← Tom Bilyeu's Impact Theory
Tom Bilyeu's Impact Theory
Will This Debt Crisis Collapse The US Economy? | Arthur Hayes Mashup PT 1
01:07:50
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- [00:00]
Grainger Narrator
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Tom Bilyeu
What's up guys? Tom Bilyeu here and welcome back to another episode of Impact Theory. Today we're diving straight into the heart of the financial system. You're probably feeling overwhelmed by the complexity of that system and for that I do not blame you with incessant inflation, fluctuations in the marketplace and all of the variables you have to hold in your head. But I'm sure many of you are ready to throw in the towel on the very idea of financial independence. You are not alone and you're certainly not crazy.
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Interviewer
It is very complicated.
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Tom Bilyeu
But joining me today is none other than Arthur Hayes. A visionary in the world of cryptocurrency, Arthur is not just a financial maverick, he's the co founder and former CEO of BitMEX, one of the most influential cryptocurrency exchanges on the planet. He's a thought leader who's always ahead of the game and is going to be able to simplify this enough for you to understand how best to take
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Interviewer
action in your life.
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Tom Bilyeu
Arthur is renowned for his razor sharp insights into market dynamics, geopolitical trends and the future of digital assets. He's also a prolific writer and speaker whose bold predictions and unfiltered opinions have set the crypto world abuzz. Want you to buckle up everybody because today we're going to unpack it all.
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Interviewer
From the potential collapse of the fiat
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Tom Bilyeu
financial system to the rise of ETFs in crypto, to the unprecedented opportunities and risks lying in wait for all of us. Please help me in welcoming Arthur Hayes.
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Arthur Hayes
I think this cycle is a cycle where we break the sovereign debt markets where every Single major country finally admits that we will do anything it takes to make sure that the government does not go bankrupt. And so we're going to remove all this pretense about caring about sound money and we're just going to start printing money like it's going out of style. And so I think this cycle is going to be a bit different than the last cycle where the Fed and then every other central bank said, oh, we've overdone it, let's try to reduce it. They tried, but the governments are still printing money because they need to get reelected. And we're in an inflationary environment, there's too many old people, everyone's going to go to war at some point. So everyone's beefing up on defense. And so the central banks have come back in and said, okay, we got to print money, but we can't really call it quantitative easing or the, you know, the things that we called it before. So we'll make up new names for it, but it's the same thing. And so we want to protect the government bond market and make sure the government can continue to borrow at below the economic growth that they're creating. So I think right now we're in this cycle where people are realizing this and you have the professional investor class are also realizing it because they've had the worst bond performance, at least in the United States since the War of 1812. Over the last three years, U.S. treasuries 30 year treasury is down 50% on a real basis. That is the worst return since 1812. Now, you wouldn't know that by listening to the financial press, but bond investors are getting absolutely eviscerated. And as they come to the realization that this is not good, maybe we should own something else that's sort of this secular rise and sort of Bitcoin. So I don't think it's going to be a similar type of credit event that's going to cause prick the bubble and crypto and everything else that happened in 2021. But there's going to be some change in that mindset. And that's what I'm looking for. And there's no real one thing you can point to. It's kind of just be cognizant of the fact of why do you think the market's going up? Is there something that's happening that's challenging that worldview?
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Interviewer
I really want to push you on this. This is very interesting. Okay, so you said a lot of things in that. So I just want to cycle through recap what you just said, make sure I understand it and then I'm going to see if we can start prognosticating about some of the things that might be the signs this time. Okay, so in 21 we were at a point where for people inside the know of crypto, yeah, sure, everybody knew about it, but something happened in 2017 during that bull run where it really started to like I was starting to hear about it, they were making documentaries about it. And at the time I was not somebody that paid attention to finance at all. Dude, I could not have been more heads down building businesses and. But I was still hearing about it. Like it, it sort of cracked that first thing and then it just disappeared. Now I didn't realize there was a, you know, a, a retrenchment. I wasn't paying attention like that. But it, people just stopped talking about it then obviously I think it was in 2020 it starts really popping off again. And then in 2021 it's insane. So, okay, now we have. If I had to boil down what you were looking at in that moment, the rate of adoption, speed to awareness, however you want to think about that was just way outpacing what you would expect to happen from a, this isn't euphoria perspective. And in fact that's, that's a, a marker I want to put on the table right now. This euphoria, I never felt it before, cultural euphoria. Obviously I'd felt it in my own life, but cultural euphoria is a very different thing. And then I, I now know it when I see it and so that starts really popping off. Okay, so the rate of growth of just to use FTX as an example was just too much. Okay, so question number one. The second thing that you look for is the momentum in the credit market. Credit liquidity being the same thing. It's money printing. So they're just the governments are pouring artificial money into the system. Those two things in 21, they gave you the signals that, okay, we've got heavy euphoria, things are moving too quickly in terms of rate of adoption and the very thing that crypto is a response to inflation of the money supply has slowed time to get out. Makes perfect sense now as we go into this next cycle. You've said something multiple times in this interview and sometimes you say it very casually as you just did, which is everyone's going to be going to war soon, so they're building up their military. Hold on. That's a very big statement. So is that going to be Part of what you're looking at because one of my employees here was doing his breakdown of what he's going to look for, what his selling signs are and he very similar to what you just broke down for 21. But I worry that he's going to get blindsided because he's looking at old signals in a new market. Do you have sort of the beginnings of an idea of what you're going to be looking for in this moment? Is it a build towards war? Is it euphoria if it's not credit? Like what, what is on your mind?
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Arthur Hayes
Well, I think that we're going to get some sort of Reddit event in the government bond markets and they were
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Interviewer
going to say, you thought they were just going to print, print, print, print, print, print, print.
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Arthur Hayes
Yeah, they're going to print, print, print. And I think some people are going to try to exert an influence of saying, hey, with these bond markets they still matter. We're not going to buy a Treasury at 4% when nominal growth is at 6% or whatever it is. Right. And there will be an event and there will be a way, an off ramp to say, okay, we want to reform the system or change something and we'll see what the authorities decide to do. I think they're just going to keep printing more money and we keep going higher.
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Interviewer
Can you say more about that please?
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Arthur Hayes
If we think back to the stats I just said, so the bond market as of we want to think about really when this bull market started to gain a lot of steam was October of last year. So essentially what happened? And I'm going to focus on the US treasury market because that's the most important one globally and every other market sort of depends on that. From a government bond perspective, you have this thing where interest rates on the debt was rising, but at the long end it was rising faster. So post the September Fed meeting, the spread between the 10 year bond and the 2 year bond was increasing, meaning the 10 year yield is rising faster than the 2 year yield. And in general both are right. The yields are both rising at the same time, which is basically called a bear steepener in fixed income trading terms. And that is deadly for banks and the entire financial system because the entire financial system is modeled post sort of 1970s 80s on this assumption that when back end interest rates rise too quickly that the authorities will come in and print money to save the system. Now they did do it, so the market got it right. But in the meantime, all these financial institutions in the way that their complex financial Derivatives are structured ignore this particular quadrant of the potential outcomes and thus have massive losses. And this is what we were seeing across the banking system. So if you looked at the regional bank stock index or KBW index, which is all US Banks, they're getting crushed going into late October of last year. And so what happened, the US treasury and Janet Yellen, she said, okay, I'm going to stave this market. I'm going to issue a bunch of short term debt and take money out of the reverse repo program at the Fed, which is just this $2 trillion facility of cash just sitting there. That's outside of the financial system. And she offered a higher rate on short term treasury bills to entice this money out and which reflates the system, gives more credit money into the system. And that sort of helped, you know, fuel this bull run that started essentially on November 1st of 2023. So we're going to get another event like that because if the Fed, the Treasury and their other global central banks and fiscal governments, if they continue to do what they're doing but say that on the one hand we want to try to fight inflation by not printing money, we're going to get another situation like we got in the third quarter of last year where the bond market says, hold on a second, what do you want to do? Do you want to safeguard the value of fiat currency or do you want to make sure that the government is funded? And I don't know when that situation is going to happen. There's lots of tricks that they can pull. Probably a little bit too mundane for this particular venue if you really want to get into US money markets. But there's going to be another situation like that and you could see a general, you know, risk off, meaning financial assets decline on that situation, on the fear that maybe this time they're not going to save the banks and print the money and you know, reflate the system. I, I don't think that's going to happen. Think they'll do the same thing they've done every single other time. But you could get a situation like that. But if I have to really think about what could stop this particular bull market, it's going to be something about the belief of institutions buying Bitcoin. So what's the narrative right now? You never sell because the institutions like Black Rock and Fidelity, they're, they have to buy all this Bitcoin because there's all this pent up demand from institutions who want to incor incorporate Bitcoin into their portfolios and there's all these diamond hands out there who aren't going to sell their bitcoins to very low supply of bitcoin left to sell, which means the price goes asymptotic on the upside. Now, obviously that can be true for a while, but it won't be true forever. And so at the point in time where we start to see a massive leveling off of the allocations of money into these products, then that narrative starts to shift and people can become less confident that there will be a few hundred million dollars of buying a bitcoin every day from all these major ETF fund managers. And I think that might be the thing that I'll be looking for which says, okay, whatever the price of bitcoin is at that point, maybe it's time that I think about, at least for the other non Bitcoin and Ethereum assets, getting out of all of those. Right? And I have a very big venture capital portfolio of early stage crypto tokens that will need to be liquidated. And then on a more philosophical level, I have to think about, well, if Bitcoin has risen at such a high level relative to the energy that it represents, maybe I should own a power plant or a massive stake in ExxonMobil or something where I actually own the fundamental energy source and I got it at a very cheap price relative to the price of Bitcoin. And that's a way that I can take some chips off the table in Bitcoin terms. But what I probably won't be doing is selling Bitcoin or Ethereum for Fiat because I still think that the Fiat system is, and I don't want to participate in that. But primary energy, if I can own those resources at a very attractive price, because Bitcoin and Ethereum and these other assets have been bid up to such an insane level, then that's probably something I should be doing.
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Interviewer
Okay, so to recap, the thing that I found really intriguing because I've not heard this idea before, is that there's going to be an incident in the bond market. Now, what I took that to mean is that something is going to happen that will make the, the biggest buyers of bonds step back and say, we're not going to buy bonds anymore. And now the US Government is in a really dark place. And I think it was you that said Powell is just out there flexing. The person who's actually in control is Janet Yellen, because the treasury can ultimately just tell them what to do. And because I think it was Powell that said, like we can't keep doing this. We can't just keep printing, printing, printing.
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Arthur Hayes
Yeah, he says it, but he has no power. He can't, he can't tell the federal government what to spend his money on. He's just, he's just know the central bank.
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Interviewer
It's interesting you say it like that. So am I right? Is that what you're saying that people will say and, and enact? We are not going to keep buying bonds because your fiscal policy is irresponsible and it's causing strangeness in the, the bond market that makes it problematic for
- [15:32]
Tom Bilyeu
the reasons that you explained earlier.
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Interviewer
And that is, I mean that, that's catastrophe for the treasury if I'm understanding this right.
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Arthur Hayes
Exactly. Their number one job is to make sure that Janet Yellen's job is to fund the President and whatever he or she would like to do.
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Financial Expert
Right.
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Arthur Hayes
If Biden wants to spend a trillion on through bonds. So she must have a well functioning US treasury market and she will do whatever she can to make sure that is the case. And so if it means changing the rules on the fly, or if it means co opting the central bank to do what she needs it to do, she will do that or whoever is in her seat if she leaves after the Biden administration. So that's that person's job and they will do that. And so when this really bad thing happens in the bond market, then we get to the final stage of essentially the, the sovereign bond bubble which is okay, let's stop around. We will print money in whatever quantity is needed to keep the 10 year bond rate at X, whatever that is.
- [16:41]
Financial Expert
Right.
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Arthur Hayes
They'll go full Japan. That's the end game. Then we get Bitcoin 1 million, 10 million or whatever, whatever. And, and then it's okay, at some point we get off the train and like okay, well Bitcoin's great. It's gone to this insane value because they printed all this money. Is there a real asset, real energy producing asset that we should own that is more essential than Bitcoin? And I've gotten it at a great price because of how high Bitcoin has been bid to. Again, it's more of a theoretical, philosophical thing of is there something else to buy when you want to sell bitcoin? That's not fiat. With the American Express Platinum card you can access over $3,500 in annual value with benefits and eligible purchases across travel, entertainment and there's nothing like Platinum.
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Interviewer
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- [17:32]
Arthur Hayes
and other Limits in terms of play.
- [17:33]
Grainger Narrator
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- [18:04]
Financial Expert
Hmm.
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Interviewer
Well, that, that's the second part. So there's two things you said that I think are really interesting. One is what happens. The second one is how you respond. Okay, so the what happens scenario, I was actually misunderstanding it, so I'm glad that you clarified. So what's really happening is the bad thing happens in the bond market that
- [18:23]
Tom Bilyeu
pisses the bond purchasers.
- [18:25]
Interviewer
They stamp their feet and say, hey, you need to calm the bond market down. Which they're going to do by saying, we got you. We're going to print money until the end of time. Don't worry, we're going to maintain the price that you need to not end up being underwater. That is going to cause a massive run into cryptocurrency and that's going to create that just hyper euphoria potentially. Obviously, I know you're. This is just the. I've asked for the thing that's in the back of your mind. This isn't the thesis you're operating on right now, but that could potentially cause a massive run into crypto, which creates that euphoria that I was talking about, drives the price up. The numbers you threw out a million, 10 million, whatever. I know those are sort of the fantasy numbers that you hear people in crypto circles throwing out as the end game. But if it makes that kind of run, you're like, okay, now's probably a time where I go, all the big wins have been had. I mean, this is just like Warren Buffett said, all the eye popping wins of Berkshire Hathaway are in the rearview mirror. Like you're not going to get that anymore because there's. I'm having a hard time finding a place to put this money. So you know that that isn't going to be. We're now getting into the zone I was talking about earlier where bitcoin just becomes sort of boring. It just chops side to side for the next two decades. And that's when you start looking for, in the example that you gave, the underlying energy producing asset that you can be in once you've taken sort of the max out of the value, the, the volatile value of crypto, it's a
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Arthur Hayes
put option on government bond market. And so I think we're at the point where the largest government bond market admits that we can't afford this, so we're just going to print the money anyways. And that's, that's the option that you're really trading on Bitcoin. You want to be around for that because that's going to be. And if it happens this cycle, it's going to be absolutely insane. And so that's when I'm writing an essay right now. And the tenet of the essay is people don't have enough imagination about how ridiculous this bull market can get. Because if we combine the bitcoin is now available from a financial perspective to be ingested into tradified portfolios. And you have tradified portfolios, do not want to own bonds. Because everybody knows that this is what's going to happen in Treasury Market and JGB Market, ECBs bonds, China bonds, all the different bond markets. If these confluence of factors. This is the situation where the 40% of managed money that's in fixed income or basically sovereign bonds globally, a portion of that goes into crypto. And so you have a massive amount of fiat that can only go through a very, very small door. You just get insane price appreciation across the whole space. I don't think people appreciate that right now. They're like, oh, is Bitcoin at 70,000? Maybe I should take some out the table. You shouldn't. This is a time if this is the narrative that you were operating under when Bitcoin was 16,000, we haven't even gotten to that point yet. We've just started. This is just like the amuz bush. It's not even the fucking entree yet. So it's we're just getting started in this thesis of the collapse in terms of we have this run rat that's real. We have this whole fugazi financial system. For the first time in history, we have an ability to express a put option on these bonds in an easy digital fashion versus, you know, going out and holding a vault of gold, which is quite difficult. So that is the insane bull market thesis that I've been operating under. We're marching towards that. I don't want to be under allocated. If I'm right, if I'm wrong, we get, you know, maybe bitcoin goes to 100,000, 200,000, whatever it is. And okay, cool, made A good, good chunk of money. We'll prepare for the next cycle because it's coming. If it's not in the 2025, 2027 time frame, it'll be when there's the global world war of the, you know, end of the decade or a little bit after as we've come to this situation where every government's printing money because they're going to war with each other. So that's the trade. It only is going to happen once. He's got to be around for it.
- [22:42]
Interviewer
Okay, so that is the, I mean for anybody that's holding Bitcoin, that is certainly the fantasy scenario. Do you see going to 100k in this cycle as an inevitability or do you see something that could derail us from that?
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Arthur Hayes
Now I think it's an inevitability and more. And because now we have the banking system leased in the west and Obviously there'll be ETFs in China and in the UK, China being Hong Kong and Europe as well. So you have Tradfi now has a stake, has skin in the game. And like this is amazing. We have had the fastest growth in assets in these products of any ETF ever. And so BlackRock, largest asset manager in the world. This is their best selling product so far, right? Trading billions of dollars a day. They're getting ingesting hundreds of millions of dollars a day of inflows. They're charging fees on that Fidelity, all these other asset managers, crushing it, right? But you have all these institutions, the sell side financial institutions who depend on the fee that BlackRock pays them to access the markets.
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Financial Expert
So if you think that you're a
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Arthur Hayes
trading desk and a JP Morgan, a Citi Bank, Goldman Sachs, Morgan Stanley, blah blah, blah, you're like, fuck yeah, I love crypto. BlackRock is, has a price insensitive buyer. All these people allocating, they need to buy and sell Bitcoin every single day to manage their fund. There are people doing arbitrage trades who now need to interact with me on a TRADFI basis to trade these assets. If there's an ETF, ETF et, Ethereum ETF or some of the other altcoin ETFs that these funds want to launch.
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Financial Expert
Great.
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Arthur Hayes
More fees, more times for me that I have to do things for these large asset managers and it's volatile. There's buying and they're selling. There's opaque markets. People don't know what the price of these things should be. As a sell side investment bank, you're like this is fucking amazing. And so they aren't going to stop with Bitcoin. I think there was, I read some tweet today that some lawmakers in America were. Democratic lawmakers are saying, oh, petitioning Gensler to say don't allow the Ethereum etf. Now maybe that would have been a very convincing argument if the banks didn't have a skin in the game. But banks run governments. The Tradfi banking system in the US runs the US government. And now they have a stake in. Let's financialize crypto. Let's make as much money in fees as possible off of this amazing product that, that has been going gangbusters for the past eight weeks.
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Financial Expert
Fuck that.
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Arthur Hayes
We're going to launch every single crypto we can while the going is good and earn these fees. And so I think there's just going to be more capital coming into play as you have the Tradfi financial ecosystem putting on a full court marketing press to convince people why, oh yes, look at the US government. It's unsustainable. Jamie Dimon says this about every single quarterly report and his the US government's spending too much money. There will be a fiscal crisis and now he has a way to directly profit off that, which is, oh yeah, we have a Bitcoin etf. Now I'm going to change my tune on bitcoin. I'm going to safeguard the way for my clients to own Bitcoin. As long as you custody with JP Morgan and use a BlackRock product, it's all gravy because we're getting paid to do it. And so now you have the Tradfi marketing machine out there saying it is safe to invest in crypto. Here's a product that you can do it. It's custody by these big banks. Why wouldn't you own it? So we have interests aligned in terms of a price perspective for a very short period of time. So I think again, we're just getting started. It's just Bitcoin. Why wouldn't you do more of it if it's so successful? An Ethereum etf. Oh, Solana etf. Every fucking crypto you can during the cycle, do it. It's literally just paperwork. And watch the billions of dollars gush in the fixed income market is however many hundreds of trillions of dollars. Obviously not all that's going to go into crypto, but even a small portion of that that says I don't want to own government bonds because of all the things that we've talked about today and now JP Morgan, my. My RIA is telling me that I can invest in this product and it's custody that the bank. I don't have to worry about private keys. It fits into my investment mandate. Don't have to do any more forms it.
- [27:14]
Financial Expert
Let's go.
- [27:15]
Arthur Hayes
I get to import this thing that is going to, on its face, solve the problem that I'm trying to escape, which is a government bond market that is not paying me what I should pay to take on this sort of risk.
- [27:27]
Interviewer
Hearing you talk, it really. There's something about the. The energy, the intensity around the bond market that's making me see the relationship between us, the buyers of bonds and the government in a way that I never really thought about it. I always saw it as, this is a place for me to put my money that's safe, that I'm going to get some sort of mild. But when you start thinking about it in terms of, hey, you're asking me to fund the government and all the things that it's doing, you better pay me a worthwhile return in order to do that. This goes back to one of the things you were saying earlier. I don't remember what triggered this thought, but the thing I really want people to be able to do is just something super simple to put their money in, to not have to think about it to get that return. But of course, that for some people to win, somebody else is going to lose. But gets very interesting with bonds helping fund them grow to grow the things that they're trying to spend the money on. Very intriguing. Let me ask you where. What do you think happens with ETFs when the natural volatility of crypto kicks in? Like when I think about, okay, Bitcoin. Yes. Volatility. Super strong narrative. Eth. Yes. Maybe a little bit less conviction on my part for eth, just because I think it's a harder narrative around the distributed computer. Just think it's harder for people to understand. How does that translate? Am I storing wealth in the in eth?
- [29:05]
Financial Expert
Like, I don't.
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Interviewer
So that one's a little trickier. Once you get down to like Solana now it's like, whoa, now we're really talking narrative. You've got to be deep in that com.
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Financial Expert
It.
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Interviewer
It becomes like, do you buy into the tribe? So that feels like it's. It's really going to have volatility, which could be amazing briefly and then really traumatic. So how do you think ETFs will respond to that level of volatility?
- [29:29]
Arthur Hayes
The banking system is saved by the central banks and the government squashing volatility and printing money to save them every time they fuck up, up. But at the same time, they essentially take all the fun out of markets. Nothing moves anymore. Passive investing is destroying the banks because they can't earn any money because nothing moves. There's no dispersion, there's no difference between Tesla and Microsoft and Nvidia.
- [29:53]
Financial Expert
Right?
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Arthur Hayes
So why even invest in the stock market? Just put your money in your, you know, retirement account, check the box, and it just goes into, you know, spies and Q's. So if you think about a trading floor and obviously a lot of friends who work in trading, no one's getting paid like they used to because nothing's moving. So now we have a new asset class. It's. And you have insane volatility. You have a fundamental appetite for a new type of financial system. And you are the gatekeeper between capital that can't exit the tradi system and these crypto products. It's going to be amazing. You can write research reports for days. You have thousands of different things doing thousands, like different people characters saying they're
- [30:36]
Financial Expert
going to do this, that and the other thing.
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Arthur Hayes
You have so much dispersion, so much volatility, so many things to talk about. You could call your client maybe a Solana today, maybe it's, you know, dog with hat tomorrow. Doesn't fucking matter. You have a, you have an ability as a salesperson. Have a conversation with your client to solve their problem. Government bond markets aren't paying me. Hey, guess what?
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Financial Expert
This week it's Solana, next week it's Eth. Next week it's bitcoin.
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Arthur Hayes
This happened, that happened. There's stuff going on. You have a conversation. Oh great, okay, I'm gonna allocate here. Oh, sell this, buy that, sell this, buy that, sell this, buy that. Trading fees, emotion, pathos. This is what markets are made of and what has been destroyed by central banks over the past, you know, three years. Banks are gonna love this. The trading desks are going to love this. They have a reason to call their clients now. These products are going to make them billions of dollars because we are unlocking human emotion in a form that's digestible for these tradfi institutions in a way that hasn't been available to them probably since 1997 to 2001 in the dot com era. So that's what this is going to bring to tradfi. And they're going to fucking love it. And they're going to do whatever they can politically to make sure that there is nothing stopping these ETF fund managers from onboarding as many different crypto assets as possible now that they've gotten through the bitcoin hurdle and they've seen how successful it is and how much money they're making from it.
- [32:02]
Interviewer
Okay, so that is a really interesting picture that I have never heard anybody else say taking a different angle on that. It feels like an angle that has to be considered is the people that are in ETFs want the set and forget thing that you think is destroying the passive investing that you think is destroying the markets and that when there's volatility there, there is going to be an outcry to the government to protect them. Louder than anything you've heard in a long time. Because you know when somebody's thinking about being in an etf, it's like they're not going to the ass egg to go and buy and figure it out themselves. So there is an amount of I don't want to deal with it, I just want somebody else to do it. So two things are going to happen. One, volatility hits and they, they a subset of people will freak the out and then it becomes a question of how does the government respond? I'm guessing with regulation. So that'll be interesting. And then the second thing is when you have people having a reason to call their clients, I worry that you get into the wolf of Wall street days of penny stocks and hyping people up and selling narrative and there is a reason that those guys went to prison. Are you not worried about the, the way that people will get suckered in by con men?
- [33:39]
Arthur Hayes
Well, the comment, and if, let's take it, let's assume that this is what happens. The comment is your JP Morgan salesperson, is that guy going to jail? Probably not. Jamie diamond going to go to jail for anything that happened that J.P. morgan? Absolutely not. Now again, I think that the tri banks will overdo it. Right? They're going to pump this narrative. They're going to beat the drum as loud as they can because this is, it's going to be soon to show, let's see, maybe end of the year there's going to be some banks that were probably very crypto forward and you're going to see in their financial results and they're going to tell the market, hey, guess what? My sales and trading operation beat expectations by some wide margin because we went hard into crypto trading and facilitating the flows related to these whatever the suite of the ETFs are and OTC trading and blah blah, blah blah blah, right? And then every other investment bank in their, you know, managing director committees, we're like, well what's our response to that? We can't let XYZ bank have this desk and we've been poo pooing it for the last decade. Go hire a team now. We need to be this, that and the other. That's, that's how these banks work. It's, you know, usually it's Goldman Sachs and JP Morgan make the money first and then everybody else scrambles a follow up and it up. And so that's probably what's going to happen here.
- [34:53]
Financial Expert
And I agree with you.
- [34:54]
Arthur Hayes
Of course the volatility is going to be insane on the upside and things go down as much as they go up sometimes. And when the bear market starts and maybe some of these more questionable cryptos that got put into some of these investment products go down 95% because something happened on the network or some developer rugged them. Yes, of course there's going to be public outcry of oh no, my retirement account had this ETF and I watched the commercial on CNBC and that guy in the suit said this was a great investment sir. And I put my money in and
- [35:26]
Financial Expert
oh shit, I lost it.
- [35:28]
Arthur Hayes
Representative xyz, you got to fuck these people because that shouldn't, I shouldn't have been allowed to buy this product. I absolutely agree with you. And the second that we start seeing that as a movement catching steam and the bank's ability to beat back that narrative, they can't forestall that. That's probably a sign that we might, we've reached the peak saturation of like the institutions in crypto and whatever the price is at the time, it might be time to take things off the table. So I hadn't thought of that before but as you say that that is probably another thing I'm going to keep in the back of my a signpost of okay, has it gotten so out of hand and losses started to creep in that the bank's political power to just ram things through has been checked a bit by some outraged small mom and pop investors.
- [36:15]
Tom Bilyeu
What are the signs that you see on the horizon that a financial crisis might be headed our way?
- [36:21]
Financial Expert
I absolutely agree there's going to be a major financial crisis probably as bad or worse than the Great Depression sometime near the end of the decade. Before we get there, we're going to have I think the largest bull market in stocks, real estate, crypto art, you name it that we've ever seen since World War II. And the reason I believe that is if we back up to like 1945, essentially Europe blew itself up, China was destroyed by a civil war and Japan. Russia essentially fought the war for everybody else and massive destruction. So if you look across the world, the only country that was left was the US and they had a manufacturing base that was unharmed from the war, and they essentially rebuilt the war and reaped enormous benefits. And people who are American are still living off of those benefits today. But at the end of the day, everybody started believing this thing called, you know, Keynesian economics, which basically is if something gets in trouble, the government should rush in, spend money. If they don't have the money, the central bank should print it. And, you know, everybody collectively in the world, depending, no matter if you're, you know, what sort of ism you believe in, subscribe to this, this theory. And what that means is, you know, we all have collectively agreed that the government is there essentially to attempt to remove the business cycle. Like there should never be bad things that happen to the economy. If there are, we want the government to come in and essentially destroy the free market. So every time we've had a financial crisis over the last eight years, what happens? The government rushes in and they essentially destroy some part of the free market because they want to, you know, save the system. And what does that mean? It's like whack a mole. So every time there's a disturbance, you know, the central banks, like, you know, the Federal reserve in the U.S. they come in, they print money, they enact a bunch of regulations, and they basically say, okay, we don't want this sector to fail. We don't want, you know, the creative destruction that is so called, you know, capitalism. If you actually believe in that, we don't want that. And every, you know, five, seven years, there's another sector of the economy that's essentially price fixed. And so we've gotten to this point where, you know, globally, central banks have basically destroyed the free pricing mechanism just about every single sector of the financial economy, except for one, which is the government bond markets, because they're so large, so unruly that it's practically impossible to essentially remove the market forces from this part of the market. But the problem is, right now we're going to try. We've gone from 100% debt to GDP globally to about 360% as per the World bank, and we are accelerating the amount of debt that we're adding onto the pile. Why? Because in the rich World, including China, Russia and Brazil, we've stopped having enough kids, so the population is actually declining. So if you have all this debt and you don't have more humans being born to essentially do stuff to pay it back, the only way to ensure the system is solvent is for the governments and the central banks to start printing money. And now we've gotten to the situation where we have all this debt that needs to be rolled over. We have a population that has been told that, hey, you're good, anything ever happens, we, the government are going to come in and we're going to make sure that, you know, you have enough food to eat, you got health care, we're going to protect you, blah blah, blah, right? And all that's expensive, especially as you have less and less humans who are doing productive stuff. And so we're just going to keep adding on debt because that's the only way the government can stay in business. And now we've gotten into the situation where there's so much debt that, and it's accelerating in an exponential fashion that in order to save the market this time, right. So I think in the next three to six months there's going to be some sort of major market disturbance and probably in the US treasury or other large global bond markets. And the solution is going to be let's print the most money that we've ever printed to try to save essentially this fiat financial system that we've created since World War II, which is going to in the first instance, create a massive bull market and anything, you know, like stocks, crypto, real estate, things that have a fixed supply, maybe they're productive, they have some earnings. And then after that we're going to find out actually the government can't save everything. They can't just print as much money as they think to try to save themselves and fix the price of the yield of their bonds. And we're going to get a generational collapse and hopefully that doesn't coincide with a major global conflict. Usually it does. I hope it doesn't because I don't really want to live through World War III while I'm alive. But that's sort of the my overarching like macro cycle thesis. So, you know, massive top 20, 26 time frame and then, you know, some sort of, you know, Great Depression like situation happening towards the end of the decade. If we want to take a look at the progress of human civilization of the past 150, 200 years, it's all predicated on hydrocarbons. The moment we Started extracting oil commercially out of the ground and turning it into thousands of different products that we all use every day that basically powers our modern life development. Supercharged, right? We went from I don't know how many billions of people in the 1970s to today, it's population more than doubled. Right? And that's all because we were able to harness this particular type of potential energy of the earth that's underneath us, okay? And we, we've piled on all this debt, we brought forward all this future growth, and we haven't really innovated on another form of energy that makes us that much more productive. You know, maybe if the world started adopting nuclear today immediately, like small nuclear reactors in our cars, our apartments, powered by nuclear, nuclear energy, maybe we'd have a chance at growing our way out of this debt. Or, you know, if there's some magical alien that comes down and gives us, you know, some basic research that allows us to tap a new source of energy and like we can commercialize it instantaneously. Yes. Then we could pay back all this money. Or if the population doubled overnight, right, to 16 billion people, then okay, great, we've built all this stuff, there's more people that need to use it. Okay, we can pay back this debt, but barring any of these, you know, you know, I like to say it takes 18 years to make an 18 year old. So it's pretty much impossible to create humans out of thin air, no matter what any politician tells you. And you know, we're not really, you know, what we've seemed to be doing is in certain countries is saying, you know, hydrocarbons are worthless, we want to use these other forms of energy that are less dense, less productive, and somehow think that we're going to grow our way out of this debt, which is mathematically impossible. There's just no other way other if the government wants to save itself by then printing money. And printing money isn't growth, it's just a piece of paper out of thin air. And once the population thinks, hey, there's more and more of these pieces of paper floating around, there's only so many real goods. There's only, you know, there's only so much oil, there's only so much electricity, well, I guess I should be consuming everything I can now, that's not actually generating real growth. If we could just print our money and generate real growth, then Rome would have survived. Zimbabwe would be the richest country in the world. Same with Argentina. We've had the Weimar Republic in Germany. If this was the answer there's plenty of other societies that have tried this and the result is always the same. Massive inflation and then social unrest and collapse of the government. So I think we've proven over thousands of years of human history that printing money is not growth. It's a Shimmera. And at the party it lasts for only so long. And then, you know, it's bad news bears.
- [44:44]
Interviewer
This is the thing that really freaks
- [44:45]
Tom Bilyeu
me out about what Ray Dalio is talking about is the predictability of this cycle and what I want to do. You're really good at explaining this. I want to go through the different things that build up to this moment, this, this inevitable moment. And then one of the things I want to make sure we talk about later is getting the timing right on. This is next to impossible. And so that's going to loom in the background. But first I want to, I just want to go through the things. Now, you said that you hope that this doesn't all happen in a moment of political instability. But I would like to quote Arthur Hayes to Arthur Hayes here real fast. This is from, this is the opening line from one of your recent articles. You said World War III has already begun, whether the mainstream media and political elite wish to acknowledge it or not. So let's talk about the political instability. We're going to get to the debt, we're going to get to the banking crisis, inflation, all of that. But set the context for us right now. What, what's happening right now that unnerves you from a political standpoint?
- [45:49]
Financial Expert
So for whatever reason, and I don't know why Western Europe starting and then America following has it in for Russia. And if you read the, I think it's Mackinder, his global home island theory that he wrote, I want to say in the early 19, early 20th or end of 19th century, whatever, he was a very famous war strategist. And he basically said that the, the home island is essentially Eurasia, right? So think of China, Russia, Western Europe, right? Whoever controls that portion of the world controls the world. And so if you think about the naval powers such as Great Britain and the U.S. let's talk about Great Britain first, right? What was the British foreign policy all about in the 19th century and early 20th century, preventing a strong continent, whether it was France or Germany, they didn't care. They just don't want a unified Europe. Now as Russia industrialized In the late 19th century, they started to worry about, okay, well what about Russia, right? We can't have an alliance of German strong Germany after Bismarck, united Germany And Russia, because Russia has all these commodities that would be the worst thing that could ever happen for us. Great Britain and naval power. So what do they do that this, you know, a series of alliances that precipitated World War I, which was, let's make sure that Germany and Russia are not friends. And essentially that was a strategy going into World War I, obviously that blew up. What was the strategy in World War II? If you take a look at the rise of Hitler and all the different Western powers that were okay with Hitler as long as he was going to turn his army and just fight Russia. Right. You know, Hitler wrote about this. He said, we want to create the space for the, the German people to essentially eradicate the Slavs in Russia and, and go in there. And the Western neighbor is perfectly happy about that because again, what do they want? They don't want a united home island. They don't want a united Eurasia because that threatens the, the hegemon. You know, Great Britain at the time, obviously that didn't work out so well. Hitler turned his army on the other half of Europe and then everybody started fighting again. And then we ended that war. And then what we were left with, we would have the United States versus Russia again and again it was all about let's make sure that Russia and China aren't aligned or Russia and the rest of Russia in Europe aren't aligned. That's why US poured however many billions of dollars to the Marshall Plan into rebuilding Western Europe to make sure it was a bulwark against Russia and the virus of communism. And you know, I forgot I was reading a recent book. It was called the wars of Asia 1911-1949. And the author made a very good point about why communism is so hated as a form of government to anything that's not communism. And the reason it is because, you know, obviously communism has its flaws, but at its. The kernel of truth for lots of people is we are going to completely uproot the social system. We're going to replace the classes that are oppressing us. It's not like, okay, it's one class of elites who was running things. We're going to go over to this other class of elites which is like socialism, fascism, capitalism. It's just one group of elites versus the other. Communism is let's destroy the whole class of elites and bring the people up to power. Now, obviously that never actually happens, but in the beginning it does. And so if you're a bourgeois intellectual and you know, in one of these other systems, you're like I can't have communism take over. I can't have the actual workers rise up, replace me as an entire class and then try to rule. Which is why they hate communism so much. And so, you know, the Russian system and what they're trying to export in terms of ideology is so hated. And the, you know, they're both democratic or you know, pseudo fascists West. In any case, the, the US has now, you know, locked a hedge with Russia to make sure that a divided Eurasia, because a strong Eurasia will control the world because it controls most of the natural resources of the world and most of the population. And that's been the U.S. foreign policy since the end of World War II. Fast forward to, you know, the 90s when the Soviet Union collapses. The U.S. response was not, not let's do another Marshall Plan and rebuild Russia. It was let's incentivize a bunch of former gangsters, now called oligarchs to come in and take all the natural resources, impoverish their people and move their wealth to London and New York. Right? And so that was the policy. Now out of that came, you know, essentially Putin who was all about, let's build a strong, you know, revisionist, the Russian ideal. Believe it or not, whether you think that's good or bad, but that's his appeal to the Russian people is hey, you guys suffered through the end of the Soviet Union. The west was not your friend. You know, they stole your, I'm here to rebuild the Russian for the Russian people. Believe that that's his message to his, his constituents. You know, you can like it or not like it. And so now we're at the situation where Russian vades, Ukraine and the west plus pumping in resources to essentially fight them using the blood and the blood and tears of the Ukrainian people. It's not Americans fighting, it's not European, you know, NATO, Europeans fighting yet. Right. So it's a, it's a proxy war between Russia and the West. Obviously Russia is tacitly supported by, by China and the rest of the world is like, well, we don't want a part of this. This, we're trying to be non aligned. We don't want to get involved in this thing. So we have this sort of the setup of all over again of what was happening in, in the late 19th century of the west aligning to create a divided Eurasia. And so you know, we can call it a conflict or a skirmish or whatever, but you have, I don't know how much, how many billions of dollars have been authorized by US Congress to essentially ship weapons into Ukraine. You have NATO shipping and weapons, different countries providing intelligence so that the Ukrainian forces can attempt to stymie the Russian advance. Now, while, yeah, there's not boots on the ground from, from the west and Russia, to our knowledge, maybe there are, I don't know. It's, it's basically a war. And so you can, you could make the argument that World War III has already started. It's just not this hot, super kinetic, you know, I'm going to throw my nukes at you, kind of thing that we had in the last world war.
- [52:32]
Interviewer
Now why do you think this matters? Is this going to play out in energy prices?
- [52:35]
Tom Bilyeu
Is it going to play out as a debt problem?
- [52:38]
Interviewer
Why does this become part of the
- [52:41]
Tom Bilyeu
backdrop of the context that will lead to this coming financial crisis?
- [52:47]
Financial Expert
So at the end of the day, right, human civilization is a transformation of the potential energy of the sun and the earth into useful economic work, right? So cheap energy prices equals prosperity. Russia is the largest commodity exporter in the world. They have oil, they have natural gas, they've got metals, they've got food, right? Ukraine, the Korean bread basket, was one of the largest wheat exporters in the world. Sunflower seeds, oils, all this stuff is in this region. And now the west has decided that we're no longer going to trade with Russia on paper. Now, if you actually look at the details, you know, India, China, some of these other countries are basically buying the Russian stuff, refining it, selling it back to the Europeans and the Americans at a higher price, right? So the, the, the, the result of this policy of let's ostracize Russia is let's just raise prices on our energy inputs globally. And so they're just, the war is causing the inflation that now the central banks have to fight by raising interest rates, which then bankrupts the banking system because they now have all these bonds that are underwater. So this ideology we need to fight Russia to keep the Eurasian island fractured is the proximate cause of the inflation that's causing the financial crisis in the west itself. So it's a dumb policy, but it is the natural result of what happens when you say, I'm not going to trade with the largest come out of the export border in the world.
- [54:19]
Interviewer
I think it's important to break down exactly the cocktail of things that go into making a,
- [54:28]
Tom Bilyeu
an economy weak. This was something it took me a long time to learn. And for anybody that's been watching the show for a while, they've, they've gotten to go on this journey with me of figuring out how all this works, the debt cycle, exactly what happened with
- [54:39]
Interviewer
the banking crisis, inflation, all of that,
- [54:42]
Tom Bilyeu
how does, how does this begin? Does it all start with the money printing which leads to the inflation which causes the banking crisis? What comes first? How does this ball get rolling?
- [54:52]
Financial Expert
So, you know, the situation wouldn't be so bad if there wasn't all the money printing prior. So at the end of the day, let's take the US for an example because it's the largest and richest country in the world. My opinion and thesis is, you know, back in the 1970s, the US government made a tacit promise to the baby boomers and they said, hey, go out, work, spend your money, don't save. We got you. We're going to make sure that when you get old, you're going to have healthcare covered by the government. And don't worry, you can be as energy inefficient as you want. Two cars in the garage, driving all over the place, not supporting public transportation. We're going to make sure that where there's oil, we're going to get it. So our defense budget is going to be astronomic. And so the baby boomers are great. We're, you know, we're going to go out there and live our lives and consume the most that any generation ever has in human history. US Baby boomers. And what's happened, health costs continue to rise. Now, they didn't rise so much starting until maybe five or ten years ago because these are, they're in the productive years of their life. But now, and I'm sure probably you've had some guests on talking about what they call it, US sick care, right? The amount of money you spend in the last 10 years of your life dwarfs all the money you spent proceeding. And the way the incentives work in the US healthcare system, there's no incentive to actually have preventative care. It's, you know, when you get sick, let's stick you up in the hospital and like, just go to town on the insurance company, which essentially is a US taxpayer of Medicare and Social Security. Now, no US politician, and I don't care if you're Republican or Democrat or third party, whatever, can stand up there and say, I'm going to reform the US Healthcare system. And guess what, Baby boomers, who are the richest cohort and the most politically active, your health benefits are going to decline. You will not get reelected. And so these two programs are sacrosanct. You also will not get reelected saying, hey, we're going to really tackle this, you know, this runaway U.S. defense budget. We're not going to go around the world bombing everybody to make sure that you have enough oil so that you can have the newest badass pickup truck in your garage guzzling oil. You also will not get reelected. So healthcare and defense, these line items in the government budget cannot be altered under the current political system and what has been promised to the people over the last 50 years, which basically means that as the population gets older and as the world becomes more multipolar, meaning there's other challengers, namely China, who are saying, hey, this quote unquote rules based order that's determined by 4% of the population doesn't work for the rest of the 96 of the population that never got a say. And what this order was, we want a new order. We want to have our own commodities, we want to have our own material wealth. We also want to eat a bunch of beef and drive a car, right? If you think about the per capita energy uses of the world, for it to match the United States on the global level will require an inordinate amount of energy that we just don't have. Right? That just means inflation. So what are countries doing? They say actually we're going to keep our stuff for ourself. We'll only export finished products, which makes things more expensive. And so this is all happening before we even got to what's going on today. And as we've had less and less kids because rich people have less kids and when women have the choice of contraception, they choose not to have as many children. The, the Federal Reserve is like, well, okay, we don't have any growth of humans. We don't have any, you know, we have an escalating cost of keeping the political promises we made to our people. The only option is to print money to make sure that the government can fund itself at an affordable level. And every time there's a financial crisis, instead of reforming the, the, the banking system and allowing some people to fail, they get print money to make sure that the banking system is sound. And the goal of the banking system is to take the people's savings and hand it to the government. That is why the banking system must always be saved from the government perspective, because that's what it's there for. And different countries use their banking systems in different ways to essentially get to the same goal of funding the government at a cheap level. And so that's why whenever the banking system is threatened, the government or the central bank must come in and Save it by printing money. So we've gone through this situation, you know, coming up in today, where, you know, the US went from, I don't know, 30% debt to GDP in the 1980s to 130% today, which is, you know, a massive amount. And if you read, forgot the other professor's name, Rogoff wrote a piece about debt, maybe 2011 book came out, I forgot when, sometime in the last 15, 20 years. And the empirically showed that once a country crosses about 130% debt to GDP, there is always a default. And the default could be massive currency depreciation, it could be massive financial repression, or it could be some sort of default in the government bond market every single time, no exceptions. Right? So they're at this level already. And now the inflation comes. And the inflation is part and parcel result of there's less humans doing productive things, the war on climate change and the rebuke of hydrocarbons, and then more players in the world wanting, getting assertive over their natural resources, saying it shouldn't just all go to the United States and Western Europe, it should come to our people. We should enjoy the same standard of living that we see in the Hollywood movies.
- [60:30]
Interviewer
The idea that 130% debt to GDP has always historically equaled default, I've never heard that before. That's troubling. We'll come back to that. So the idea of money printing, this
- [60:42]
Tom Bilyeu
is what I want to anchor people around. Okay. So you make all these promises to a gigantic generation, that generation does not replenish themselves, so there are not more people to be productive and take care of them. And so you're only tool that you have is to start using debt. The only way to manage the debt is to print money to not default on it.
- [61:04]
Interviewer
And now walk us through this.
- [61:07]
Tom Bilyeu
Took me a while to really get my head around the idea that money printing is inflation. Inflation is simply saying that the, the, the amount of money is inflating like a balloon compared to the things you can buy with it. So since there are no additional things to buy, then people just start charging more for the things that are on offer because there's more money floating in the system.
- [61:29]
Interviewer
How accurate is that?
- [61:32]
Financial Expert
That's basically it, right? There's the denominator, I. E. The amount of money is just growing infinitely. And then the stuff, the finite stuff, and I think about finite stuff as energy, right? We produce and that is, in my opinion, hydrocarbons, because that is the thing that powers our entire global civilization. I don't care what you believe about the good or evil of oil, but your entire modern life is predicated on oil, whether you believe it or not. You want to believe it or not. And so it's not as if we've gotten that much more productive in pulling oil out of the ground or have found or, you know, decided to commercialize nuclear energy, which has been around since, I don't know, the 1960s, right? For whatever reason, we as a civilization globally decided to ignore this amazing energy source and pooh poo it. Now if we had decided back in the day to commercialize nuclear and spend the amount of energy and money that we have spent on wind and solar on making nuclear the safest possible energy usage in the smallest possible delivery mechanism, we might not be in this situation. But those are the political choices we made as a civilization. So the energy and the amount of energy and how much energy we're producing every year is not growing. In actual fact, like we hit pre coil a while ago, meaning the entire growth of the oil industry has been predicated on US shale. And the number of new discoveries and new wells being drilled is declining precipitously because shale depletes itself very quickly. But it's not like we're finding a new Saudi Arabia every 10 years now. You know, these massive oil discoveries, we're just not making them like we were in the, you know, 60s, 70s, 80s, and so more debt. The amount of energy we're producing is flattish. And so that's why we're going to have energy inflation. And when you have energy inflation, you have goods inflation because every single good we use is a derivative of energy.
- [63:26]
Interviewer
So this is a unique take, at least for me.
- [63:28]
Tom Bilyeu
You're the only person that I've heard anchor everything around energy. I've heard you say, and this is what really important for people, if they want to understand the point of inflation and why it becomes so problematic, is
- [63:40]
Interviewer
that what you're really trying to do
- [63:42]
Tom Bilyeu
across time is preserve your purchasing power as it relates to the amount of energy. So energy is going to determine the cost of a flight, energy is going to determine the cost of a car. Energy is certainly going to determine the cost of gas, plastics, on and on and on. Like even when it's not plastics can be confused because made of the same substance, roughly. But even just to, to do the, the creation, all of that stuff requires energy, which right now obviously the main, the main source of that energy is still currently coming from fossil fuels. So understanding that, that you're in this race against that, so now you've got two problems. Problem number one is what you just
- [64:26]
Interviewer
laid out, that we're flattish.
- [64:27]
Tom Bilyeu
We're not finding new Saudi Arabia's every 10 years which would be lovely and would certainly help make that easier setting aside any obviously potential global warming issue but just from an an energy cost standpoint. So then problem number two becomes that we're inflating the money supply and so now the cost of that is already going up. So what I want to get into so if we know that we have this magic mark of 130% debt to GDP is going to equal a default. We're already at 130% debt to GDP but we have two promises, health care and that to keep the prices where they are. From an energy perspective we're going to have to run around the world defense to make sure that we have access to the flows of oil. We're going to be doing more money printing. Now walk me through what are some of the things that are other than that. Because the crazy thing is is you listed those two. I wasn't even really thinking about those two as being something that's going to cause us to inflate. I was thinking about for instance the BTFP bank term funding program. So which is basically stealth money printing, quantitative easing just under a different name. It's actually bigger than the COVID stimulus which was 4.41 trillion. So walk us through what are some other things that you see on the horizon that are going to lead to more inflation.
- [66:03]
Financial Expert
So that's sort of in the past. In the future we have essentially the rest of the world and you know, call it the non aligned Countries. They don't subscribe to the West I. E. NATO or the China sphere. Right. They just hey, we're a bunch of countries. We've been impoverished ever since, pretty much forever. We have the natural resources that are needed to power the green revolution. We have hydrocarbons. We have people who will come into the US and be your nurses, will clean your toilets, who will take care of your children. Right. This is what we have. We want to keep these resources for ourselves. Now we don't want to choose a side China or the U.S. we just want to get wealthier ourselves. How do we do that? We trade. What do we trade? We trade higher value goods. Right. So an example would be Indonesia, a large producer of nickel, one of the largest in the world. Jokowa Dodo, the president of the country has recently banned the export of raw nickel. He said no guys, you want some nickel? Come down to Indonesia Build some sort of manufacturing plant and export the refined products. So I think if I read the statistic recently, they went from about a billion dollars of economy around nickel when they were just exporting the raw stuff to something about $20 billion of value added when they were said, guess what, guys? You need to build stuff to employ our people, to elevate the standing of our country. So this is just one country. The rest of the. Of the world is like, why the fuck are we letting these guys come down here, own our natural resources, not give us jobs, and then send back the raw stuff and then we import finished goods. Right? That's been the entire structure since, since World War II. And why stuff is very cheap in the US and Western Europe relative to how expensive things are in, in the rest of the world. And so they're fed up with this. And now sort of they've broken the ideological position, you know, conditioning, you know, maybe some of the leaders who were on the take from all these countries or no longer in power, and they're like, we want to be like the Americans in the Western Europeans. We've seen the movies. We want to be like them. Why can't we be like them? Well, we're going to stop giving you guys all of our stuff, essentially almost for free. And so this is just a movement resource nationalism. This is what it called. Kirill Sokolov from 13D calls it the allegiance of the aggrieved. The aggrieved being anyone who suffered postcolonial issues from essentially being an economic vassal of, you know, some European nation or, or America. And so they are saying they're, they're gaining their voice again. And at a time when the, you know, the appetite of the Western public to go and knock heads against a wall is, is declining. And so you have this situation where the, the raw stuff that powers the awesome standard of living that's, that's in Western Europe and America is going to get more expensive because it doesn't come from those countries themselves. And in the case of America, America has all the stuff it ever needs. It's just that the companies in charge would rather ship all the stuff out to, you know, third world countries and have a cheaper labor base than employ Americans who are expensive.
- [69:26]
Arthur Hayes
Right.
- [69:26]
Financial Expert
Europe's not so lucky, but I think that is a source of inflation that's only going to grow as the rest of the world says, I want to live in the Hollywood movie too.