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Ten31 Timestamp: Druck and Disorderly · TFTC: A Bitcoin Podcast

0:00
It's the last day of August.
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I don't think John and I took a vacation this summer,
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so we decided to dress down.
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It's a T-shirt.
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1031 time stamp recap episode today.
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You know, when you do what we do,
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when you're a professional situation monitor,
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every day is a vacation, right?
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So I feel good.
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I'm feeling rested.
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I am too.
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I am too.
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I'm feeling well.
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I got eight hours of sleep last night.
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Got the kids at the home base back from the shore.
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Ready to dive in.
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A lot going on in the world.
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We mentioned last week that Jackson Hole would be happening between last week's episode and this week's episode happened over the weekend.
0:35
We'll touch on that, but we're going to start where we always start, the Strait of Hermes, Iran Treasury,
0:41
launching unprecedented campaign against Iranian regime on Economic D-Day and also launching Operation Economic Outcast.
0:48
We want to make clear here today that no one is above the reach of the U.S. sanctions,
0:52
Bissend said when asked whether the U.S. would sanction Chinese banks that do business with Iran.
0:58
I don't think I mentioned it. I wanted to surprise John because I know of how big of a fan he is of
1:03
MindPrint Hash. But I had a conversation with Matt Dines early last week where we talked about
1:09
economic D-Day and what it means. But I want to hear your perspective, John.
1:14
Yeah, I think so. I listened to I haven't actually finished your conversation with with him from last
1:19
week. I did listen to the guys this past week, and this is now just a Mindprint Hash recap show
1:23
for the record. But no, I mean, I think it brings up a lot of good points and a couple of things
1:29
that I was going to flag here too. I like Matt's framing that the phrasing of this as economic D-Day
1:34
is notable because D-Day is the landing point, not like the end of the war, kind of breaching
1:40
enemy territory, so to speak, and then moving forward and gaining ground from there if it works.
1:45
So but I think it's it's helpful framing to keep in mind that this is probably the even in the administration's mind, kind of the beginning, not the end.
1:52
And, you know, very notable, obviously, for a variety of reasons, kind of broad, broad sweeping sanctions, kind of wide berth of what's being affected here, number of entities, etc.
2:02
Also, it's not on the screenshot here that we have in the video if you're watching, but secondary sanctions threatened for any institutions or countries that are, you know, deemed to be working with Iran along any of these axes that are cited here, which, interestingly, the first of which is digital assets.
2:19
So digital assets, technology, gold, aviation and shipping that in the administration's words, the Iranian regime uses to try to prop up its failing economy.
2:27
So secondary sanctions are much broader than your kind of typical sanctions package.
2:32
And you kind of allow give the Treasury and OFAC leeway to kind of reach into the pockets of actors that are potentially well beyond kind of the first order of who's who's doing business with with Iran like immediately.
2:46
And I think notable that in Besant's press conference to talk about this, he was specifically asked, you know, could China even be affected by these sanctions, Chinese banks?
2:57
And he pretty much deferred and said, you know, no one is going to be above the reach.
3:01
Now, you could argue that that's kind of a veiled threat and kind of, you know, some bluster.
3:06
And I think that's certainly what how the administration would like you to view it.
3:09
You could also argue that he could have taken an even stronger stance and said, you know, we're definitely going after China.
3:15
I don't know if that's strategically advantageous. And he kind of specifically even said, you know, we're going to try to let people, you know, do in his view, quote unquote, the right thing, because there's no reason to blow up a bunch of trade relationships in the global economy if we don't have to.
3:28
But, you know, watch out because we will. So I think it's definitely an escalation.
3:33
And I think that the China angle, as we always bring up on here, is one of the one of the big ones.
3:38
We probably the really the driving force behind a lot of it, in addition to the the ongoing controlled demolition, potentially of the euro dollar market, which we can get into.
3:48
But I do think it's it's notable. Right. It's not. I saw a lot of commentary over the past week saying, like, well, you know, sanctions never do anything.
3:56
and this is just a bluster from the administration because it's kind of scared to go on, you know,
4:02
the offensive or get kinetic and it knows it can't win. So it's kind of throwing this,
4:07
it's throwing this package out there just to kind of as a token way to tuck its tail between its
4:12
legs and kind of go home. And I mean, I think that's, I think that's the wrong read. I definitely
4:17
think there have been sanctions on Iran before and prior administrations that have, you know,
4:21
not really gone anywhere. I think you can argue that those were maybe not as committed to
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targeting some of the key nodes that I think the administration is actually interested in going
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after, which are probably like well beyond Iran, which Matt's documented well, Tom Longo's
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documented well in the UK and in China and elsewhere. So, you know, remains to be seen.
4:40
It's absolutely the case that sanctions generally don't have a great track record of kind of
4:44
doing what you want them to do and really hitting the people you want them to hit.
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So I think we'll have to see if these are different. But I do think given how clearly
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this fits into all the other strategic kind of initiatives that are at play here, all the
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plates that are spinning. I think the wrong read is to say that this is kind of a nothing
5:00
burger announcement that isn't going to matter in the long run.
5:03
Yeah I recall a conversation I had with Tom Longo last year describing sanctions is you got to look past the first layer implications and they a good way to basically light up the map of I think the reaction to sanctions is what strategically people are
5:21
looking at like okay you put sanctions on who do they fall back to like what routes to begin
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routing through after that to highlight where their allies and potentially our adversaries are
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to really just like paint the map of who's working together behind the scenes. Yeah right like
5:35
throwing up friction into kind of existing established channels and kind of like a smoke
5:40
out campaign, right. To kind of see where, where activity goes. I think that's, uh, that's a decent
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read, but again, like all the, you know, aligns with everything that we've been talking about here
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and has some, some interesting backdrop as well that you just, you scroll to the next slide,
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I'll let you set it up, but, uh, we're in a, it's an interestingly timed, you know,
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announcement for sure. Yeah. And timing announcements is important. If you think you
6:00
have leverage and a lot of the conversation over the last six months, eight months has been around
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oil and gas markets and the traffic in the Strait of Hormuz. Will it lead to deleterious effects in
6:14
the supply chain? And will that have knock-on effects in terms of the price of fuels and
6:19
inflation throughout the economy as fuel is the base layer of our economy? And it looks like they
6:26
some leverage because the sea lanes and the straight are opening up. And I mentioned this
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to John before we hit record. He wasn't monitoring the situation too well on Friday, but there's also
6:36
reports out there that the U.S. Department of War is dredging a canal on the Omani side of the
6:42
straight to create another pathway for oil tankers to get through. So it looks like traffic is
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skyrocketing nearly 400%. The U.S. is returning staff to the Middle East. Goldman says Hermuz oil
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flows at two-thirds of pre-war levels, so it looks like the flow of oil is continuing. And if the
7:03
reports out of the weekend are to be believed, it looks like the Department of War in the United
7:08
States is creating optionality for themselves by dredging a canal in Oman right now. Yeah,
7:14
The male impulse to go dredge a canal to route around attacks in a contested waterway.
7:22
Yeah, look, I only saw the tweet right before this recording.
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So obviously, I'm really failing in my situation monitoring.
7:29
We'll see if that gets more confirmation in airplay.
7:32
Wouldn't be surprised in any way if that's happening.
7:34
And we did know that the midnight runs that were happening along the Imani coastline were
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helping get a lot more oil out of the strait.
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But I think, yeah, all of these headlines hit last week.
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And I think you can argue over numbers.
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You can argue over whether there's kind of Western bias to any of them.
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And it's probably the case to some degree.
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But I do think kind of where there's smoke, there's fire.
7:57
And the chessboard seems to be kind of moving in a certain direction here.
8:03
If it's one headline like this every now and then, that's one thing.
8:06
But I think we've gotten a steadier and steadier drip of these from different sources over the last few weeks.
8:12
And I think that's, you know, important to kind of keep an eye on.
8:15
And I think generally like it's, this is not, you know, a rah-rah US podcast.
8:20
This is not saying like, you know, the basically, you know, we're up 40-0 in the fourth quarter.
8:25
And the game's also is already basically one, not really the point at all.
8:29
But I think it's important to just kind of level set relative to, you know, the context of the overall drift of the story over the past year or the past six months.
8:37
just like full stop. If you were saying that the oil market's going to implode, the U S is going to
8:44
be totally, you know, strategically wiped out and have no leverage. And it's all going to be,
8:48
it's all going to be put by, you know, if this isn't resolved by like April or may or whatever,
8:52
like you were just wrong, like full stop, like that was not correct. And there were all of these
8:56
things, you know, happening in the background, which we, you know, we don't have any particular
8:59
insight into a lot of it, obviously we have no security clearance, but like if you were kind of
9:03
paying attention then it's, it seemed like it was all about like, how do you extend and pretend?
9:08
How do you, um, you know, open up a little more, a little more leakage here, a little more leakage
9:13
there. Um, how do you backfill lost volumes and kind of all these different ways? And it's kind
9:17
of, you know, the opposite of death by a thousand cuts, right? It's like, you know, survival by,
9:20
um, a thousand little maneuvers, TBD, if it will continue, but like, this is kind of what we were,
9:26
you know, signaling early in the spring. It's like, it looks like this isn't necessarily like
9:30
nuclear yet, let's see how it plays out. And thus far, I think the things that we've been seeing
9:35
over the last couple of weeks continue to point meaningfully in that direction. And I think
9:38
probably, you know, to your point, set up the treasury, set up the administration to feel like
9:43
it had, you know, the hand to really, you know, push. And maybe those two things in conjunction
9:47
will make the sanctions more, you know, meaningful this time around than they had been previously.
9:52
Yeah. And the timing is very positive for the domestic side of things too. Like if you're able
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to signal like, hey, straight's open.
10:00
Not even signal, just verify that traffic's up.
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You're dredging an alternative pathway in case things do.
10:08
Hit the fan.
10:09
Oil prices coming down, leading into midterms.
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That's what you want to see.
10:13
Because we have very short-term memories here in the United States.
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So if gas prices are coming down as everybody heading to the polls to vote on midterms that a positive indicator in their mind as they headed Like okay gas prices are back down Maybe they not doing such a bad job Maybe we will
10:30
vote red this time. So I think there's definitely some non-coincidental timing of these moves
10:38
leading up to midterms as well. And we'll get into it in a bit too, but it's got to keep oil
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in the back of your mind and energy in general as a key input, obviously into everything in the
10:48
economy and the inflation picture and what that does, then that is then an input into where rates
10:54
want to go. So we'll get into that more, but I think it's critical to continue focusing on
11:00
a path of oil and energy prices as an input into that downstream question of can the US manage?
11:06
It's Achilles heel of its massive debt burden that we've talked about. So just put a pin in that and
11:11
keep it in mind. Yeah. And speaking of putting a pin on the Iran conversation and John's point of
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victory by a thousand little maneuvers. I think you were alluding to this in your previous comments,
11:23
but it seems like if everything is as presented in the headlines and the stories and what we're
11:30
covering while we're monitoring the situation, it looks like we did successfully push the people
11:37
of Iran to a limit where they're demanding the war to end. And there are real consequences that
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that are basically leading people to a point of exasperation where it's like, okay, let's move on.
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Yeah. Like it, maybe, maybe that's the case. Maybe it's not, maybe these headlines are,
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you know, uh, overly biased and overly tilted toward kind of a Western U S perspective.
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Always got to keep that in mind, fog of war and everything. Um, I think these are at least
12:02
highlighting that, you know, as we've talked about on the show before, like there's the,
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there's the civilian component of the government and then the IRGC, um, which is much more kind of
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hard line and maybe more plugged into kind of some of the Euro dollar and dark money networks that
12:14
are really driving this whole thing. But it certainly looks like, again, you're getting a
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drip of headlines from the more civilian moderate side of the aisle, pointing to a desire to wrap
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this thing up sooner than later and realizing that there are limits to the leverage points that Ron
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does have. And I think everything we just talked about with Stradivormoos is certainly related to
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that. It's also tough because it's like that that's a card that it's almost a better card to
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to just have in your back pocket and be threatening to play than one that you're actually,
12:43
you actually play because like when you play it, you know, they're all of your neighboring
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countries, right. Are just never going to allow this to happen again. It's going to take a few
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years to dredge up, you know, new canals and open up new pipeline capacity that we've talked about
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with East West pipeline, Saudi Arabia, et cetera. It's going to take, you know, more,
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several years to maybe we'll get into this in a minute, but find alternative sources of oil to
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make Hormuz itself less meaningful. But like, as soon as you play this card, like you better hope
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that you win with it. Right. Because you do it once and like you're, everyone else is immediately
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going to decide we will never, ever allow this to happen again. We'll find any way to avoid this,
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even if it takes a few years. So I think the, the shot clock on, um, the, the relevance of
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Hormuz as a, as a leverage point, you know, just is running down, you know, rapidly every day. And
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I think that's something that, you know, maybe the more kind of moderate elements of the government
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are carefully considering. Yeah. And speaking of finding alternative sources of oil, big headline
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towards the end of last week, big deal in Venezuela. Trump says the U.S. has entered a
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deal with Venezuela to take control of 65 billion barrels of oil reserves. So it was a little under
13:55
a year ago where, or excuse me, at the beginning of the year, where, or the end of last year,
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where we went in and took Maduro out. And people have been wondering what's going to happen with
14:05
Venezuela, particularly as it pertains to the U.S.'s relations with Venezuela and their oil.
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And I think many people were expecting there would be some sort of deal. I don't know if
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everybody was thinking it was going to be the whole shebang, but it looks like we're getting
14:19
the whole shebang here. I mean, it's a lot, right? The headline number is more than doubles U.S.'s
14:25
current access to proven reserves. And that's obviously meaningful. I think, you know, to be
14:31
to be clear, like this is a Trump size deal, which means like every, basically every detail still
14:36
needs to be worked out or at least announced. Like we don't really know a lot about this. We don't
14:40
know what capital commitments are, who pays for what, what the timeline is. You know, it's not
14:44
like this tomorrow we wake up and there are 65 billion additional barrels of oil that the U.S.
14:49
can just kind of access free and clear. This will take likely years to kind of materialize in terms
14:54
of actual flows into the oil market. And so all those caveats are relevant. And certainly like
15:01
there's a chance it falls through, like who knows what's actually been signed and firmly committed.
15:05
But again, like I think all those caveats aside, like if you were, if you were coming into the
15:11
year, you know, Jan one before Maduro was taken out and you were told only, you know, the, everything
15:17
that had gone on in Iran and you were looking at kind of the strategic position and thinking about
15:21
energy impacts. I think, you know, if, if, if I then also told you that this deal was going to
15:26
happen, you would say, okay, like I can at least squint and see like what they're trying to do here.
15:30
And I think anyone who looks at um you know this headline and says oh well that a nothing burger again Yeah Some of the the the treasury thing we talked about earlier in the episode if you look at this and say ah it irrelevant That Trump bluster That doesn matter I think that just like straight up the wrong read
15:43
I think you're being very intellectually dishonest.
15:44
If you think that a deal like this as, as, you know, novel as it is in terms, especially
15:49
as it relates to the U S actually going in and taking a stake in, I think it's a JV,
15:54
the company that's going to be responsible for and have the benefit from these barrels
15:59
of oil, you know, the structure of it to basically take out a leader of a sovereign nation, again,
16:04
right or wrong, and then spin up a new corporate entity that the government controls to go take a
16:09
massive amount of the interest in oil fields of a nation that has the most proven reserves in the
16:17
world. Like if you're going to tell me that that's somehow not relevant, I mean, I just don't really
16:20
think you're being very serious. So, but it all, like we've been saying not to do the Pepe Silvia
16:25
I mean, but it all ties together, right?
16:27
It's all all these plates have been spinning at once.
16:30
And, you know, very, very clear how this is meaningful to, you know, kind of the rest of the dynamics that we've talked about.
16:36
And correct me if I'm wrong, but this doesn't include the Guyana oil assets.
16:43
I think that is right, but I would have to go back and look.
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And either way, I bring it up because I don't think it does.
16:51
And you have to imagine that Guyana would be more willing to work with the US government
16:56
compared to the Maduro regime.
16:58
Yes.
16:58
So the point being is that there's potentially even more reserves that we can tap into if
17:04
we come correct to Guyana and say, hey, let's help you monetize these assets.
17:09
Yeah, I think that's reasonable.
17:12
And certainly like the last year has shown you something like that is definitely not
17:14
beyond the pale or outside the Overton window anymore.
17:17
And I think the point that I highlighted here on the video on the slide is just notable, too, as it relates to how you think about all these discussions, like the interests that in a lot of these oil fields that the U.S. is taking over, you know, were controlled by a former Venezuelan insiders in the Maduro government who were being indicted, kind of, you know, extracted and thrown out.
17:37
But more more interestingly, by by China. Right. So this is like maybe the purest expression that we've seen so far, even more so probably than Maduro being taken out of, you know, the I kind of hate the name.
17:49
It's very stupid. But the Don Roe doctrine. Right. The idea of, you know, the U.S. really reasserting dominance in the Western hemisphere.
17:55
Again, whether that's right or wrong, there are a lot of considerations to think about there.
17:59
But I think just on a calling balls and strikes basis, it's extremely notable to go in and essentially kick out a proxy government of your main geopolitical rival and kind of take the spoils for yourself.
18:12
Yeah, big moves.
18:13
The night after it recorded, I believe, Stan Druckenmiller took to the Wall Street Journal to write an opinion piece.
18:21
Many people took it as chastising.
18:22
Well, he didn't write it either.
18:23
AI wrote it and he admitted that. But many, many people from the Reddit and then from the hip
18:29
reaction was, oh my gosh, he's, he's completely dismantling his protege and Scott Besson here.
18:34
But if you read through the tea leaves, what he was really calling out was the entitlements
18:39
side of the fiscal book here in the United States and how unsustainable it is. And I really liked the
18:47
title of this week's timestamp, Druck and Disorderly. This isn't just an op-ed.
18:53
It's a think piece to quote Claude, but you know, I, I, I'm, I'm glad you liked the title.
18:59
I have to, I have to cop to, that was a Claude suggestion.
19:02
So soon, so we're not, we're not quite there where, where Claude can write, you know, write
19:06
it entirely for me, but, uh, I, I have to give it, give it props.
19:09
I have to give Dario props, um, for creating machine that can make a great newsletter puns
19:14
like that is very, uh, very beneficial to me.
19:17
But I, I, I think there, I mean, there's a lot to take away here.
19:20
Um, and I put this kind of toward the end because I think it, it, it all ties back to
19:25
everything that, you know, we discussed in the prior slides and ways that may not be
19:28
totally obvious, but I, I want to maybe like, I'll say a couple of things and then kick
19:33
it to you.
19:34
But like the, I, I've seen a lot of, uh, kind of 40 chess type analysis about how, well,
19:40
like this is actually, you know, drug and Besson probably have dinner every week.
19:44
And so this is just some sort of like, there's, there's all this like game theory around like
19:48
what he was actually doing with the op-ed and was he actually providing air
19:51
cover kind of to your point for for best and to do what he needs to do.
19:54
And, you know, I think that's all interesting and potentially correct.
19:57
I kind of just want to address some of it from the perspective of like the
20:01
pulling back from like the, the 4d chess, just like, how would the,
20:05
how does the modal like wall street journal reader look at this?
20:08
And I think there are two big pieces that I, that are worth digging into.
20:12
And I, the, an asterisk before I say any of this is that this is,
20:15
this is Druckenmiller up at the, up at the top.
20:17
If you're watching on video, this is this is the last face you see before your portfolio gets utterly decimated by a legend.
20:23
So I think important to say that Druck is definitively several orders of magnitude smarter than either of us.
20:29
So no one should take this as me critiquing him too harshly.
20:33
But I think on the left side of the of the slide, there's basically a quote, which I won't read all of.
20:39
but he's basically comparing yield management,
20:41
like what he thinks the treasury is doing,
20:43
which we talked about last week with the buybacks
20:46
that Besson has embarked on or doubled the size of.
20:49
Uh, he's indicated that, or at least sources have indicated that investment will use a TGA
20:54
if he needs to, to fund those trillion dollar TGA, you know, to, to kind of scare markets
20:58
into where they need to be with long, long end yields.
21:00
And, you know, Druckenmiller sees this as a kind of yield management that looks like
21:05
akin to, um, kind of the treasury fed operations to the cap yields, uh, during world war II
21:10
to get that financed.
21:12
And then he kind of moves on.
21:13
But I think it's notable because like, again, my guess is that he probably realizes a lot
21:18
of this.
21:18
I'm not gonna be telling him anything new.
21:19
But to, you know, to a reader of his op-ed, like it might, the power and relevance of that analog might be lost on people.
21:27
Like, I think that's exactly what, agree or disagree, I think that's what Besant thinks he's living through right now.
21:32
I think that's, you know, we can debate worse.
21:34
We haven't even talked about Jackson Hole, which we don't have time for, because I think a lot of stuff is actually more relevant.
21:39
But Hegseth, Besant, Bridge Colby, Trump, to the extent that he, you know, actually thinks about this stuff in too many meaningful degree.
21:47
Like, I think that they believe that they are living through something like a transition, like World War II, right?
21:52
Economic D-Day.
21:53
I mean, they're being very expensive.
21:55
Yeah, exactly.
21:56
Economic D-Day, global economic reordering.
21:59
Like, so I think that doesn't necessarily mean that, again, any of this is like right or wrong.
22:03
But I think it's important to remember a lot of the, I've said on the show before, but like correlations kind of go to one in the institutions that hold the levers of power.
22:12
they all kind of start moving in lockstep when it's a question of like sovereignty and hegemony
22:17
or when they perceive it to be that. And so I think like you should expect to see things like
22:22
this, right? Like get used to it. Like the, the analog to world war two and saying, well, that,
22:27
that was like, you know, the implicit, the implicit idea there is we're not living through anything
22:32
like world war two. So that's, you know, it would be crazy to do some sort of extreme like yield
22:36
management. And I don't necessarily know if it's going to look exactly like it did back then,
22:39
But I think like that's, that's the wrong view to take. Like the, these guys like it or not,
22:43
I think believe that they are living through a time as, as pivotal, as pivotal and transformative
22:48
as that. Um, so they're going to act like it, right. The other quick thing I'll say is on the
22:54
right side of the slide. And there's another quote here where to, to your point, he, it's kind of the,
22:59
the, the punch that he's landing in the op-ed is that, well, what we should really do is, uh,
23:04
return buybacks, their stated purpose, move on from that. Um, and basically do the responsible
23:09
thing, turn out the debt. Honestly, if the, if the 30 year must trade at 5.5% to clear a market,
23:15
that isn't a crisis. It's an invoice. Thank you, Claude. Then do, uh, the only thing that,
23:19
you know, durably lowers long-term yields, address the primary deficit reform, entitlements,
23:22
all these different ways, means testing, et cetera. Um, and I look at this and I'm like,
23:27
again, he, he may have a totally different view in mind and you know what he privately thinks,
23:31
but just from like the surface level of what's being said, it's like, well, yeah, like no kidding.
23:37
But like you missed that exit 20 years ago, right? Like y'all could have listened to Ron Paul in like
23:42
1995, but no one wanted to. And like the, the, the argument that he was always making that,
23:47
you know, your Mises Institute guys were always making is like the, there is an event horizon
23:51
at which you will no longer have the opportunity to just go do fiscal rectitude and, you know,
23:56
go be responsible. And I think Druckenmiller's op-ed even kind of recognizes earlier, earlier on
24:02
that, like, you know, there are all these structural constraints to actually getting
24:05
any of this through. And it's like, you know, if you, if you really like are honest about that and
24:08
take it to its limit, it's like, this is literally never going to happen. Okay. With like, with,
24:13
with that GDP, where it always, where it already is deficits, where they already are. And you know,
24:17
the, the dynamics behind this thing. Yeah. The dynamics behind mass democracy. Right. I mean,
24:24
Look, look around you.
24:25
Like the capital of finance in the world is run by a communist Like do you not see where we are Like we not doing entitlement reform Okay It not going to happen And like all meanwhile like the the
24:37
the vast majority of campaign finance comes from, you know, from who, from boomers who are like the
24:42
main beneficiaries of all this stuff, right? They're just not going to vote this away. I don't
24:46
really think you're going to vote your way out of this problem. And like, it's not just a question
24:49
of like, get Congress to act responsibly. Like that's, that's done, man. That's done. So then
24:53
And the question is like, what do you do to deal with that?
24:56
Well, you can like print the difference,
24:58
which is what I think a lot of us have assumed,
24:59
you know, would ultimately have to happen.
25:00
And certainly it might, it still might.
25:03
Or you can embark on an aggressive campaign of,
25:07
you know, reshoring and kind of decoupling that where you,
25:11
you know, get a bunch of vassal states on your side
25:13
and basically kind of make them eat the difference
25:15
in different ways and do economic partnerships with them.
25:19
Run, you run the GDP hot as much as you can,
25:23
you know, you try to dismantle all systems like the Eurodollar, which, you know, drain economic
25:29
mass and economic energy out of the U.S. and more fully bring, you know, the dollar system under the
25:34
control of the treasury, perhaps in the form of, you know, spendable T-bills, which is effectively
25:40
what, you know, stable coins, I think, will ultimately be all these different things. Maybe
25:43
this stuff will work, maybe it won't. But like, those are kind of your options, right? You radically
25:47
redesign the game board in some way, or you print the difference. And I don't think they're at the
25:52
point where they have accepted, um, you know, that they might have to print the difference
25:55
eventually. So if you weren't going to do that, like the only other thing that you can do is kind
26:00
of exactly what they're doing. So, and, and by the way, to get back to the point of this op-ed,
26:04
that includes buybacks, that includes things like managing every little, you know, all thousand,
26:09
uh, little things on the margin to kind of keep the game going so that you can, um, so you can
26:14
just get to the other side of this trade without getting shaken out of it. So I think like all this
26:18
to say rant over, but basically like the op-ed strikes me as written from the perspective of
26:24
an extremely, extremely conventional boomer who is, is processing things from the perspective of
26:29
1995. Basically. I don't actually think that's what Druckenmiller is. I think he's again,
26:34
like orders of magnitude smarter than either of us. So I probably think to your point,
26:38
there's a lot of game theory going on here, but for the, again, like the modal reader of this,
26:43
who's looking at it and saying like, yeah, great idea. That's what we should do. It's like
26:46
in reality, that's not going to happen. So like, just be honest with, uh, you know, with yourself
26:51
about where things are sitting and then kind of evaluate, you know, policies accordingly from that.
26:56
Well, the fact that, I mean, the fact that this was written with AI, it's like, it was the Wall
27:01
Street Journal, some outside force putting pressure on the Wall Street Journal and drug,
27:08
like, Hey, we need you to come up with something quick as like, just to set the scene or set a
27:15
seen between you and Scott Pescent or put another perspective on this.
27:20
Like that, just the fact that this happened and the fact that he came out a minute, like,
27:24
yeah, I've read it with AI.
27:25
It's like, what, like, do you think he approached the Wall Street Journal?
27:28
He's like, I have some thoughts, like Claude and I have been going back and forth.
27:30
Or was he approached and asked to allow them to put his name on this, which I think the
27:36
latter may be the case.
27:37
Yeah.
27:38
Kayfabe, basically, right?
27:39
Yeah.
27:39
Yeah.
27:40
Definitely possible.
27:41
Yeah.
27:41
So moving on, bringing it back to AI, which is another core theme at the center of all this economic reordering.
27:49
You have another Wall Street Journal article, I believe, or is this the Times?
27:53
Yeah, it's Wall Street Journal.
27:54
Yeah.
27:54
We're talking about blue collar jobs are the next, the new flashpoint for data center fight.
27:58
So trade unions are threatening to withhold support for politicians joining the building backlash.
28:03
And so I think if you talking about hurdles or speed bumps in the road for reshoring and basically facilitating the large build out of the AI data centers in the United States It becoming clear that blue collar work and anti center propaganda is material It
28:21
real and something that needs to be figured out. Yeah. I think this is relevant to all of it
28:27
because as we talk about every week, this is the key driver right now of any kind of reshoring push
28:32
that you want to do, you know, it doesn't really work without, you know, a massive ongoing CapEx
28:38
campaign for data centers and everything related to AI. So I think it's, it's relevant to that
28:42
degree, but I think it's, it's notable to me that if you look, if you look through this article,
28:47
various different instances of unions and union leaders and trade groups, basically saying, you
28:53
know, we're not going to donate to anyone. We're not going to support for any, we're not going to
28:57
knock doors on doors for anyone who is opposed to the AI buildup. So you're basically in a situation
29:03
where, as we all thought, you know, a couple of years ago, the greatest allies of Jeff Bezos and
29:09
Sam Altman would be trade unions. It's a pretty funny new set of bedfellows that we've created
29:16
here. But I think it's notable that I recommend people go read this article. We don't have time
29:21
to get into all of it right now, but this really cuts against and is like a consensus narrative
29:27
of violation for a lot of what the mainstream readers of the journal or New York Times or
29:32
whatever might be thinking about kind of the data center build out. Gavin Baker had a great post
29:36
over the weekend on kind of basically just dismantling point by point all of the myths
29:41
surrounding data centers. I think there's a lot that you can say if you are opposed to data centers
29:46
or if you're uncomfortable with AI. I think that's those are all like there are reasonable points to
29:50
make there. But basically, you know, the the water impact, the environmental impact, the impact on
29:55
jobs, whatever, at least on the blue collar side are all like very, uh, very overplayed or very
30:00
misunderstood. Now you could also say like Gavin is mainly, uh, potentially like the most AI levered
30:06
investor in the entire world. So like what a shocker that he likes data centers, but I think
30:10
it's, it's a good moment to just revisit from first principles, like everything going on here.
30:14
And I think it's very notable as you, as you go into midterms, as you think about the realignment
30:19
of different interest groups to see kind of your typical like yellow dog Democrat type voters in,
30:26
you know, labor unions who are massively benefiting right now from all the skilled
30:31
trades demand resulting from data center build out to kind of see them aligning more and more with,
30:36
you know, a ticket that looks more and more red is, I think, extremely noteworthy going into
30:41
November and beyond. I mean, the Republicans have become the party of the working class.
30:45
it's very obvious and i mean we we read the the piece i forget what what was the data center
30:51
review or something like that that the cto of giga wrote a piece and i mean in in that piece he
30:56
highlighted that there's a a extreme shortage of electricians for this build out and so you have to
31:02
the union's got to be licking their lips right now like hey we're gonna be able to grow grow our
31:06
force we're gonna be an appealing sort of sector of the economy to to to join in the next decade
31:12
and it makes a lot of sense.
31:14
Yeah, I mean, it's the first time in like 40 years
31:15
that manufacturing has had like real secular tailwinds
31:19
in the US.
31:20
Like it's been multiple generations
31:21
since you've seen anything like that.
31:23
So don't underrate the AI push
31:26
and the run-out hot push on that vector either.
31:29
Yeah, and as always, we will end on Bitcoin.
31:33
And this week, it has,
31:34
the topic that we're gonna cover has to do with quantum,
31:37
quantum computing, quantum resistance.
31:39
More specifically, a couple of pretty big developments.
31:41
If you are worried about the quantum scare,
31:44
I'm still a bit skeptical that it is imminent
31:46
or at all possible but don short human ingenuity especially with these AI tools Let not say that there won be a breakthrough in quantum computing And if there is Bitcoin needs to be prepared particularly its signature scheme And there are two big developments last week
32:01
The first was Starkware Research demonstrate that quantum-resistant Bitcoin transactions are possible.
32:07
So they had an actual mainnet transaction that was QRBT compliant.
32:12
So they were able to successfully get a transaction that was made with a signature scheme that
32:20
is quantum resistant, included in a block.
32:22
The way in which they did this, it was a non-standard transaction within consensus rules, but not
32:27
a standard transaction.
32:30
So they created this transaction and then used Slipstream, which is an out-of-band sort
32:34
of transaction facilitator that Marathon runs, Marathon mined a block with this transaction
32:39
in it.
32:40
basically what qrbt does i believe to get the signature you do some gpu compute on the side
32:48
to create the signature and then you can broadcast a transaction after you do some gpu work so it's a
32:54
bit clunky and adds another variable to bitcoin transactions but it successfully did it if you
33:00
want a quantum resistant bitcoin signature the team at starkware proved you can do that on mainnet
33:06
last week. And then the team at Blockstream Research, Jonas Nick and Mikhail Tutin and many
33:11
others, they've been working on ABIP Shrinks, which is a new signature scheme that is quantum
33:19
resistant. I had Jonas Nick and Mikhail Kudinav on TFTC last December talking about this at the
33:25
very beginnings after they came out with a research paper. It looks like they've made a lot of
33:29
progress. And so if you're worried about quantum, the Bitcoin developer research landscape is making
33:37
progress on that front. Yeah. I think it's just like, you know, we do every week, but they're
33:41
always over the last, you know, if you want to call it the bear market, maybe that's ending,
33:44
whatever. But, um, the, as we've gone through bad or sideways price action, just like every single
33:50
week, there are very notable, uh, headlines under the hood, whether it's on the technology side or
33:55
of the kind of financial infrastructure side for Bitcoin. So as you're seeing more and more,
34:00
what I think we would argue are secular tail ends and meaningful generational shifts in the way that
34:06
the financial system works globally, the way the dollar system works. You're also seeing at the
34:10
same time, Bitcoin continue to execute against a lot of key priorities. I think it's fair to,
34:15
like you said, put an asterisk on, you know, is quantum imminent or is it potentially ever going
34:20
to exist in a cryptographically relevant way. We'll see. But I do think these are certainly
34:26
worth keeping an eye on. There's a lot of work going on behind the scenes by some real giga
34:32
brains to kind of advance the state of the art here and encouraging to see it continue.
34:38
Yeah. I'll just end it with, particularly when it comes to what Jonas and McHale and others
34:42
working on with BIP shrinks. I really like how Jonas McHale framed it on TFTC last year,
34:48
where it's like, hey, eventually ECDSA is going to be broken.
34:51
We should not rely on one signature scheme.
34:54
We need to bring more signature schemes to market
34:57
regardless of quantum comes.
34:59
We have been researching that.
35:01
This has been well-known in the Bitcoin developer space for a while.
35:04
Progress is being made best of both worlds
35:06
as we get a new signature scheme.
35:08
We think about it, we do a lot of research,
35:10
we work on it for many years and then say,
35:12
okay, we think we have a signature scheme
35:14
that we're comfortable with, begin implementing it.
35:16
And it just so happens to also be quantum resistant.
35:18
that's the best of both worlds work methodically do the work do the research do the review
35:23
and it's happening totally we'll be back next week see you guys