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BTC254: Bitcoin & Macro Overview w/ Luke Gromen Q4 2025 (Bitcoin Podcast)
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- [00:01]
Preston Pysh
You are listening to Tip.
- [00:03]
Hey everyone. Welcome to this Wednesday's release of the Bitcoin Fundamentals podcast. Today I'm joined by Luke Grohman to break down the growing financial stress inside the US System. From the Treasury's heavy reliance on the short term funding to the signals coming out of the repo market and why record tax receipts still aren't enough to cover the interest and entitlements. We also touch on the global pressure points, the dollar, and why bitcoin remains the earliest warning sign for liquidity. This is surely an episode you won't want to miss, so without further ado, let's jump right into the conversation.
- [00:39]
Celebrating 10 years, you are listening to Bitcoin Fundamentals by the Investors Podcast Network. Now for your host, Preston Pysh.
- [00:57]
Hey, everyone, welcome to the show. I'm here with the one and only Luke Roman. Welcome back.
- [01:02]
Luke Gromen
Thanks for having me back. It's great to see you again. I'm sorry we didn't have more time to catch up down in Nashville.
- [01:08]
Preston Pysh
Oh, that's right, yeah. Yeah. We only had a little bit to talk there, but, you know, it wasn't as exciting as it is right now. So we didn't, we didn't miss out on too much.
- [01:17]
Luke Gromen
No, no, it's, it's exciting and I think it's going to get a lot more exciting in the next three to six months.
- [01:23]
Preston Pysh
Yeah. For the person who's not intimately familiar with all the terminology and, you know, the nuances of, of macroeconomics, explain it in very simple language. In your opinion, what's taking place right now?
- [01:37]
Luke Gromen
Oh, boy. I guess if I had to say we're running headlong towards a poly crisis of sorts, there's a lot of things going on. You know, for starters, the fiscal situation, which was for all of the hubbub about tariff receipts and they were a record. So we had record tariff receipts and we had record all time high receipts overall. The fact is we're still at, when you look at true interest expense, which is which GROSS Interest expense plus entitlement pay goes, plus Veterans affairs benefits, you're still 96% ish on as a percent of receipts that are all time highs. So we're still right in that hot zone of if anything slows down, you're going to be right back over 100%. You're right into, you know, printer default mode. And they, they always choose print. They have to. Furthermore, we're now seeing early signs of stress in the overnight funding markets. There's a variety of views on that mine is that it is. Essentially we're now 30 months into the US shifting issuance to the front end because there's not enough demand at the back end. And as a result Besant has a red Queen or Axl Rose problem, if you will. I used to do a little, but the little wouldn't do it. The little got more and more. The red queen, I got to run faster and faster. Same in the stay in the same spot. There's more and more issuance coming, right? So you know, 2013, we were issuing 100 billion, not issuing, excuse me, rolling, let me be clear with my language. We were rolling about $100 billion of T bills a week per Secretary of the Treasury Jack Lew. Now it's $550 billion per week being rolled per my friend Andy Constant. And so that requires having a greater level of money in the treasury general account or tga, which Besant is doing, which is in turn putting overnight funding strains on overnight funding markets akin to a little bit like what we saw in 2019. So you're seeing tightening liquidity there and sort of spot applications of liquidity in terms of standing repo facility being borrowed against in a bigger way than we have seen ever before. It's back to basically nothing. But two weeks ago on Halloween it was 50 billion overnight. So you're seeing, you know, that is, that's not a problem that's going to go away, that's going to need, you know, and, and they'll continue to put spot applications of liquidity. You're seeing in Japan. 10 year yields in Japan are at the highest levels and a long time, Long time.
- [04:06]
Preston Pysh
Yeah, sorry, long time.
- [04:07]
Luke Gromen
And yeah, we know. And, and the yen is weakening me markedly, which is when your yields are rising and your currency still weakening. That's like emerging market type of action, which is very important because if you know, for the last five plus years, if you want to know where the 10 year treasury yield is going to be in anywhere from a few weeks to a month or two. Just look at, you know, the direction of the, of Travel of the 10 year JGB. And the reason that is is those are the two biggest carry trades, funding currencies in the world. Going back 30 years. You know, after 89, the yen became a carry trade and then after Bernanke in 2008, the dollar became a current carry trade. And we saw in summer 2024 that anytime the yen gets too strong, the carry yen carry trade blows up. And anytime the yen gets too weak, dollar gets too strong, the dollar trade Carry trade blows up. So years sort of between, you know, Scylla and Charybdis on that front with Scylla starting to get a little mouthy in terms of the, the Japanese 10 year bond yields. You've got US shale production rolling over and the EIA saying hey, we've, we need to drill faster just to stay flat with oil at 5,960. We've got the IEA coming out saying, I know we said two years ago that oil, peak oil demand would be here by 27 or 2030. Oops, it's actually not peaking at all. Demand's rising faster than we thought. So we've got US shale, which has been 90% of world supply growth over the last 10, 12 years per guring and Rosenzweig rolling over while demand that was supposed to be rolling over, not rolling over. So that is a stress point. You've got the geopolitical where it's becoming clearer and clearer. We've talked about this in the past. Russia won in Ukraine, they beat NATO. That is what it is. That has important implications for macro because you know, I don't know how many times in my career I've been told, but it's more than one, that ultimately the US military backs the dollar. If we can't credibly project power conventionally against a major peer near peer power that has implications for prospective rule changes to the system. You've got Bitcoin, which to me still is the best or the last functioning smoke alarm starting to, starting to cry shrilly and issue a very shrill warning of illiquidity. And so I mean I could probably, I could probably. And then let's, just for giggles, let's layer on AI which has gone from funding out of earnings and cash flow to they are now borrowing money and using very creative financing mechanisms. And you know, I had a good friend of mine point out that credit spreads on Oracle debt are starting to rise. Credit default swaps on Oracle are starting to rise sharply.
- [06:42]
Preston Pysh
And, and the hyperscaler.
- [06:45]
Luke Gromen
The hyperscaler, yeah. Topping it all off, you have an issue where the market leaders, you know, the semiconductors and in particular Nvidia, and I don't have an opinion on Nvidia one way or another. All I can say is the useful life of these chips are said to be anywhere from three to four years and you can't get an electricity hookup in some of the most attractive places in the United States for hyperscalers till 2030. I'm hearing. I got that. So the market I think is at some point, probably in the not too distant future, going to ask itself what the value of a chip with a three year life is if it can't get electricity that chip in five to seven years. That's a pretty important question and I don't think they're going to like the answer when they ask it. And I guess lastly into all of this, the Fed released a white paper three weeks ago, four weeks ago, noting that not only is the hedge fund basis trade in Treasuries been an important buyer of Treasuries, they have been the biggest marginal buyer of middle and long term Treasuries. Mid dated and long term treasuries. Since 2022 they have bought 37% of net issuance of longer term Treasuries.
- [07:52]
Preston Pysh
Wow.
- [07:52]
Luke Gromen
They own $1.8 trillion. Not out of the Caymans, not 465,000 or 465 billion as the foreign holdings report says for Treasury. And as we've talked about many times together, these hedge funds are highly levered. So if there's volatility anywhere, they have to degrows and so they will degrow Treasuries and so there will be a trillion 8 of treasury selling if volatility picks up anywhere. And bitcoin's telling you volatility is coming and soon and maybe we've already seen it starting and yeah, that's, you know.
- [08:25]
Preston Pysh
It'S quite the roll.
- [08:26]
Luke Gromen
That's what I can think of right there. Right.
- [08:28]
Preston Pysh
So like God.
- [08:28]
Luke Gromen
And oh, by the way, if any of these things goes a little bit wrong like it, they're, it's sort of like smoking and you know, in a nitroglycerin plant you just need one of them to catch and then the law catch.
- [08:38]
Preston Pysh
Yeah, just a really, in one sentence, try to summarize the fiscal issues are the math ain't math and anymore and I mean it hasn't for a while but it's becoming obvious to everybody on Wall street that the math just does not work. The liquidity issues is the driving thing. When people were asking me, Preston, what's happening with the price of Bitcoin, I said, well, you know, they're having liquidity issues right now. It's very obvious with the repo market. Luke, do you think that the government shutdown. I saw that the TGA was building, basically the checking account for the government was building during the shutdown. And it seemed like that was just an added piece to the liquidity challenges that were already there. It just kind of enhanced it A little bit and maybe threw a little bit of extra fuel on the fire. With the government being shut down, is that how you're seeing that particular piece or is that, I think it, the.
- [09:29]
Luke Gromen
Short answer is it clearly added to it. Right. So we, we know it added to it the growth in the tga. In terms of how much of the growth in the TGA was because of the shutdown. I had thought it was more than it was most of it. We put out a report citing work by an analyst named John Comiskey, who's a Treasury funding analyst, has a substack. You can find him online. We had a great interaction two weekends ago where he pointed out to me surprisingly, oh no, no, no, this wasn't shut down. This is not besant playing 40 chess trying to basically, you know, squeeze, you know, the funding markets into a crisis so that the Fed has to come back and do not QE or whatever. He's like I was forecasting the TGA was going to go here because there's a formulaic, he's got to have enough in the TGA relative to, I think it's like 10 days of outlays or two weeks outlays, whatever it is. But the formula is it's very formulaic. And I said, so is that current deficits? He goes, no, no, no, it's not current deficits. It's the fact they're rolling so many bills from the past deficits.
- [10:28]
Preston Pysh
Wow.
- [10:29]
Luke Gromen
And so that to me, that really changed my mind on a couple fronts. Number one, it's, it's not mostly shutdown related. Number one, it's just 30 months of Yellen and then Bessant going, oh crap, we don't have enough buyers for the long end of our market. So we're just going to shift it to the front end and do that enough for 30 months and pretty soon, you know, you've got 550 billion a week you're rolling and that requires having a big TGA just to make sure you never have a failed auction. So along with everything else you're spending money on, you got to have the cash cushion. So that in turn is really important because if that's the case, if that's the real driver, like there's a whole bunch of people out there, I'm seeing that think, okay, well the TGA just went to a trillion because of the shutdown and now it's going back to 300 billion or 400 billion or whatever and great, we're going to get this big liquidity flush into the end of the year and what have you that increasingly to me, I'm not sure that's going to happen. I mean maybe it'll go from a trillion to 800 billion or something.
- [11:23]
Preston Pysh
Yeah.
- [11:24]
Luke Gromen
Which is still kind of helpful. But it's not, I don't think it's going. If Comiskey's right and it makes sense because he's not the only one saying that. I've seen a number of others citing this guys that are really good in the plumbing saying the TJ has got to be bigger. In a world where you're rolling 550.
- [11:37]
Preston Pysh
Billion a week, that number is so insane.
- [11:41]
Luke Gromen
Oh, it's astonishing. Like I said, the growth rate from 2013 to now 100 billion to 550 billion, that's 15% a week CAGR and that's deficit plus shifting to the front end because you don't have the demand at the long end after central bank stop growing holdings.
- [11:53]
Preston Pysh
Right. So and Luke, that is such a huge story that I don't know know a lot of people are talking about the fact that you have 30 months of the government having to issue just short duration paper because they can't go into the mid to long duration issuance. There's no buyers. And to the point that you made in your opening statement about hedge funds basically have been. What did you say the number was? 77 of the buy.
- [12:18]
Luke Gromen
It's 37. Right. So it's to be clear there's buyers. Right. Because bills are still only 22% of total outstanding.
- [12:24]
Preston Pysh
Right.
- [12:25]
Luke Gromen
But that's probably up from 15 or 18%. Right. So you've got way bigger deficits and you've got a shift, you know of call it 15 or 18% or whatever it was to 22% of bills as a percent of total. And then yeah, the kicker is as like okay, well of the stuff that you have placed long end, 37% of it is with these highly levered basis trade hedge funds that can't get more levered. Well and ironically that fund, that trade to buy the 37%.
- [12:55]
Preston Pysh
Yeah.
- [12:56]
Luke Gromen
At the same short end that you're crowding out with the TGA because you've placed so much at the front end. So it's literally a snake eating its own tail. And that's why I'm not encouraged that like there's going to be this giant liquidity flush out of the tga that this was just a shutdown related thing like they have to do whatever they can to keep repo down and they got to keep the repo rates calm and they got to keep the long and calm and they got to keep equities calm and they can't have Vol anywhere, they'll have Vol everywhere. And you know, they're using standing repo to keep volume down at the front end, which is fine, that's what it's designed for. But the more you tap that, the more there's going to be an inflationary impulse that's going to make the long end a little restless and so then you've got to worry about that. No, by the way, if these hyperscalers do anything like untoward, that creates a problem or if private credit does, which I didn't even touch on, but which is, you know, there's smoke and now there's more smoke. And now there's more smoke there.
- [13:50]
Preston Pysh
Tom.
- [13:51]
Luke Gromen
You get equity volt a spike, you're going to get treasury volt a spike. They're going to degrowth on treasuries. You're going to get, you know, the 10 year yield goes down for three, four days, five days, seven days and then it's going to start spiking just like it did in April and then, you know, then, then comes more liquidity. So it's tricky. But it's this snake eating its own tail dynamic of we had to shift to the front end because we know the demand at the long end and the demand we do have the long end is actually financed at the short end that we're now crowding out because we have to have a bigger TGA for liquidity cushion because we've been financing so much at the short end. It's like everyone's like, oh, look at all these crazy financing schemes that, you know, OpenAI and Oracle and, and Nvidia are doing. That's piker stuff compared to, it's literally the, you know, treasury is doing it to the tune of 550 billion a week.
- [14:35]
Preston Pysh
A week.
- [14:36]
Luke Gromen
That's the big boy. Leaks.
- [14:37]
Preston Pysh
Yeah.
- [14:38]
Luke Gromen
Let's take a quick break and hear from today's sponsors.
- [14:41]
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- [18:27]
Luke Gromen
All right, back to the show.
- [18:29]
Preston Pysh
So I had an interesting conversation with a friend who's a real estate agent, and I was just asking him, hey, what's it like in the market right now? And I know this is a very localized thing, especially when you get into, like, retail homes and things like that, but his comment was really fascinating to me. He says, preston, it's really strange right now, like, way weirder than it's ever been. He's like, there's nothing moving. A lot of people are just used to their low interest rate, and they're like, sitting here waiting for that environment to come back. And he said, honestly, the last Fed meeting that happened when they dropped rates, you know, 25 basis points, he's like, everybody in my community and in my space was like, okay, here it comes. Here comes the drop in interest rates. And he's like. And they went up and he's like, everybody was just like, looking around like, what in the world is happening? Like, what is this? They just. The Fed just dropped rates, but yet ours are staying the same or going higher. And he said after that meeting, he's like, everything has just been dead, completely dead. So it's. I think it's a very strange environment. It almost seems like since COVID you know, we had the. The 2020. What was it, 2023 contraction, and then the liquidity, you know, came back into the market very heavily. And it seems like this is the second go around where everybody's thinking that, that old rates are going to get dropped down to 3% or whatever. I can refi my house. I can do all these things that just persisted for like 40 years straight. And it seems like people are final recognition that something's very different. It doesn't seem to be changing. It seems to be getting worse. And stranger to all these points that you kind of laid out at the start of the show, I'm just kind of curious if you have any anecdotal stories like that or any comments on that particular real estate, you know, interest rate situation, you know, in summer of.
- [20:24]
Luke Gromen
2022, if you remember back, and I'm sure we talked then, the consensus on Wall street was Powell's going to be Volcker. Right. Inflation's out of control, but he's going to be Volcker. He's gonna, he's gonna take pain. And we wrote in, in summer 2022, like, he ain't gonna be Volcker. It's not even a choice for him to be Volcker because of the debt and the deficit situation. Apples and oranges compared to Volcker. He has a choice of being Benjamin Strong, who led the US into the Great Depression, and. Or he can be, oh, gosh, Burns. He can be Arthur Burns, who leads the US into the 70s. Those are his choices.
- [20:57]
Preston Pysh
Yeah.
- [20:57]
Luke Gromen
And those are, if he's lucky, those are the good outcomes for him. And so we assumed it wasn't going to be, you know, wasn't going to be Benjamin Strong. And so, you know, probably some version of Burns. And we're sort of seeing symptoms of that. But the point in saying that comparison was when you're in fiscal dominance, when debt to GDP is as high as is, you raise rates, you raise deficits. And deficits are stimulative if you cut rates. Well, especially once inflation's a little elevated.
- [21:24]
Preston Pysh
Yeah.
- [21:25]
Luke Gromen
To lower deficits, to cut interest rates, to lower deficits, which is in theory, lower deficits should be non stimulative or contractionary. You're stimulating by cutting rates. So he has a choice of how he wants to inflate, how he wants to be Arthur Burns. And that's what he said at the time. And it's starting to play out. And what your anecdote suggests is the real estate community doesn't understand that yet, but they're gonna soon, which is how do they want rates to go up, they want rates to go up with inflation going up, or do they want rates to go up with inflation going down? Because either way, you know, they'll go up if he raises, if he cuts rates and inflation picks up. And they'll go up if he raises rates because he's raising rates. And oh, by the way, that makes the debt less sustainable and therefore higher rate on a less sustainable debt. So there are still a lot of people, I don't think, that appreciate that that outcome. I agree with you 100%. You said something before that people are finally kind of seeing, you know, the bigger picture. The fact that everyone and their mother in the mainstream media is now talking about the debate. You and I have been talking about this for what, five years, seven years?
- [22:35]
Preston Pysh
Yeah.
- [22:36]
Luke Gromen
So like you know, it's, I feel like Bruce Willis like, come on in the. Well, you know, welcome to the party, pal. But it's not a debasement trade. It's a debasement trend. Like, this ain't going to stop. And oh, by the way, the only way you stop the rates go up with hikes or rates go up with cuts is you devalue the heck out of the currency and you basically buy down the debt. And you know, provisionally. We've talked about this before, it's on the books. They could do it with gold. It ain't going to happen at gold 4,000 and ain't going to happen with gold 8,000. You know, gold 20,000 is probably the opening bid to have a real effect with that. So point being is like, I think not a lot of people, people are seeing the symptoms, right? Like for your friends saying, oh, rates went up when they cut rates. I don't get it. That's the girl washing up on the beach at the beginning of the movie and Jaws, right? Like, oh, it's just a boating accident. And then, you know, next comes the poor little boy, you know, and then they're going to catch a shark, right? And they're, you know, 50 year mortgages or Trump's going to tweet out the Walmart CEO thing. Well, Thanksgiving spending's down and, and then they, the fact check them and they're like, well, there's six less items. There were 21 items on the menu last year. There's 15 this year. And they're almost all store brands versus brand names last year. But yeah, other than that, right? That's where they catch the shark. And, and everyone's like, hey, we got it, it's over. And the guy's like, the bite radius on that animal doesn't match the bite radius on the victims. That's not your shark. Right? And then finally we're going to see the shark. And when we finally see the shark, everyone in the real estate business is going to go, oh my God, we. If they cut rates, we're screwed. If they raise rates, we're screwed. Sell your house now as fast as you can. And you know, then what? I don't know. But people don't appreciate that they are painted in a corner yet that I very. They know they need to debase, but they don't really get like, oh yeah.
- [24:22]
Preston Pysh
It'S funny you mentioned the 50 year mortgage thing because in my conversation with him, one of the things that I said to him, I says, dude, think about this 50 year mortgage thing, like just from a first principle standpoint, imagine I give you tools, you know, we're 200 years in the past and I give you some tools to go out, cut down some trees, start building your own house, right? Do you really think it would take you 50 years to build yourself a nice house? It's like, no, it'd take you two years or a year or something that's like way more manageable. And I know this isn't like a perfect example, right? But it does help a person just kind of contemplate, sit down and think, why would it take me 50 years to pay off some something that I can afford? Right. The whole reason they're going to a 50 year mortgage is to mask the reality of the monthly payment of what the typical person can afford to pay off 50 years later for a house. And it's totally insane how all of this is just being masked and people aren't asking like the basic questions of like, why should it take 50 years to pay? And here's the irony is if you can get a 50 year mortgage at call it 5 and a half, 6% or whatever the yield would be on something like that. It's actually in my opinion, probably a screaming deal for the borrower considering where I think inflation and what the debasement is actually going to be over that same 50 year period in fiat terms. But it's just, it's clown world. It's totally nuts.
- [25:56]
Luke Gromen
Well, and it's particularly when you look at what the other hand of the government is doing at the same time, right? They're like, we have an affordability problem with housing, so let's mortgage out, right? Yeah, cut rates, take the mortgage out, okay? But then at the other hand, our president comes out and says, you know what, we are going to let these 600,000 other students in because otherwise our colleges are collapsed. Okay, Competition. And he literally told Laura Ingram, we can't build things in America anymore unless we have all these H1B visa holders. And so on one hand you're saying, here, take a 50 year mortgage, you know, we'll make it more affordable, we'll cut rates. And then with the other hand you're like, I'm going to bring in all this labor competition, ensure, like think about the message he just told, yeah, don't go into skilled trades. We're going to let people in to undercut you so you're never able to afford those houses. Don't go into engineering because we're going to let all these H1B visas so that the companies don't have to pay a real wage. So you're literally undercutting. And oh, by the way, in the grand scheme of what we're trying to do here is we need to reshore industry so we can compete with China so that we're not relying on the Chinese to build our weapons. So we're going to make our houses more expensive, we're going to make our labor still cheaper so that we have nobody going into these things. We're going to remain short these things and then take it back to Nvidia. And this AI thing where we can't build the grid, you've got chips that are going to expire in three to four years and you can't get an electricity hookup for five, six years. You should be like, literally, hey, let's subsidize electricians to be making, you know, what short term interest rate traders make on Wall Street. And then you know what, you know, that hookup will happen in 2027. But that's not what we're doing. We're extending 50 year mortgages, we're trying to cut rates, and then we're bringing in H1Bs and we're capping or bringing more college stuff in to cap wages in this country as, oh, by the way, AI is going to deflationary crush.
- [27:50]
Preston Pysh
Oh my God.
- [27:50]
Luke Gromen
Introductory.
- [27:51]
Preston Pysh
We're not even like, we're not even talking that.
- [27:53]
Luke Gromen
That's right. So like literally the point is like from a first principle standpoint. Yeah. Like people like, we're finally taking action. Don't mistake action for progress. This is like, you know, the action we're taking is we're punching ourselves in the nuts repeatedly and mistaking that for progress. You're like, what are you doing? And what they're missing is that.
- [28:16]
Preston Pysh
But you're punching so hard, Luke.
- [28:18]
Luke Gromen
You're punching. Inflation is the fundamental market signal. Everyone's like, we need to get back to free markets.
- [28:25]
LinkedIn Jobs / Remarkable / Netsuite / Shopify / Vanta Advertiser
Great.
- [28:25]
Luke Gromen
You know what a free market is? Close the border, let inflation for skilled trades and engineers explode so that we can have an explosion of supply to those areas so we can do all of this. But that's not what they're doing. They're like, we're going to manipulate the market. The 50 year. We're going to cut rates at the short end and we're going to bring in all this labor to crush labor in the US While AI is going to do the same thing, by the way, and think that's going to work.
- [28:50]
Preston Pysh
Here's what I think. Here's what I think's really hard for the listener. So they're hearing all of this and they're saying, everything you're saying is making sense. But why is. When I look at bitcoin, it's down so hard right now. And I know what your answer is, but I think for the listener, they might hear all of this stuff and get really frustrated and say, I don't understand why bitcoin's not performing well in this environment with all of these things that are going wrong. So how do you respond to that person who's thinking that right now?
- [29:19]
Luke Gromen
Bitcoin's just one of your early source. It's just the early source of liquidity. Right. And so all of these things, when you hear your friends say the market is locked up, when you hear what I just described, which is the market's going to lock up more like you can't extend the term and cut rates. And then, you know, you are promising labor, you're going to kill them over the next five to ten years. You're promising. Essentially what I just said is the Trump administration acting to maintain the real value of the bond market and not inflating, which is what the country needs, which is if we want strategically. So ultimately, if they're going to try to act to support the bond market by capping, that's austerity, Right? So actually, that's not going to work. That's going to tighten liquidity, and bitcoin is going to be the first thing that warns you of it.
- [30:13]
Preston Pysh
And it's by going down, down when that liquidity's tightening, which we're seeing right now.
- [30:18]
Luke Gromen
Yep.
- [30:19]
Preston Pysh
And you call it the canary in the coal mine. Why aren't you seeing it with gold?
- [30:23]
Luke Gromen
I think you're not seeing it with gold, in part because gold is being. Well, I think ultimately gold is being bid on the other side of this as the sovereigns are going, holy cow.
- [30:38]
Preston Pysh
That'S what it is, isn't it, Luke?
- [30:39]
Luke Gromen
It's a tiny thing, right?
- [30:41]
Preston Pysh
Like the sovereigns, have fun.
- [30:42]
Luke Gromen
This is going to end, right? If I'm managing a sovereign fund, A, I don't try to trade month to month, quarter to quarter, but B, I run a surplus. I have a choice. I can buy dollars or I can buy gold. That's it. Those are my choices.
- [30:56]
Preston Pysh
I think the sovereigns, I buy gold. I think the sovereigns understand gold. They always have understood gold as the debasement trade. And I think prior to 2020, nobody believed we could get into all of this detail and all this nuance and how all these incentives are broke and how it's a disaster. But until you started to see inflation actually manifest itself in everyday prices and see the long end of the bond yield curve start to sell off in a trend reversal kind of way, which we had never seen prior to 2020. Then, since 2020, we saw it, we saw the first spike, 2022, 2023, and then it didn't go away. And now the yields are still going higher or kind of holding their own. And it looks like a trend reversal. And I think because the sovereigns understand gold, they see the trend, they see the math. And you ask anybody on Wall street if the governments are going to be able, advanced governments are going to be able to get this under control. And I think every one of them would say, hell no. Right. And so where are they going? I think they're going into gold because they understand it. I think, you know, my conversations with a lot of people on bitcoin, there's a lot to get it on Wall street today, but I don't know that they trust it like they trust gold because it's really easy to understand. But I think when you get into bitcoin, I think to trust it requires a lot of technical competence to dig very deep. And I think that a lot of them that are controlling massive flow of funds are just pointing it at gold. Instead of the risk that's involved, the technical risk for them to wrap their head around Bitcoin, I mean, that's my two cents. I'm curious, do you kind of see it the same way or is there some other factors that you think are playing into this?
- [32:46]
Luke Gromen
I think it's most of the private sector and particularly in the west, they don't have the luxury of taking a 40, 50% drawdown. The implied volume of bitcoin and gold simply really hasn't shown that kind of volatility. I think that's part of it. And part of it it's been Bitcoin in the short run has traded like a tech stock, right. And so its technicals look like a tech stock. And you know, think about, we're talking about tech like, ugh, like if AI breaks, bitcoin's probably going to break. And I don't necessarily, I don't agree that, that I don't think they, I don't agree that bitcoin should break with AI. I had been arguing that point up until very recently that no, they won't. There'll be a recognition. And recently I'M like, no, taken out back in shot. Bitcoin's going to take him out back in shot too. And it's not the right thing to do and it'll be an opportunity. And, you know, I don't make the rules. Right. So I think that's part of it.
- [33:41]
Preston Pysh
So you're saying that the correlation in the typical investor's mind is that. And I would agree with you, Luke. I think you're right.
- [33:48]
Luke Gromen
Yeah. I think it's ultimately, yeah, guys who get paid on, you know, they have to put up numbers every month or else they get taken out of their seat every quarter or they get taken out of their seat. These aren't guys who have luxuries to, you know, say, well, the market's wrong and bitcoin's ultimately going to be a neutral reserve asset because they're going to have lost, you know, 12 jobs before that's ever true. And it may, I think, I think it will ultimately be true based on what I know today. But it's, it's not true now and it probably won't be true for the next six months. And in the meantime, you know, what's going on in AI and private credit and the fiscal situation, all that is like, you know, real rates are moving up and you know, you sell tech when real rates move up, what else do you sell? Well, sell the thing trading just like tech. Bitcoin.
- [34:29]
Preston Pysh
Yeah. In your recent report you talked about this stablecoin contradiction between Mehran versus Trump, the Pentagon, the reality of all this. Explain to the listener what you're talking about here.
- [34:42]
Luke Gromen
Yeah. So put out in a recent report. I'm going to find it here real quick just to make sure I quote it properly. Myron, Stephen Myron, Fed governor came out with a white paper discussing what he called the opportunity to use stablecoins as a basically create a global stablecoin glut, which is something we've talked about before, not in those terms, but that basically, hey, you know, Besant has said there could be up to 3 trillion in stablecoins. And the thought is, you know, what, foreigners would rather hold a dollar than their own currency. And so they can own it in stable coins on their phone and that'll be backed by T bills. And this will create trillions of dollars of T bill demand. It's essentially repressible balance sheet. And what Myron's white paper talked about was this global stablecoin glut is what he phrased it, saying it could be like what Ben Bernanke called the global savings glut from 1996 to 2004. So by way of background, Bernanke did a white paper in 05 talking about the global savings glut. He was trying to explain why interest rates in the US in particular the west more broadly, remained persistently low despite growth, et cetera. And he reasoned out that there was this global savings glut. And so Myron's paper comes out and says, well, if we do this stablecoin thing, we could get 1 to 3 trillion dollars in stable coins and that would lower interest rates, it would pull flows out of foreign currencies into the dollar and strengthen the dollar, and it would widen our current account deficit in the same way that the savings glut. Right? So the current account deficit is basically we import more stuff and foreigners put more money in our markets. Right? So the current account deficit, the stuff we bring in, gets bigger and then the capital account surplus, what the foreigners invest in our markets get bigger. What confused the heck out of me about this report is that, number one, Myron wrote a white paper very widely quoted last year called Restructuring the Global Trading System, in which he called for essentially the exact opposite on all those things. Weaker dollar, lower current account deficit.
- [37:00]
Preston Pysh
Right.
- [37:00]
Luke Gromen
We make more stuff and send it to the world and then reducing foreign capital flows in here to weaken the dollar. And now, so he puts out this white paper and highlights that. That left me very confused. Number one. The second thing was that the stablecoin market cap for this $3 trillion number, like, I don't know where they're going to get it. Maybe they're going to do bank reserves all at once. But like it's 300 billion and it was 260 billion when they passed the genius act four almost five months ago. So that's like a $10 billion a month growth rate, right? So if Besson wants to get the 3 trillion by 2028, like, he better get going. And then if you look at it back even further to the past peak in stablecoin market cap and the last call it crypto peak, it was like 190 billion in early. That's like a $5 billion per month growth rate in stablecoins compounded annually. So like at that rate, it would take us like 60 years to get to 3 trillion. So there's gotta be some sort of.
- [38:01]
Preston Pysh
Like forced demand, forced demand by US Banks. Is that what you.
- [38:05]
Luke Gromen
Maybe it's forced demand by banks. Maybe. Like to me, it's unclear to me how they can get to those numbers. Without Bitcoin being a much bigger number. Unless they come out and say look, there's 3 trillion in bank reserves and we're going to convert them all into stable coins. Like now that could work and that opens up some inflationary implications. Maybe that's what happens. I don't know. Broader point, do you think, do you.
- [38:28]
Preston Pysh
Think that this 3 trillion number that he was throwing around was just marketing for the genius act?
- [38:32]
Luke Gromen
It might have been. It might have been. And it's also, it's like what we were just talking about with the mortgages, right which is like we're doing we can to help the American, right, the American consumer. We're giving a 50 year mortgage, we're dropping rates while we're literally kneecapping their ability to, for positive wage growth by bringing in H1B and bringing in foreigners to study here. It's kind of the same thing where like the administration has like chapter and verse. We want to reverse trade flows the, you know, get Chinese capital out of here. They want people investing in factories here. Well how are they going to do that if they're going to increase the current account deficit? They literally can't. It's an accounting identity. It's not my opinion. It's a friggin double entry accounting bookkeeping. So it runs completely contradiction. You know, it's strengthen the dollar, we want a weaker dollar. They've been very clear on that. So I just don't, I look at this white paper as it relates to stable coins and the goals expressed for the stable coins and they're running diametrically opposite of the goals of the administration and of out of myron himself literally 12 months ago. And I just like I come to two possible conclusions, neither of which I hold a strong opinion on. Either way they're either throwing stuff against the wall and hoping it sticks or they're saying one thing and they're just kind of doing what they need to do to keep the bond market happy, to keep Wall street happy. And, and that oh by the way is 180 degrees of what they promised they would do. They are acting in Wall Street's interest, not Main Street. But I don't know, I can't. It's one of these things where like I don't know what it means but I know, I know it doesn't fit and I, you know, we'll know soon enough, right, because there might be this sort of, I guess my other point is they might be something really important they're leaving out, right? Like oh, we're going to convert 3 trillion of bank reserves immediately into stable coins and be like, oh, now that makes sense. And you know, the dollar is going to get waylaid and inflation is going to pick up. And you know, because you're basically mobilizing sterilized reserves. Yeah, that would make sense. Growth would pick up. But again, then you go right back to the discussion we started with, which is if inflation picks up, then monetary supply growth picks up and it's not the money supply would change, it's that the velocity of those reserves rise markedly. So the effective supply would increase. Who wants to own 10 year treasuries at 4.15? Who wants to own JGBs? 10 year JGBs at 1.71? They're going to like, yeah, so I don't know, it's destabilizing. It doesn't make sense to me. It's contradictory to what they said they were going to do unless there's a piece that they're kind of leaving out, you know, and meanwhile it's just being spun. Right. It's like, you know, Affordable Care act or Operation Iraqi Freedom. Right. It's like we're going to bring back dollar dominance. Like really? And it's almost like they just say stuff. If you repeat the lie enough people will believe it. Right. Which is a proven, the proven tactic. But that's not my job. My job is to find the truth. So I, I don't know, I'm, I'm rambling. I'll stop there. It's a little confusing and frustrating to me. Let's take a quick break and hear from today's sponsors.
- [41:37]
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- [44:58]
Luke Gromen
All right, back to the show.
- [45:00]
Preston Pysh
One of the things that I like to take pride in with the show is just trying to give people tools so that if when they do see a certain thing, they know how to react in the future if it plays out. So one of the most demonstrative things for me, participating in markets was during the COVID 2020 liquidity insertion. And just watching the markets when literally nobody was at work, everything was shut down. But because they inserted so many trillions of monetary units into the system, we watched stock indices just rip within 30 days to new all time highs. When if you were an alien and you came here and landed and said, hell, look, nobody on the entire planet is working, they're all at their houses not buying anything, you would suspect that you'd be seeing market lows. And we saw the exact opposite. And for me, when I saw that, it was like, okay, when they add this much liquidity, this is the reaction that you get. And that doesn't mean that they're ever going to step in at the magnitude that they did during COVID because that was a very unique scenario. But when I'm looking at the current setup, I'm saying, okay, it looks like we're having liquidity issues. The dollar is getting bid relative to everything else because it's tightening. What are we going to have to see for that trend to reverse and to say, okay, I think we're about to step into the correction of this and we're going to start to see everything risk on, start to get bit again. What does that look like? Is it tricky for us to do it if they don't really do anything in size? Like the COVID example, it was so obvious the amount of trillions of units that they added into it, that it's like, okay, game on. Right? But in this setup or this scenario, they could be just kind of slowly trickling the liquidity in. It kind of plateaus, it runs sideways for call it six months. Because they're not taking any type of decisive liquidity action. Which is my biggest, I think that's the hardest thing to navigate is whenever that's the response that you're getting is they've just kind of like slowly eased into the expansion of the liquidity in the system and there was nothing really that broke or that was decisively changed in the trend. So what are you on the outlook for as far as something that would maybe define a change in this tightening of the liquidity in the current setup?
- [47:29]
Luke Gromen
Yeah, for me it's one of two things because right now, to your point, they're trying to ride two horses with one rear end, right? Which is we want to maintain the real value of the bond market and we don't want a lot of inflation. And we, you know, they're fine with that, right? They're, they're Trying to maintain the, you know, both the bond market and the currency. Right. And you got to choose one eventually. I would watch, unfortunately, I, I thought we could do it without a bigger crisis. I think ultimately we're gonna need a huge whoosh down probably in the first half of next year. And then they'll do it. And especially because they'll do it because of midterms, because we just got a little tiny glimpse two weeks ago, what is it, 17th? Yeah, two weeks ago.
- [48:09]
Preston Pysh
Yeah. Right.
- [48:10]
Luke Gromen
Into how the midterms are going to go. And it is going to be a butt kicking. They are going to go blue, blue, blue, blue, blue. If nothing changes, if we just stay in this status quo right now, it's going to be like a blue wave like you've never seen. They don't want that because then he's a lame duck for the next two years and then it's, you know, that might, you know. So point being, I think we either got to get a huge whoosh down or we got to get something political, which is that it's made very apparent to the administration that they have to do something. Now, the problem is, is Paul's not out till May. Right.
- [48:42]
Preston Pysh
So, yeah, right.
- [48:43]
Luke Gromen
You know, what if I'm Powell and.
- [48:45]
Preston Pysh
I've heard he can stay around on the board too, after he's done.
- [48:48]
Luke Gromen
Is that right?
- [48:49]
Preston Pysh
Yeah. So even though, yeah, if you're the.
- [48:51]
Luke Gromen
Fed, you know, forget the Fed. And oh, by the way, most of the Fed, we've seen their voting records, their donation or not their voting records, but their donation records. Right. There ain't a lot of them that are hoping that things go really well for the current administration, put it that way, based on their donation records. So what are the odds they're going to do it to be nice?
- [49:08]
Preston Pysh
Do they need the Fed or does Bessett at the treasury have the capacity to juice the markets from a liquidity standpoint by himself?
- [49:17]
Luke Gromen
Well, and I think that's part of the reason why we're seeing the illiquidity. Now. He has been, remember in 24, he was very vocally critical of Yellen for shifting to the front end.
- [49:27]
Preston Pysh
And what do you mean nothing's changed? Yeah, nothing.
- [49:30]
Luke Gromen
He comes in, not only does he keep up what she was doing, but he literally doubles the run rate of treasury buybacks that she was doing.
- [49:37]
Preston Pysh
Doing. Yeah.
- [49:37]
Luke Gromen
Post May of 24th in the first half of this year. And it's very focused on replacing long end paper with short paper and announce.
- [49:46]
Preston Pysh
A 3 trillion dollar stable coin, which is all on the short end as.
- [49:50]
Luke Gromen
Well, which is all on the short end, which by the way, I was told was a quote, unquote, Hail Mary to quote, prevent the collapse of the treasury market, end quote.
- [49:58]
Preston Pysh
Wow.
- [49:58]
Luke Gromen
Yeah. Oh, yeah.
- [49:59]
Preston Pysh
From a pretty reliable source or yes, extremely extreme.
- [50:03]
Luke Gromen
Like literally their words, not mine. And the context of the call was like they reached out and they're like, look, you've been writing about this. They're trying to find source of repressible balance sheet, which is, you know, for the audience. They need to find someone that will buy debt at zero when inflation is above zero. They need to find a sucker at the card table. And I'm saying they need to find a source of repressible balance sheet. And yeah, what this person said to.
- [50:28]
Preston Pysh
Me is it's and the suckers the.
- [50:30]
Luke Gromen
Same that you think stable coins are the source of repressible balance sheet. And you are right. And this is why they're doing that now.
- [50:36]
Preston Pysh
Yeah.
- [50:36]
Luke Gromen
The challenge for best scent is like I get how you can kind of do it with the euro dollar market in theory, right? Hey, anything in the euro dollar market is fully backed by the US Government if it's in a stable coin and not if it's not. And that sounds like a really good plan if you have the attention span of a squirrel. Because what's going to happen is like you're going to flood capital out of Europe. Dollar is going to skyrocket. Dollar skyrockets. That's going to trigger a crisis. Number one, by the way, the Europeans own a ton of dollar assets. Guess what? They're going to sell to raise dollars because they're now short dollars. They're going to dump dollars or dump dollar stocks dump treasury bonds. Yields are going to go. You're going to get a replay of what we saw in March and April where stocks or stocks down, bond yields up. You might get the dollar up. Right. So you're literally gonna have a crisis like a week later if you do it to the Europeans with stable coins. You know, best incited. Hey, somebody in Nigeria would rather hold that. Yeah. But like really how much is of the free capital in Africa right now and in sort of developing rest of the world? It's not that much money relative to what we need.
- [51:40]
Preston Pysh
So you're kind of implying that he's already kind of done what he's done.
- [51:44]
Luke Gromen
What he can do. I mean, yeah, look, he could do the bank reserve thing and I'm not the best guy to talk about that, but my understanding is is that bank used to back stable Coins that I do know for the genius act. Then you can get into the question of a would they. And some of the plumbing guys say, yeah, they don't really want to do that. And I don't remember the technical reason why. But in theory he could do that or encourage that. That's still a banking choice. In theory, he could distribute dollar stable coins. Right. Once those rails are up to people direct, without the Fed, without the banks, he could do that. But boy, that's, that's a political issue. Right. Like, why do we even have the Fed at that point? Yeah. Which. So I don't know all the things he could or could not do legally. I think the reserves thing is one where, yeah, you could start to mobilize those reserves into stable coins. But then again, I'm not sure how motivated the banks would do that relative to some of their capital requirements, etc, I just don't know. But yes, other than that, absolutely. A lot of what he has done has already, like, he's played a lot of cards already. This is not like, oh, well, now he's going to start to do it.
- [52:52]
Preston Pysh
What is the weakest link? So you said maybe first half of, of next year, 2026, that, you know, something maybe breaks and then they have their excuse to step in with a lot of liquidity. But what are you seeing right now? That is one of those weakest links in the economy. That would be something that could break.
- [53:12]
Luke Gromen
So we've got what we've already seen with repo rates, overnight rates straining a bit. That's not an accident. That's going to keep happening. Now standing repost exists to sort of calm that down.
- [53:25]
Preston Pysh
Where before in 2019 it did not.
- [53:27]
Luke Gromen
Where before it didn't. No, exactly, exactly. So that one has some Runway on it. So then that leads you to the conclusion in terms of the other things that could break. Number one, something in AI breaks. Right.
- [53:40]
Preston Pysh
Where a lot of talk on that.
- [53:42]
Luke Gromen
Yeah, right. Where just literally somebody has a problem. Sam Altman does come out and go, oops, I am asking for a federal backstop. We can't make this debt payment, whatever. And I'm not saying I don't want to. Like, that's, I, I'm just a hypothetical. I, you know, I bring that up because they had their whole. His CFO said maybe we'd like a backstop. Then he said we wouldn't like a backstop. And he said, well, we actually want to access funds as it relates to whatever, you know, money that the Trump administration was handing out, whatever, to rebuild.
- [54:10]
Preston Pysh
America, the numbers there, by the way, I was listening to a show and they were throwing around some of the numbers with just open air alone. And I mean, it was so out of touch with reality. What they were going to need from a capex spend in the coming five years. The number was in the trillions, low trillions. And then you're looking at the top line of the company, which, and I might be off on these numbers, but if I remember right, it was like today is like 20 billion. And so when you're looking at the, the delta between these two numbers, you're in literally different universe. And this is just one of the AI. I mean, it is the biggest AI company, but still. These numbers are crazy, Luke. These numbers are crazy.
- [54:50]
Luke Gromen
They're crazy. And I think it answers why Bitcoin's going down, right? Because think about what you just said. So if AI needs trillions of dollars, you know who else needs trillions of dollars? Got Besant, the U.S. treasury. So you got two different entities competing for trillions of dollars that really aren't there. But certainly that puts upward pressure on real rates. And oh, by the way, the trillions of dollars that AI is trying to fund is actively undermining the tax base of Scott Besant at an exponential rate. So to the extent that AI is successful, the trillions that Bessant needs to raise, who's competing against AI, those trillions are going to go up exponentially as AI takes out white collar jobs and tax receipts. So here too we have like a snake eating its tail. So like, those are the types of situations, like it's hard to predict when it's going, you know, what's the straw that's going to break? The camel's back. But the camel's back is going to break. It's already bowed pretty badly. But barring something like that in the funding markets, to me, I don't see something that's going to snap right away other than sort of the inflationary stuff, right? Like basically a political, you know, the political reaction. And as tense as we are, I don't see anything that explosive. Now you can get something where, you know, maybe the markets freak out and that triggers, who knows. But it would have to be a reaction to inflation or it's going to have to be something, you know, in the funding markets related to two giant entities trying to access trillions of dollars with one entity undercutting the other's funding by accessing those funds, you know, oh, by the way, all, you know, biggest marginal supplier funds being, you Know, a bunch of hedge funds based in the Caymans who are funding at the overnight rate. Both of them are squeezing higher.
- [56:35]
Preston Pysh
This is the hardest question I got for you, Luke. So let's say markets continue to tighten liquidity wise in the coming three to six months. It gets pretty aggressive in that environment. Typically nothing will outperform the dollar itself. You go back to 2008, 2009, during, you know, what was a really tight, you know, liquidity crunch that occurred, and you watched even gold itself sold off quite a bit against the dollar. The dollar just bid and beat everything. Is this the moment in this current. And I'm just assuming that tightening continues to happen. It may not, but let's just assume that it continues to get pretty tight in the next three to six months. Does gold outperform the dollar in that environment for what I would say is like the first time in many decades?
- [57:22]
Luke Gromen
I think it does.
- [57:23]
Preston Pysh
Interesting.
- [57:24]
Luke Gromen
Yeah, I think it does. Because the part that a lot of people on Wall street are leaving out about gold and the rally because they. I can say it. I'm Cleveland. I'm. I'm not the establishment guy. And whatever they can't say yet, they'll say it in another two or three years. But here's what they're going to say. 2022, US government, by sanctioning Russian FX reserves, told the whole world, take your money elsewhere. Treasuries are no longer a safe haven. Then 22 to 2024, the Russians told the world at U. S. Military. And in 2025, the Houthis a little bit of the same in terms of technological change. Right.
- [58:01]
LinkedIn Jobs / Remarkable / Netsuite / Shopify / Vanta Advertiser
And.
- [58:01]
Luke Gromen
And I would encourage everybody to read Erik Prince, former head of Blackwater, his speech from February, it's on YouTube, about what the Houthis and the Russians were doing. Then the technology change, the exponential changes that our friend Jeff Booth talks about came to the military. And now you got Houthis in the red Sea, you know.
- [58:19]
Preston Pysh
Yeah.
- [58:19]
Luke Gromen
Making. Making aircraft carriers have to evade so hard that F18s are falling off the ship.
- [58:24]
Preston Pysh
Yeah.
- [58:24]
Luke Gromen
That wasn't an accident. And then you have the Chinese make it very clear that the United States can't go to war full stop.
- [58:32]
Preston Pysh
Yeah.
- [58:32]
Luke Gromen
Without Chinese rare earth. Full stop. And the last people to admit this is true. These three things are true are Wall Street. They're the last ones to get it. This is blasphemy. A, treasuries are no longer as safe as Gold after 2022 sanctions. B, the Russians outproduced NATO and the Russians beat naito. C, technology shift has ended 400 years of mayhem doctrine. Right? You control naval checkpoints, you control the world. Naval checkpoints now are death traps. Like, you had the Houthis making aircraft carriers of the United States dance so hard that F18s are falling off the deck. What do you think the Russians are going to do? What do you think they're underwater on, you know, unmanned, whatever the heck those things are. Do you want to be on a ship that's going through a narrow area like the Red Sea with those things out swimming? I wouldn't want to. And so checkpoints like that, that reverses the relative power dynamic, which, again, I'm not anti American. I am simply telling people how it is and what that implies for the macro situation, which is you're pro reality.
- [59:33]
Preston Pysh
You're pro reality.
- [59:35]
Luke Gromen
I am pro reality. And then the final part is. Is like, we can't make missiles fast enough if the Chinese send us the rare earths. And the Chinese are not sending us the rare earths. And there's like, it's a fascinating study in cognitive dissonance. You can see with our treasury secretary, he was this week, we think the deal is going to be done with magnets by Thanksgiving. Wait, wait, you said the deal was done a month ago, and then it was done two months before that and done three months before that. And there's like, I like to try to keep things simple. I know I talk a lot, but I try to keep things simple. Look at it this way. Besant and Trump, etc, are making the case that the Chinese are going to willingly sell us rare earths that we are telling them we are going to use to make weapons to point at them. If your neighbor said he wanted to kill you and then also said, hey, can I borrow your shotgun? Would you give it to him? And if you did, you deserve to get shot. You're an idiot. And the Chinese are the neighbor. So, like, the rare earths aren't coming. They're not coming.
- [60:29]
Preston Pysh
Yeah.
- [60:29]
Luke Gromen
And so we're in this window of opportunity of like, to tie it back to your question. I think. I think gold will beat the dollar. I think the dollar will go up, but I think gold's going to go up in dollar terms and liquidity, I think, you know.
- [60:40]
Preston Pysh
Yeah, yeah, yeah, I agree with that. I think you're right. And you know, people, I'm a hardcore bitcoiner. I think in the long tail, like, if you pull out five years, 10 years, I think bitcoin just outperforms all of it. But I'm talking specifically if you know, the dollar liquidity really dries up in the market in the coming three to six months because for all intents and purposes, I think bitcoin is already demonstrating that it's selling off. It's the, you know, if people need liquidity, they're pulling it from the bitcoin network right now. At least that's what the price is, you know, showing us in dollar terms where gold is not doing that. And it's been pretty obvious so. And to your point that we talked about earlier in the show, it seems to be some in the minds of the market participants is somewhat correlated to risk on still tied to tech. And I think that the large billion dollar tranches on Wall street that are understanding this debasement trade are going to the thing that they understand and it's pretty simple and so far it appears like it's gold. So that's going to be a fun one to track and then continue to watch for the next time we talk. I love that you have an opinion on it.
- [61:49]
Luke Gromen
So I will tell you when I don't have an opinion on somebody, when I do have an opinion on something, it tends to be. Tends to be and what fairly strongly held until facts change.
- [62:00]
Preston Pysh
If you're right, that's going to be one hell of a signal.
- [62:03]
Luke Gromen
Oh absolutely. And it's. To me it's just so clear. Right. Even as things as simple as, you know, look, I'm excited we're finally moving towards industrialization again. I'm excited that we realize we have a grid problem. You know, we've been talking about this for years and years.
- [62:16]
Preston Pysh
Yeah.
- [62:17]
Luke Gromen
People finally understand and I'm excited to see new technologies like small modular reactors and discussions that, you know, there might be one up and running in Ontario in 2027 or 2029. And in the last 10 years the Chinese have put up electrical capacity equal to the entire United States grid. Yeah. In 10 years.
- [62:36]
Preston Pysh
So insane.
- [62:37]
Luke Gromen
And they're not standing still. And so when you look at things like that and you go up above the dollar in the next crisis. Yeah, absolutely it could.
- [62:45]
Preston Pysh
And this is Jensen's point from Nvidia that why he thinks China's going to win the AI race is just because they actually have the energy infrastructure to support all of the hyperscalers, to train the models over there, where in the US we're going to be limited in our energy capacity and by the time we get it online it's going to be too late. This is the article and you know, the talking point that's Been kind of going through the news in the last two weeks. So, yeah, and it's, you know, we're.
- [63:13]
Luke Gromen
Moving in the right direction, but it's. There's still far too much hopium and not enough reality. And what do I mean by that? Right? How many times have you heard, well, we just need to go to a wartime footing, like 1940, right? We just need to. We need to do Operation Warp Speed, right? Even Scott Bassin said we're into Operation Warp Speed. And I think in Rare Earth, we might be able to do some stuff maybe I'm hearing, like, in the next two years, three years maybe, but, like, Operation Warp Speed for the shots. Like, they started developing that stuff in the 60s and 70s. Like, they started really testing it in the 90s. They put the first one in place in 2013. Like, and then if you want to go to wartime footing, like, okay, but again, America needs to decide, does it want to rebuild and compete or does it want to preserve the real value of its bond market? Because when we went to wartime footing in 1940, Fed's balance sheet went up 10x in three years. You know, we capped interest rates, we put marginal tax rates on the highest earners at 95%. We rationed goods.
- [64:08]
Preston Pysh
You also didn't have the ability for people to tap into the knowledge like you do today back then. So, like, as they're capping rates and they're putting commercials on TV to buy war bonds, and people are like, hey, I'm going to do my patriotic duty to go buy the war bonds. You didn't have talking heads out there explaining how in real terms they were losing X percent on an annualized basis, which is so readily available to anybody today that has an Internet connection and, you know, a Twitter account or whatever. The information is so easily found nowadays. It's very different than then.
- [64:47]
Luke Gromen
It's so easily found. And I would add to that, like you had in 1933, the. The commission that Joseph Kennedy led to investigate 1929, gosh, the name of it is. But basically they ran a big review of the Great Crash, and the bankers came out of that as the bad guy. And there was real reform done to the system. And we had 8, 10 years of depression, 8 years depression after that of people coming together as a society. And we had 11 to 15% unemployment. So there were ready workers ready to go. We do not have the society that is together. We're like, oh, you know what? So we can make Elon Musk a trillionaire. We're gonna buy bonds. Then These tech guys can become 100 billionaires. Well, or send a billionaires. What? I don't even know. Whatever.
- [65:32]
Preston Pysh
It's that big.
- [65:33]
Luke Gromen
It's that big. Like, let them buy the bonds. That's whatever. That's whatever. Like 95 of the country is going to be like, Let them buy the bonds. Where Were you in 08? We don't have the. The unity in this country that we had then where people would say, you know what? I know I'm probably gonna lose, but, you know, a, they can investigate how much they're gonna lose, but B, they'll be like, these people haven't helped me for 20 years.
- [65:56]
Preston Pysh
Yeah.
- [65:56]
Luke Gromen
Yeah, you know I'm not gonna help them.
- [65:58]
Preston Pysh
Yeah. Well, Luke, you and I could chat literally all day long. Thank you so much for always making time, always coming on the show and just, you know, sharing your deep knowledge. I do not miss a week of your newsletter. I am an avid reader of your Forest from the Trees newsletter. Give people a handoff if they want to learn more about you or anything else that you want to highlight.
- [66:22]
Luke Gromen
Oh, I appreciate that. Yeah. If they're interested in learning more about our different mass market and institutional research products, you check out fftt-llc.com and obviously I've got a fairly active X feed at Luke Gromen. L U K E G R O.
- [66:37]
Preston Pysh
M E N Luke, as always, thank you, sir.
- [66:40]
Luke Gromen
Thanks for having me on, my friend. It's always great catching up with you.
- [66:42]
Preston Pysh
Thank you for listening to tip. Make sure to follow bitcoin fundamentals on your favorite podcast app and never miss out on episodes. To access our show notes, transcripts or courses, go to theinvestorspodcast.com this show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by the Investors Podcast Network. Written permission must be granted before syndication or rebroadcasting.