Latest / The Vance Crowe Podcast / Luke Gromen "print the money or trigger the revolution"

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Luke Gromen "print the money or trigger the revolution" · The Vance Crowe Podcast

• 0:04
  Unknown: And so I ran a book club, during COVID, and Mandibles was one of those,
• 0:09
  terrifying reads that makes you go, like, oh, man. It it actually could work out that way. And now here we are almost a decade later,
• 0:16
  Unknown: and it is happening that way. It's happening. It's it's absolutely happening. Right? You can see every day
• 0:21
  on,
• 0:22
  x,
• 0:24
  the economist, you know, the uncle. You know? I mean, the uncle that's like, oh, no. This is fine. This is fine. And you can see central banks
• 0:30
  are buying gold, which is and and and pricing commodities outside the dollar, which is the Bancorp thing within it. You know, sadly, you know, the one girl, you know, the daughter of the economist who's who's all of a sudden comes into a bunch of money and, like, the kid's like,
• 0:44
  I I think she's turning tricks to make money. And, like
• 0:48
  like, sadly, OnlyFans
• 0:50
  is, like, literally just a version of that where you're reading about, you know, girls, you know, doing OnlyFans and making a lot of money doing so. It's never perfect, but there's a lot of things that are rhyming with that book. People should really read it. It's a good read.
• 1:04
  Unknown: Well, I think what's so fascinating is they show how slowly and pernicious inflation is and how it rips out the value of everything. Right? It's just like all of a sudden you go to the hardware store and you're you're buying a doorknob for $30 and doesn't make any sense. And I remember when we're reading this, people thought that couldn't happen here. That's something that happens somewhere else. But you look at prices today, and they're insane.
• 1:27
  Unknown: Yeah. That's that's
• 1:29
  it it is. It sneaks up on you, and it it
• 1:32
  you know, there's a book,
• 1:34
  The Raven of Zurich,
• 1:35
  by, the memoirs of Felix Somery.
• 1:38
  And he was called the Raven of Zurich because basically
• 1:41
  he consistently got so much right.
• 1:44
  And his memoirs are basically
• 1:47
  his journals from
• 1:51
  the early 1900s
• 1:52
  through after the end of World War II. And given the circles he was running in Zurich, he was at very high levels, like pre war meeting with the King of England and things like that. He was very high level. And one of the things he said about inflation was that, you know, after the First World War, he said, the best thing you should have just done is just devalue the debt overnight
• 2:12
  in a flash,
• 2:13
  rather than trying to inflate it away slowly because
• 2:17
  you do it once and it's over and you can start to recover immediately. But inflation
• 2:21
  is like poisoning the blood of society. It's pernicious, like you said.
• 2:25
  It lead it it it destroys value systems. It destroys trust.
• 2:31
  And unfortunately,
• 2:32
  we made the choice, you know, it's human nature, right? Because politicians don't wanna do
• 2:37
  the short, expedient,
• 2:39
  painful thing on their watch. They wanna play for time. And
• 2:44
  after World War One, they played for time and poisoned society, and it led to World War Two. And then in the aftermath of 'eight, and again in COVID,
• 2:52
  the politicians have played for time. The central bankers have played for time, and they are, you know, we're starting to frighteningly see, especially in the last month or two, a lot more of the,
• 3:02
  the more frightening aspects, the more pernicious aspects of poisoning the poisoning the blood via, you know, of society via inflation,
• 3:09
  Unknown: sustained inflation. Welcome back to the podcast. I'm glad you're here.
• 3:13
  Today, we have Luke Groman.
• 3:15
  Luke is a well respected economist and runs a financial firm in Ohio.
• 3:20
  And I sat down with him because he is in the Bitcoin tribe,
• 3:24
  One of probably two of the biggest names that are talking about how Bitcoin, gold,
• 3:31
  different finite commodities
• 3:33
  impact the economy.
• 3:34
  And it is a fantastic honor that he was able to come on the show. During this podcast, we're gonna talk about the economy. We're gonna talk about China, and we're gonna talk about gold's unique place in the future of our economy.
• 3:48
  We're gonna get to that interview in just a moment. But first,
• 3:51
  if you're somebody that is thinking about a Christmas gift, something that is truly special for your parents, I would encourage you to think about getting a legacy interview. This is where I sit down with your loved ones to discuss their lives, to get them to open up and share some of those memories that made their life the rich and interesting
• 4:11
  thing that it was. We can do it online or in our studio here in Saint Louis,
• 4:16
  and it is a profound experience for the person doing the interview.
• 4:20
  But even more than that, when you get a chance to watch the interview, when your children or grandchildren get to sit down and hear these stories, we've heard from so many guests that this was one of the best moments that their family shared together
• 4:34
  because the video will prompt more questions. It will get engagement in a way that you might not get if you're just
• 4:42
  chatting over the holidays.
• 4:44
  So if you're interested in getting your loved one a legacy interview, go to legacyinterviews.com
• 4:49
  to find out
• 4:50
  more. As you look at central bankers and the actions that they're taking right now, are they behaving rationally? Like, hey. They know they understand what's going on, or are they on a totally different playbook and operating from old rules that they shouldn't
• 5:07
  Unknown: be? They understand what's happening here, and they understand the risks.
• 5:12
  They are stuck in a political
• 5:14
  situation
• 5:16
  that they can't win.
• 5:18
  I I, you know, I I actually really empathize with with Jerome Powell, for example.
• 5:24
  You know, back in 2022,
• 5:27
  you know, 2021,
• 5:28
  when people ask me, what would you do if you were Powell? Right?
• 5:32
  I'd say I would resign. You know? I would resign because there's no like, he was named like a hero on the cover of, I think, Barron's or or Institutional Investor magazine
• 5:42
  in '21 or late twenty twenty.
• 5:45
  I'm like, that's as good as it's gonna get for him. There's you know, from a sort of how he's remembered, unfortunately.
• 5:50
  Because
• 5:53
  on one hand,
• 5:55
  this is this is this is why a debt based system ultimately ends the way it ends.
• 6:00
  Once the debt gets too high, if the debt is taken on for unproductive things like war,
• 6:06
  like bank bailouts,
• 6:08
  like stimmies that largely go into consumer goods,
• 6:12
  versus things that have the ability to earn back
• 6:17
  a positive rate of return over time, right? So the Eisenhower Highway System, or
• 6:22
  the Internet,
• 6:23
  some of these, if
• 6:25
  we would have invested in high speed rail or industrial base, these things.
• 6:29
  But when you run up debt on unproductive
• 6:32
  things,
• 6:33
  so and and the debt backs the currency. Right? That's the key. We're no longer on a gold based system. That's essentially the debt backs the currency.
• 6:41
  His choice would
• 6:43
  at some point stops being, do I want inflation or not inflation, and just how do I wanna trigger the inflation? There's a great quote from the book,
• 6:52
  lords of finance, which I would highly recommend everybody read. I've been recommending that for years and years. It's
• 6:59
  a biopic of the four central bankers of The US, England, Germany, and France
• 7:05
  after World War One. And it reads like literally like another one of these how to
• 7:11
  roadmaps of what's been happening
• 7:13
  in the West and around the world.
• 7:15
  And there's this great quote about Rudy Havenstein, Rudolf von Havenstein, who was the
• 7:21
  central banker of Germany who famously hyperinflated the currency. And I'm not saying that The United States is going to hyperinflate,
• 7:27
  and, you know, certainly not like there. But
• 7:32
  he the choice he was faced with was,
• 7:35
  you know, print the money or trigger the revolution.
• 7:38
  And that's the choice that Powell's been faced with, which is print the money or trigger the revolution. It's what the Western central banks all these central banks are faced with print the money or trigger the revolution.
• 7:48
  What do I mean by that?
• 7:51
  The United States,
• 7:52
  which I focus on, number one, that's that's my area of expertise. Number two, it's the center of the system where the reserve currency issuer, the treasury bond has the been for fifty years the primary reserve asset of the entire system, which means treasury bonds back banking system across the West.
• 8:09
  When we look at The United States, we have record treasury or treasury receipts of about 5 and a half trillion dollars.
• 8:19
  We are spending
• 8:21
  about 70%
• 8:24
  of that record receipts
• 8:26
  on entitlement payments
• 8:28
  to the baby boomers and the silent generation.
• 8:30
  And, yes, they earned some of that, but they didn't earn all that. They are they are taking out way more than they put in in nominal terms,
• 8:38
  by far.
• 8:41
  And then you look at the rest of that 5 and a half trillion,
• 8:45
  70%
• 8:46
  is going to entitlements and about
• 8:48
  30%
• 8:49
  is going into interest.
• 8:51
  So we are literally spending
• 8:54
  a 100% of all time record receipts
• 9:01
  on things that are interest or interest like obligations. There is very little functional difference
• 9:06
  between the German war reparations after World War I that had to be paid in gold. And so the Germans, it was not a currency the Germans could issue,
• 9:14
  and
• 9:15
  entitlements
• 9:16
  to the baby boomers and silent generation.
• 9:19
  We don't owe them dollars. We owe them hips. We owe them knees. We owe them pharmaceuticals. We owe them dollars time, all of which are inflation adjusting just like gold was. The more money we print, the more the cost of those entitlements,
• 9:32
  those that off balance sheet debt's gonna rise.
• 9:36
  And so you're faced with then when you add in, you know,
• 9:40
  defense spendings another
• 9:41
  20%,
• 9:42
  25%
• 9:43
  of receipts and going higher now,
• 9:46
  print the money or trigger the revolution. You know, with the federal government at 25%
• 9:52
  of GDP in terms of their annual spending as a percent of GDP nearly.
• 9:57
  And with the stock market based on the policies we have pursued offshoring and the financialization of the economy,
• 10:04
  the stock market is now a critical driver to marginal US consumer spending and therefore tax receipts. You tell me what the stock market is doing today, I will tell you what stock receipts are going to do or excuse me, tax receipts are going to do in six months. It is like clockwork. And so if the stock market just falls and stays down 15 to 20%,
• 10:23
  which in historical terms is nothing,
• 10:27
  The US
• 10:28
  will have its interest and and its entitlement obligations well above receipts and find themselves in a print or default on entitlements or receipts.
• 10:36
  And so they have created
• 10:39
  the they've created,
• 10:42
  a doomsday machine of sorts for themselves. Right? They have created a situation,
• 10:47
  print the money, or trigger the revolution.
• 10:49
  Do you you know, you either have to print the money to pay for this stuff,
• 10:53
  and you need to keep inflating and keep chasing it higher as your costs go higher. And the hope is that you can sort of, and this is
• 11:03
  this is harsh. It doesn't make me happy to say. But basically, delay deny
• 11:07
  claims. Right? If you can sort of, yeah, we're gonna take care of you, mister baby boomer. Just wait six months. Just wait six months and hope they pass on while they're waiting for care. That's what they may try to do.
• 11:20
  But if you outright cut,
• 11:22
  you're gonna trigger the revolution. Right? You can't you can't have bailed out Wall Street multiple times and then turn around and slash entitlements
• 11:32
  by what you would need to slash them by, which is
• 11:36
  roughly
• 11:38
  you would need to cut defense spending because the only
• 11:41
  when you look at what we're spending money on, there's only three things that matter, entitlements,
• 11:46
  interest,
• 11:47
  defense. That's it. Everything else is a rounding error compared to those three.
• 11:54
  And so when I say print the money or trigger the revolution,
• 11:58
  you either have to cut,
• 12:01
  you know, to get deficits down to where Bessant and the Trump administration have said, we're gonna get deficits to 3% of GDP by the end of our term. We're at seven today.
• 12:09
  You need to cut four points of GDP. GDP is 30,000,000,000,000.
• 12:14
  You need to find a trillion 2 in spending to cut today
• 12:18
  permanently.
• 12:20
  Okay. Well, you can't cut interest rates because that'll touch off inflation. Right? Print the money. So set that aside. Okay. You need to pull a trillion 2
• 12:30
  out of
• 12:32
  entitlements,
• 12:33
  which is 3,500,000,000,000.0,
• 12:35
  and defense,
• 12:36
  which is about a trillion. So a trillion 2 divided by 4,500,000,000,000.0,
• 12:41
  well, 30%.
• 12:43
  25, 30%. So you would have to cut entitlements of defense by 25 to 30% permanently today, immediately,
• 12:50
  trigger the revolution. And, oh, by the way, doing that would likely trigger a decline in the economy, a decline in receipts,
• 12:57
  and that would actually send the deficits higher. And so you'd actually have to cut more and then chase your cut or
• 13:05
  or
• 13:06
  you gotta cut rates.
• 13:08
  That's you cut rates, and you get the fed back into QE with inflation where it is.
• 13:13
  And when you look at those two, print the money or trigger the trigger the revolution,
• 13:19
  you know, especially in what we have seen over the last six to twelve months in terms of the political stability of this country,
• 13:26
  Unknown: they're gonna have to print the money. They're gonna have to print the money. That's what they always do. Well, we see what you're talking about in the ag world is going on right now and maybe on a smaller,
• 13:36
  size, but,
• 13:37
  ag has been getting bailouts right now. If you look at the typical farm, 13 and a half percent of their income comes from government. They call them transfer payments, but it's, you know, it's it's bailout money.
• 13:49
  And,
• 13:50
  certainly a huge percentage of that is going to the largest landholders,
• 13:54
  which are all baby boomers. And what they're doing is continuing the same system. The people that already own the land continue to get the money from the government.
• 14:02
  And just like that cantilever effect, like those are the first people that get the money sent to them in a check, they go spend it. Input prices,
• 14:10
  land prices, equipment prices, labor prices, all go up. And then that that increase has to be handed down to consumers.
• 14:18
  And I don't think consumers have any concept for how expensive farming is getting. It is so wildly out of control that people, when they go to pencil out their their loan, if they do not include the government is going to give me money,
• 14:32
  they won't make it.
• 14:34
  Unknown: You know, it's it's fascinating. We were talking about before we jumped on that I I owned a a 100 acre farm, as an investment property that I ran into a friend and his family who are third, fourth generation farmers.
• 14:46
  This was 02/2011,
• 14:47
  02/2012,
• 14:48
  and this is out here in
• 14:50
  Ohio,
• 14:51
  West Of West Of Cleveland.
• 14:54
  You know, I think I I think I paid
• 14:58
  your your listeners are gonna think this is cute. I think I paid 4,300
• 15:01
  an acre,
• 15:03
  right, which is you know, and it was decent land. It's not we've got really good land if you go further west. That's like, you know, it's not quite Iowa land, but it's
• 15:12
  it's getting there. But where Iowa is, it was more sort of, you
• 15:16
  know, But $4,300
• 15:18
  ground.
• 15:19
  And I think I sold it two two or three years later for 6,000. But my point is is that the math
• 15:26
  when I bought it at 4,300 didn't make sense, right, because I got my loan through, I think it was ag credit, right, so I get my loan through ag credit and I had to put 30% down because they don't play the game that they that all the banks play with residential housing, right. So I I gotta come up with 30% down.
• 15:42
  I float the rest. And then when I float the rest, I think rent
• 15:46
  on it was
• 15:49
  I think, you know, I gave him a bit of a sweetheart deal because he was a friend and because I wanted to help him kind of you know, get he was a younger guy and wanted
• 15:57
  and and I wanted it to be mutually beneficial. You know, I didn't wanna just basically
• 16:02
  be the rentier guy, just, you
• 16:04
  know, making a guy sharecrop effectively.
• 16:08
  But I think it was getting two twenty at first year. And this was, if you remember,
• 16:14
  this was the year there was the big drought. The next year was, right? So we raised rent the next year. 'eleven, I think, was the big drought. And we did really well. Somehow, we
• 16:24
  we had, like,
• 16:25
  we had, like, two ten
• 16:28
  bushel an acre corn in Ohio. That's doing pretty good. Yeah. Because we were because we were like, we it was better lucky than good. Like, it was supposed to be planted early, and it was, like, a huge drought. And then
• 16:40
  the,
• 16:41
  or or we were supposed to be planted early, but the loan was delayed. And then there was a huge drought, like, nationwide. And for whatever reason, like, we got the crop in late, so we used sort of short season corn. And then we got, like, the perfect mix of rain. And so, like, we were the only people around with any corn,
• 16:56
  and they hadn't hedged it out because they weren't sure they were gonna plant it. So we got, like so we raised around a little but my point is is that even when we raised the rate a little bit the next year, the the the rent the a little bit the next year, when you looked at the interest on the note relative to the rent from the land,
• 17:10
  I was still massively negative cash flow negative as the landowner.
• 17:15
  And, you know, corn, I wanna say, was right around
• 17:19
  5 or $6 then. Beans were probably 9 or 10,
• 17:23
  here. And the point is is that
• 17:25
  over the next from 12/13, whenever, over the next however many years,
• 17:30
  prices went down, and I'm like, oh, land will start coming down again in price.
• 17:35
  And the land just kept going up in price even though the,
• 17:38
  you know, the yield asset, the the crops
• 17:42
  kept going down.
• 17:43
  And and
• 17:45
  fertilizer
• 17:46
  kept going up, and all the inputs. So, like,
• 17:50
  I just have been watching that as as a, you know, not every day, but every now and then I'll check-in, and I'll just go,
• 17:58
  that doesn't make sense. Like, that is a sign of a broken system where the land is going up, the inputs are going up, crop prices are like and the crop prices weren't covering the note on the land
• 18:11
  thirteen, fourteen years ago. And so you end up with this situation where I think what you're describing, right, which is the big land owners are probably largely
• 18:20
  they're older and they're probably largely out of debt.
• 18:23
  And then the younger guys
• 18:26
  are probably all wildly in debt.
• 18:30
  Unknown: And, yeah, it's, you know, it's it's a it's a tough situation. It's a it's a symptom of the system. One of the things that's been hardest for, you know, anybody that's in water, it's hard to know that you're swimming in water. Right? It's that it's that kind of fish analogy. You don't know what you're in.
• 18:46
  And I think that Bitcoin has given a way to be able to say, well, what are land prices really doing? Because if you're just measuring it in dollars, then you're just like, Hey, look, it went up another 20%. Look how much more we can leverage. We can go to the bank and get more for this because we're able to,
• 19:05
  value it for higher. But when you think about what could you do with that money,
• 19:09
  if you weren't buying land, the purchasing power of that land goes down. But until Bitcoin,
• 19:15
  or you can compare it with gold, people have only just now recently started doing it. Land prices are not going up at all. They're going down each week. I do on this, podcast I have called the Ag Tribes Report where we compare how much, Bitcoin would it cost to buy that land. And a year later, I'll do an interview with the same guest and you'll see, you know, the price of Bitcoin is appreciated by 50% or a 100%. Well, the land, the price of land has not. And so to me, Bitcoin is demonetizing
• 19:43
  land. It is pulling that monetary premium out and people don't realize it because they're still valuing their land in dollars.
• 19:51
  Unknown: It is such a great point. It's such an important point. I I
• 19:55
  I'll send you the chart. If you didn't see, you probably saw it on on x. But a couple of weeks ago, I had a post that went pretty viral. I mean, it had over a million views, and it was a chart that showed that since COVID, it showed a chart of the S and P five hundred, the Nasdaq,
• 20:10
  and US home prices as defined by the Case Shiller home price index priced in dollars,
• 20:16
  priced in gold,
• 20:17
  and priced in Bitcoin.
• 20:19
  And it was astonishing. Right? You had, you know, Nasdaq and
• 20:22
  and and S and P were up over a 100%
• 20:25
  in dollars, and home prices were up, I think, 60%,
• 20:28
  70% since COVID in dollars.
• 20:31
  In gold, the S and P five hundred is down 20% since COVID. Nasdaq, I think, was up 7%
• 20:38
  in gold. It's probably flat
• 20:40
  after the performance of gold last week.
• 20:43
  And home prices were down, I think, 30 or 35%,
• 20:47
  maybe 40% in gold terms since COVID.
• 20:50
  And in Bitcoin terms,
• 20:53
  which is simply an energy you know, Bitcoin is just an energy
• 20:56
  derived
• 20:58
  digital
• 20:59
  gold. It's, you know
• 21:02
  in Bitcoin terms, the S and P was down 75%
• 21:06
  since COVID.
• 21:07
  NASDAQ was down 68%,
• 21:09
  and home prices are down 85%.
• 21:12
  And my point is is that I think if we would add farmland to that, we would see the exact same and I'm not even gonna think. I know for a fact, if I would have run our farmland, farmland would have looked like home prices.
• 21:25
  Because absolutely, part of the reason,
• 21:28
  not even part of, a big
• 21:30
  the reason farmland prices, if not
• 21:33
  the major reason, if not the entire reason, that farmland prices have
• 21:38
  separated
• 21:40
  from the underlying
• 21:41
  commodities the way they have over the last ten to fifteen years and the way I describe that I saw personally, you know, from, you know, what I was just describing,
• 21:51
  is because
• 21:53
  the Cantillon effect, right, the people who get the money first, it's
• 21:57
  it's happening, which is to say,
• 21:59
  there was an article in the Wall Street Journal
• 22:02
  two weeks ago,
• 22:03
  which highlighted
• 22:05
  that treasury secretary Bessent owns
• 22:08
  I wanna say he owns, like,
• 22:10
  39,000
• 22:11
  acres in South Dakota or something.
• 22:13
  Yeah. I remember seeing that. Yeah. Right. North Dakota. I think he's North Dakota. But yeah. That's a big holding of land. Right? Maybe it was 3,900, but it was it was like big boy big boy land holdings. Now he ain't running that land. He's he's farming it. What did he do in his prior life? He was a hedge fund manager for thirty years. And
• 22:32
  okay, fine, whatever. I'm not judging, but I'm simply describing why farmland prices are doing what they're doing, which is if you run a
• 22:40
  chart of farmland prices against The US m two money supply,
• 22:45
  it's a very
• 22:47
  they correlate extremely well. And so what you're having is
• 22:51
  a recognition of people who touch the money first,
• 22:54
  New York City hedge fund managers, etcetera, even guys like myself and Clemos, you know, I wasn't looking to run that land. I understood that, okay, this is gonna be inflationary. I'm gonna buy some farmland, and I'll rent it to a friend who knows what they're doing.
• 23:06
  That's been happening for ten, fifteen years,
• 23:09
  and it's why and
• 23:10
  that's why you've seen farmland do what it's doing.
• 23:13
  And it's why Bitcoin is so important, I think, for farmers to own some because, especially younger farmers, because
• 23:21
  what Bitcoin allows you to do is basically cut in, cut to the front of the line of the Catalan effect. When they create the money,
• 23:28
  Bitcoin goes up first and fastest by virtue of its 21,000,000 unit cap.
• 23:33
  And now your Bitcoin goes up faster than land, and you can step in front of the line. So when they print more money and Secretary Bessin or whoever or Lou Groman shows up to buy more farmland,
• 23:45
  you can't you can outbid them because your money is rising faster than theirs.
• 23:50
  And that's why I think it's so important.
• 23:53
  Unknown: Yeah. And it's one of those things that, you're just now starting to see ag get into this, but it was only a few weeks ago. I was at k State University,
• 24:02
  and I made the case. Those who are engaging with Bitcoin today will be the land owners tomorrow.
• 24:07
  This is, like, shocking and appalling and,
• 24:11
  difficult because
• 24:13
  if you don't own Bitcoin and the idea of, like, going out and buying it, it it just doesn't make sense. And there are a lot of guys in there that are probably holding gold, but the idea of holding Bitcoin is anathema to to their sensibilities.
• 24:26
  What's the difference between gold and Bitcoin?
• 24:31
  Unknown: So there's a few things. So
• 24:34
  the way to the
• 24:36
  the way to think about Bitcoin is so gold is simply stored energy. Let's start with gold. Because
• 24:42
  if you can understand gold, then it's you know? And I I it's easier it's very easy to understand Bitcoin
• 24:50
  once you kinda have it described through a gold lens. So that's exactly sort of how I got there. Well, because you're a gold guy. Right? You that's that was your starting position, would you say? That's right. Yeah. I started from gold. And
• 25:02
  once you understand gold, you can get to Bitcoin. So gold is simply stored energy. That's all it is. Right? It takes
• 25:09
  a bunch of,
• 25:11
  you know, it takes a bunch of energy expended to get gold out of the ground, refine it, process it,
• 25:19
  melt it, whatever. And and
• 25:21
  that's all gold is. Gold is simply a store of energy
• 25:26
  in metal form. Gold isn't used for anything. People say, well, gold's not used for it. Exactly.
• 25:31
  All it does, all it serves is is a storage of energy
• 25:36
  over time
• 25:37
  Unknown: as a currency unit moves around it. And so for me When I when I try and say that people are like, no. No. Gold has utility. The reason it's so valuable is because of its utility.
• 25:47
  And, I mean, I completely disagree with this, but there are a lot of people that believe no. The reason that gold is intrinsically valuable is you can put it in some kinds of electronics. It is in jewelry. Whereas a Bitcoin, you can't wear it and you can't put it in electronics. So to them, it's like one has utility value, the other one doesn't.
• 26:05
  Unknown: No. And I you know, I've seen that argument made, and I think there's some validity to it. And that's you know, the gold has a small usage for that, but there's other things you can use gold for. And, certainly, you know, you can you can you can use other metals,
• 26:20
  rather than gold for most of those applications.
• 26:24
  What gold's main
• 26:26
  main usages is for
• 26:28
  preserving purchasing power. It is for
• 26:31
  devaluing sovereign debt or recapitalizing
• 26:33
  sovereign balance sheets after they get too much debt.
• 26:37
  And
• 26:38
  it does that because it is essentially somebody expended a whole bunch of energy
• 26:43
  to get that gold out of the ground, and here it sits.
• 26:47
  And if the price of gold gets too cheap,
• 26:51
  no one's gonna expend the energy because they can't make money doing it. And so mining comes down. So gold is a store of energy.
• 26:59
  Bitcoin
• 27:01
  is a store of energy as well. It's digital, though.
• 27:05
  And the reason it is similar is because,
• 27:10
  there there's only number one, Bitcoin is harder than gold. Right? So when when the price of gold goes up,
• 27:16
  more supply is gonna come online. Right? Because gold miners are gonna be incented to to get more. And the price and gold gold's, you know, supply goes up, I don't know, 1% a year anyway.
• 27:28
  But it'll go up faster as the price goes up.
• 27:31
  If gold was a million dollars an ounce, you would have people out there going out in the ocean and literally pulling the tiny bits
• 27:39
  out of the ocean that that sit there.
• 27:44
  But Bitcoin
• 27:45
  has a hard cap. There's only 21,000,000 that are ever gonna be mined, and that is coded into it. And that's above my pay grade for why that is, but I interact in that world and that it has been, you know, you know,
• 27:56
  very, very, very bright coders, etcetera. They like, they're all saying the same thing. Like,
• 28:04
  it's it's a hard cap at 21,000,000.
• 28:07
  Now what a lot of people
• 28:09
  denigrate
• 28:10
  Bitcoin about, which is look how much energy it uses,
• 28:13
  that's actually
• 28:14
  you know, that's not a flaw. That's that's the feature.
• 28:18
  That is the equivalent
• 28:19
  of,
• 28:21
  you know, basically
• 28:22
  Bitcoin's
• 28:23
  you know, when I say gold is a store of energy, Bitcoin is a store of energy. If you look at the price of Bitcoin over time, the amount of, you know, the value
• 28:31
  of of Bitcoin is supported by the amount of electricity it takes to create a Bitcoin.
• 28:38
  And
• 28:39
  that is essentially
• 28:41
  very similar to the amount of energy it takes to mine an ounce of gold.
• 28:45
  And the difference of Bitcoin is, number one,
• 28:49
  there is never gonna be more than 21,000,000.
• 28:52
  Number two, the pace of mining
• 28:54
  does not change. So when Bitcoin goes from 50 to a 100,000 like it did last year, it's not like the Bitcoin miners all of a sudden start mining way more gold or Bitcoin, excuse me, as fast as they can.
• 29:06
  There, it gets
• 29:08
  the amount of mining continues to be regulated
• 29:12
  relative to the amount of ass
• 29:15
  mining
• 29:17
  put to the system to mine Bitcoin. And I won't get more complicated than that, but it's basically
• 29:22
  algorithmically
• 29:23
  limited based on the amount of resources being allocated to mining Bitcoin.
• 29:28
  So, again,
• 29:29
  better for
• 29:31
  maintaining purchasing power in energy terms.
• 29:35
  The other ways, you know,
• 29:36
  gold,
• 29:37
  if you had to
• 29:39
  go to another country, you know, you can't exactly pack it up and, you know, if you had to I'm not fleeing The US.
• 29:46
  I suspect a lot of your listeners like, uh-uh. You know, I've been here three three, four, five generations. My dad, my grandpa, they're not leaving either. But if you had to move it, if you there was
• 29:57
  so Bitcoin is way easier. I could you put a QR code up on the screen right now as we're talking. I literally could move you millions of dollars of Bitcoin
• 30:06
  using a QR code
• 30:08
  over a Zoom call.
• 30:10
  Obviously, you can't do that with with gold. So,
• 30:14
  it's much more volatile than gold for now. I think as over time Bitcoin acceptance and price and market cap and the network effect happen, I think Bitcoin's volatility
• 30:24
  will continue to decline over time.
• 30:27
  But, ultimately, if I was a if I was
• 30:30
  a farmer who already understood and owned gold,
• 30:34
  and I I would I would put, you know,
• 30:36
  start by putting 2% in. Start by putting 5% into Bitcoin.
• 30:41
  Put an amount in where you're like it's enough
• 30:43
  to watch it. Right? You're watching it, but you're not you've got some skin in the game, but you're not it it's not gonna wreck you either way. And you'll start to understand that you start to pay more attention,
• 30:54
  then you can buy more, you can buy less, whatever.
• 30:57
  But I think just getting, you know, two to 5%,
• 31:01
  10%,
• 31:02
  especially for the younger farmers,
• 31:06
  putting that money into that because,
• 31:09
  you know, it is, I think, over time gonna outperform gold given it's that it is it's a harder cap given,
• 31:15
  it's it's easier network effects.
• 31:19
  Unknown: So, yeah, that's that's what I would say. Let's talk about the price of gold. Somebody is accumulating it. Somebody is buying an awful lot of gold because the gold price is going up. Like it's never gone up in my lifetime.
• 31:30
  Who's buying all this gold and what are they planning to do with it?
• 31:35
  Unknown: I think the reason gold's going up the way it is,
• 31:39
  is
• 31:39
  we have reached a critical
• 31:42
  tipping point
• 31:44
  of,
• 31:46
  oil in particular, but commodities more broadly being priced outside the US dollar. So most of your audience will be very familiar with the petrodollar system where oil only priced in dollars post 1971,
• 31:58
  and commodities more broadly around the world only priced in dollars.
• 32:02
  Beginning around
• 32:04
  ten, twelve years ago, China began
• 32:08
  advocating for shifting some of their commodity import bill into Chinese yuan.
• 32:14
  They did this not because they hate the dollar, they wanna tip over the dollar, or they necessarily hate The US. They did this for a very practical
• 32:22
  reason, which is
• 32:25
  they
• 32:28
  were certain to have a commodity crisis like we saw in Southeast Asia in the late 1990s if they did not start to buy more of their oil and other commodities
• 32:38
  in Chinese yuan.
• 32:40
  Why? Because China is growing. China has a finite stockpile of dollars. Right? They have a certain amount of dollar reserves.
• 32:47
  Their economy is growing. Their oil usage is growing.
• 32:51
  The price of oil was going up over time.
• 32:53
  And so you could just do the math and say, okay. Well, if we have fixed number of dollars,
• 32:58
  economy grows, population grows, oil use grows,
• 33:02
  oil price grows.
• 33:03
  We're gonna run out of dollars to buy oil sometime in the next x years. And when we run out of dollars to buy oil
• 33:10
  to buy, we are going to have to do one of two things. We're either gonna have to significantly
• 33:16
  shrink our economy,
• 33:18
  political no no, you know, collapse our economy, use less oil,
• 33:22
  or we're gonna have to devalue our currency,
• 33:25
  which will then send our price of oil and overall inflation up, and
• 33:30
  that is also a no no. That'll be, you know, a currency crisis, a political crisis.
• 33:35
  And so what the Chinese decided on was
• 33:39
  we need to be able to buy oil in our own currency, in the Chinese yuan.
• 33:44
  The problem
• 33:46
  with that is twofold. Number one, we need to find someone willing to sell it.
• 33:51
  And number two,
• 33:52
  how do we get people to trust the Chinese yuan? You know, how do we trust how do we get oil producers
• 33:57
  to trust taking the Chinese yuan? Because, you know, nobody
• 34:00
  trusts the Chinese yuan.
• 34:02
  And what they arrived at was
• 34:04
  setting up a system where
• 34:07
  they will
• 34:09
  you can settle on a net basis any yuan surplus as you end up with as an oil exporter
• 34:15
  in gold.
• 34:17
  Nobody trusts the yuan more than the dollar, but everybody trusts gold more than the dollar.
• 34:23
  Witness witness farmers holding gold.
• 34:26
  And so what they have done is essentially,
• 34:30
  now who did they find to sell? Well, it started with Russia.
• 34:33
  And Russia has been doing this for ten, twelve years. I think it has factored very heavily into US foreign policy
• 34:40
  decisions relative to Russia.
• 34:42
  But we haven't been able to do anything about it for a number of reasons. And so I think what we're starting to see in gold markets is a tipping point where you're seeing other oil exporters doing this. Iran, for example, Venezuela,
• 34:55
  also,
• 34:56
  coincidentally enough, added to the, you know, sort of, you know, top
• 35:00
  five list of regimes we would like the regime change.
• 35:05
  Last week, we saw BHP Billiton, the gigantic
• 35:09
  Australian,
• 35:10
  iron ore miner, say that they had agreed to price 30% of their iron ore in the spot market in Chinese yuan.
• 35:18
  And so
• 35:19
  as this system gains traction,
• 35:22
  this makes great sense if you're an oil exporter. Right? It's literally what we're advising farmers to do. Right? Buy if you own gold or Bitcoin and you're a farmer
• 35:31
  and you're taking some of your farming surplus, the dollars you earn every year and you roll it into gold, guess what happens? The world keeps getting cheaper to
• 35:40
  you. Well,
• 35:41
  that's literally
• 35:42
  what China and Russia have been doing for the last ten to fifteen years, which is, alright. If there's net surpluses left over from us selling you oil,
• 35:50
  we're Russia's gonna end up with yuan. They can change some of the yuan into gold. Russian gold reserves go up. As Russian gold reserves go up and the price of gold goes up,
• 36:00
  Russia is effectively
• 36:02
  using their commodity production to bid up the price of gold and recapitalize their FX reserves.
• 36:08
  And the it's not the issue, but the reason I think why gold, you know, has begun going up on every day that ends and why it seems,
• 36:15
  is that we've reached a tipping point on this.
• 36:18
  It accelerated after we seized Russian FX reserves
• 36:22
  in 2022. Right? I mean, if you're a farmer, imagine if the US government came to you and said, you know what? We don't like your political views.
• 36:29
  We're gonna take, you know, all the money you have in the bank in dollars, we're taking.
• 36:33
  That's what we did to Russia in 2022.
• 36:36
  I'm not saying we you know, I'm not not making a political statement here. I'm just telling you the facts of the case.
• 36:43
  And if you're China,
• 36:45
  if you're Saudi Arabia, you go,
• 36:47
  wait a second. That could be me.
• 36:49
  And so what did the Russians do? They bought gold. What did central banks do? They bought gold. And so this trade is getting,
• 36:56
  momentum.
• 36:57
  The point here is that as we sit today, if we took the total, you know, 105,000,000
• 37:03
  barrels of oil per day produced times,
• 37:05
  where we at $62
• 37:07
  a barrel,
• 37:08
  times three hundred sixty five days a year,
• 37:10
  and then we compare that to global gold mining production every year of, call it 3,000 metric tons,
• 37:17
  $4,200
• 37:18
  an ounce today.
• 37:20
  The oil market alone is still probably 6 to eight times the size of the global gold market. So you're basically trying to fit
• 37:29
  the oil market, which is six times six to eight times bigger than the gold market into the gold market. What's gonna happen to the price of gold as that happens? It's gonna go up. Now factor in iron ore, copper,
• 37:38
  gas, all these other commodities.
• 37:40
  Global commodity markets, as they begin being priced also in Chinese yuan and in other BRICS currencies,
• 37:47
  but it's I think it's made primarily that yuan. Even the Indians last week were reportedly buying oil in Chinese yuan from Russia.
• 37:56
  You're gonna be trying to fit 10 to 15
• 38:00
  pounds
• 38:01
  of commodities
• 38:03
  into a one pound bag of gold. Right? It's the the old one. What happens? You know? What happens when you try to find ten ten pounds of crap into a one pound bag?
• 38:12
  The bag better expand or it's gonna blow up. What we're watching with gold's price is essentially the expansion of that bag as the commodity market tries to fit into it
• 38:22
  driven by
• 38:25
  a enlightened self interest of the parties involved, which is we cannot afford to only buy commodities in dollars. And this has been going on for ten, twelve years. And more recently, the we cannot afford
• 38:37
  to have our our savings in dollars because the if we do the wrong political thing,
• 38:44
  the Americans will freeze it.
• 38:46
  Unknown: And when you see this run up of gold, I think there are a lot of Bitcoiners that are sitting there being like, why would you trade into yuan? Now you're trading one devil for another when you could move into a currency that, that isn't expanding and isn't controlled by somebody central government. What what do you think? Is it this it's not a time
• 39:06
  it's not been enough time to develop,
• 39:08
  or do you think this is because the Chinese don't want Bitcoin? Where do you think about that?
• 39:15
  Unknown: Well, I I have been told that they've been stockpiling it for three years quietly, multiple different sources that don't know each other. I don't know how much they have.
• 39:24
  I'm told that you know? So for example, I have a a a good friend who's been there for thirty years,
• 39:30
  and, you know, we were on a Zoom call.
• 39:32
  And, you know, he's an American,
• 39:34
  and and, you know, he's been trying to get the Americans to, like, wake up to what's happening.
• 39:39
  And he'd go like, look. Here's my phone. Right? Here's the Chinese Internet. Here's you can go on the Chinese Internet and buy Bitcoin.
• 39:46
  Like, if they didn't want the populace buying Bitcoin,
• 39:49
  this wouldn't be here.
• 39:53
  So,
• 39:54
  you know, they're, like, standing and shouting all over, hey. Buy Bitcoin. Buy Bitcoin. But,
• 40:01
  you know, I've heard credible rumblings that the government has bought some, and the government is, you know,
• 40:05
  not encouraging, but encouraging, you know, by virtue of being there
• 40:09
  to buy some. So I think there's I think there's some of that. I think gold has a
• 40:13
  you know, Bitcoin is still young. Right? Bitcoin is unproven. Gold has a five thousand year history, and China is a culture that very much abides by,
• 40:23
  you know, history and sort of Confucian common sense infused with whatever else, you know, this capital, low communist,
• 40:30
  central arc
• 40:32
  it's a weird place.
• 40:36
  So I think
• 40:37
  that's
• 40:38
  I think it is happening a bit on Bitcoin
• 40:41
  there.
• 40:43
  You've seen Russia and Putin talk about Bitcoin. So there is some openness to it.
• 40:48
  I just think there's
• 40:49
  they are being prudent as I was as I am in terms of my own holdings. Right? I I have not sold all my gold to buy Bitcoin.
• 40:57
  I own I own both in, you know, and they're both, you know, pretty good sized positions.
• 41:02
  So yeah. So, I mean, that's I think that's that's that's,
• 41:06
  I think, how it is being handled.
• 41:08
  Unknown: So another big confusing thing for a lot of people is they hear Bitcoin. They hear about crypto.
• 41:15
  Show we clearly dismiss. You know, there's only one true Bitcoin. All the rest are our shit.
• 41:20
  But there is this other thing that's come on to the scene
• 41:24
  more and more, which is stable coins.
• 41:26
  And this floats into an idea that I think I first heard from you where what we're attempting to do with these stable coins is to issue them to, other countries.
• 41:37
  And those countries are saying, I don't really want this, Egyptian with a Lyra. I'd rather have access to US dollars, so I'm gonna buy stable coin.
• 41:47
  What's going on here? Am I getting that right?
• 41:50
  Unknown: In essence, yes.
• 41:52
  The the the goal or the gambit. Right? So stablecoins, I think there's two important things for the audience to take away. Number one,
• 42:00
  stablecoins
• 42:01
  is a gambit
• 42:02
  that we're trying because, essentially,
• 42:05
  we can no longer sell the amount of long term debt
• 42:09
  that
• 42:10
  we need to sell
• 42:13
  at rates
• 42:15
  that wouldn't blow up the debt market
• 42:18
  and the broader economy. Right? So we can't we can't our deficits are now so big,
• 42:24
  Unknown: and foreigners are not buying nearly enough long term bonds. And so we can't issue it out there without sending yields to to levels that blow blow up the economy in the world. Because if people don't buy it just so for people that aren't familiar, you go out to buy a treasury. If they sell them and people aren't buying them, then the interest rate goes up, up, up, up, up, up, up. And then the amount that the US government has to pay out in order to be able to borrow that money goes way up. So The US does not wanna have
• 42:48
  treasury auctions
• 42:49
  that don't sell out because it just increases the amount that they have to pay.
• 42:53
  Unknown: Correct. And that ten year treasury, as as you know, is also the base rate for
• 42:58
  farm loans, home loans, like the entire financialized economy. So as the US government's borrower rate goes up,
• 43:05
  everybody else's borrowing rate is going to go up
• 43:07
  plus 200 basis points or 300 basis points above that rate commensurate.
• 43:12
  So that's why it would blow up everything. So
• 43:15
  the solution,
• 43:17
  the attempted solution, I don't know if it's gonna work or not. It might. It might not.
• 43:22
  The stablecoins are an attempted solution at fixing this, which is
• 43:26
  what the all they're doing
• 43:28
  is shifting issuance to the front end. There's a lot more demand because of our financialized economy
• 43:33
  for T bills, for short term paper, for a whole number of different reasons.
• 43:39
  Stable coins have been, per the Genius Act, can only be backed by T bills, bank reserves, dollars.
• 43:46
  And so essentially, they are trying to
• 43:52
  use stable coins to create enough demand for T bills to finance the deficits. It's basically financing our deficits at near cash in near cash markets, which is
• 44:02
  secularly inflationary. Forget about this reading, that reading, month to month. Over time, it's going to add to the inflation rate, which I think is very important for people to take away.
• 44:10
  As it relates to foreigners, yes, there's a whole lot of different countries out there that would say, yeah, all else equal, you know, the Nigerian naira, right, is down you know, the dollar's up 300%
• 44:21
  over the last, you know, I don't know, year, two years, three years against the Nigerian naira. And if you're in Nigeria and you have a smartphone, which is American technology,
• 44:32
  there, you would much rather have dollars. And so this is essentially a way to
• 44:38
  get countries to, you know, to ditch their own currency.
• 44:43
  You know, there are people to ditch their own currency to hold dollars and
• 44:46
  finance our deficits. And
• 44:48
  that's the thesis of it.
• 44:51
  Could it work? Yeah, for a time.
• 44:54
  The question becomes if the dollar starts rising rapidly against everything else,
• 44:59
  that's going to create
• 45:01
  problems down the road, but we'll we'll set that aside. But, ultimately,
• 45:06
  if you are if you're in Nigeria and you go, oh, gosh. The net narrows down a bunch against the dollar last three years.
• 45:13
  I'm gonna move it to dollar stablecoins. Great. But then you're gonna go one step further in all likelihood and go, wait. Dollar's down. You know, the Bitcoin's up
• 45:21
  4600%
• 45:22
  against
• 45:23
  against the dollar
• 45:26
  over the last,
• 45:28
  you know, five years, three years, whatever it is. Right? And so
• 45:33
  the stablecoin
• 45:34
  gambit
• 45:35
  relies essentially on foreigners being stupid on some level. Right? Like, that they're going to buy dollars
• 45:42
  and that they're never gonna you know, that they're sort of not smart enough to figure out that, hey. I could take
• 45:47
  a quarter of my dollar balance and put it in Bitcoin. And so it's going to undermine
• 45:52
  other currencies. It's going to undermine the dollar as well. But it's really good for Bitcoin Bitcoin utilization ultimately. And the higher Bitcoin goes, the more stablecoins there will be, more stablecoins there are, the more T bill demand there's going to be. So it turns it into a very
• 46:07
  virtuous cycle for the treasury's eyes. Right? Oh my gosh. Gosh. As as Bitcoin goes up, it's gonna drag along stable coins, and it's gonna drag along t build, man.
• 46:15
  For the average person who doesn't own Bitcoin, it's gonna be a vicious cycle because the more t bills we issue, the more
• 46:22
  the more,
• 46:23
  inflationary it is over time.
• 46:26
  And it it's another reason why it's so important to have some Bitcoin.
• 46:30
  You know, your purchasing power will improve markedly in Bitcoin terms as this happens, but it'll fall markedly in dollar terms as it happens.
• 46:38
  Unknown: Man, I love it. You you are always willing to say the quiet part out loud. That's the way I've always felt about stable coins,
• 46:43
  which is, like, if you have access to get to a stable coin, which I would have to go pretty far out of my way to find it, And then you might as well buy Bitcoin, which isn't going to be I mean, how many stable coins are out there? Well, as many as they wanna issue with the dollar back, there's nothing there's nothing in in comparison.
• 47:01
  So you look at this, you look at the the amount of gold that
• 47:05
  Asia is amassing. You look at the price of Bitcoin. You look over to Europe and they are still saying
• 47:12
  speculative asset. I wouldn't hold any of it. You know, we'd rather have our own central bank currency.
• 47:19
  These people seem
• 47:21
  either dumb or they're playing dumb or something
• 47:25
  because their strategy seems to be obviously going to fail.
• 47:30
  Where's the weak point in in what I'm saying here?
• 47:34
  Unknown: Well, there there is no weak point there. And, you know, I would typically point out
• 47:39
  the same people
• 47:41
  the same people that thought it was a good idea to shut down their nuclear power plants on the advice of a 14 year old teenage girl,
• 47:49
  and their coal plants, and they're
• 47:51
  on the advice of a 14 year old teenage girl,
• 47:55
  and go to windmills
• 47:56
  and go to solar to run their industrial factories,
• 48:00
  and then shared as, you know, who knows, Kaiser Soze blew up the Nord Stream two gas pipeline that fed cheap gas that made their industry competitive,
• 48:12
  are the same people that are saying, no. Bitcoin is bad.
• 48:16
  I'll leave it to your judgment. Right? It I I think they have demonstrated
• 48:21
  a level of strategic
• 48:24
  stupidity
• 48:26
  is one option
• 48:27
  or
• 48:28
  a level of
• 48:30
  political capture
• 48:32
  slash corruption.
• 48:33
  That is so great
• 48:35
  that if those people say sell Bitcoin, you should buy Bitcoin.
• 48:39
  Unknown: Yeah. You know, I,
• 48:41
  I I lived in Kenya for a while. And one of the things I realized when I was in Kenya is
• 48:46
  it is a ruling class. We'll let their people live in destitute poverty if that's what allows them to succeed.
• 48:54
  And like, if you think like, no, they couldn't possibly sink our entire economy just for themselves.
• 48:59
  Like that is exactly what happened in Kenya. They're they're total. The elites are completely willing
• 49:05
  to rip all the value out of the walls
• 49:08
  and, and leave you there with a with a husk. So to me watching, I'm exactly with you. The more they say don't buy Bitcoin, the the more the more likely you should.
• 49:19
  Unknown: No. Absolutely. I mean, I've I've seen and I've preached it here in, you know, The US Rust Belt for years and years and years, which is,
• 49:28
  you know, they hollowed us out for economic, you know, purposes. Right? They
• 49:33
  the economic policy of the United States government
• 49:37
  since roughly 1982
• 49:40
  has been subjugate The US middle and working classes
• 49:45
  in order to support
• 49:46
  the bond market in Wall Street.
• 49:49
  And and that's that's been our economic policy in a nutshell. We need to send factories and jobs to Asia to keep inflation low, to support the bond market, to allow the US government to run deficits, to support Wall Street. We will do that. We'll do it over. First, they'll go to Mexico. Then they'll go to China.
• 50:06
  Whatever we have to do, we will do that. And so absolutely, like,
• 50:14
  they will do exactly what you said. They are doing exactly what you said. Right? It is the old apocryphal
• 50:19
  it's the old apocryphal
• 50:21
  Thomas Jefferson quote. There's some question about whether he actually said it or not, but attributed to him. Right? Where, you know, if you allow, you know,
• 50:28
  banks, private banks to issue the money of the country,
• 50:33
  you know, at first by inflation, then by deflation, you will wake up homeless in the land your fathers, you know, your fathers conquered. You're the land your fathers,
• 50:41
  you know, developed.
• 50:42
  And that's what's happening when we go back to the first point of the conversation around, hey, why farmland just keep going up when crop prices are, like, meh, and inputs are up. That's it's literally
• 50:52
  what is happening
• 50:54
  is the T the Thomas Jeffrey, the apocryphal Thomas Jefferson quote.
• 50:58
  Unknown: So it appears to anybody that's looking that electricity
• 51:02
  generation
• 51:03
  and transmission
• 51:04
  is absolutely
• 51:06
  the most important thing that's going to happen. Right. In order to run any of the AIS, the robots, the cars,
• 51:12
  the Bitcoin mining,
• 51:15
  you are going to need unparalleled
• 51:17
  amounts of, of,
• 51:19
  energy.
• 51:20
  Does this mean, you know, Hey, average guy can just go buy some energy ETFs and ride this wave to the future?
• 51:29
  Unknown: I think there are certain, company ETFs that you can own. Right? So there's there's,
• 51:34
  electrical infrastructure
• 51:36
  type industrial companies that stand to benefit from this.
• 51:39
  You know, for me and I and I think that's part of a a good diversified portfolio.
• 51:44
  You know, for me, ultimately,
• 51:46
  you know,
• 51:47
  my favorite way to play energy
• 51:49
  is gold and Bitcoin. They're just stored energy.
• 51:52
  And with the kicker of, you know,
• 51:56
  we know there's too much debt. We know they face a choice of print the money or trigger the revolution, and they're gonna choose print the money.
• 52:02
  So if I look at at at the intersection, right, of a Venn diagram of, you know, a lot more electrical
• 52:07
  infrastructure and spending in this circle and a whole lot of print the money to avoid the revolution in this circle, like, the intersection of those two things,
• 52:15
  in my opinion,
• 52:17
  are golden Bitcoin. And I think AI fits into that too. Something that we've said a lot in our our reports
• 52:24
  is AI, if it does even close to what it is expected or what the optimists say it's gonna do, is fundamentally
• 52:31
  incompatible
• 52:33
  with our debt based monetary system. Because ultimately, what's gonna happen is AI is going to create a rise in unemployment amongst white collar workers similar to what China did to blue collar workers
• 52:43
  throughout the two thousands after China went into the WTO.
• 52:47
  And when that happens, those white collar workers are gonna start defaulting on mortgages, on car loans, on credit card loans. And once that starts to happen, the banks are gonna run into trouble. And when the banks run into trouble, the banks hold treasury bonds as their reserves. They don't owe gold. They don't owe dollar. They don't owe treasury bonds. And they're gonna start selling treasury bonds in a recession to offset credit losses. And when they do that in the next recession, rates are gonna go up. And then that only accelerates the spiral. And, ultimately, that cycle will happen for only as long as it takes until the Fed comes in and prints money again. And so AI, paradoxically, which is on the surface, extraordinarily
• 53:24
  inflation or deflationary,
• 53:25
  excuse me, which it absolutely is,
• 53:28
  will force
• 53:30
  not just the Fed, but Western central bankers to essentially fully reserve
• 53:35
  the global debt market. And the global debt market's about a hundred thirty, hundred forty trillion dollars.
• 53:40
  They're gonna have to print
• 53:42
  AI will force them to print so much money
• 53:46
  to keep banks from defaulting from from banks from collapsing
• 53:50
  after
• 53:51
  AI,
• 53:52
  which drives job losses, drives credit consumer credit losses.
• 53:56
  And that's why I say it too, to me, one of the best, you know, sort of chicken plays of,
• 54:03
  of of AI
• 54:04
  is Bitcoin and gold. Because ultimately, like, I can't figure out I'm
• 54:09
  I'm a fairly well educated man. I don't have enough education to know which AI is winning better, this, that, the other. It's it would be a full time job just to figure that out.
• 54:18
  But what I'm a 100% sure is if it is if any of them are successful,
• 54:23
  the pace of
• 54:24
  job loss, deflation, credit losses, bank issues, Fed printing, it is going to drive.
• 54:30
  I am highly confident it's gonna be very good for Bitcoin and gold. And so I think the more you see on AI, I think that's another factor driving gold. Because I think there are more people understanding, like, oh my gosh.
• 54:41
  I need to own an asset that is nobody else's liability, which gold is. And if you own Bitcoin self custody, often exchange,
• 54:49
  Bitcoin also is.
• 54:51
  Unknown: So
• 54:52
  this leads me to something that I kick around in my mind a lot. We were talking about the boomers before
• 54:58
  that,
• 54:59
  in nominal terms, the amount of dollars that your stocks are worth or that your house is worth just keeps going up, up, up, up, up. But if this
• 55:09
  inflation cycle continues
• 55:11
  and, and we just it keeps rising up, who will be able to buy
• 55:16
  these things that are, you know, the that are the store of wealth. That is the baby boomers. I mean, like the people that say, Hey, my house is worth 2 and a half million. When I bought it for 500,000,
• 55:27
  there's not that many people out there that can buy it for 2 and a half million.
• 55:31
  What happens when you have an entire market where the older people as they go to get out, there's nobody there to buy it?
• 55:38
  Unknown: I don't know. That's a thought I've had from, you know, frequently as well. Right? I think about it in terms of markets. Right? Robust markets of, you know, in far in my experience, farmers understand markets better than than than most people. Oh, because they're dealing with it every day. Yeah. Oh, and they're they're so wise because they're not trying to get every tick. Right? That is a matter of life and death for them. Right? So it is all about cutting, you know, making that that margin of safety for them. So they they tend to be very wise investors. And
• 56:06
  I look at the bid ask spread on those houses, right, to your point. Right? There's a whole lot of, you know, McMansions for sale.
• 56:13
  Sometime you know, there's seventy, sixty five million boomers, whatever. Right?
• 56:17
  All their houses are
• 56:19
  expensive
• 56:20
  relative to history,
• 56:22
  and the boomers control
• 56:24
  boomers in silent generation total control, I wanna say, around two thirds of the total wealth of this country.
• 56:31
  So, like,
• 56:32
  I I don't know. I think,
• 56:36
  you know,
• 56:37
  there's, I think, sort of two versions of the way this goes, which is at least two, but but two two most likely, I guess, which is, you know, as the as the older generation, you know, goes into
• 56:47
  retirement homes, etcetera, downsize and sells their houses,
• 56:52
  you know, I think that the market will stagnate to decline in terms of pricing in certain key markets where they're most inflated because their kids just don't have the balance sheet, as you noted. Now as they die,
• 57:04
  you know, there's gonna be a whole bunch of houses
• 57:08
  and a whole bunch of sort of stock portfolios, retirement portfolios in theory. Right? If they are not consumed by the government in some sort of Medicaid spend down, which
• 57:16
  is a separate, but somewhat related issue. But
• 57:20
  let's assume,
• 57:22
  you
• 57:23
  know, the house, the Boomer dies, house stock portfolio all goes to the kids.
• 57:29
  Well, if I'm a kid, I already got my own house. I got the stock portfolio.
• 57:34
  I probably sell the house for whatever I can get for it because it's all it's found money. Right? It's a lottery ticket. It's probably completely paid off.
• 57:43
  Renting it is like, it's not kinda what it's cracked up to be because rental housing has the same problem increasingly, you know, VRBOs, etcetera, as farming does. Right? Which is the price of the underlying asset has gotten so high that the yield is, like, not worth you know, it's not saying it's not worth it, but it's it's it's very competitive, so I would say. Right? I think in some cases in rental, you know, it is not worth it because, you know, in farmland, the land is still there. Right? You can lay it fallow, you fertilize, whatever, away you go in a couple years. Like, you rent a house, someone come in and trash a joint, and now you gotta, you know, put a bunch of your last year's profits into into fixing the house.
• 58:18
  So point being is that,
• 58:20
  ultimately, I think,
• 58:22
  you know, I've I've said this is I think the game of, like, hey. Buy a house because, you know, buy a house to get rich. I think it's over.
• 58:29
  I think that's over.
• 58:31
  Buy a house because,
• 58:34
  you know, you like it. It's in a good school system. It's a place to raise a family.
• 58:38
  It's safe. It's whatever.
• 58:40
  You like the location.
• 58:42
  But
• 58:43
  I just I don't
• 58:45
  particularly when we overlay, you know, sort of the demonetization
• 58:48
  of housing
• 58:50
  of
• 58:51
  that Bitcoin is doing, right, which is younger generate.
• 58:54
  I've been advocating to my my sons. They all own some Bitcoin.
• 58:58
  Been advocating it for five years. Buy some Bitcoin. Buy some Bitcoin. Buy some Bitcoin. That Coinbase ad that was on TV,
• 59:05
  it's a thirty second ad during NBA game back in May, was mind boggling.
• 59:09
  Same house that was thousand Bitcoin in 2016
• 59:13
  was
• 59:14
  10 Bitcoin in
• 59:16
  2020, and now it's,
• 59:19
  you know, 2 Bitcoin.
• 59:21
  And that house is going to 1 Bitcoin in the next five years. And five years after that, it's gonna be half a Bitcoin. And five years after that, it's gonna be a tenth of a Bitcoin.
• 59:29
  And
• 59:31
  that's my base case. And so you have this demonetization of housing. So I I think home prices are probably
• 59:39
  flat to down
• 59:41
  for some for some time.
• 59:44
  Unknown: Earlier in the conversation, you mentioned, like, you know, you either print the money or you have the revolution.
• 59:49
  And the slow printing of money is poisoning
• 59:53
  the bloodstream and it, it just, everything just continues to decay.
• 59:57
  The other option then is to just
• 1:00:00
  print as much as you can in a very small amount of time and have, you know, rip the band aid off.
• 1:00:06
  Is this an option that you think The US would would actually consider?
• 1:00:11
  Unknown: Yes.
• 1:00:13
  I do.
• 1:00:14
  Unknown: That's terrifying.
• 1:00:15
  Unknown: There is a provision.
• 1:00:18
  There's something called the financial accounting manual for Federal Reserve Banks.
• 1:00:22
  This is basically like the instruction manual or the the rules
• 1:00:26
  for sort of, you know, Fed and Treasury interactions.
• 1:00:30
  And in section two dot 10,
• 1:00:32
  it is provided for that the Treasury secretary can instruct the chairman of the Fed
• 1:00:37
  to revalue US gold.
• 1:00:40
  And that
• 1:00:41
  would then create a deposit
• 1:00:43
  into what is essentially the Treasury's checking account, free and clear. It's It's called the treasury general
• 1:00:49
  account or TGA.
• 1:00:52
  Right now
• 1:00:54
  now this is important because
• 1:00:56
  we still hold the gold on our balance sheet at a statutory rate of $42 an ounce than it was back in 1971.
• 1:01:04
  So at $4,200
• 1:01:06
  an ounce, and we if assuming we have all the gold we say we do, which I I think we probably do, but let's just
• 1:01:13
  keep it simple.
• 1:01:14
  At $4,200
• 1:01:15
  an ounce on our 8,100,
• 1:01:18
  tons of gold,
• 1:01:20
  today, if we revalued the gold, if if if Powell Bessen called a Powell and said, okay. Revalue it.
• 1:01:26
  Treasury would have a windfall free and clear of about $1,200,000,000,000
• 1:01:32
  deposited into their checking account with which they can do whatever
• 1:01:35
  whatever he wants within reason. Now
• 1:01:38
  the problem is is we have
• 1:01:41
  $27,000,000,000,000.
• 1:01:43
  You know? The the the treasury market's $25,000,000,000,000
• 1:01:45
  in debt. 37,000,000,000,000 overall, I think the treasury market is is 27,000,000,000,000
• 1:01:50
  in size. So, like,
• 1:01:52
  that's a whole 4% of the treasury
• 1:01:55
  market.
• 1:01:55
  It's not big enough. Now if gold was $20,000
• 1:01:59
  an ounce, that would be about 5,000,000,000,000.
• 1:02:01
  Gold was $40,000
• 1:02:03
  an ounce,
• 1:02:05
  you know, that gets you about
• 1:02:07
  10,000,000,000,000.
• 1:02:09
  He could literally wade into the treasury market with that $10,000,000,000,000 windfall. It's which is essentially just straight money printing using the gold. We would not have to sell a single ounce of gold to do that. It's just an accounting creation gimmick.
• 1:02:21
  And
• 1:02:22
  he could buy back, you know, $10,000,000,000,000
• 1:02:25
  on $27,000,000,000,000
• 1:02:27
  treasury market, $25,000,000,000,000
• 1:02:28
  treasury market.
• 1:02:29
  That's 40% of the market. Now our debt to GDP is not a 120%. It's 80%. And, oh, by the way, the monetary multiplier
• 1:02:37
  printing that much money and injecting it essentially into the economy. Right? Because if you own treasuries, now you got cash.
• 1:02:43
  You're gonna spend it.
• 1:02:45
  You would
• 1:02:46
  GDP would probably grow
• 1:02:48
  30%
• 1:02:50
  for two or three years.
• 1:02:51
  Fed would have to cap rates, but
• 1:02:54
  the net of it would would be after two, three years, we would have debt to GDP, probably, 25%,
• 1:02:59
  20. And now the Fed can act independently,
• 1:03:02
  manage the monetary system,
• 1:03:04
  etcetera.
• 1:03:07
  No. I think it's really important. Those numbers sound preposterous.
• 1:03:10
  But if you look at the market value of US official gold, just the market price times our 8,100 tons,
• 1:03:17
  as a percentage of the foreign held portion of US treasuries outstanding,
• 1:03:22
  today with the massive run we've had in gold,
• 1:03:25
  that is at 11%.
• 1:03:27
  Now by way of comparison, in 1989 when the Berlin Wall came down,
• 1:03:31
  it was 20%. So gold would have to almost double just to get back to 1989 levels on that metric. The long term average is around 40%, so gold would have to quadruple
• 1:03:41
  from 4,200 an ounce just to get back to the long term average. And in 1980, when we had an honest to goodness dollar crisis,
• 1:03:49
  that percentage was a 135%.
• 1:03:52
  So in 1980, foreigners could have brought all of their foreign debt to The US, demanded gold, taken gold, and we still woulda had a third of our 35% of our gold left over. That is a gold bubble. Our our foreign debt was 135%
• 1:04:06
  gold back. Today, it's 11.
• 1:04:09
  So
• 1:04:11
  now if Besant revalued
• 1:04:13
  it unilaterally,
• 1:04:14
  he would have to make that market, I think, which is a whole lot of money creation, and that's tricky. But
• 1:04:19
  if they're able to pursue policies
• 1:04:22
  that let the market value the gold up to those numbers, you know, for 20%, you know, double from here, four times from here, and then did it,
• 1:04:31
  that's the market.
• 1:04:32
  And there are steps we could take. Right? Where, you know,
• 1:04:36
  there's nobody better being a bull in a China shot than Trump. Right? He can go in there and start
• 1:04:41
  breaking stuff, and people go, oh, god. I need gold. And if everybody bids up gold for him,
• 1:04:47
  they could do it. They could do it. I mean, it's
• 1:04:50
  that is a way to do it fast.
• 1:04:52
  Unknown: And what would it be like for the the normie that's just out there working a regular job, you know, living life, and and this process gets implemented by the government?
• 1:05:04
  Unknown: I think at first, they don't notice at all.
• 1:05:07
  They would notice a couple things right away. They would notice that the S and P 500 is limit up
• 1:05:14
  today,
• 1:05:15
  tomorrow,
• 1:05:16
  the next day, the next day. And all of a sudden, their four zero one k has, like, doubled
• 1:05:22
  in a month. They're like, oh, this is great.
• 1:05:24
  And if they own gold,
• 1:05:26
  boom. They're they're great. I think they would see Bitcoin. Like, wow. Bitcoin is $600,000
• 1:05:30
  an ounce. It was 110
• 1:05:33
  just, like,
• 1:05:34
  a month ago. That's weird. About four or five months after that,
• 1:05:39
  not even. They would start to see prices in the stores rise a bit.
• 1:05:45
  You would see help wanted ads all over the place. You know? All of a sudden,
• 1:05:50
  you know, skilled trades would be you know? There would be a story in the Wall Street Journal about welders making $500,000
• 1:05:56
  a year in more than starting investment bankers.
• 1:06:00
  And you would see wealth inequality on a lag, like, collapse in this country, you know, because basically,
• 1:06:06
  the wealthy classes, which are Wall Street and the and the elderly, where's the elderly have most of their money? It's in bonds.
• 1:06:15
  They
• 1:06:15
  just
• 1:06:17
  we just it will have amounted to a tax increase
• 1:06:21
  on the elderly to pay for what to actually pay for what they're using. Entitlements
• 1:06:27
  in terms of their generation,
• 1:06:30
  the real cost of it is much higher than than what they paid in over the course of their working career, thanks to the inflation. And so it would be inflationary, but it it it's
• 1:06:38
  Unknown: that's where this is going. I see a smile on your face. Is this something you want to see happen?
• 1:06:45
  Unknown: I'm smiling not because it necessarily it doesn't make me happy in any way, but I
• 1:06:51
  this is the only way out.
• 1:06:53
  People like, we're still in this bargaining phase. Right?
• 1:06:57
  We we're we're in the bargaining phase, so we can do this. Right? And and sort of
• 1:07:02
  you know, historically,
• 1:07:04
  when nations find themselves in this position,
• 1:07:08
  you know, they print you know, they they first prefer to peg it on somebody,
• 1:07:12
  you know, pin it on somebody,
• 1:07:14
  outside. Right? We go to war. Let's go to war. That'll paper over it.
• 1:07:18
  Well,
• 1:07:19
  that's why what has happened with these Chinese rare earths over the last
• 1:07:24
  week, two weeks, four weeks, four months has been so important.
• 1:07:27
  We can't go to war.
• 1:07:29
  The offshoring of our industrial base over the last forty years has gotten so extreme that critical parts of the US military are now made in China. We literally
• 1:07:38
  ran down 10 to 15
• 1:07:40
  of our high end air defense missile
• 1:07:42
  inventory in eleven days of medium combat
• 1:07:45
  in The Middle East this summer.
• 1:07:47
  We would run out of stuff
• 1:07:50
  in a month or two because we offshored too much. We financialized too much. So the point here is, like, okay. Well, if we want to avoid having to inflate ourselves this way, then, you know, let's go to war and we'll beat somebody else up, and they'll have to take the pain.
• 1:08:05
  Maybe we can push the Europeans underwater for a bit with some of the things we're trying to do. But ultimately,
• 1:08:11
  like, there's not gonna be a war to get out of this because everybody needs China to make all the stuff for the war. And China's not interested
• 1:08:17
  in making weapons for The US, so The US is gonna point at China. So, you know, you could read chapter and verse.
• 1:08:23
  What is it? It it's Von Mises, you know, the inflationary systems always end. You either have to voluntarily with you know, get away from it or the currency
• 1:08:33
  system has an issue.
• 1:08:35
  And what we're talking about is the currency system collapsing against gold. And, you know,
• 1:08:39
  100%
• 1:08:40
  of fiat currency systems in history
• 1:08:43
  always end by collapsing against gold. Like, this
• 1:08:46
  this at least allows us to
• 1:08:50
  redirect.
• 1:08:51
  Right? If Besson ends up with 2,000,000,000,000, 5,000,000,000,000, $10,000,000,000,000,
• 1:08:56
  now we can go, okay. We are going to subsidize,
• 1:09:01
  an education program for the skilled trades. We are going to build up a new generation of young farmers. We are going to rebalance the economy. We're gonna build productive
• 1:09:10
  assets,
• 1:09:11
  whether that be farmers, welders, industrial capacity,
• 1:09:15
  the electrical grid
• 1:09:16
  with some of this money.
• 1:09:18
  That's a good outcome. Is it inflationary? Sure. Do bondholders get killed on a real basis? Sure. But that's in the cake.
• 1:09:25
  That's the good outcome of the currency collapsing against gold. The good the bad outcome is you pretend like none of this is true,
• 1:09:33
  and you don't proactively do some of the things I just said.
• 1:09:38
  And then
• 1:09:39
  when the currency collapses against gold, you have no ability
• 1:09:44
  You have no ability because
• 1:09:46
  when people are scrounging for food or whatever, they don't go to work. Right? This is like a Russia
• 1:09:52
  1998
• 1:09:53
  type scenario. Right? It takes you a long time to rebuild from that in some sort of leader. So, and that's a really
• 1:10:00
  bad outcome.
• 1:10:01
  And that's,
• 1:10:02
  you know, I wish it was these weren't our options,
• 1:10:05
  but I really wish we wouldn't have gone to Iraq on a lie. I really wish we wouldn't have offshored our industrial base and and subjugated The US middle working class for forty years
• 1:10:13
  to support the bond market in Wall Street. And I really wish we wouldn't have bailed out fraud in 02/2008, which is what we did.
• 1:10:19
  And I really wish we would have been more strategic with how we handled COVID. And I
• 1:10:23
  but I didn't make those policies. Right? So, you know, those those are in the cake. And it's, you know, it's not some sort of happy thing. It's
• 1:10:31
  and I guess why are you smiling then, Luke? You know, sometimes when you wanna cry, all you can do is laugh.
• 1:10:37
  Unknown: So, Luke, we just jumped straight into this conversation,
• 1:10:40
  but you are not just a a titan in the Bitcoin world just doing podcast. You run a company, FFTT.
• 1:10:47
  And, why don't you tell us a little bit about that, and and what what do people come to you for?
• 1:10:53
  Unknown: Sure. So, FFTT
• 1:10:55
  stands for, Forest for the Trees.
• 1:10:58
  It is a consulting firm I started, eleven years ago doing
• 1:11:02
  trying to see the forest for the trees, essentially,
• 1:11:05
  connecting dots in macro and thematic investment research for,
• 1:11:10
  individual investors, mass market
• 1:11:13
  investors, high net worth, institutional.
• 1:11:15
  We have a range of product availability, and people are interested in learning more about that.
• 1:11:19
  They can go to fftt-llc.com
• 1:11:22
  for more information. And, you know, if they're interested in hearing more what I have to say about, various things or my thoughts on things, I'm also on exit at Luke Grohman, l u k e g r o m e n.
• 1:11:33
  Unknown: Well, Luke, it was a huge honor that you would come on. I, I've been listening to your stuff when I, I am a
• 1:11:41
  a pretty
• 1:11:42
  discerning,
• 1:11:43
  person when it comes to who I listen to about Bitcoin and the larger macro world, then I would say you and Lynn Alden are what we call up the graph. You are,
• 1:11:52
  seeing things long before other people do, and I've I'm so grateful you were willing to come on and, have a chat.
• 1:11:58
  Unknown: Oh, I appreciate you having me. Like I said, I've got a a very, soft spot for the farm community as as somebody that was a,
• 1:12:05
  you know, a wannabe farmer for a moment in time and as someone who has, you know, in in a semi rural community and has a lot of, has a number of different friends in that business.
• 1:12:15
  You know, it's a
• 1:12:17
  it's it's an important,
• 1:12:18
  it's an important group of people, to me. And I and
• 1:12:22
  I always find farmers to be just so
• 1:12:24
  great to talk to because they're real, and they're just, you know, they they they get it. They're real. There's no bullshit. And so,
• 1:12:31
  Unknown: the honor's all mine. I appreciate you having me on. Alright. That's gonna do it for our conversation with Luke Groman. I wanna thank him for coming on the show. What an honor it was to have somebody with such a rich band of knowledge that thinks about the world so differently.
• 1:12:45
  I hope you enjoyed the show. If you're somebody that is thinking about their professional career and you're starting to wonder what can I do that will give me an edge, a way to express my ideas
• 1:12:57
  so that other people understand me or that you're better able to prompt other people to talk and share what they're thinking about, then you may be interested in my interest based communications class?
• 1:13:09
  This is a five session course where I go through everything from interest based negotiating to introducing yourself, having great conversations by learning how to ask better questions and not interrupt people. We'll also talk about conflict and how to manage difficult situations.
• 1:13:25
  And we finish
• 1:13:26
  with an entire session on how to become a better presenter
• 1:13:30
  when you're presenting to a room full of people, maybe that are not gonna like what you have to say. But how can you put it in a way that they'll understand it and engage with your ideas?
• 1:13:39
  If you're interested to learn more about interest based communications, go to vancecrow.com
• 1:13:44
  and look up interest based communicating. Send me a little note that you're interested either as an individual or for your organization,
• 1:13:51
  and we'll get a call set up to figure out a way for you to do this course. Alright. That's gonna do it for the show. We'll be back later.