It's like, it's like, it's like flying by instruments as opposed by, opposed to flying by looking out the window. Right? Looking out the window, you'd see nothing is wrong. But instruments show actually beep, beep, beep. There's a big mountain in front, so you should pull up, right? And you have to essentially trust your instruments at that point because nobody is saying anything, everybody's calm. And that's like absolute reckoning as opposed to relative reckoning. And that's an unnatural way for humans to behave, especially when it comes to doing something atypical. You have to have the, you know, that's what being an angel investor is like. That's what being an investor is like. I mean the whole point, of course, you've heard buy low, sell high, right?

[Tom Bilyeu]

You know why it sounds.

[Balaji Srinivasan]

Oh yeah, it's much harder than it sounds, right? Because, right. If you're, if you're buying low you're going against a crowd. If you're selling high again, you're going against the crowd, buying low. You know, you're, you're, you're getting something when everybody else thinks it's a bad idea. You're literally going opposite the crowd both times. So it's trivial. When you look at a graph, oh, I bought here and I sold there. When you actually, if you could have VR, that would project the emotions of the moment, and then you're hitting the buy button at that time when, you know, as I say, the time to buy is when there's blood in the streets or whatever. Right. Or you, you know, you get greedy when others are fearful. Fearful. If you had VR that captured the emotions of the moment and being very contrary to the crowd, it feel very different, you know, Anyway, so, so too slow is too late, and many things are breaking. Okay, so there's the recent debt ceiling showdown. That was a near miss. But the, it boosted uncertainty in US debt. It felt like the conversation was different this year. Did you feel like that as well?

[Tom Bilyeu]

Very much so. And I reacted differently and moved my money differently. And yeah, it. Not only did it feel different, when you look at the chart of how high the debt ceiling is now compared to what it was last year, like, it is a straight vertical line. It's crazy.

[Balaji Srinivasan]

Yes, that's right. And what's happened is basically like, in a sense, you can think of it as the more people can deficit spend and borrow without apparent consequence, the more they do. So it's as if you had a seemingly infinite credit card and there were no consequences for decades, and you were accelerating into the wall. Right. Because it just feels like nothing's happening. Hey, we're such a superpower. We're so invincible. Even as the tide is going out, even as this will get to like, you know, foreign affairs now agrees. It's a multipolar world. China is like the number one car manufacturer. Out of nowhere, they're becoming a plane manufacturer. Like all of these graphs, huge amounts of. Essentially, the US's scope around the world is narrowing very quickly, and its domestic scope, there's massive internal conflict. And yet its ambitions go to the sky even as state capacity is falling through the floor. Does that make sense? Right.

[Tom Bilyeu]

So one thing I want to anchor people around, and I want to know if you think this is true, that the, the, the collapse, the big collapse begins with debt, and if it. I think that the story that we're going to go through, at least in the beginning part of the interview, is really A story of debt.

[Balaji Srinivasan]

Do you agree with that? It is. It is debt, but it's also, you know, it's. It's. It's a. It's several different shocks at the same time. So, you know, Dalio actually talks about the. And I'm just citing him because I think he came to similar conclusions. But I actually have in some ways, maybe a more hopeful take or somewhat different takes in terms of similar inputs, different outputs. So, yeah, there's the economics where you have essentially a sovereign debt crisis not just brewing underway with lots of smaller countries already defaulting, but, you know, the big ones yet to come, potentially. But you also have massive internal political conflict in the us, and you have massive external superpower conflict between the US and the Dragon Bear, Russia plus China. And you also have a couple other factors which are a huge consequent decline in the US's soft power globally and domestically. So super majorities of Americans don't trust dc. And abroad you have France, Brazil, Israel, even allies that are trading in Yuan or declaring strategic autonomy, or Brazil is housing Iranian warships. And even Taiwan said it would shoot down US planes if they tried to bomb tsmc. And that was a little tempest in a teapot, but it was clear that a lot of countries are kind of going their own way. And then finally you've got the technological shocks, where in a sense, the ABCs of economic apocalypse for blue America in particular are AI, Bitcoin, and China, in the sense that AI takes their jobs and Bitcoin takes their power over money, and China takes potentially their military power, because lots of the jobs, especially of the Northeast, are lawyer, bureaucrat, doctor. They're licensed jobs in some way where an AI might be able to do them better, faster, cheaper. And then finally you have the uncensoring of social media. And that is what Elon has done with Twitter, but it's also YouTube is following suit. They have reduced their level of censorship on certain things. And then you also have things like Nostr and Farcaster, which are decentralized social media. So that's like a digital glasnost to accompany Bitcoin's digital perestroika, meaning when the Soviet Union collapsed, you had truly free speech, which was like glasnost. And you also had free markets, which is perestroika. And we're having that in the West. So you have like a lot of different shocks hitting at the same time. It is not simply the economic shock. It's in the context of everything else. Does that make sense?

[Tom Bilyeu]

All right, so we have all these things colliding at the same time. It's what I'll call a rogue wave phenomenon.

[Balaji Srinivasan]

Yeah. And let me kind of just show. Yeah, like a rogue wave. Right. So, but let me show what all these things are. Right. So I mentioned debt ceiling was like a near miss that boosted uncertainty in U.S. debt. There's an ongoing banking crisis. Most U.S. banks are quote, technically near insolvency. Hundreds are already fully insolvent. Okay. That's, you know, a guy who disagrees on many other things. This guy Rubini, you know, is, is saying that there's a banking crisis at the time of, you know, in, in May, June of 2023. We've seen 3 of the largest, 3 of the 4 largest bank failures in, in the last 2 months. Somebody, this guy Bianco, Jim Bianco, Bianco Research coined the term. It's not a bank run, it's a bank walk. Right. Deposits are leaving banks regularly. They are not, they're not moving all at once digitally, overnight. They're moving pretty fast and they're moving to places with higher interest rates. They're moving out of regional banks. Right. Hundreds of billions of dollars. And you know, when you start something off with three of the largest four bank failures in the last few months, is that, is that the end of something? You know, it's funny, you know, somebody observed the reason the banking crisis is kind of operating in slow motion is we don't have, it's not like on a blockchain where you can see real time financials for everything in banks. You have to sort of wait for the quarterly reports. So it's a hurry up and wait kind of thing. So every quarterly report, then people look and they're like, oh my God, the losses are so big. And then, you know, they act on it. Right. This is kind of a slow motion thing in some ways. I'm not saying there aren't things that happen in between quarterly reports. Sometimes there are, like obviously the bank running, but, but often quarterly reports kick off a whole new burst of activity. Moreover, it's not just, you know, these, these huge banks that have just failed Stanford study reports. There's $2.2 trillion in unrealized losses that many US banks face. The same risks that brought in Silicon Valley bank. And fundamentally what happened as we'll get to, is the, the Fed and the Treasury. The Fed basically devalued Treasuries. So the bedrock of the financial system, everybody who bought Treasuries, long term treasuries in 2021 got completely destroyed in 2022 and some of those institutions started to collapse in 2023. And so the safest asset in the world became the riskiest asset in the world.

[Tom Bilyeu]

The quote, how do they undermine this is an important idea. How did the government end up doing that?

[Balaji Srinivasan]

Let me give a few analogies first and then let me get more kind of technical or specific. Do you remember in 2008 when the banks sold AAA mortgage backed securities to each other, but they really weren't aaa. Right. And it was something where it was a combination of some of those guys were lying to themselves, some of them were lying to themselves so they could lie to others. The ratings agencies were lying. Like everybody was kind of, you know, a combination of it's like self interested delusion, right? Where you know, oh my God, are you saying that these mortgages aren't real? That would mean a housing crash. That would mean all these people are going to lose their homes. That's anti American, right? That was the tone in 06 07. What are you saying? The housing market doesn't always go up. You're crazy, right? You're a doomer and you have to work back to that period of time. But that is one of the reasons why this was allowed to go on for so long, the housing crisis. Why I was able to get so bad is because people thought, well, real estate's a safe investment. It's always going to go up. When is that ever going to go down? The government is backing it, et cetera, et cetera. Right. And the AAA ratings on mortgages or not mortgages themselves, mortgage backed securities is part of what allowed the crisis to get so bad. And one of the issues was rating agencies were not able to down rate those things for a variety of reasons. One is that they're paid by the, you know, the, the guys who, they're raiding. Okay. So that's a private issue. But the second is later. For example, in 2011 when S&P actually downgraded US debt from AAA, do you know what happened to them?

[Tom Bilyeu]

No, nothing.

[Balaji Srinivasan]

They got a case from the US government and I believe like a senior official there, this guy Sharma, had to step down. The government did not like S and P downgrading the debt. And I'm pretty sure that, you know, the government would not have liked the ratings agencies downgrading the mortgage backed securities either in the run up to 2008. Because a bipartisan thing by both Bush and Clinton was to get people into homes. Okay. NYT has this article like, you know, the Bush Drive for homeownership fueled the housing bubble. And then there's another one, which was how the Clinton era roots of the financial crisis, okay, in the Wall Street Journal. So if you have sometimes binocular vision where you take the New York Times attacking Republicans and the Wall Street Journal attacking Democrats, you put it together and you're like, oh, that was a bipartisan government caused housing crash. Did you know that part?

[Tom Bilyeu]

No.

[Balaji Srinivasan]

Okay. That's actually pretty important, Right? It's important what follows. Because there's a bunch of movies that have been made on the housing crisis and some of them are good movies. There's the Big Short, which talks about the outsiders and they're seeing the problems there is Too Big to Fail, which talks about the government's vantage point on it. There's Margin Call, which talks about the bank's vantage point on it. There's Inside Job, which sort of activists point on it, which is calling for more regulation. But what there really hasn't been, at least to my knowledge, is one that shows the extent to which government policy pushed banks to, you know, again, in the words of both the, the Times and the Journal, to. Because they wanted to get people into houses, because they wanted affordable housing goals, ending redlining and so on and so forth. Both the Journal and the Times were publishing the truth on this around that time in the early 2010s. So the government was nudging, pushing banks. And if you didn't, if you didn't go and, you know, extend all these mortgages to people who probably couldn't pay, well, often you got acquired by a bank that did and that would kind of, you know, override your decision making. Anyway, a vacation rental should come with support, not surprises. That's why VRBO comes with a VRBoCare guarantee and 24. 7 life support from real people. So if something goes sideways, Verbo care can help. If the host cancels Verbo care if the listing says heated pool, but there's actually no pool to heat. Definitely a Verbo Care thing.

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[Balaji Srinivasan]

instead of mom, that's a family thing, Leslie.

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[Tom Bilyeu]

Sorry.

[Balaji Srinivasan]

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[Balaji Srinivasan]

So that's.

[Tom Bilyeu]

So hold on. I think it's important to understand why, why they're doing that. So are these ESG style goals where there's like a moral imperative that's driving it?

[Balaji Srinivasan]

That's exactly right. You know, for example, Here's a quote. December 21, 2008. Again, when the New York Times had an incentive to attack Bush over this, they said Bush drive for homeownership fueled housing bubble. Quote, we can put light where there's darkness and hope where there's despondency. And part of it is working together as a nation to encourage folks to own their own home. George W. Bush, October 15, 2002. Right. So that is the approach which says, oh, we deregulate the market and push people and so on and so forth. There's some truth to the idea that they pushed lending standards to be low, but that's not exactly the same as deregulation. They actually used regulations to push banks to hit certain, whether you call them formal or informal quotas, they were doing that then. The other side of it is the Clinton era roots of the financial crisis in Wall street journal article in 2013. And that says affordable housing goals established in the 1990s led to a massive increase in risky subprime mortgages. Right. And there's a strong case the answers can be traced to September 12, 1992. On that day, presidential candidate Bill Clinton proposed using private pension funds to invest in government priorities such as affordable housing generate long term broad based economic benefits. Right. And so the point is, if you add up these two articles again, you start getting binocular vision. Have you heard that saying? Like, you know, there's, there's the stupid party and the evil party and sometimes they get together and do something bipartisan and that's both stupid and evil. Have you heard that?

[Tom Bilyeu]

Nice.

[Balaji Srinivasan]

It's lovely.

[Tom Bilyeu]

So one thing, I don't want to get lost in all this. I really want people to understand why this stuff is happening. So this is. Maybe you and I don't agree on this, but I, I am formulating a hypothesis, the more that I get into this, that the following is what's happening. And this is, this is actually me synthesizing you and Dalio and a few other people like Raoul Paul. So you what ends up happening? My thesis goes, and please strike this down where you think I'm wrong is that you become the reserve currency. You now have the ability to print money to cover up problems. That begins to change the, the way that people perceive money even at the governmental level. So now all of a sudden people start trading what works in a free market sense of working that you spend a dollar, you get to. In return, it exchanges that for. I, I think morally we ought to do this thing. We do it not working, meaning that we're losing money. So you get the 2008 crisis, but they're like, what crisis? We're just going to paper over it, we're going to print money, we're gonna, it was bad, but it wasn't fall off a cliff bad. And so they print over that and they, they go, oh look, see, that wasn't that bad and we were doing something good. We're trying to be moral actors because to be honest, like this was the big awakening that I went through. I'm like, this sounds awesome. I love that you're ending redlining, you're getting people onto the housing ladder that previously weren't like, it all sounds amazing. But then Thomas Sowell comes along and this idea that then you start watching play out, which is the last 30 years have been marked by exchanging what worked for what sounds good. Now when you tie that to debt. Because again, my whole thesis is that the collapse begins with debt. Because if you don't have debt, you can get away with some of this. But the problem is you, you end up getting into the moment that we're in now, which is why you talk about all these problems happening at the same time. The reason I think this becomes a, that you're potentially about to walk off a cliff is because you have all this debt. The government has a full GDP in debt, US households have full GDP and debt. Corporations have full GDP in debt. And so now all of a sudden the only way out of that debt is to either lower your interest rates, which if you do that then you're going to have inflation to print money to cover some of your debts, which again inflation. And so if you have to print and you can't lower rates anymore, now you're in trouble. So they start raising rates. The problem is everybody's got all this massive, massive debt. And this is where editors put back up that the debt ceiling picture where we see this huge spike in the last year where it is just mahusive. The, the amount of extra debt that we have right now is not a little. It is, it is unbelievable. It's like 400% more than normal. It's just absolutely astronomical. So you have this massive amount of debt. You can no longer lower interest rates. In fact you have to start raising interest rates. The Fed gets everybody. Again, this is me quoting you. The Fed gets everybody to buy into the bonds, Treasuries like, hey, rates are going to be low for the foreseeable future. All is good. And then whatever, six months later they take them to the moon. The fastest rate kite in, in history or certainly recent memory. And so now people like, whoa, whoa, whoa, all these bonds that I just bought, they're now toxic. I can't get them off. SVB fails. Everybody's blaming them as if they did something crazy. They put all their money in like the supposed safe asset. And so now you're in this game of like the only solution left is to print because you, you can't lower interest rates because if you, you can't lower interest rates because of inflation, you can't raise interest rates because you will break the economy and more people aren't going to be able to pay their debts, including the government itself. And so now you're in a conundrum of your tools are gone except printing money. And so the question that I'll ask you point blank is we've printed a lot of money and nothing bad has happened. So why, why now? Why, why is it a problem now?

[Balaji Srinivasan]

In short, like the system is starting to creak and you're starting to see what I'd call consumer failures. Like in the sense of in 2008, you know, when you went to your ATM or something that didn't, that just continued to work. The failures in were like enterprise failures in the sense that there were guys who were sweating in skyscrapers with pieces of paper back and forth that weren't worth what they, what they thought they were. Now you're having banks blow up on, on Main street. You are having it. It is becoming much harder to cover things up. Okay, so we just talked about the fact that all these banks blew up. The fact that there was this near miss on the debt ceiling that got people talking about debt again. The fact that there's 2.2 trillion in unrealized loss according to the Stanford study. And I'll come back to what those are. But we have commercial real estate crisis due to remote work, due to all the crime in blue cities and and so on. Commercial real estate prices could crash 40% from their peak in a worse disaster than the financial crisis. Morgan Stanley warns. Okay, that alone is pretty bad. All right, 2022 was the worst year for bonds evidently in recorded history. So it's a bond crisis, not just a bank crisis. And everybody buys bonds as we'll come back to. That's actually at the core of a lot of this. And bonds were seen as a safe haven, but they're actually central to this crisis. It's a crisis that's caused by governments, just like 2008, but even more directly insurance. Remember AIG when they went down in 2008, like the guys who were supposed to backstop everybody, you know. So today insurers also bought a lot of bonds and you know, double digit percentage of their portfolio, which are supposed to be safe, are held in now essentially these unsafe assets that are being devalued in a big way.

[Tom Bilyeu]

Isn't it like 70% of their portfolio?

[Balaji Srinivasan]

Yeah, exactly. There's a graph here. Life insurers have like 70%. And you can go to other kinds of insurers. And the thing is life insurers, you might say, oh well, that's different than real estate insurers. There's actually been a collapse in life expectancy in the US like this overnight, huge collapse. So life insurers are paying out way more than they expected. And so lots of insurers are just getting they have to pay when they didn't think they were going to have to pay. Okay, there's insurance crisis, there is a fiscal crisis, 1.4 trillion in unfunded pensions. There's auto loans spiking defaults in that trillion dollar plus sector. There are student loans. Payments may resume on 1.8 trillion in debt after this multi year holiday due to Covid. And it's almost like the worst, right? If you just kept it or you'd forgiven it. Right. Both those would have been better than suspending it for three years and then resuming it. Because now what's happened is people didn't sock away the cash for a rainy day, right? They didn't use it to pay down the debt, they just expanded their spending and now suddenly many of them probably gambled that the soon loans will go away forever, right? And because it got suspended, now they're coming back and they're like oh no. And now they've got it on top of their rent payment or something like that. So that's going to be.

[Tom Bilyeu]

Well, let's use this as an example. So why then don't we just forgive that debt?

[Balaji Srinivasan]

Oh, you. I mean, well first that's a, that's a huge tug of war between two groups you're, when you, you know, if one man's assets, another man's liability, you are marking down a trillion dollars in someone else's books. And they will fight tooth and nail to stop that from happening. Happening. Right? And so it's a zero sum game. It's like if you have the debt, you want it to be marked down. If you, if you're the, if you're the lender, you don't because that's your revenue stream, right? That's how, you know, maybe if you're a college, that's how you pay your administrators or whatever.

[Tom Bilyeu]

Right, but then why doesn't the US government just pay that debt?

[Balaji Srinivasan]

Well, it could. And if it does do that, then it's just, just printed a giant amount of money. And then people say, why don't you print the, you know, my mortgage as well, not just my student loan debt, why don't you print my car loan away, right? And once you've kind of broken the seal on that, that's like the people's qe, the people's quantitative easing where the money is printed not just to bail out banks, but to bail out everybody. And you know what, like at first people will, some people will love that. But that much introduction of money into the system starts actually devaluing the currency itself. So we talked about student loans, there's credit card debt, almost a trillion dollars in credit card debt. Record high. Okay, there is. And there's yet more, right? Globally, there's Ukraine, the Ukraine crisis, that's like at least 100 billion in, it's like 100 billion in direct cost for just the arms. But that understates it. It's easily a trillion indirect. Europe alone paid like 800 billion in energy costs. It's like a multi trillion dollar war. You know, people say wars cost blood and treasure. I mean, just think about it like you've seen obviously these bombs blowing up things in Ukraine or what have you. Think about how expensive a building is, right? It's like somebody's entire life to pay for like a, like a house, you know, 30 year mortgage or whatever. So now you have a bomb that blows up like a thousand person apartment building, that's like a thousand economic lives wrecked, right? Even if the people didn't get blown up, it's like a thousand healthy working people's 10 years of their life or whatever is consumed at current very high housing prices. So when whole cities are leveled and stuff like that, that's a lot of damage. And that's just within the country, obviously. Outside the energy crisis is tremendous. And of course, the humanitarian crisis is tremendous. You also have. So it's the Ukraine crisis, you have the energy crisis in Europe. And some people are like, oh, well, prices are down. So energy crisis is over. And it's like, well, what was the cost of that? Right? You had demand destruction. You had businesses that shut down because they couldn't afford the energy costs. And then they stopped consuming energy. And maybe that's why energy prices are down, because they're not consuming the level of demand destruction that probably happened in Q4 of last year. You need to see stats on it in Q4 of 2022. Then de dollarization, this guy Steven Jen, who's not like, he's not like a zero hedge guy, he says de dollarization is happening at a stunning pace and people did not account for exchange rates and so on. He's like, by his calculations, the dollar was down in terms of its share of assets, but held by other countries like 19% last year and everything else is up. Southeast Asia, all those countries, the 10 countries are using their own currency for trade. Indonesia, President has said that Central Asia, the ACU they met, they said they want to de dollarize. You have, you know, South America, Latin America, Brazil saying they're using yuan. You have even France saying they want to use yuan. You have Iraq and the Middle east trading oil for yuan, you have Russia trading oil for yuan, and you have Israel even holding yuan. And you know, that's a lot of countries, that's a lot of the world right there, you know. And so de dollarization, if the dollar is no longer have to be used in an obligate way, right? If it's no longer, you know, it's only the thing that you have to use, if you have options, then that means you've got another rail to go on. And one thing I should make clear, by the way, is I don't think this is where I differ from Dalio actually on this. He thinks the dollar just gets replaced by China. That's a clean kind of US China replacement. I actually think that de dollarization is decentralization. So the kind is money is a store of value, meaning of exchange, unit of account. And sometimes in the cryptocurrency, you might also include like a system of control and like a financial system. Okay, so with store of value that you know from treasuries or you know, just holding the dollar itself, you may go to gold, central banks are buying record amounts of gold, or you may go to Bitcoin or you may go to other cryptocurrencies or you may go to foreign fiat. So medium exchange, you may use foreign fiat currencies, the yuan, you may use the rupee, you may use local currencies, you may use cryptocurrencies in roughly that order, I think. So, you know, in terms of unit of count, that may remain the dollar for a while, but that's like the last thing to flip. You know, basically you can just look up an exchange rate, you know, and flip that. That's the easiest one. System of control is the most important in some ways. It's not normally listed. This is due to Andreas Antonopoulos. He came up with this concept. But system of control is who has root access over the currency you're using. This was not necessarily quite an explicit concept in the past, but today it's very explicit is the Fed can literally hit a button and freeze accounts just like they did to the Canadian truckers, just like they did to Russian assets. Canada's banking system to debt. And so system of control, the Chinese yuan, the Indian rupee, bitcoin, Ethereum, those are outside the ability of the US financial system to set down, to shut down with one click. Okay? Then there is the financial system, and I think that's the yuan. And the repeat for the domestic economy is that maybe, you know, in the Middle east, aed, Dubai's currency is still pegged to the dollar. Maybe it gets unpegged. There's a Singapore dollar. And then of course there's Ethereum and the global financial system that's built on crypto. So you have essentially both what I call land and cloud competitors to the dollar, Land being the sort of brics and especially China currency. And then cloud being cryptocurrencies. Right? And so once you start enumerating all of those, then you add on top of that, there's a huge development since 2008, which is there's lots and lots of fintech and crypto people around the world, okay? And if you go to other countries, often their payment systems are more advanced than in the US for example, like WeChat in China or UPI in India or, you know, even like, you know, GrabPay in Southeast Asia or, you know, Pag Seguro in Brazil. And so like, you know, it's not that hard nowadays to stand up a fintech or crypto company, right? And by contrast, you have ach and so on within the US where it's like slow wire times and what have you. You know what I'm talking about, right? Like how payment technology is relatively lagging in the U.S. yeah.

[Tom Bilyeu]

As soon as you get into crypto, you realize real fast how slow the legacy system is.

[Balaji Srinivasan]

So the point is that the only thing the US financial system has going for it is its legacy traction. It's not technologically superior. It is not something which you choose from scratch because the US Is no longer a major exporter of physical goods relative to China. China is the world's number one trade partner. It's not something that either your engineer in the US Would pick or your conservative in the US Would pick or much of the world would pick. Right. So it's an incumbent that has incumbent advantages. But if it. If it had to be adopted from scratch today, it's not clear that it'd be adopted in that way. Does that make sense? Right. So that's important that the rest of the world. It's much easier to launch currencies than to scale factories. I've done both. Okay. It's not trivial to launch currency, but it's digital. Basically. China is the number one trade partner for most of the world, right?

[Tom Bilyeu]

Yep. I think that's shocking to the average listener. They have no idea that's true.

[Balaji Srinivasan]

See, here's the graph, right? Like essentially, here's the US in the year 2000. Here is China's trade crazy.

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[Balaji Srinivasan]

It's amazing, right? And so the thing is that's. That's only accelerator the last three years. Right. In a sense, of course.

[Tom Bilyeu]

That's really terrifying. This is where I feel like people aren't seeing how all these things are Adding up. In fact, I wrote down what I think your thesis is because I'm again, I, I don't quite know if we fully agree. So it's like you've got, okay, there's all the problems that we just went through, all the debt, all that stuff, plus the lack of financial innovation on behalf of the US is, is leading to this moment where we are now weak to contenders and the most obvious contender is China. How close am I getting to the stack of problems or the stack of issues that you think are creating what I referred to earlier as the rogue wave that seems prone to be the mark of the end of the U.S. empire?

[Balaji Srinivasan]

I think the lack of financial innovation is certainly a factor, but it's, it's really. I mean the physical world is made abroad, right? Like if you have to choose, if you. As I showed that graph, countries don't want to choose, but they have to choose. China makes your, your chairs and your screws, right? People think the competition with China is like a high tech military competition. In large part, it's a low tech economic competition. China will screw you on the screws, right? They will literally just withhold the nuts, bolts, screws and so on. You can't make things right.

[Tom Bilyeu]

Or more terrifyingly, during COVID the medication and PPE masks and so on.

[Balaji Srinivasan]

Yep, that's right. In fact, actually there was, there were, there's aid airlifted. It wasn't, wasn't made public or it was made public, but wasn't emphasized. Aid came from China to the US so. August 6, 2020, Rolling Stone, the unraveling of America. And essentially here's this thing he said, he's like, basically for more than two. For the first time, the international community felt compelled to send disaster relief to Washington. For more than two centuries, reported the Irish Times, the United States has stirred a very wide range of feelings in the rest of the world. Love and hatred, fear and hope, envy and contempt on anger. But as there's one emotion that's never been directed towards the US until now, which is pity. American doctors and nurses eagerly awaited emergency airlifts of basic supplies from China. The hinge of history open to the Asian century. Okay, that's, ooh, right now. The thing about it is I actually somewhat disagree with the quote in the sense of this is actually, I'd say it's not for more than two centuries really about like, like US World dominance is actually relatively recent. You know, it is not, it's not like an eternal fact. It. There's this book by Stephen Wertheim which is good. Which is, it's like called tomorrow the world the birth of U. S Global supremacy.

[Tom Bilyeu]

Do you call that, do you mark that after World War II?

[Balaji Srinivasan]

Well it's actually in the lead up run up to World War II and the thing is, I mean this is sort of obvious but you don't become number one by accident, right? It's kind of like deciding to do a startup, right? You don't become Google by accident. It's really hard to become Google. You have to set out to become Google. It's a very difficult process and even those who set out to it don't become it. The reason I say that is a lot of people just sort of think oh you know the US kind of just fell into this role and you know it, it didn't, it didn't, you know I never wanted to be you know totally world dominant with embassies in every country and military bases everywhere in a financial system everywhere and regulations adopt everywhere. No, there were people in Washington D.C. who had a quote plan for world domination just like the Soviets did. And you know the difference is that I think that from 1945-91 the American version was better than the Soviet version. And why is that? It's because you know if you look at West Germany vs East Germany West Germany is better off. South Korea vs North Korea, South Korea is better off. You look at you know the Taiwan and Hong Kong which are you know, capitalists and the PRC that was communist for most of the cold war and the western aligned countries were better off and so just looked at it in terms of that neutral ground. The American system with its flaws from 1945 to 1991 was better than the Soviet system. So even if it was world domination it was relatively benevolent world domination. What I think happened after 1991 is without the Soviet check as bad as the Soviets were and it's good that that is on the ash heap of history and Eastern Europe is free and India's gone capitalist and all of that is generally good. Even though it was tough for a lot of the, the former Soviets what happened is the you know over time at first the US just helped Eastern Europe get back on its feet and it was occupied in making sure that the Soviet Union didn't totally blow up. Do you know for example that or the post Soviets blow up. Do you know that the, they shelled the, the Russian White House in 1993? Do you know about that?

[Tom Bilyeu]

No.

[Balaji Srinivasan]

Yeah the like you, you heard a lot about Tnan Men in 89 but you didn't hear about 1993 and Yeltsin ordering like the Russian White House to be shelled with tanks. Even though that's more of a, like, you know, Russia was at least within the Western camp ish at that time. Ostensibly, it's like a. It's a new democracy and so on and so forth. You've never heard about that. Most people have not heard about that. But basically the post Soviet era was a huge message and the US to its credit, essentially supervised that mess. And it's revealed later that the US was backing Yeltsin. It wasn't like a completely organic thing that Yeltsin became prima center Paris, of course, CIA. All these guys have an interest in loose nukes not making their way around. So the US was all over that situation. It's almost like you're seeing a waiter, they catch a bunch of balls that have fallen down from the air. It's like a bunch of plates going there to go look at this and catch them. So in the early 90s, I think the US overall was doing a decent job. Great job in some ways on foreign policy. Eastern Europe is way better off than it was. Estonia is way better off than it was. I'm not somebody who's just like, oh, the US is always evil and so and so forth. Not at all. In fact, I think the US has actually done a lot of amazing things. What started to happen, in my view, towards the end of the 90s and then especially in the 2000s, is you start to get that messianic, crusading, neocon, slash Samantha power slash responsibility to protect kind of thing, arguably starting with, you know, Kosovo and then going into, you know, like Iraq and all the Middle Eastern forever wars, and then unto the present day where.

[Tom Bilyeu]

But why is this bad?

[Balaji Srinivasan]

Why is this bad? Good question. The reason it's bad is that wars are never clean. You know, they're always sold to the public on this clean line of like, here's the bad guy, here's the good guy. And they're very, very rarely clean. Like, even, Even World War II. You're talking about like the firebombing of Dresden. You're talking about the nuking of Hiroshima. You're talking about lots of civilians and innocents killed, right? And many other wars are much more great than that. A B is like, in general, war should be a last resort. Absolute, absolute last resort. And usually you want to solve things with economics or some kind of political solution or something like that. And the reason it was bad in the late 90s is it's just unchecked power. Actually, it's one way to think about it. If power corrupts, absolute power corrupts absolutely. Have you heard that before? Right, of course. So basically, especially Iraq is something I think we can have consensus on. A country which is totally blown up on totally false premises. $8 trillion was wasted on these Middle Eastern wars. Huge part of the debt, by the way. Okay? Iraq, Afghanistan and so on. ISIS formed in the aftermath of that. All these countries in the Middle east were destabilized, and for what? Like, there's no accountability. A lot of the same people are still in power. A lot of those neocons are still, you know, advising. They're saying now war with Ukraine, it's totally memoryless. It's like a sociopathic serial killer at this point. Right? And at best you'll get, well, we meant well, and then move on. Why are you bringing that up, you know, and why are you dwelling on the past? Okay, well, I mean, we're going back to 16, 19, but we can't go back to 2003. Right? Like you're going. You know, people will selectively excavate aspects of history and use them as a weapon in, you know, like the current events, but they won't do the things that, that the New York Times was responsible for printing this false intelligence. But they want to go back 400 years. And not to their own faults, if you notice, from 1945 to 1991. Again, you can't defend everything that US foreign policy did during that period. People will say, oh, there are right wing death squads and so on. Probably there were. But you know what? There were left wing death squads, the Communists who killed 100 million people. And they didn't play nice. You know, like Venona decrypts have shown that. Do you know what that is? V E N O N A. Have you heard that?

[Tom Bilyeu]

No, not once.

[Balaji Srinivasan]

Venona showed that basically the Soviet Union had riddled the United States with Soviet spies. In fact, you read Sean McMeeken's book Stalin's War, and it makes a point that, like, you know, this is not very well known about, like World War II. You know, one of the, number one. First of all, he makes a point that World War II is actually not Hitler's war, but Stalin's war. Because Stalin was actually on two fronts. He had both an Asian front and a European front. And the second thing is, you know, the least. Just to digress on this for a second, you know, the least covered but perhaps most important theater in World War II. No, it's the Japanese.

[Tom Bilyeu]

Soviet, I don't know, literally know nothing about that collision.

[Balaji Srinivasan]

All right, so isn't that interesting? Obviously you know about the Pacific war between the US and the Japanese. You know a lot about probably the European conflict between, you know, Germany and Russia and Germany and, and the us, uk, France. But, but isn't that interesting? You don't. And you know, about like Germany, you know, versus Russia in terms of Stalin grad and whatever. But why, why didn't Japan and Russia fight? Because Vlad Vostok is there. Russia has a huge, you know, Asian front. Why didn't Japan invade from the east when Germany's invading from the West? Why did they not. Pincer attack. Right. Why. Why did it happen in reverse? And it turns out that actually getting Japan to fight the USA was in Sean McMeeken's report and in a lot of documents that got declassified. Getting Japan to fight the USA was like one of the number one goals of Soviet foreign policy.

[Tom Bilyeu]

I did not.

[Balaji Srinivasan]

Yeah. So the reason is it goes all the way back 1905. You can push back even further. But 1905, the Japanese. Just digress on this. The Japanese beat the Russians in the Russo Japanese War. 1904-1905. This was the first time a non white power had beaten a, quote, European ancestry country in a war. This had huge influence in terms of anti colonialist movements around the world. And in fact, at the time, the Japanese positioned themselves as friends of W.E.B. duBois and the African American movement in the US like what would later be called the civil rights movement. That's an overlap most people don't know about. There were Indians who were sympathetic to the Japanese because, you know, it's like, oh, wow, non white people can be free or whatever. Right. Of course, you know, Japanese were, you know, like they, they committed terrible war crimes later. But that's an aspect of history that people don't know about. Point is that after that, after 1905, that was a huge, you know, like, black eye for the, the Russian Empire. And they took the Japanese seriously culturally after that. And even after the communist revolution, even if the ideology changed dramatically from SARS to communism, you know, it didn't change the geography. Right. The, the territory is still abutting Japan. Right. And so they still had geopolitical rivalry with Japan. They couldn't swap that part out. Right. And, and they couldn't. You know, there were attempts to make Japan communist, but, you know, didn't succeed. And so essentially, for years and years and years, Soviet foreign policy was focused on how do we get these other capitalist countries? That's how they thought of it. How do we get these capitalist countries to fight amongst each other? And so there's guys like Harry, Dexter White. There were Soviet spies in the US and they helped turn Japan against the US and vice versa. Not saying that anybody here was a good guy.

[Tom Bilyeu]

This goes to an idea of there are second, third, fourth, fifth order consequences to things. And when you have a lot of things happening at once, especially on a geopolitical stage, this all plays into why in this unique moment, we are standing so close to the precipice and why people aren't hearing you, that we're standing this close. So I want to, I want to re anchor everybody around. This interview is born out of. You spent a million dollars to get people to understand why we're printing so much money. That's so crazy. Like, there's no way that people understand that. You're the only person I can conceive of that would ever do this. I mean, it just, it struck me as so bizarre when you first brought everybody's attention to this that you were going to pay the million dollars to get attention. I'm obsessed with getting people to say like what their thing is in a single sentence.

[Balaji Srinivasan]

Here's, here's, here's a single sentence. Yeah, the. If in 2008 it was a banking crisis and a mortgage crisis, in 2023 it's a central banking crisis and a currency crisis.

[Tom Bilyeu]

Now the question becomes why? Why do these one, why is it a central banking crisis and why then does it potentially mushroom into something bigger?

[Balaji Srinivasan]

We are now in an inflationary environment that had been denied that inflation was going to happen for a decade. And due to what inflation? Because people had, quote, printed money from 2008 to 2020 and the only effect seemed to be on asset prices and home prices and all the things in financial markets. But in the physical world, you had deflation partly due to tech bringing down prices, you know, like electronics became cheaper and so on. And so people thought if you go back to early 2021, that inflation's a, quote, right wing conspiracy theory or it's not going to happen. Hasn't happened for 12 years. You're so stupid for bringing it up. And there's all these articles about that. And so over the course of 2021, they're first saying inflation isn't going to happen. So more stimulus is good. We've proved inflation can't happen. They're saying, oh, maybe it's transitory inflation, but they're still selling hundreds of billions of dollars in bonds during this period. And then suddenly in, you know, as late as November 2021, they're still saying transitory inflation. Then December 2021, after Powell is renominated in November 22, 2021, they hike, start hiking interest rates very rapidly. And everybody was that deceit? I think it was deceit. I've got actually an article on this called Too Fake to Tell. Okay. Which basically makes a case that Powell was aware, at least at one point that so, so let me give an analogy here because it's a very technical sounding space and when you explain all this, you know that meme where the guy is like pointing at the, the cork board and you know, there's all

[Tom Bilyeu]

the lines connected to everything else and you look like the, the crazy guy.

[Balaji Srinivasan]

Yeah, exactly. See, the thing is the financial system is set up to be intentionally opaque.

[Tom Bilyeu]

If you are the Fed and you're saying, hey guys, buy long duration bonds which will lock you into an interest rate. Rates are going to be low forever. So just take what you can get now, take it out 10 years, whatever, all is going to be well. We don't have any intention of raising the interest rates. But you actually do plan to raise interest rates. So then the problem is people put all their money into an asset that you are about to tank by raising the interest rates. So they effectively get you to buy. Now I don't know, I don't understand this well enough to say whether they did it on purpose or if this is just one of those things that's too hard to predict. I don't know. But that was the effect. Hey guys, buy these bonds, buy them long, not going to increase the, the interest rates anytime soon. And then people go buy them, billions of dollars worth of them and then they raise the interest rates. And so now the value of those bonds tank. Now your money is locked because when you bought them, just so understand how this works. When they bought the bonds, they thought they'd be able to sell them. So they didn't think, oh, I'm going to be stuck with this for 10 years. It, that's, that's the time to maturity. But they thought that they would be able to sell them, that the market would still be good because interest rates were going to stay low. So it all hinges on this question. Did he know, did the Fed know they were going to raise rates? Because if they knew they were going to raise rates and they got the banks to buy in, now you've got a problem. And I've heard you say the phrase the Fed lied and banks died. Now that. That's sinister. If they knew they were going to raise the rates, that's really gnarly.

[Balaji Srinivasan]

Can you see the screen there on page 193 of these minutes? Okay, the, the Federal Reserve minutes here. Second, I think we're at a point of encouraging risk taking. Meanwhile, we look like we are blowing a fixed income duration bubble right across the credit spectrum that will result in big losses when rates come up down the road. You can almost say that is our strategy. Okay, so at least 10 years ago, he was aware that. How could you not be aware in his position, but that if you sold a ton of bonds and then hiked rates very, very, very rapidly, that you would devalue everything you just sold. Like, the bond market is complicated. So I came up with an analogy to kind of explain this, right? Imagine Apple told Best Buy and Target and Walmart that it was only going to be selling iPhone 10s for the foreseeable future, okay? And so it sold them billions and billions and billions of dollars worth of iPhone 10s. And you know, it said, we're not going to be selling better iPhones for a long time. Buy these, buy them in bulk, and so on and so forth. Okay? Then after Apple sells all those billions of dollars in inventory, suddenly it turns around and launches the iPhone 11, a better phone, and thereby devalues everything it just sold by at least 10 or 20%. And even though it's maybe a small depreciation, it's across such a huge amount of inventory that Best Buy, target, Walmart take massive losses. And some of these are low margin businesses, so it's like a huge, huge hit to them. And the thing is that, you know, whether Apple knew that it was going to launch the iPhone 11, which it probably did, or even if it didn't know, either way, at the time it sold those old iPhones, it was telling the buyers it's not going to launch a better model for a long time. Make sense? Right? So had Apple done that, had it committed to not launching a new phone and dumped a bunch of older phone inventory on buyers and then suddenly devalued all of that, the buyers would have a case, they'd call that fraud. Right? Apple would have sold those assets on false representations, regardless of whether they knew at the time that they were going to launch the iPhone 11. And frankly, how could they have not? Okay? But if they just changed their minds, the commitment they gave to the guys who bought it at the time that they were Selling it was, we're not going to launch a new phone for a long time, so feel free to buy tons of these are our best model. Okay. Does that make sense? You know?

[Tom Bilyeu]

Oh, yes.

[Balaji Srinivasan]

As a bond buyer, you have the same thing. You think, okay, do I want to buy at today's interest rate or do I want to wait and maybe the interest rate will be higher and I buy tomorrow, especially because if I buy a bond today, it gets depreciated if the interest rate is hiked tomorrow. The treasury and the Fed are different entities. Treasury is selling the bonds and then Fed is effectively setting the price of the bonds by setting interest rates. If you think of them as a unitary entity, the US Government, because they do act together in most, most cases, then it's like the US government sold all of these banks hundreds of billions of dollars in assets that it then devalued.

[Tom Bilyeu]

One of the things that I find interesting is that value investing is really broken down for what, like at least the last five years. Which leads to the question, what the hell is going on? And that's what, you know, that's what we're really dancing with here, is the complexity of this problem. But there are so many signals that something's going on from all the things we listed. And I just want to recap some of the things we listed in the beginning here. So you've got. Debt ceiling is way up. Markets estimating a record high probability of US sovereign default. Most US banks are near insolvency or already technically insolvent. Three of the four largest bank failures in US history have happened in the last two months. $2.2 trillion in losses at banks have yet to be reconciled. Morgan Stanley believes that the commercial real estate sector is poised to be a worse disaster than the 2008 financial crisis. 2022 was the worst year for bonds in a long time. De dollarization, which you went through in detail, is happening. Sovereign defaults are at an all time high. We had 14 in the last three years versus 19 in the previous 20 years. That's 4.7 per year now versus less than 1 per year previously. That's an increase of almost 5x. We have. Millionaire migration to the US has dropped by 86% in the last three years. And central banks are buying a ton of gold. A ton of gold. The chart is ridiculous. Presumably because they see that something is coming. So it's like, okay, you are the.

[Balaji Srinivasan]

You actually missed a few. You got a lot. Oh, dude, you missed a few.

[Tom Bilyeu]

I cut out like 10.

[Balaji Srinivasan]

Yeah. So there's an insurance crisis, there's the fiscal crisis. Blue states are bankrupt, like California, Illinois, places like that. They're losing a lot of money. There's auto loans, there's the student loans, there's credit cards. Each of these are like trillion dollar problems that could crash the economy. And they're all happening essentially at the same time.

[Tom Bilyeu]

It is insane. So I feel like we're standing on this really rickety thing. You said that the, you know, the economy is beginning to creak. But I've heard you use an example before that I worry is more accurate. Now remember, all I care about, I want people to look at this. Neither of us have a crystal ball. The one thing we are guaranteed to get wrong is timing. I just want everyone to be very clear now. The wins and losses all come around timing. So of course, like if I had a crystal ball, I'd just shut the show down and just go make a lot of money. So I have no idea when this is going to happen. So to, to be very clear, but you've used an example before that I think is absolutely brilliant. And that is. This is a Wile E. Coyote moment.

[Balaji Srinivasan]

Yes.

[Tom Bilyeu]

What do you mean by that?

[Balaji Srinivasan]

So, you know, Wiley Coyote, if people haven't seen, you can probably put up an image of it. This character from Looney Tunes and they walk off a cliff and they're just, you know, merrily going in midair. The one day they look down, they're like, oh my goodness. And the markdown is digital in a sense. Right. They just fall all the way straight down. Right. And if you look at the graphs of some of these bank stocks, they're kind of like that where they're analog and they're just kind of of floating through the air. And then suddenly somebody actually looks at the financials, they look down and they're just digital. They die overnight.

[Tom Bilyeu]

That analogy is so apt because. And this is why I, I never know how to handle these moments because by talking about it, you are getting people to look down. And so in some ways you run the risk of speeding it up. So you talked earlier about Janet Yellen. She knew there was a problem, but she didn't speak up. Now you've, for people just listening, he just made a face. So we're going to get to the face in a second. But like you've got Janet Yellen, who knows there's a problem but doesn't broadcast the problem. But I don't know if I'm mad at her for not broadcasting the problem. But at the same Time. I can't help myself out of a moral sense of obligation from telling people, hey, you might want to look down.

[Balaji Srinivasan]

Why make the face? Well, the reason is that line of argument that talking about it is causing it is actually people throw that around. I think it's false, but it's false in a. In an important and interesting way, which is when, you know, when one of the things I've found that's. I think a stupid kind of meme is you talk about this type of stuff, people be like, oh, you're such a doomer. You're such a downer. Just look on the bright side, man. You know, blah, blah, blah, that kind of thing, right? And, you know, the goal is to be neither a, a pessimist nor an optimist, but to be just a realist. And if you're a realist, then you're not a Pollyanna, right? Like, it's not a doomer to say, oh, there's a wall in front of you, you might want to turn the car. You know, that's like, that's just. That's being smart, right? That's being realistic. And the thing is that what happens when you talk about this stuff in the absence of another human being there, the negative emotions that people have out of visualizing what a deleveraging actually is, are projected on you. Oh, you're causing it. Oh, my God, you're causing a bank run, et cetera. You know, who caused it is Jerome Powell and the Federal Reserve and Janet Yellen and the US Financial system, but especially Powell because he's the chair of the Federal Reserve. Why does Powell hate America so much? You know, like, that's actually the question. Why did he, you know, devalue the treasuries that the government had sold in 2021? Why did he tell people that interest rates were going to be kept at zero before totally, you know, jacking them to the moon? Why did he say that inflation was transitory when it, when it wasn't? Right.

[Tom Bilyeu]

I have a slightly different hypothesis, which is all the things you just said are true, that the, the mistake, the, the actions that are being taken are being taken by those people, and those actions are creating the problem. But my whole thing about it's. It's the debt. Debt that causes this collapse. I don't think any human, any. Any group of people is a better way to think about it. I don't think any group of people can stay emotionally sober for long once they've lost sight of the people who built the thing. So once You've had enough people that have inherited the country working well, you, you now just, it, it is guaranteed to devolve into these choices that happen around debt. Because again, we talked about this earlier. This is a, this is a. It's coming from a beautiful place. They want to, they want more people in housing. They want to make things better for people. They want to elevate people, lift people out of poverty, make sure that, you know, nobody goes without. Like, it really does. Like, I understand the, what you call the, the wokening. I think the wokening of America, like,

[Balaji Srinivasan]

it's not my coin.

[Tom Bilyeu]

The Great Awakening. Whoever came up with it, I, like, get it, I get the impulse to it. But the problem is that you end up, you get in this debt cycle of, oh, let's just, let's, let's inflate the currency, let's print money. So we're printing money, we're inflating the currency and look, yeah, kind of cheeky. It does devalue everybody's money, but nobody feels it too badly. Like, honestly, that in 2008, I was like, word, like, print money, man. If that's going to help people, that's amazing. I got devalued, obviously. And then again, svb, I didn't have any money in svb, but I was still like, word, yeah, print. So I'm just like, wait, is this much ado about nothing or is this the cycle that humans cannot get themselves out of? And I'm as much of the problem as anybody else because I'm like, yeah, I don't want to see people suffer, man. If you can print, like, print, I guess we all, like, take a hit. But it's like, when does it become a problem?

[Balaji Srinivasan]

Okay, well, so first is there's something called the Cantillon Effect, okay. Which is to say, and you know, I think some people have an intuitive grasp of this, but I'll explain it anyway. Printing money is, in a sense, like official counterfeiting. And the guy who is got the counterfeited dollar first can spend that and get more of the purchasing power. And then eventually it makes its way through the system and the entire money supply gets marked down and it's got less of its purchasing power with the 15th guy who's got it, okay? And so printing is not costless. What printing just does is it's like basically inflation is taxation. It's like, let's say you had, I don't know, $100 billion, okay, in the economy as a whole, and then the government prints another hundred billion Dollars. That's as if the government seized 50% of the wealth in the country. Does that make sense? Or at least 50% of the savings?

[Tom Bilyeu]

Yes. And I, I don't know how intuitively this comes to people, but yes, once you get it, once the penny drops, it's brutal.

[Balaji Srinivasan]

Yeah. So in. So inflation is taxation, that is to say, and printing, when, especially when you're printing a large percentage of money supply, it is essentially centralized seizure of wealth. The difference is, it is. If you think about the difference between like a, like a in your face predator that's like communism, you know, or like a, like a lion you can see it coming, versus a stealth predator that's camouflaged like a snake. That's like Keynesianism Communism. They would just go to your house with a gun and they would just shoot you and take your farm and, you know, throw, you know, your, Your, your children in a Gulag or whatever. Right. Very direct. I mean, that was a lived experience. That's a lived experience of many people in Russia, China, Vietnam, like all kinds of people. That's what collectivization was. Okay? But Keynesianism is. It steals the money in a much more subtle way where a button is hit and it's like a mosquito. You don't even feel it. Right. The blood is sucked, or it's like a camouflage snake or something like that. You're dead or bankrupt or devalued at the end of the day, but you might even feel it's helping you. So, for example, let me show you in particular a very important graph. Did Republicans pay for 2008? So let's revisit. First, take a look at this graph. Okay. Have you seen this graph before?

[Tom Bilyeu]

Oh, yes, my friend, I told you, every graph you've ever put out, I think I've seen. It's probably not literally true, but it's very close.

[Balaji Srinivasan]

Okay. All right. Well, that's cool. So there is a Wall Street Journal article that this comes from, okay. And it's actually like an animated version. So you can play the animated version that goes back and forth. So you should do that. Point is, what is this graph showing? Basically, it is showing congressional districts in the US by their real gdp. Okay. Inflation adjusted gdp. And what you can see is the kind of solid line, blue line and red line. In 2008, Democrat and Republican congressional districts were mostly evenly matched as to say, both them had rich districts, both them had poor districts, and the median wealth, median real GDP in both those districts was comparable. Okay. Ten years later, by 2018, the distribution of Democrat districts had pulled away from the Republicans. Like the median GDP of Republicans was like $30 billion in their congressional districts for Democrats was like 50 billion or thereabouts. And moreover, all of the wealthiest congressional districts were suddenly Democrat. So essentially in 10 years, this massive gap was opened up between the two parties. And this is how you went from the like, suit and tie wearing Republicans of the early 2000s to the trucker hat pearls of the late 2000s. And that transformation happened over the life of most of the people who are watching this. But I believe it happened in part because the printing went disproportionately to the coasts. That is to say, if you track the Cantillon effect, if you track the flow of print of money, well, it's the Fed. It buys these overpriced mortgages from banks. The banks now have extra assets on their books and they can spend it on financial assets and then those people have money in their bank accounts and then they can go and spend it on houses or goods or whatever. But that's disproportionately in, in the coast, the money went to Washington D.C. it went to New York, and then some of it made its way to Silicon Valley. Venture capital is actually a tiny fraction of the overall investment landscape. It's like a few billion versus hundreds of billions of dollars. But like a small rivulet of that printed money made its way out to Silicon Valley venture capital. And that was probably like the most productive use of the money because you're talking about investing in businesses that are being built from scratch. And, and that's a whole separate story as to what happened there. But essentially the money made its way to the coast and, and the guy in Oklahoma, who's some cashier in Oklahoma, got the printed dollar last and didn't even realize that they had been devalued and that they had been essentially had a good chunk of their assets seized and their whole town had their assets seized. And the thing about this is, the whole time, as you just said, people are like, well, we're helping people. The Fed saved the world, right? Well, what it actually was, I mean, you know, 2009 to 2016 is a Democrat administration. Perhaps it was just a coincidence that the Democrats became far richer than the Republicans in 10 years, okay? But it does seem like the cost of the print was imposed on the political opposition in a deniable and invisible way, unconscious even to those doing the imposing, who'd actually say, we, we save the world, we help people, stimulus, blah, blah, blah, right? And that's like a camouflage predator where it's like anesthetizing its target that doesn't even know the blood is being drained, okay, that's being attacked. It's like it's, you know, you know, strikes like this, right? And that's actually better because you know, a lion gets your fight and flight response up, you know, it's a predator, mosquito doesn't, it's done and you don't even maybe detect that it's happened, right? And so it's like we see that evolution has selected for the camouflage predator and that's a lot of what the financial system is. And if you think about this, by the way, and you start relating, I mean think about how many times banks try to get one over on you with fine print, right? Fine print is not a tactic, it's a strategy. The whole point is to get somebody to sign a contract that they didn't fully read or they didn't understand and parse the legalese and lock them into some adjustable rate mortgage or some student loan where they're too naive to understand how bad it is for the rest of their Life. And they're 18 and they don't. They're not taught interest rates, they're not taught taxes and stuff in high school, they're taught just a bunch of gibberish and then they sign a student loan for the rest of their lives. The system is sort of set up to get people into debt. And to be clear, I'm as capitalist as they come, but I do believe there's asymmetric information, information arbitrage there. And that which you've seen at an individual level that the financial system does is all something it does in my view at a collective level. By the way, there's somebody else who paid for 2008. You know, that was no, potentially the, the Arab world. And the reason is basically food price spikes help trigger the Arab Spring, right? The US export, its inflation. Remember the whole Arab spring in the early 2010s, right?

[Tom Bilyeu]

I do very much. And this, this is going back to your earlier thesis. For everybody listening along as, as you biology as you fractal into these ideas, I want people to understand that there is an angle come back something that triggers this for you. But like the, the second, third, fourth, fifth order consequences in hindsight can be seen. And so a big part of why I find your thinking so interesting is you're like, hey, look backwards, understand what you're going to see going forwards.

[Balaji Srinivasan]

Basically once you understand that inflation is taxation and that Republicans paid for 2008 and with their money. And unfortunately a number of people in the Middle east paid for 2008 in part with their lives because, you know, people are like, oh, 2008 financial crisis. It wasn't the end of the world. Well, you know what, for the Arab Spring, it was the end of a lot of people's world. Right. Libya was plunged into chaos. That inflation did destabilize countries. And even if you say it's only 20% the cause, because it's multiple causes, and I would agree with that, that's 20% of a lot of chaos.

[Tom Bilyeu]

How, how did that happen? I actually don't understand how the inflation, we didn't really feel it, not in like a way that broke us, but it caused actual instability in other countries. What happened? What's the mechanism?

[Balaji Srinivasan]

So food prices are the often discussed mechanism that there was like a, a fruit vendor who set themselves on fire. That helped, you know, Mohammed Bouazizi, right? Fruit vendor set themselves on fire. And that is thought of as what triggered the Arab Spring. Right. Like essentially, you know, his, his prices, December 17, December 2010 would have been a normal day if the local, you know, prices, if the prices hadn't changed. Right. And so the thing about this is like, it's multifactorial. There's a reason that the government, you know, and media covered it at that time and whatnot. It was useful in the sense of, have you seen that clip from Wesley Clark where he talks about how even in the early 2000s, like there's folks in the military industrial complex that had decided to invade like 7 Arab countries? Have you seen that one?

[Tom Bilyeu]

No.

[Balaji Srinivasan]

Wesley Clark's former four star general, right. And you know, pretty, pretty senior guy before the Iraq invasion that, that the US plan to attack seven countries in, in a few years. And actually a lot of that came true.

[Tom Bilyeu]

Oh my God. I did hear this. And they asked him why and he said, I have no idea.

[Balaji Srinivasan]

There, there were a bunch of these folks in like the Project for a New American Century who essentially thought that Islamic fundamentalism was a huge problem and they need to democratize the entire Arab world with like what they did to Germany and Japan. Right. That's like the good motives version of it. But of course, I mean, good motives, you know what I'm saying? It's like let's, let's call it. That is probably what their internal mental model was like. Yes, it's terrible that war exists, but you know, it was terrible that World War II happened and Japan and Germany are better off for it. So we need to conquer the entire Middle east and democratize them so that their women are free. And what. That was the narrative of the early 2000s. Okay. What happened, of course, was just, just absolute mayhem and chaos with isis and many of these countries destabilized in Libya and civil war.

[Tom Bilyeu]

But is that what destabilized people? That, that, that feels more direct. I'm still trying to understand how 2008 we inflate the currency. Why does that impact their food prices?

[Balaji Srinivasan]

We don't have a blockchain where I can show a purchase B from C. And so, I mean, markets are complicated. But the US exports its inflation in part because it is the consumer of all these products around the world and the dollar is its major export. And what is a small or tolerable rise in prices in the US is intolerable abroad if somebody's living hand to mouth to give the. You know, what I could diagram out for you, by the way, is like the exact sequence where it goes from the Fed buying an asset from a bank which then has a cash and can buy a stock, which then puts money in the hands of an investor who can buy a house. That's actually something where you can probably track it through the financial system to track exactly how the printed money is bidding up. You know, the, you know, ever heard the saying the price of tea in China? Right? Like, like what does that have to do with the price of tea in China? What does that have to do with the price of grain in Libya? Okay, to track it exactly, you would need access to several different databases that are not public. So you have to kind of look at the aggregate stats and say, okay, here's how the US exports inflation. And then people will argue about that. Part of the point is that it's meant to be deniable, right? But the concept of the US exporting inflation is certainly not my, like innovation or anything like that. That's something a lot of folks have talked about. So if you want to get mechanistic about it, you probably have to go and pull data sets from, I don't know, several different grain vendors and so on. You see, okay, this guy suddenly got a printed money and so he bit up X, which bit up Y, which bit up Z, which bit up the prices of this guy in the Middle east, right? But that X, Y, Z, A and B are hidden because they're not on chain. Does that make sense? Yeah, right. And that's actually part of the point. The part of the point is the. Again, the mosquito, right? The Camouflage, predator. The point is that you can't see it, right? The point is that that's not public. I mean, think about how much more coverage we. We've got of Kim Kardashian or whatever in the 2010s, then where did all that printed money go? Hundreds of billions of dollars, trillions of dollars. Where did all that go? How many, how many articles have you seen? Is it. Is it a daily thing on that, a breakdown of where the print of money went? If you know that inflation is taxation, then, you know, one option is you can just stay in the system. Like those Republicans, like those people in the Middle east and those folks who are near the money spigot who can benefit from the Cantillon effect, do another print and they benefit again first. Right? But if you see it coming and you get out first now you're not part of the base. That is diluted. If you get out to outside money, you get out to gold, you get out to bitcoin, you get out to maybe a foreign fiat. Now you have an asset where. So go back to that example. Let's say there's $100 billion and the US government prints another 100 billion. It seized 50% of dollars, essentially. Right, but. But if there's 21 million Bitcoin, the US government cannot print even one Bitcoin, so it can't seize the bitcoin.

[Tom Bilyeu]

Does that make sense by stealth means? Yeah. I'm not in the camp that bitcoin is unseizable. I think that you lock somebody up, they're going to real quick be like, all right, here it is.

[Balaji Srinivasan]

Yes. But basically it's not easily centrally seizable. You have to go back to communism. And this is actually very important. It Bitcoin and cryptocurrencies more generally, increase the cost of seizure. Okay? Because like a SWAT team costs money. You know, it's like, what are 40, $50,000 or whatever, right? So now you have to actually look at the P and L of going and kicking in somebody's door and beating them up and taking their private keys. Right? And you have to have. You first, you have to find them. You have to find. You have to have, you know, like some legal authority to go in and beat them up. Take the. And then you have to replicate that, and that'll arouse resistance because now it's no longer the camouflage predator. It's. It's the lion. Right? It's something that you can actually see

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