A Great Depression Worse Than 2008 - Survive The Upcoming Financial Crisis | Balaji Srinivasa

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

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

I do believe that we're in the middle of something or the beginning of something that is at least as serious as a 2008 crisis. The government is extremely good at kicking the can and like, that's his primary skill in some ways. So it's hard to know exactly when things will be formally acknowledged as such. You know, I've got, I've got a bunch of slides that show that the economic situation is parlous A B, that, you know, the, the degree of collapse across a number of different industries, a number of different weaknesses, will probably necessitate some form of bailouts or printing. Even if it doesn't look exactly like 2008, a lot of what the financial system does is it evolves to evade last time's pattern recognition. And so it won't. It may not look exactly like it used to, despite what form it comes in, whether it's like treasury buybacks or the people's qe, which are different ways of like injecting money into the system that don't look exactly like the 2008 bailouts. I do believe an enormous amount of money is going to be printed just like Ray Dalio, just like a number of other people do. And in such case, you want to have, quote, outside money, whether that is gold, whether that is a foreign fiat currency that you have faith in, that's sort of outside the Fed's control, or whether that is bitcoin or cryptocurrency. Bitcoin in particular is, you know, built to be difficult to seize. I think that's, that's part of the answer. And it's not the only, it's not the only thing you want allocation. You want to think about other things in life, like where you live, your location. Again, Dalio also thinks of that as an important thing. You know, early 2010s, Janet Yellen was credibly reported as having known about the housing crisis, having seen it and not raise the alarm and now I'm actually sort of finding, like, you know, people, quote, don't want to hear you raise the alarm, or they'll be like, oh, my God, you're a doomer. Why are you saying this? Right. The financial crisis was maybe officially acknowledged in September 2008, but of course, it had been going on for years before then. It was just something where it became undeniable at that point. But I felt it was my responsibility, having put together what I had seen, to be like, you know what? It's a lot worse than people are saying. It's not just like a single bank crisis. It's not even just a banking crisis. It's a central banking crisis. The problems go all the way to the bedrock of the financial system in terms of treasuries being the new toxic waste. And it's going to be at least as bad as 2008 or probably worse than that.

One thing I really want to. I want the audience to understand why I become so obsessed with this. And I've heard you say that the farther we get from the last deleveraging, the more incautious people become. And what I think people have, the. The subroutine that runs in the average American's mind for sure, is that this hasn't ever happened. Not realizing what they mean is, hasn't happened in my lifetime. And they don't realize the hard truth, which is that every single empire and every reserve currency all throughout all of recorded history have all collapsed. They have all failed. They have all gone through this massive deleveraging. Leveraging is a really polite way of saying everybody loses everything, and it is a bloodbath. It is often, as Ray Dalio talks about it, is often marked by blood, literal blood in the streets. This is when we go to war, Everybody's freaking out. And so because it's been so long since we've had a big war on a global scale because nobody alive in the Western world anyway is aware of a massive deleveraging. They don't understand that, A, they do happen, B, that they ha. When they happen, they happen fast. And C, when they happen, it is catastrophic. And so I'm like, I don't want to be Chicken Little. I am super optimistic. But, man, the more I started getting into financial content, the more I was like, whoa, there's something going on here. Ray Dalio says that every society, every empire, goes through six stages. Stage six is absolute collapse. And for people that don't know Ray, he built the largest hedge fund in the world. So this is somebody that literally puts their own money at stake, much in the way that you have to say, hey, I think I know what's going on. He's been right so many times that he's built the largest hedge fund ever. And so what he's saying is, okay, there's six stages. Stage six is total collapse.

P.S.

The U.S. is stage 5.5. So like that's, that's not ideal. So as people hear you talk, the one thing, you're a very metered guy. But the one thing I want people to understand about why I'm obsessed with this content is sky's probably not falling today. At least that's my take. We'll get to the sort of how impossible it is to predict the timing a little bit later, but to really understand how these cycles happen and they are cycles where we're at in the cycle so that you understand what to do. So if you don't mind, walk us through the, the rapidity with which this stuff happens. Because I know that you have some slides that walk through like it was three days from when SVB collapses to when they're printing like that. The, the speed at which this stuff happens I think is really important for people to understand.

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

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

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

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

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

You know why it sounds.

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

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

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

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

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

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

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

This is an important idea. How, how does, how did the government end up doing that?

Let me give a few analogies first and then let me get more kind of technical or specific. Do you remember in 2008 when the banks sold AAA mortgage backed securities to each other but they really weren't aaa?

Mm.

Right. And it was something where it was a combination of some of those guys were lying to themselves, some of them were lying to themselves so they could lie to others. The ratings agencies were like, like everybody was kind of, you know, a combination of, it's like self interested delusion. Right? Where you know, oh my God, are you saying that these mortgages aren't, aren't, aren't real? That would mean a housing crash. That would mean all these people are going to lose their homes. That's anti American. Right. That was the tone in 06 07. What are you saying? The housing market doesn't always go up. You're crazy. Right? You're a doomer and you have to work back to that period of time. But that is one of the reasons why this is allowed to go on for so long. The housing crisis was able to get so bad is because people thought well, real estate's the safe investment. It's always going to go up. When is that ever going to go down? The government is backing it, etc. Etc. Right. And the triple A ratings on mortgages are mortgages themselves. Mortgage backed securities is part of what allowed the crisis to get so bad. And one of the issues was the rating agencies were not able to downrate those things for a variety of reasons. One is that they're paid by the, the, you know, the, the guys who, they're, they're rating. Okay, so that's a private issue. But the second is later, for example, in 2011, when S&P actually downgraded US debt from AAA, do you know what happened to them?

No, nothing.

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

No.

Okay. That's actually pretty important, right? It's important what follows because there's a bunch of movies that have been made on the housing crisis and there are, some of them are good movies. There's the Big Short which talks about, you know, the outsiders and they're seeing the problems there is Too Big to Fail, which talks about like the government's vantage point on it. There's Margin Call which talks about the bank's vantage point on it. There's Inside Job, which sort of like activists point on it, which is calling for more regulation. But what there really hasn't been, at least to my knowledge, is one that shows the extent to which government policy pushed banks to, you know, again, in the words of both the Times and the Journal, to. Because they wanted to get people into houses, because they wanted affordable housing goals, ending redlining and so on and so forth. Both the Journal and the Times were publishing the truth on this around that time in the early 2010s. So the government was nudging, pushing banks and if you didn't, if you didn't go and you know, extend all these mortgages to people who probably really couldn't pay. Well, often you got acquired by a bank that did and that would kind of, you know, override your decision making anyway.

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

That's exactly right. You know, for example, Here's a quote. December 21, 2008. Again, when the New York Times had an incentive to attack Bush over this, they said, Bush drive for homeownership fuels housing bubble. Quote, we can put light where there's darkness and hope where there's despondency. And part of it is working together as a nation to encourage folks to own their own home. George W. Bush, October 15, 2002. Right. So that is the approach which says, oh, we deregulate the market and you know, push people and so on, so forth.

You can reboot your life, your health, even your career, anything you want. All you need is discipline. I can teach you the tactics that I learned while growing a billion dollar business that will allow you to see your goals through, whether you want better health, stronger relationships, a more successful career. Any of that is possible with the mindset and business programs in Impact Theory University. Join the thousands of students who have already accomplished amazing things. Tap now for a free trial and get started today.

There's some truth to the idea that they pushed lending standards to be low, but that's not exactly the same as deregulation. They actually use regulations to push banks to hit certain, whether you call them formal or informal quotas, they were doing that then. The other side of it is the Clinton era roots of the financial crisis in Wall street journal article in 2013. And that says affordable housing goals established in the 1990s led to a massive increase in risky subprime mortgages. Right. And you know, there's a strong case. The answers can be traced to September 12, 1992. On that day, presidential candidate Bill Clinton proposed using private pension funds to invest in government priorities such as affordable housing, generate long term broad based economic benefits. Right. And so the point is, if you add up these two articles again, you start getting binocular vision. If you hear that saying like, you know, there's, there's the stupid party and the evil party and sometimes they get together and do something bipartisan and that's both stupid and evil. Have you heard that?

Nice. It's lovely.

It's good, right?

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

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

Isn't it like 70% of their portfolio?

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

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

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

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

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

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

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

Yeah, I think that's shocking to the average listener. They, they have no idea. That's true.

See, here's the graph, right? Like essentially, here's the US in the year 2000. Here is China's, you know, trade and crazy. You know, this is why it's amazing, right? And so the thing is that's, that's only accelerated over the last three years, right? In a sense, of course, that's really terrifying.

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

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

Terrifyingly, during COVID the medication and PPE.

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

Do you mark that after World War II?

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

No.

Yeah, the, like you heard a lot about Tiananmen in 89, but you didn't hear about 1993 and Yeltsin ordering like the Russian White House to be shelled with tanks. Even though that's more of a, like, you know, Russia was at least within the Western camp ish at that time. Ostensibly it's like a, it's a new democracy and so on and so forth. You've never heard about that. Most people have not heard about that. But basically the post Soviet era was a huge mess and the US to its credit like essentially supervised that mess. And it's revealed later that, you know, the US was backing Yeltsin. It wasn't like a complete organic thing that Yeltsin, you know, became prima central. Paris, of course, you know, CIA, all these guys have an interest in loose nukes not making their way around. So the US was all over that situation. It's almost like you're seeing a waiter, they catch a bunch of balls that have fallen, you know, down from the air. Like, it's like a bunch of plates going there to go look at this and catch them, you know. So in the early 90s, I think the US overall was doing a decent job, a great job in some ways, on foreign policy. Eastern Europe is way better off than it was. Estonia is way better off than it was. I'm not somebody who's just like, oh, the US is always evil, and so and so forth. Not at all. In fact, I think the US has actually done a lot of amazing things. What started to happen, in my view, towards the end of the 90s and then especially in the 2000s, is you start to get that messianic, crusading, neocon, slash Samantha power, slash responsibility to protect kind of thing, arguably starting with, you know, Kosovo and then going into, you know, like, Iraq and all the Middle Eastern forever wars and then onto the present day where, you know, we've got. Why is this. Why is this bad? Good question. The reason it's bad is that wars are never clean. You know, they're always sold to the public on this clean line of like, here's the bad guy, here's the good guy. And they're very, very rarely clean. Like, even, even World War II. You're talking about, like, the firebombing of Dresden. You're talking about the nuking of Hiroshima. You're with lots of civilians and innocents killed. Right? And many other wars are much more great than that. A B is like, in general, war should be a last resort. Absolute, absolute last resort. And usually you want to solve things with economics or some kind of political solution or something like that. And the reason it was bad in the late 90s is it's just unchecked power. Actually, it's one way to think about if power corrupts. Absolute power corrupts absolutely. Have you heard that before? Right, of course. So basically, especially, like Iraq has something, I think we can have consensus on, a country which is totally blown up until. False premises. $8 trillion was wasted on these Middle Eastern wars. Huge part of the debt, by the way. Okay? Iraq, Afghanistan and so on. ISIS formed in the aftermath of that. All these Countries in the Middle east were destabilized and for what? Like, there's no accountability. A lot of the same people are still in power, lawless neocons are still, you know, advising. They're saying now war with Ukraine, it's totally memoryless. It's like a sociopathic serial killer at this point. Right. And at best you'll get, well, we meant well, and then move on. Why do you bring that up, you know, and why are you dwelling on the past? Well, I mean, we're going back to 16, 19, but we can't go back to 2003. Right. Like, you know, people will selectively excavate aspects of history and use them as a weapon in, you know, like the current events, but they won't do the things that, you know, New York Times was responsible for printing this false intelligence. And, but they want to go back 400 years to. Not to their own, their own faults, right? So like, if you notice, like from 1945 to 1991, again, like, you can't defend everything that US foreign policy did during that period. People say, oh, there are right wing death squads and so on. Probably there were. But you know what? There were left wing death squads. The communists killed 100 million people and they didn't play nice. You know, like Venona decrypts have shown that, you know what that is. V E N O N A. Have you heard that before?

No, not once.

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

Know nothing about that collision?

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

I did not.

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

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

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

Now the question becomes why, why do these 1. Why is it a central banking crisis? And why then does it potentially mushroom into something bigger?

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

Know, like there's all the lines connected to everything else and you look like the crazy guy.

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

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

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

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

You got a lot.

I cut out like 10.

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

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

Yes.

What do you mean by that?

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

That analogy is so apt because. And this is why I never know how to handle these moments, because by talking about it, you are getting people to look down. And so in some ways, you run the risk of speeding it up. So you talked earlier about Janet Yellen. She knew there was a problem, but she didn't speak up. Now you, for people just listening, he just made a face. So we're going to get to the face in a second. But, like, you've got Janet Yellen, who knows there's a problem but doesn't broadcast the problem. But I don't know if I'm mad at her for not broadcasting the problem, but at the same time, I can't help myself out of a moral sense of obligation from telling people, hey, you might want to look down. What's up, guys? It's Tom Bilyeu. And if you're anything like me, you're always looking for ways to level up your mindset, your business, and your life in general. That's exactly why I started Impact Theory, a podcast that brings together the world's most most successful and inspiring people to share their stories and most importantly, strategies for Success. And now it's easier than ever to listen to Impact Theory on Amazon Music. Whether you're on the go or chilling at home, you can simply open up the Amazon Music app and search for Impact Theory with Tom Bilyeu to start listening right away. If you really want to take things to the next level, just ask Alexa. Hey, Alexa. Play Impact Theory with Tom Bilyeu on Amazon Music.

Now playing Impact Theory with Tom Bilyeu on Amazon Music.

And boom, you're instantly plugged into the latest and greatest conversations on mindset, health, finances and entrepreneurship. Get inspired, get motivated, and be legendary with Impact Theory on Amazon Music. Let's do this.

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

I have a slightly different hypothesis, which is all the Things you just said are true, that the mistake, that the actions that are being taken are being taken by those people and those actions are creating the problem. But my whole thing about it's, it's the debt that causes this collapse. I don't think any human, any, any group of people is a better way to think about it. I don't think any group of people can stay emotionally sober for long once they've lost sight of the people who built the thing. So once you've had enough people that have inherited the country working well, you, you now just, it is guaranteed to devolve into these choices that happen around debt. Because again, we talked about this earlier. This is a, this is a. It's coming from a beautiful place. They want to, they want more people in housing. They want to make things better for people. They want to elevate people, lift people out of poverty, make sure that, you know, nobody goes without. Like, it really does. Like, I understand the, what you call the, the wokening, I think the wokening of America, like the great awokening. Whoever came up with it, I like, get it, I get the impulse to it. But the problem is that you end up, you get in this debt cycle of, oh, let's just, let's. Let's inflate the currency. Let's print money. So we're printing money, we're inflating the currency. And look, yeah, kind of cheeky. It does devalue everybody's money, but nobody feels it too badly. Like, honestly, in 2008, I was like, word, like, print money, man. If that's going to help people, that's amazing. I got devalued, obviously. And then again, svb. I didn't have any money in svb, but I was still like, word, yeah, print. So I'm just like, wait, is this much ado about nothing or is this the cycle that humans cannot get themselves out of? And I'm as much of the problem as anybody else because I'm like, yeah, I don't want to see people suffer, man. If you can print, like, print, I guess we all like, take a hit. But it's like, when does it become a problem?

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

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

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

Oh, yes, my friend. I told you, every graph you've ever put out, I think I've seen.

Okay.

It's probably not literally, but it's very close.

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

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

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

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

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

No.

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

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

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

And that would destabilize people. That, that, that feels more direct. I'm still trying to understand.

Oh, sure.

But yeah, inflate the currency. Why does that impact their food prices?

We don't have a blockchain where I can show A purchase B from C. And so I mean markets are, you know, are complicated. But the US exports its inflation in part because it is the consumer of all these products around the world. And you know, the dollar is its major export. And what is a small or tolerable rise in prices in the US is intolerable abroad. If somebody's like kind of living hand to mouth to give the. You know, what I could diagram out for you, by the way, is like the exact sequence where it goes from the Fed buying an asset from a bank which then as a cash and can buy a stock which then puts money in the hands of an investor who can buy a house. That's actually something where you can probably track it through the financial system to track exactly how the print of money is bidding up. You know, the. Ever heard the saying the price of tea in China? Right. Like what does that have to do. The price of tea in China? What does that have to do? The price of grain in Libya. Okay. To track it exactly, you need access to several different databases that are not public. You know, so you have to kind of look at the aggregate stats and say, okay, here's how the US exports inflation. And then people will argue about that. Part of the point is that it's meant to be deniable. Right. But the concept of the US exporting inflation is certainly not my like innovation or anything like that. That's what a lot of folks have talked about. So if you want to get mechanistic about it, you probably have to go and pull data sets from, I don't know, several different grain vendors and so on. You see, okay, this guy suddenly got a print of money, and so he bit up X, which bit up Y, which bit up Z, which bit of the prices of this guy in the Middle East, Right? But that X, Y, Z, A and B are hidden because they're not on chain. Does that make sense?

Yeah.

Right. And that's actually. That's actually part of the point. The part of the point is the. Again, the mosquito, right? The camouflage predator. The point is that you can't see it. Right. The point is that that's not public. I mean, think about how much more coverage we've got of Kim Kardashian or whatever in the 2010s. Then where did all that printed money go? Hundreds of billions of dollars, trillions of dollars. Where did all that go? I mean, how many articles have you seen? Is it a daily thing on that, A breakdown of where the printed money went? If you know that inflation is taxation, then, you know, one option is you can just stay in the system. Like those Republicans, like those people in the Middle east and those folks who are near the money spigot who can benefit from the Cantillon effect, do another print and they benefit again first. Right? But if you see it coming and you get out first, now, you're not part of the base. That is diluted. If you get out to outside money, you get out to gold, you get out to bitcoin, you get out to maybe a foreign fiat. Now you have an asset. Where to go back to that example. Let's say there's $100 billion and the US government prints another 100 billion. It seized 50% of dollars, essentially. Right? But if there's 21 million Bitcoin, the US government cannot print even one bitcoin, so it can't seize the bitcoin. Does that make sense? Right.

By stealth. Yeah. I'm not in the camp that bitcoin is unseasonable, feasible, I think.

No, that's true.

You. You lock somebody up, they're gonna real quick be like, all right, here it is.

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

And that I don't want to derail us on on that part yet. We're going to get into that, which I think is a big thing with the network state and all that. But the question I want to ask before we move on, I think this is very important. So Chamath Hollyhuppatiya Sorry. So I don't want to misrepresent his views, but he is, I think he's incredibly bright and he has said many times, and Chamath, forgive me if I'm getting your, your idea wrong here, but basically that the debt to GDP ratio is a big nothing burger and everybody gets their panties in a twist as that number gets bigger and you know, we've got multiples of GDP and debt. And he's like, nothing's ever going to happen. It doesn't matter. There is no upper bound. What do you say to that? Is, is there a breaking point or can we actually just keep printing money basically forever?

Well, you know, Chamath is, you know, he's a colleague and co investor and I've been on all in a bit and I think we have a cordial relationship. Has also said put 1% of your assets in Bitcoin just in case because if everything else goes to zero, then you know what, like they can't dilute that. So you know, if you, if you asked him, I don't know where he is at numerically on that, but he probably, I don't know if you'd say it. There's 100% probability of no devaluation. He's sophisticated investor, he probably hedges. So that's, that's the first counter argument. Many people, I mean it's a point about not seeing something in one's life. I mean, let me make the point in somewhat different way. Most of the 20th century, most people in the 20th century saw an economic apocalypse of some kind. It was communism in Russia, in Eastern Europe, in Vietnam, in Korea, in Cuba. Right. It was Islamic fundamentalism in for example, Iran. That was also asset seizures happened there. That's actually why a lot of Persian People made their way to la. A lot of the entrepreneurial class, their assets were seized in that revolution. There was socialism in India. There was currency devaluations in Latin America, all the kleptocracies. And, you know, like, Argentina was once a rich country, and it became poor in part because of these kind of currency crises. And, and certainly there, you know, Even, even the UK had huge problems after World War II to pay for all of that. And so the, you know, I think there are three countries. Dalia talked about this. There's only three countries that compounded through the 20th century without an economic apocalypse, and those were the U.S. canada and Australia. And so you have this interesting combination of three facts. First, economic apocalypse is actually fairly common. Second, economic apocalypse is uncommon for Americans. And third, economic apocalypse is uncommon in American media. And instead, the one thing that we are aware of is, you know, the potential for genocide on racial terms. Right. That is definitely a threat. That's something you should be aware of. Right. But actually, most of the conflict in the 20th century was not on the basis of just race. It was on the basis of class. Right.

Do you think Americans have to worry about that?

I do think so, yes. And the reason I think so is if you're not like, immunized against something. I mean, in many ways, I think this century is seeing sort of a flipping, okay, where. Or flipping where those countries that were on the capitalist right in 1991 and the communist left in 1991 have essentially shifted sides, where now they're on the cultural left and cultural right. And one of the consequences is all the countries that had suffered through socialism, communism and so on in the 20th century, even if they still call themselves communist, like Vietnam or China, they're done with that in a sense. Like, you know, they're not. I mean, there's. There's bad things that, you know, the, the CCP is doing, but they aren't like, fully abolishing capitalism and going back to Maoism that would make them too poor.

What do you think they learned that made them flip that leaf?

Generates power. I mean, that's like capitalism. I like to be really blunt about it. I mean, basically, you have an economic machine and you can, you know, it turns out letting people self organize generates more wealth and power than not. Right. That's if you're just totally cynical about it. Right. And of course it is. It also generates more contentment among the population. And eventually you can get from a position of totally enlightened self interest to, okay, it's more stable than the alternative. The people are, you know, have, have a good standard living. They're not going to protest. You can run the government or whatever. Right. The by contrast, if the other side is, if you have been born rich, have you heard that, you know, saying like shirt sleeves to shirt sleeves in three generations.

Love it. Yeah.

You should be an old American saying, right. So the current generation in the US has been born to wealth, right? They're born. A lot of people who have come to majority have essentially inherited this giant superpower with the scaled economic system and so on. And then they have to work for it and fight for it, fighting wars. They didn't have to earn it. And so the memory of what it took to earn it has fallen off. So it's the opposite of those, you know, who grew up under socialism, grew up under communism. You're not, you know, like in India for example, which is actually rising and doing quite well on balance nowadays. Nobody is like romantic. About 15 years ago it was much worse. You know, life is getting better there. Infrastructure is improving, technology is like a good thing, capitalism is a good thing. And in general, you know, not without its ups and downs, but things are generally up and to the right. And by contrast in, you know, the West, I think they've forgotten what's got them there. And it's a combination of, you know, oh, we can spend without having to produce. You know, you've heard the, the concept of the resource curse. You know what that is?

Yes, very much so, yeah.

So like the resource curse, it's like, you know, many countries that have oil actually find that people just end up fighting over the oil or the, or the money is spent in a bad way and so on and so forth. Right. It's like you don't have to earn it or what have you. I'm not saying all like Norway used to seem to manage it, the UAE is managing fairly well now and so on. So it's not 100, but, but it's like it's something that can set you wrong. And so there's a huge difference in founding and inheriting. You know, not just for an individual, but at a country level. You know, George Washington, you know, founded like the US military, right. And you know, there were some, you know, like Hamilton founded like the ancestor, what's the Federal Reserve? Those guys understood the constraints in the world as opposed to the 37th mayor of this or the 42nd president of that. Like those are folks who, you know, like inherited something. They just like they were named into a system that was Going before them and then continues after them in the same way that like the 15th CEO of GM or something like that is so far distant from the founder. Sometimes you get somebody who's like Satya Nadella who's like, who manages to make their way to the CEO position but has the DNA of a founder. That's a very unusual kind of person because to make your way to the CEO position you sort of be a conformist and rule follower and so on. And then to actually to reinvent the whole organization you have to have the founder DNA. So it's unusual that it happens. It's not, it's not, you know, it's on zero probability. But right now you have a machine that's the opposite of like in India or China within living memory. They were, you know, they were communist or socialists, they were very poor. So you don't take it for granted. Whereas we'll always see people saying in the US is of course for number one. We'll always be number one. We inherited being number one. I can't believe you're saying we'd never be number one. It's not hungry. And by the way, even, you know, like a great example is the response to superpowered competition. Remember Sputnik? Right, of course. I mean probably before we. Right. So when Sputnik, you know, the, the Soviets launched, you know, Sputnik, the U. S. Response at the time wasn't oh, the Soviets have demographic problems, are going to go to zero. You're, you're a doomer. Are you just repeating Soviet propaganda by talking about Sputnik. You lose your why don't you believe in America? Blah blah, blah blah. Instead they're like, oh boy, these guys are ahead. We need to get back ahead. Massive math and science, you know, effort we're going to put on man in the moon in, you know, before the end of the decade. Like rising to the challenge and treating your competition and taking them seriously is actually how you win as opposed to the. So the response to Soviets couldn't be more different than the response to China which is a combination of denial and actually stealth imitation. So denial, it's like, oh, you're saying, you know, China's going to go to zero, that, you know, they're obviously suck, you know, we have the Mississippi river and they don't. So they're, you know, you know, I'm talking about other people who will argue these like again I've got against them.

But demographics on the way out. It's done.

Yeah, exactly. Their demographics are done. They have terrible geography, they don't have a blue water navy, they can't feed themselves and so forth. Just to kind of go through these points because people will raise them a lot first on. Should I talk about that for a second? Right.

Yeah, please. This to me gets into why we're in trouble.

Yeah. So. So first just looking at the graphs, you know, maybe put the graph of steel production. Okay. And then put the graph.

Insane.

It's insane. Right. So you see this graph and what you can see is anybody who's making an analogy to the past saying, oh, you know, it's just like the 1970s and US was in a malaise, but, you know, we pulled it out. And so the US was making 10x the amount of steel of China in, in that period. And now it's the other way around. China's making why steel apology.

Why. Why do you focus on that?

Well, it's just, I mean, you can look at tons of other stuff. You can look at. You look at basically every raw material or not every raw material, I should say every manufactured thing. A variety of different graphs look like this.

And the reason I think is interesting. Exactly. It's emblematic. These guys are playing to win. And look, I'm in California. If I had to do the last three years over again, I probably would not be in California. There is, there's just a growing sense of like, that trying to win is bad and that you shouldn't want to be competitive. You should want everybody to win. And I'm like, no, I'm here to win a championship. I want to be the best. I want to play with people that want to be the best. And so when you look at China and you're like, ah, they're going to collapse. Like, you know, we don't need to respond like we responded to Sputnik. I'm like, you're going to lose. Like, you've got to be in this game to win. Now, you do not need to love to crush your enemy and hear the lamentations of their women, you know, as they're driven before you. That's not my vibe, but my vibe is very much like the reason that steel is interesting is these guys are both building things now. Are they building too many things? Are they building things they're going to like, knock down? Maybe. But one thing I've heard you talk about, which I think is. Is really insightful, is that the, that thing that, man, if you're of my age, when you hear that idea of, oh, Pearl Harbor, I think we awoke A sleeping giant. And, like, you know, this is like, a fatal mistake. And the US Comes and just like, manufactures and we do this unbelievable stuff. We're able to build this Navy and army. Like, unbelievable. We end up doing what we do in World War II. Absolutely incredible. Amazing, amazing. But now, like, if we had that same moment now, I don't think we'd be able to manufacture our way out of this. We've outsourced all of that manufacturing. And so now we're in this different period where culturally, people don't want to be dominant, they don't want to be aggressive. Like, that scene is like bad mojo and, oh, it's toxic masculinity or whatever. And I'm just like, oh, my God. Like, I need to be around people that want to go hard. I want to be around people that want to win. Like, I want to be around people. And look, this is going to be a little naive, so please look past this is. I'm just trying to explain, like, my spirit of competition. I don't look at China and think, oh, I have to beat them, and they're bad. I look at China and I go, all right, China, I see you. I see what you're building. I see that you can build a train station or whatever it was. And in, like, a night. Not joking, by the way, it might have been 48 hours. So, yes, yes. It was so fast. I was like, this is insane. And in the U.S. california especially, like, you can't get a bathroom stall put in. You've shown this, like, cutting the exact paper wrist for bathroom stalls. Like, guys, what is happening? And so getting back that energy of, like, I want to go against the best. I want China to be as strong as possible. As somebody who has read Mao the Untold Story, I am so happy for them that they have moved away from that and that they're coming out. I want a formidable opponent, but I want to be sharpened by that opponent. I want to get better because they're trying to out compete me. And so I want to out compete. I want to rise and do better. And look, I don't want to go to war. Trust me when I say I don't want to see them impoverished. That's not how I envision this. But when I was a kid and it was like US versus Russia, and it was like, they were doing cool stuff and we were trying to do cool stuff, it was like, okay, that felt good. Like, it gave me a sense of pride in my team. It gave me a reason to want to get in there and do well. And because of the way that I'm wired, I didn't want to crush my opponents. I didn't want to see bad things happen to them. But I did want to win. And like, that spirit is just going away. I already know that the comments now to this section of the video, people are going to be like, oh, this guy. But I'm telling you, man, you need that spirit.

So there's a few things which I think of as cope, whenever you mention China that are worth addressing, right? One of them immediately with people, they'll come with a psychological defense, will be like, oh, China can only do that because they're a communist dictatorship and we're a free country. So that's why it's messy and that's why we're slow at building and so on, so forth. Okay? Except, I mean, you know, if you believe America was a democracy in the 1940s, it could build a bomber in, you know, like a day, right? Actually, no. Here's stats. What is it? B2 bomber, B24 bomber. The source, Ken Burns, says 60 minutes to build a P24 bomber, okay? Which is crazy. And that is, of course, that's the average time, right? In terms of, you know, how many were being built per day. Right. B24 Liberator, long range bomber. One came off the line every 63 minutes. Okay? Like now, today, it takes, you know, so World War II, America can make a B24 bomber in 60 minutes. 2022. America needs 20 years to reopen a bathroom, okay, In San Francisco. And the thing about this is there's actually two different demographics because one demographic is the one you just mentioned which says that they don't want to win. They want like all these environmental impact reports or what have you. But their demographic is one who's like, okay, yeah, we need to do industrial policy. But they're sort of. It's like LARPing, right? Because they are trying to do it with printing and spending. They're like, wow, spending on factories is up into the. Right. But you know what? Industrial policy is like venture capital. And simply spending the money doesn't mean you'll get the returns. It has to be done in a capital, efficient fashion. And I'm not seeing that, right? I'm just seeing money thrown around without constraint and without accountability and without a CEO. And so I'm not. I'm very bearish on essentially industrial policy right now. Okay? It's like, it's like saying you're going to do venture capital, you have to. There's a difference. You're doing it. Well, coming back up a little bit. Point is, in, in if, if the US was democracy in the 1940s and China was communist in 1970s, it was much more communist and genocidal then. And so if the argument is, oh, they're a communist dictatorship, that's why they could do it. Well, why weren't they. They're even more communist then. If you're, if you're actually arguing that that gives them strength. It doesn't. Because they were weaker 50 years ago. Right. And the U.S. was stronger. And you'll argue it's still a democracy. Right. So, so that actually blows up, in my view, that kind of COPE style argument that, oh, you know, it's because they're, you know, evil, that that's why they're strong. They were actually much more evil arguably 50 years ago when they were killing millions of people during the Great Leap Forward and Cultural Revolution.

Yeah. And now against that, I think that's madness.

Yeah. So, so I'm not saying they're good, like in the sense of I don't like the social credit system and you know, the, the, the surveillance, you know, state they've built and so on. There's many legitimate critiques, but they're not like, they're not as murderous as under Mao. Right. There's actually an improvement, you know, like.

Seemingly by a country mile. But if everybody has a North Star, which is human flourishing, I will say that, yes, I don't think humans will flourish as well even under the current regime. I just think that that social credit scores and things, it just plays out in a way that breaks people's spirit. I think that part of what allows for human flourishing is freedom. But I am not deaf to Ray Dalio's take, which is, look, they are a different society, they have different values. And so, yes, once you realize that the people could rise up at any point and they don't. So there is something going on there. It's not bad enough for them to drive them to revolt. Now, maybe it would be if the US suddenly we woke up and we were like, that there might be a lot more pushback. So anyway, I can simultaneously hold multiple ideas in my head. I would not want to live there. Does not seem like the thing that's going to lead to maximal human flourishing. But I agree with you very much. Having studied a limited amount, but having done at least some studying of Chinese history, it's like, whoa, it's a lot better than it was back in the 70s, 60s, 50s, 40s, just way, way, way better.

Yeah. So one thing also, by the way, and this is controversial, but I'm just going to bring up these two articles so that people can at least see them. The thing is that it is true that China has some of charged that China is being very. Either it's genocidal or it's cracking down or it's concentration camps or something on, on Uyghurs in western China. That'd be the counter argument. The thing is that the US Was bombing, you know, Chinese Uyghur militants and you know, once jailed them and now defends them. You can see these articles from Foreign policy. So here's NBC News 2018 U. S targets Chinese Uyghur militants as well as Taliban fighters in Afghanistan. US Wants jail rigors, now defends them at UN And Foreign Policy. So the thing is that at one point the US And China were both thinking of what's going on there as quote, counterterrorism. And there's a woman named Sheena Greitens that has written about this. Right. And then it's kind of totally switched sides. Right. And you know, this is not to defend anything that's going on there because I'm sure it's quite brutal. But it's like Sheena Greitens on understanding China's policies in Xinjiang. This is in, you know, the belfercenter.org okay. And essentially like she, she's saying that China is talking about that as war on terror, very similar to how the U. S justified its interventions in the Middle East. The reason I say this is it's like, okay, that's useful to know because it is, it's just not, you know, it's just not talked about. And you know, one thing I find is, you know, the, the, the, all the, the negativity towards Russia and China is there's something merited there, I'm no doubt. But it's also something which some people think it's like, oh, being super nationalistic and being super jingoistic and having a big war is just what the country needs to, America needs to get back together. You know, a big war that'll bring us back together. A common enemy. You know, I've actually seen people make this point. Have you heard that kind of thing before?

Of course.

Right. So the thing about that is that's not necessarily true because if there's a big war, I mean if you think about COVID or 9 11, like the war on terror or Covet, that didn't bring people Together that just, you know, immediately got politicized. And, you know, if there's an alien invasion, one side would, would side with the aliens almost certainly. Right. Like, that's just the dynamics of how polarized it is. And I think, you know, even though, quote, China is a bipartisan issue now, it's questionable as to how long that lasts. We'll see. And it's a bad thing, by the way. It's like, you can't build America by hating China. You need to like love America or love other Americans. And you see my graph on like, it's not one country, it's two parties.

Yes. Dude, this is one of the most troubling things you say. And I'm saying that in the context of. I know you're saying that we are potentially facing financial Armageddon, but this. So going back to my rogue wave interpretation of your thing and I should explain that to people. So rogue wave happens when you have a bunch of big but not destructive waves. They come together at once and somehow their amplitudes magnify and it will create this rogue wave that can topple an oil tanker. And that feels like when you look at the collapse of an empire, it usually they do not die from without, they suicide from within. And so you need this high degree of tension inside the country so that you can't get everybody on the same page, that everybody's just. There's so much infighting. So yeah, walk us through because this really freaks me out that we're. We no longer make sense to think of us as Americans. Instead we should think of us how.

As Democrat and Republican or even better, as one's own tribe. You know, some people will say Republican or Texan or Christian or bitcoiner or something like that. And first is just a level set because, you know, like it's useful to quantify something. Right. So if you look at this series of graphs, right, it's not one country, it's two parties. So basically this is Congress and an edge between two nodes is whether they voted together. 1951. There's lots of bipartisan stuff happening in Congress. In 2011, it was just totally a bipartite graph. And that's a long term one. Oh, it's maybe even more than 2018.

Yeah, 2022.

This was 12 years ago. How partisan it had gone at the leadership level. And it's even more aggressive than that. Right. So this is a 70 year trend, right. Where you can just see it gradually getting more. It's like mitosis. It's like a cell Coming apart. Right. For 70 years.

That's exactly what it looks like. That's crazy.

And then it's visible at the individual level in a totally different kind of data set. So the previous one was like voting. This is social networks. And this is in the previous one was leadership. This is the masses. This from 2017. It's showing people friending each other, following each other on social networks. And red follows red and blue follows blue. And this was six years ago. Okay. It's gotten even more disjoint since then. Now blue has their own on Mastodon and red is on, you know, gab or something. And. And so it's gotten even more disjoint in their own, you know, rooms. Right. This study says that it's not just that Democrats, Republicans aren't friends with each other. Democrats and Republicans don't marry each other. 96 of Democrats are not married to Republicans. So ideology becomes biology in one generation. Right?

Yeah. The Sunnis and Shiites. This is like hearing us referred to in that way was very eye opening for me.

Yeah. If you ever read the New York Times about a foreign country, it'll be like in the arid steps of so and so, tribes have fought each other for millennia. You know, they'll kind of like a lot of gorillas in the mist kind of thing. Right. But the level of conflict in the west now is. Is tribal. It's Sunni, Shiite, it's Hudo, Tutsi. Once you kind of start applying that filter, it's only partially ideological. And one way of seeing that is during COVID do you remember, like, there were like four flips, for example, at the beginning, Republicans were worried about COVID and Democrats said it was racist to talk about the China virus. This is from like roughly January to March. Okay. Once Trump started acknowledging it and even saying something like, oh, you know, the, the virus is we should shut down testing or something like that. Like, you know, basically trying to downplay it. At the time, Democrats completely flipped, and now they were saying it was a huge deal. And then they flipped to lockdowns and Republicans flip, flip to libertarian. And then Trump's vaccine, Trump pushed, you know, operation warp speed and so on through and got the government out of the way for vaccine development. And if you remember, Kamala Harris said something like, I'm not going to take a Trump vaccine. And so at the time, it was a Democrat position was vaccine hesitancy. This has been totally memory hold. And then after the election, the vaccine was actually, you know, held back until after the election. There's a guy, Eric Topol, who's talked about how that was like there was a campaign or lobbying campaign, like, to keep the vaccine back so, you know, it wouldn't affect the election either way. Then I flipped again, and now Democrats roll for the vaccine. Okay. And. And then eventually it became something where Democrats kind of gave up on lockdown. And then the whole thing has gotten just sort of like forgotten. And I shouldn't say forgotten about, but memory holder, not discussed. So the point is that's like at least like two or three or four flips, depending on how you count. Okay. And when you have flips like that, it's tribal, not ideological. Each tribe is saying what they. You know, there can be some rationalization for each tribe at any given point in time. Oh, I didn't think it was serious, and I thought it was. Oh, I thought it was serious and I realized it wasn't. And maybe there's some truth to that on, you know, but it's also something where A is taking a position because it's the opposite of B, and then vice versa because stick a thumb in the other guy's eye. Does that make sense? You know? Oh, yes. And, you know, the, the thing about that is, why is that important? It means talking about the United States is actually a misnomer. It's a disunited states. It's a. It's the individual states and it's Democrat and Republican. And, you know, it's something where, like, the flag itself is a contested symbol where you'll find people saying, you know, in your time, just like a year ago or something, what did they say? It was like the American.

I had a friend that put an American flag up on his house and I said, oh, that's going to get ripped down. And he was like, oh, yeah. And I'm shocked.

Okay.

Crazy.

Ouch. Yeah. Fourth of July, symbol of unity that may no longer unite people make assumptions. So the flag is like a contested symbol. Okay. And that was like July 2021. The point being that, you know, I think the only thing that you can get super majorities 99 of Americans to agree on is that they value the dollar, not the flag. That is actually the. It's an economic union, like the eu, where the dollar is last tattered piece of paper that's holding the thing together, you know, and, you know, like, the EU has the euro. Right. It's like an economic union even though. Right. So if there's like a serious currency crisis, which I think is coming because we're already in A background of high inflation. With all of these crashes, they're going to have to print. That's a high level version of why that printing will cause way more inflation. And then you have something and you have options also, right? You have exits, you have alternatives, you have cryptocurrency and you have foreign currencies and you have other countries that are opting out and getting into gold or trading with China. The thing is, do you think that.

Helps or hurts the pull apart?

Well, that's it. I mean, helps. It accelerates in a sense, right? Because a person can pass away without any successor. But for a system to die, it needs a successor or multiple successors. Like let's say for the Soviet Union to collapse, people had to have an alternative system they could look towards that they would copy. And so people copied the US system, right? So when the Soviet Union went down, India moved towards capitalism. So on China's only one that didn't, right? It kind of kept its own system at the time, not the only one. There are five communist countries that see it communists. But China was a big one that did. Almost everybody else went into the kind of capitalist liberal democracy camp. So right now what's happening, what happened in March is really apocal because you had, you had AI going vertical and that's a whole other massive storyline that's like an entire multiple podcast, whatever the AI going vertical. You had the banking crisis getting underway, showing how important this devaluation of bonds was. And you actually also had China going vertical, which is much more important than people realize. Do you know what I mean by that? China going vertical in March.

No, I was going to ask you.

This was just not covered in the Western press. It should have been blaring front page headlines and total focus on it. China developed a new muscle that I had not seen them flex. They had been kind of yelling and so on for the past few years. They developed the muscle of diplomacy and they figured out how to get a peace treaty between Saudi and Iran, which is a huge deal to get Saudi Yemen war to stop. To essentially unify the Middle Eastern countries around Chinese, like China being the hegemon coming in. Like, like, for example, they're forming like a unified navy in the region with Chinese input as an op, as a country to the US Navy. Okay, that's insane. Like totally different than what you think of as Middle east where everybody's boring. They're like all unified with each other. Saudi and Iran and China against the U.S. the U.S. u.S. Is unified, its enemies. You have even Iraq like trading in yuan with China. You have the UAE training in Iran with China. You have Brazil sending a massive delegation to China. You have Macron taking photo ops with Xi Jinping in China. And part of that is because again everything is connected. But the Ukraine war has caused such huge energy costs and other costs to Western Europe that Macron and France are dealing with like social unrest. You know, they're the yellow vests a while ago and now there's people protesting pensions and things. So he needs wealth for his country. And you know what, China's can export stuff and he can do economic deals with them. So that's why he's kind of part of why he's reaching out. There's the reason is he, you know, has always wanted to put strategic autonomy for Europe. Then you have Southeast Asia, which is another contested region between China and the US and the Asian countries are saying they're going to deep dollarize and they're taking, they, they have their own skepticism in part of China, but they're taking money from China and on and on and on and on. You know you have like basically the fact that China learned diplomacy is and is bringing also one more example the, you know, Zelensky went and took a call with China and now Lincoln, the Secretary of State has said China may be a partner for peace with Russia Ukraine. Okay.

That is acknowledging the de dollarization.

I mean would basically how seriously I take it very seriously. And the reason I take it seriously is there's actually this great article saying China's you know, unusual path to reserve currency status. Right. And what's it called? The Renminbi's unconventional route to reserve currency status. And this was actually here's, I'm pasting the link here in, in chat and it was also written up in the Financial Times and essentially the, the point they're making, if you remember that graph would show that China traded with the rest of the world. Right.

The terror graph that shows that. Yeah, they've basically taken over most of the world.

Yeah. So a lot of people, the US is so finance heavy that people will point to the dollar share reserves and say hey, that's still really high, therefore nothing is happening. Right. But this is like pointing to in my view, Soviet gdp. The USSR posted its highest GDP with its fake stats in the year of its collapse. Okay. The difference here is all these countries are trading with China. So if you go away from thinking about in terms of finance and thinking about instead in terms of trade, all these countries that get hard goods from China will use Yuan to buy those goods from China. Right. So as you know, it's kind of back to the future. How did you know the US didn't start as a financial power. It started as a manufacturing and export and trade power. Right. And in a sense, it's a very interesting. Go ahead. Right. You see my point, right? So it's not that big a deal for those countries to flip over to paying China in its own currency and holding some of that currency to pay for their imports from China. And those imports just keep surging. So, so that's like the, the fundamental is. I mean, it's not trivial to replace a financial system. But remember my points earlier on how fintech and crypto talent all around the world and people have launched currencies. There's countless fintech and crypto companies, payments companies. Right. So that talent is there in a way that it wasn't in 2008. People know how to do that from scratch. Okay.

I want to lean into this moment, though. I think it's. It's really important to. Because what people are going to push back on there is they're going to say, okay, sure, they're doing a lot of trade in the yuan, but they're still reserving in dollars or storing value in dollars. Because they're doing that, it's never going to lose its status as a reserve currency. Because of that, we're going to be able to keep printing money and also. And this will be big pushback. And this really resonates with me. And it's why I would not be putting any of my money into yuan. I don't trust the Chinese government not to seize it. So it's like, I get that countries are going to. For sure, for sure they're going to do more trade with China, but if they're smart, they're going to keep them at arm's length. They're not going to overextend themselves. They're going to stay in the most trusted currency. Which the question becomes, will the most trusted currency be the US Dollar? Given our very aggressive moves, certainly sanctioning the life out of Russia, that signaled to people that, hey, like, we're not afraid to weaponize the dollar against people. I think that's a terrible signal at a time where China is taking over a lot of the world trade. But I do have a feeling that people are going to be very hesitant to switch over from the dollar to the yuan. What say you to that?

Yeah, so. So that's why I was saying de dollarization is decentralization and so meaning you're.

Gonna break over to China yuan, it's going to go into bitcoin as but one example or maybe just you forget.

About bitcoin for a second. Right. So I think because it's a big world with 8 billion people, right. So after this thing fractures you have even if a few hundred million people pick an option that's actually enough to, to do quite a lot with it. Right. So first let me just give some graphs to level set. Do you see this graph which shows foreign holdings of U.S. treasuries as, as a percent? Yep. Total, total debt. Yep. Right. So that peaked in 2013, has declined quite a lot over the last 10 years. Right.

So essentially massively, what percentage drop is that? Do you know?

I mean that. But from 34 to 24 it's like 10 absolute relative.

Yeah, sorry, it's too small for me to read the numbers. I can just see the arc.

Oh yeah. So it's 34 at the peak here and 4% as of 22. It's probably dropped off quite a bit more in 2023. So the point is that foreigners when they're saving money are not saving it in U S bonds in the same way they're reducing their bond holdings. Japan, China, etc. Okay. For the most part this is a whole graph on foreign holdings of U.S. treasuries. So what are they buying instead? They're buying gold. So basically they're not saving. So it's not just this chart right.

Here tells you something like this. This really is interesting to me. Now I look at this chart and I expect the price of gold to have skyrocketed. But it hasn't, has it?

Well so that's an interesting point. Right. So basically by the way, if you take this chart in the previous one you can see as foreigners are buying less U.S. treasuries, they're buying more gold. Right? Gold is a time tested way of physical. Gold is a time test way of saving. But you can just go in as a foreigner you can go and load in gold and get back you on and more importantly you can put in yuan and get gold out. Okay, if that is true, China does have an open capital account in gold. Okay. And the thing is that not everything, you know, not everything is necessarily reported. Have you heard my concept like pre headline people and post headline people?

No.

So like a pre headline person think about a like a CEO or a researcher or a reporter, right? The CEO knows a product is going to launch. A researcher knows a study is going to be Published. A reporter knows the story is going to appear, they know something is true before the headline appears. Make sense? Right? Whereas a post headline person can only process something that has been officially acknowledged by an establishment out.

Okay, yeah, I talk a lot about this. As an entrepreneur, you cannot lead unless you understand the essence of the thing. If you understand the essence of the thing now, you can make predictions, you can move in a way where you don't have to follow people. That's a great point. Can I quote you quoting Elon Musk on this point really fast you posted this tweet. I thought this was absolutely brilliant. So this is you like giving context for everything you're saying is going wrong. And Elon Musk tweeted, between Tesla, Starlink and Twitter, I may have more real time global economic data in one head than anyone ever. And then he goes on to say, fed data has too much latency. Mild recession is already here. It's not like just the canary in the coal mine. SVB died, one of the staunchest miners, Credit Suisse died too. And the cemetery is filling up fast. So one just sort of closing the loop on all the trouble and people seeing it, but reinforcing that point that you're making that there are people that are able to accrue data, to form a worldview, to have a hypothesis on where this goes and they're able to move differently.

Yeah. And the thing is there's a lot of people nowadays who are like regime apparatchiks who are just incredibly literal and you know, you know the term NPCs, right? Like just very much basically. Yeah. Like anything that has not been published in an official source that they, that they think like they're Pravda is a conspiracy theory. Where's the source? Citation needed. And so on and so forth. Like anybody you know, if you don't have. That's why I said pre headline versus post headline people, they are so literal that they cannot make logical inferences. Right. And so, and that doesn't mean it's 100%. But for example, not every single currency deal that China has done has probably been announced. People speculate that they may be doing gold deals behind the scenes with the Middle east, where that is a well known proven currency. And you know, where do I think gold, physical gold lands come back to the gold price? Gold price is increasing. Right. Where I think physical gold, I think physical gold is something that probably returns as a state to state instrument. And maybe Indians in particular use it as an individual thing. Gold is still like a Big thing in India at the individual level. But the thing about gold is, you know, this overhead of verifying it and validating it and it can be spotted with the metal detector that they are port and all that type of stuff. Right. It's like physically hard to carry. It's not modern in that sense still as like a fire alarm, like as something that you can go ring, ring, ring, and. And everybody runs out of a burning building and they converge on one spot that's like a proven spot before they go back to their homes or something. Gold's a pretty good shelling point. It's one of several shelling points. You know, bitcoin, I think is another right point being that people who take like the very first order approach, oh, China doesn't have an open capital account, therefore I've never. And, and certainly I wouldn't want to have a lot of holdings in the yuan, but people might keep a checking account in yuan to pay for their imports from China and they have their savings account in gold or perhaps your local fiat or bitcoin. That's what I mean by de dollarization is decentralization. Does that make sense?

Very much so now. So we haven't talked a lot about bitcoin and actually do want to get a better understanding of where you think the this goes. And we probably at this point need to get a peek into your future thing with America, American anarchy, China control, so on and so forth.

But sure.

So one of the things that you really grab people's attention with is this idea that bitcoin will go to a million dollars. Anybody holding bitcoin sort of wants that to be true. But if you're anything like me, you also don't want it to be true because you know that it just. The amount of brutality. When you put out that tweet, I said I'll be a hell of a lot richer if that actually does happen. But oh my God, I hope you're wrong. So do you really see a path to bitcoin going to a million, or is it just going to be one sort of small player in this decentralized fracturing of a whole bunch of different. Whether it's coins or sovereign fiat that get a piece of the piece.

You see that in the Atlantic, the trillion dollar coin might be the least bad option. Why? The legal scholar Rowan Gray thinks the US Mint can defuse and you see the United States of America, $1 trillion. Okay. And this is. Now, it wasn't actually pursued. Okay. But the, the fact that this was. This got Closer to being done or discussed. Okay. And it was defended by Krugman and it was only rejected from a optic slash tactical standpoint because it might.

Why a trillion dollar coin? What? What?

Oh, you don't know. But okay, so basically because the debt ceiling, evidently this was something that they had a rationale that this to be a workaround and the treasury could mint a coin of any denominations just like they could, they could just mint a coin and deposit it and you know, via some magic you. The debt ceiling wouldn't be a constraint anymore in government spending.

I'm, I'm outright confused by this one. So I see a trillion dollar coin. I assume somebody's kidding and they're just talking about hyperinflation because it does make me immediately think about that.

Oh, you unheard of this. Sorry, I thought, I thought you had heard it.

If this is, this is a meme.

Like, what have you heard of, like modern monetary theory?

I've heard of it, but I couldn't tell you what it is.

Basically it's a group of folks who believe that the only constraint on the US government's, you know, ability to print is inflation and taxation. Like that is to say they can and should print as much money as they want. You know, it, it is something which is just a legacy, stupid constraint that we have a debt ceiling or whatever. It's essentially like, though they wouldn't phrase it this way at all, it's digital communism that says because the US has, the government has guns, it can see as much of your wealth as it needs to by printing money and it can force you to give it back at gunpoint if you want so it can redistribute all the wealth and so on and so forth. Okay, so people. Which is true that it can digitally do that. And the question is whether that breaks the illusion and people move to some other currency or whatever. Right. At which point you get to difficult situations. I'll get to. But this trillion dollar coin thing comes out of that school where they're like, we don't want to negotiate with Republicans over the debt ceiling. Instead we will use this, you know, thing in, in, you know, legal code to mint a trillion dollar coin and deposit it such that we don't have to negotiate with Republicans at all. It's almost like an executive order. Right. The point is though, that this creation of money, they're obsessed with it. Like a lot of these folks are like, mint the coin, mint the coin. Krugman has talked about it. This guy on Bloomberg, Weisenthal has Talked about it. Rowan Gray's talking about. It's in the Atlantic. It's taken seriously as a policy proposal and it's gotten closer, you know, since the last debt crisis. Whether it actually happens or not, it's symbolic of.

So the trillion dollar coin would go in somebody's bank account and allow them.

To not, not a humans but in like, in like the government's bank account. And then it wouldn't need to, you know, like raise the debt ceiling because it now has the money. It wouldn't change anything is how they say it wouldn't have any inflationary impact. I think I'm kidding. Just Google, Google trillion dollar coin. See that's the thing.

It's okay, see what's good is expression on your face.

Go ahead.

Yeah, I want to make fun of them, but I, I want to pause before I do that. I'm going to assume that they're smart, well meaning, well intentioned people, but they really believe this is going to work. And so one of us has the wrong base assumption. So here is a law that I live by and I really believe this is true. When two smart, well intentioned people think the other is stupid, they have different base assumptions. Now a base assumption is your belief about how you are and how the world is and if now when you have a collision of values, it's a totally separate thing and that's how you, it's what you believe the world ought to be like versus how it actually is. So I believe, maybe erroneously, but when I hear a trillion dollar coin, I have a base assumption that says if you print money, you have what you're calling tax. You have robbed people of the buying power because of something mechanistic, not something philosophical, something mechanistic that there is now more money but no additional goods. And so the cost of the goods goes up because everybody's like so flush with cash that they will pay more for a finite pool of items. And so the cost of those items necessarily goes up to match the number of people just like throwing money at them. And so if you think like, oh my God, I just got a trillion dollars, but now your loaf of bread costs a trillion dollars. And so yes, you have a trillion dollars, but everything just costs more in proportion. And so you haven't gotten rich. Like I will just tell you as somebody who went from normal money to rich in the refresh of a banking app, because I sold a piece of my company, like that moment where you outstrip inflation, your life changes, everything's different, you can afford different, everything Everything, it's just like, it's a really fascinating moment. But if my rent, like if somebody gives me $100 million but my rent moves up in proportion, I may have $100 million, but I still have to live in the same apartment, I still have to have the same car, my gas proportionately has gone up, food's proportionally gone up. So it, it literally doesn't matter. So what am I missing? Like if really take their stance for a second because I want to understand, like they're not idiots, they may be wrong. Well, I may be wrong, but like.

Okay, so there's a few different filters on it. Right, I understand. So first is, you know, conflict versus mistake. It's like is this something where they're just making a mistake or is it something where they're a different tribe and you know, the government tribe, blue tribe wants to, you know, attack Republican tribe or non government tribe. Right, that's one filter. The second filter is, you know, the 50 IQ. 100 IQ. 150 IQ meme.

Yes. And love it. Right, but so it's said to make fun of something.

Well yeah. So 50 IQ guys like trillion dollar coin is stupid. 100 IQ guys like no. And then gives this whole Krugman gibberish on why you know, like the trillion dollar coin won't be inflationary and so on. And the 150 is like yeah, it's stupid. Right. So there's like this is kind of like CDOs or AAA rated subprime mortgages. If 50 IQ guy says these people can't afford their house so why are you doing a loan with them? 100 IQ guy has all this stupid, you know, math or whatever that explains why, you know, that, that that house is good. And then the 150 IQ guy can actually go into the math and rebut it and say actually when the default rate rises above X, then you know, your CDO crash the Y and your CDS increases. So they can go in and plow through those abstractions and show why it actually collapses. But, but that's kind of what's in my view happening here. Now one thing I will say is I think a lot of the financial system is quote smart in the sense of like playing a three card Monty on people. They'll go like this. And the thing is that the trillion dollar coin is less clever than their usual kinds of illusions. You know, when they do quantitative easing or the bank term funding program that is set up to be hard to understand, it is like naturally selected and evolved to Be understand, you know, I can prove that to you.

While you prove this, I want to ask a very pointed question.

Yeah.

Do you think the people running the global, because this seems like a global problem. Are the people running the global financial system evil?

So it's really difficult question. I think some of them are evil. I think some of them are stupid. I think some of them are like Soviet. I think it's the closest analogy is like Soviet apparatchiks. Right, let's go to 2008 for a second. There's some mix of fraud, some, some error, some like spin, some tribalism, some pseudoscience, right. And different people did different things at the same time, right. Like the result was evil, some of the inputs were evil, a lot of it was stupid. Like finance years thinking of everybody else as dumb and what have you. It's a mix, you know, there's a way of thinking about it, you know, which is good is helping somebody else without concern for yourself. Smart is helping somebody else while also helping oneself. Evil is harming somebody else while helping oneself. And stupid is harming somebody else while harming oneself. And I think a lot of the things the financial system does are it's evil in the short run and stupid in the long run. Like they have a short term gain by harming somebody else but they spend down especially recently they spend another trust so they harm everybody in the long run. Like a lot of stuff they do with sanctions or freezing, deplatforming, censoring, that's not just the financial system but like the in social system it has a short run advantage for, for them the institutions are doing this but it's a long run disadvantage because it actually reduces their power. But they're so short sighted or short term oriented they only see that.

I'm going to sort of refute my own point here. So as you were saying that I really want to believe that people are well intentioned that they look at this incredibly complex thing that is the economy. They look at the modern miracle that is the modern economy. When you look back at I mean tens of thousands, 20,000 years that you realize that for a long time the sort of capital markets that make capitalism work, they didn't exist. And so we've had this just Cambrian explosion of betterment for the world with innovation and all of that because we really sort of master this economic game. Now as Ray points out, you unfortunately you are in the middle of these big cycles and when a deleveraging happens it's really brutal. But if you don't care about any one generation on the long arc of history. It's pretty amazing. And I've heard you talk about these helixes. So there is a sense of repetition in the way that societies move, but we are also moving up and we are making progress. And so that is, there's something very interesting there. So anyway, but when I look at that, I do say to myself, all of this makes a lot more sense once you know, Nietzsche's will to power. And I do sometimes chastise myself for my really wanting to believe that the way that the global financial system is set up is well intentioned. People who maybe have gotten out over their skis a little bit and they're really trying to do something wonderful and beautiful. But I do worry what I know about the Nietzschean idea of we all crave power, to be in control of our lives, to be in control of others, to be the one with our hands on the stick, as it were. Because once I let myself bring in that bit of darkness, my predictive engine works better. And that scares me.

There's stupid and evil. There's also tribal. And if you remember the thing about it's not one country, it's two parties. You know, the thing is, so okay, if, if you just imagine like a Japanese guy was in Beijing and he just started suddenly knifing, you know, five Chinese guys, okay, that would be a huge incident. That would be something that'd be considered a crime by the Chinese government, the Japanese government, you gotta go to jail, right? Be a huge thing. If that happened 80 years ago, right, when the Japanese were, you know, invading China. That guy might get, the Japanese guy might get a medal, you know, like bayonetting, you know, like Chinese soldiers who had never met. And the reason is that that was tribe on tribe tribal warfare. So, so that act that we consider evil when those tribes were not at war would in fact be considered laudable when the tribes were at war. And that's like conflict versus a mistake. And so if you feel that the Republicans or the population at large or whatever is, is evil, then any deception or whatever. I mean, like, you know, obviously the Allies deceived the Nazis during World War II and there's all kinds of spy versus spy, deception, sabotage, et cetera, versus the Soviets. You know, if it's another tribe, then people will do what they want to do and what they, what they feel is right for their tribe. They'll justify it that way.

Right?

And a lot of that, the trillion dollar coin stuff comes from make sure the Republicans can't hold US hostage, you know, and in fact, if you see this article, debt ceiling gimmicks. This is exactly what I'm talking about in terms of the evolution of kids camouflage. Okay? There were two courses of action that he's stating were equivalent. Minting a trillion dollar coin and premium bonds. Trillion dollar coins. Even somebody without any finance or knowledge is just facially ridiculous. It summons a visual over here. Premium bonds, immediately people's eyes glaze over. Oh, that sounds maybe good. Premium bonds, right? And now you need to go through a long explanation of what they are. But notice he's agreeing that they're equivalent in terms of their function. But natural selection selected against the trillion dollar coin because it's too obvious and it's selected for the premium bond in his kind of thing over here. Does that make sense?

But what does in that I understand the words coming out of your mouth, but I don't yet understand why a premium bond is actually like a trillion dollar coin. Because presumably that's the whole point.

You have to read this whole thing.

Give me the punchline quickly. But first let me say for those that don't understand bonds, so I'd be buying a bond because I think that it's backed by the US government. I'm not going to lose my money. If I hold it to maturity, I add a minimum, get my principal back, and I may get some sort of return for buying that bond. So 1%, you know, in a low environment. So that seems okay because you're asking me to give you my money. Basically I'm going to loan it to you, I'm going to buy that debt, but you have to give me my money back. Whereas in a trillion dollar coin, you're just making it up.

Yeah, but basically the thing, the point is I can explain how premium bonds work and this article does, but actually that gets us into the 100 IQ trap, right, where the whole point is that Krugman is admitting that the trillion dollar coin and the premium bond are equivalent, but the premium bond is harder to explain and that's why it's a more likely path. And this is exactly how the camouflage evolves. Do you understand?

Okay, let me see if I understand. Yes, I understand the camouflage part, but let me understand why. I'm going to take my best guess at why they are the same. They are the same because the debt that they created, they create out of thin air. So I'm buying something that isn't real. I'm in a Wile E. Coyote moment of hey, I said this is real. You can give me money, it's all good. And I'm going to give you that money back. And the reason I can guarantee it is because I will print the trillion dollar coin in order to be able to pay you back. Because I'm just printing the money to make sure that basically there are two.

Different ways to work around the debt ceiling and have arguments that you're not actually violating the debt ceiling thing, but still essentially creating new money. Right. And so, so that is that, that's like how functionally they're equivalent. I mean I, I, you can read it like, you know, I can explain it. But the point is getting yourself mired in that complexity. I mean you can't. Okay, what are they doing? They're issuing a new note with an interest rate that's far above market and they're selling the debt instruments for more than their par value already. It's like eye glazing. You have to actually go and diagram this thing out. And that's the point. It's evolved camouflage. To give you another example, just to you see this video clip that I pasted in more KBAK Securities Subprime Loans.

Tranches basically, for anybody watching the the or just listening to the podcast is basically that financial instruments are designed to confuse you.

Yes. This is a clip from the Big Short in a totally different context. The point is you could headline it and you could say, hey, this number of people who got a mortgage like this have gotten bankrupted in the future, had to declare bankruptcy or they lost a lot of money or whatever because this teaser rate is actually a terrible thing and your rates are going to go up and your payments are going to go up. Or they could say, look, our T's are rate only 995 and they could just sell it. Right. And so when you're, I mean the thing is Wall street and finance as opposed to other sectors, like if you're producing, I don't know, bananas, you're selling the bananas and you're trading a good. Right. The other person is buying the banner for consumption value and utility value. Right. But when you're buying a financial instrument, I'm not saying that it's always bad. Sometimes it's okay, right. But often Wall street, it, it's something which is zero sum. You know, for example, you stock and it's going to go up or down. If it goes up, then the buyer is getting a better deal and it goes down, then the seller is getting a better deal. So each party, you know, there's a question which is like how are you screwing me? Right. That is what the Wall street guys ask each other. You know, you've probably heard that before.

I haven't heard it said like that, but that is not at all surprising.

Yeah. And the difference is that when you go and you buy banana or whatever from the groceries, like nobody's screwing anybody. Right. That guy produced a good. You gave some money and both parties are happier. Right? That's gains from trade in the stock example. I'm not. Again, it's possible that you sell the stock and it goes up, but you need liquidity at that time frame or go, you know, like. I'm not saying, I'm not pathologizing every single financial interaction like that. I am how we're saying that there's a greater degree of zero sum behavior there. Much greater degree. Degree, Right. And because of that, that culture has evolved and the contracts evolved. It's easily spotted. Okay, if it's obvious how bank A is screwing bank B, then bank B spots it. You see what I'm saying? If, however it's camouflaged in such a way, then bank B doesn't see the fine print. But bank A can be like, you agreed to X, Y, W and Z. We got you. Right? So each party is kind of weaponizing the contract system to try to fool the other guy into getting a worse thing. You know, this is dramatized in the movie Margin Call where, you know, the, the guys were fooling their counterparties into buying these assets when they were saying that they were more valuable AAA mortgages. You remember that, right? And so let me come back. So the point is the financial system is set up to deceive you as to what it's actually doing. Hence Bernanke, for example, years ago talked about how quantitative easing wasn't printing money. But then more recently, Powell admitted that it was just to show you those two clips. I always, I always try to have citations for everything I'm saying.

Yeah, man. I have to say that's one thing like you're, the way your brain works is terrifying. I don't know how you remember all these things, that they exist first of all and that be that you can find them as quickly as you can. Yeah, I tweeted about that when I was researching. I was like, what the hell? Your memory is prodigious. Is that like a thing you, you, when you think about your own identity is, is your memory being like freakishly robust part of your self identity?

I, I don't notice it. It's like, I don't know, it's like your ears or whatever, something like that, right?

Funny you should pick ears. First of all, I notice my ears because they are so big. And then second, I, I notice my memory because it is so shoddy when I, Yeah, I, when I look at how much you reference, I have to believe that you, you, you remember a disproportionate amount of what you encounter. Or you have a time machine or something and you have more hours in the day. I don't know, but it is.

People always ask me, I remember a little snippet, it's like a little hash and then I can look it up. Right? But partly I've got, it's kind of like I've got a story. It's like a clothesline and then I can hang things off of that, you know, so it makes, it's almost like remembering song lyrics. And you can, you can play it front to back, but it's not necessarily random access, you know, prompted recall. Anyway, here is Bernanke once again explains why QE is not money printing. Okay? And then after. So lie or they'll dissemble or they'll convince themselves it's not money printing because we intend to do quantitative tightening later. So we're not introducing into the system permanently. And you don't understand, you're not sophisticated, right? And of course the sophisticated 150 IQ will say, well, you're never going to be able to tighten this Ponzi economy when you start. And that's exactly the problem we're running into. We have had 20 years of just absolutely systemic economic fakery, okay? Just to give you some examples, Bernanke talking about how the quote, great moderation, right, Means that macroeconomic volatility is over, all right? Meaning, you know, there's not going to be any more. We've solved macroeconomics. He was basically saying this in early 2000. All right? Cheney saying, the thing is, man, they.

Really, they really have gotten rid of that volatility. So my, my, like central question is, does it break at some point? Because they really have reduced the amount of volatility tremendously.

I disagree. I mean, like just the 2008 crisis or 2020 Covid, that's significant macroeconomic volatility.

Yes, but Compare that to 1929, man. It's like it, it was devastation.

Okay, but like what he was talking about was there wouldn't be a financial crisis, right? That like, he's like macro, there's no business cycle. That's what he's talking about, okay?

There's no business cycle. That isn't true.

Let me give the totality of it the great moderation. We've tame macroeconomic volatility. Cheney saying deficits don't matter. Bush and Clinton blew up the mortgage bubble in a bipartisan way. I showed you those before. In April 2008, Bernanke says we might see a mild recession five months before the collapse of Lehman. And certainly 2008 was not a mild recession. Right. Raising change since 2008.

Okay, so he said this before the 2008 crisis.

Yeah, that's my point. It could be a mild recession. That's not what it was. It was far, far worse than that.

Right, right.

Yeah, yeah, yeah. Here the radio season in 2008 calling some. Yeah, this thing, the great moderation was before the financial crisis. He was like, we killed it.

I still think he has a point. But fair. So if he's saying that before, when he's still like pounding his chest saying that there is no such thing as macro basically anymore, he's basically saying we've.

Saw macro, it's all done. It's a little bit like Rutherford saying we've solved physics. There's nothing left before quantum mechanics. It's like, yeah, yeah, yeah.

But I would like to quote biology for a second. So maybe you've heard of biology. Right? So one, an idea that you have that I think is, is really brilliant is that, okay, so give me, give me fiat currency. And what I'm going to do is I'm going to rob from you constantly, but just a little bit. And by doing that I'm going to be able to keep, I'm going to be able to keep it stable. So I think that, that what you're doing to the currency also applies to the macro economy. So I think that 2008 in any other time period is, is 10x that event that, that I thought you were not saying that it wasn't difficult.

Sometimes, you know, there's like, you know, an evolved function of something where people don't know exactly what that institution is doing and their verbal defenses of it are not actually what the function institution is. It's like what does one of your organs do? Could you explain it verbally? It just does that. Right. It's kind of evolved to do that. Right. And your point is you're actually citing me on this. And it's true. And I thought you might bring that up, which is one way of thinking about fiat is the dollar has had that long term decline, you know, the decline we're talking about like the inflation cost of the dollar over time. Right. It has a long term decline in return for short term stability. Right. And like, essentially what's happening is they're borrowing from the future, they're printing. You have this long term decline of purchasing power, but it's like relatively smooth during the period. So you can plan on a short term basis. Right. And the thing about it is that's actually sometimes a valuable property to have something that is flat and it's not going to oscillate that much in terms of purchasing power over the short run, as opposed to something like cryptocurrency, which goes up and down percentage or whatever each day. Right. Bitcoin has the opposite set of trade offs in a sense where it's appreciating over the long run, but has a huge amount of volatility in the short run. And you could imagine that you could have some flat coin where you embrace that as an engineering constraint and you had a basket of goods and you had a reserve of funds and you tried to maintain the price stability of that flat coin against a basket of goods, which you couldn't necessarily do if there was a true shortage. If you tried to maintain, let's say, the price of this, you know, flat coin against grain, and so there's a grain shortage, then no matter what you do financially in the physical world, that supply is gone, so the price is going to rise. Right. But point is though, that yes, under some conditions it's possible to have a long term decline, but short term stability and a huge crash at the end. Right. Do you know the concept of hormesis? Have you ever heard of that?

Oh, yes. A little bit of bad does a little bit of good. It's interesting. I would not have expected you to bring up hormesis in this context. So do tell how, how we get there here.

So this is kind of the graph, you know, like in. So it's kind of like if you have too much volatility, yeah, you're dead. Right. But if you have too little volatility, well, it's actually also worse than having some volatility that you can adapt to. It's like exercise. If you have too much exercise, you're dead. If you have too little, then your, you know, you're.

You're basically going to decline and die.

Yeah, that's right. But in the middle is kind of the sweet spot. Right. And so what a lot of the system has done is, and this is actually a broader point in many ways we have the eternal western present. Right. Blue America is holding on to the present while the tech libertarians are in the future and the conservatives are in the past. And the Chinese and so on are both like the future and the past. They think of themselves as like the Chinese Empire, right. So the western present is hanging on with its fingernails. And you can see it in the financial system where it's like bailing out GM and 400 something companies in the S and P have no growth and they're all in tech and they're trying to prop up these existing institutions. But you can see it also outside the financial system where you have 70 and 80 year olds running for president and you have all the Hollywood remakes and Top Gun, Infinity and oh, we're going to do a cold War again. And it's all this stuff which is just referencing this increasingly distant faded glory and just trying to keep the current system together and to keep the present going for as long as possible without adapting to the future. And then you get just. The whole thing just snaps and breaks, I think, right. And it just like, you know, gets washed away. It's similar to, in my view that the current situation is similar in some ways to before World War I, where you know, you had, before war one you had the kings and the nobles, you had the monarchies. And yeah, there was constitutional monarchy, but there's still absolute monarchies. And that world seemed like it was eternal and it wasn't going away. And maybe it was changing and changing very slowly, but under the hood, all these political movements, technological movements, industrial revolution, all this stuff was bubbling and then in a cataclysm like the modern world arose. Right. And we kind of saw some of that during COVID There was a lot of change that happened during COVID in a year that became like the year that the Internet, it was Internet first, right. For example, every meeting now you can do a remote meeting. Digital currency rose like, you know, all kind, you know, all kinds of things. There's like civil conflict in the US I think in many ways 2020 was a preview of what we're going in terms of, like just like 2008. It's like a preview of what we're going to see. It's like an appetizer for a main course of a lot of change happening at once.

All right, you have a very clear thesis on this. What, what is the change? What does the future look like?

What does the future look like? So I mean, I have a thesis and of course, look, I could be wrong and so on, but the, and let me also Give some optimism or whatever here. So let me see if I can say in a few sentences, optimism or whatever. All right, all right. So the, the few sentence thesis is G7 countries are actually running out of money and will attempt asset seizure in the future, whether through inflation or actual seizure.

That is so dark. Where's, where's my optimism?

Okay, I'm getting to the option.

That's terrifying. I don't, I don't know that people understand like how gnarly seizure is. So first of all, I have family in Cyprus and so watching this happen where the bank's just like, we're taking your money now.

Right?

Crazy. Anyway, keep going. So there's going to be some kind of seizure. Agreed. Terrified but agreed.

So the reason, whether it's via inflation or actually seizure, I mean the reason is like people didn't expect Dalio's Principles of the Change World Order. It came out I think right before Ukraine and the rate hikes, you know, and it seemed obvious that the path they were going to take was just going to be printing a ton of money. But sometimes the path they take is a non obvious one and it may just be hiking rates, the moon and you know, just watching the system collapse and you know, doing selective bill. We don't know exactly how the thing will unwind. Sometimes things surprise you, right? It's probably likely it's going to be printing. Point is though, G7 countries are going to have a real problem and they're going to be harder for money. And then a lot of the world hinges on whether or not the G7 countries and China can seize digital assets. If they can, that's like one branch point in history. It means that you have like total states in the CBDC and so on and so forth. If they cannot, then you have a different branch point in history where it means that communities can now basically have digital gold or cryptocurrency and crowdfund bits of territory where they can have their own startup societies and eventually what I call network states. Okay. And then you'd go back to the future of something more like the 1800s where you could get a plot of land and you could build a town or something like that, or even you know, the Alaska purchased Louisiana Purchase, things of that nature where their sovereigns would sell land. The real, the branch point is fundamentally will asset seizure be possible in the digital world? And the biggest risk factor for that is actually Apple, Google and Microsoft because they have operating system access. And that's actually if I think about what I'm most Concerned about it is the fact that Apple has software update and Google can get into your Google Drive and Microsoft has Windows, and if ordered by the state, in theory, they could scan your hard drive for private keys and then pull your Digital Glass assets. That is, to me, one of the most important problems that's coming up in the next X number of years. You might say, well, that sounds kind of crazy biology. And let me see if I can motivate that a little bit. In 2010, remember we talked about the Arab Spring, right? 2010, the Arab Spring had happened. And, you know, people knew that Twitter and Facebook had been a component in literally like the overthrow of countries. They had political importance. Remember that? Oh, yes, yeah. Yet still in 2010, 2011, if you had said in 10 years, the most important political issue in the world, or at least for a few days will be whether the President can tweet, people would have laughed. Right. Come on. Because they thought that social media is destabilizing political impact, that it's political importance was something that happened elsewhere. Right. That, you know, really wasn't a big deal at home. We have a culture of free speech. Who cares? Twitter still calling themselves the free speech wing of the Free Speech Party. All that stuff is early 2010s. Now, what's happened over the last 10 years, you know, from basically, let's say the 2010s is all politics became social media over the 2010s, and in my view, in the 2020s, all politics becomes crypto tribalism. Why? Because again, taking that Twitter analogy, just like you went from Twitter being acknowledged to have political importance to being the main event of all politics. And every politician is on Twitter first, and they think about Twitter first often as when they do something, they do a bill and they're thinking about it for Twitter. Right. I don't think that's. That's an exaggeration to say that. I mean, Twitter didn't just. The 2016 election also really wasn't about Trump, it was about Twitter. Twitter was upstream. It elected Trump, it elected Bolsonaro, it got Brexit through. It was essentially a parallel media channel. And that's why those elections flip. That's also why there was a counterattack on Twitter from 2016 to 2022, and it looked like the genie had been partially pushed back in the bottle. But now Elan, then free Twitter again, and we have digital glasnost. Okay, so with that whole story where even as big as social media had gotten to hundreds of millions of users, billions of dollars, public companies overthrowing governments in 2010, people still didn't think it was going to be the main thing for the President of the United States of America. With me so far. Yep. Okay. So in the same way, in 2023, where cryptocurrency is, is, it's $1 trillion, it's hundreds of millions of users globally, it's quite a few billionaires, publicly traded companies, and even perhaps more importantly, every single bank, financier government in the world has heard of bitcoin, and many of them have launched CBDC programs in part or in whole, motivated by the competitive threat of cryptocurrency. Okay. And El Salvador has adopted bitcoin as a national currency in Panama, and I think Central African probably are considering it. And so it's kind of like the Arab Spring in the sense of there's, like, there's already a political proof point of cryptocurrency's importance. You know, there's the Wyoming Dow law, there's the Tennessee Dow law, there's Texas saying bitcoin shall not be infringed. There's, there's all, you know, Colorado accepts crypto for taxes, blah, blah, blah, blah. There's all of this stuff that's happened. And yet still, if I said that in a few years, one of the most important questions in the world will be, does government have enough cryptocurrency to finance its operations? That still seems unrealistic. Okay.