Latest / What Bitcoin Did / Trump's Secret Plan for a US Economic Renaissance | Brent Johnson

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Trump's Secret Plan for a US Economic Renaissance | Brent Johnson · What Bitcoin Did

• 0:00
  One of the primary tools that any government has to control their population is the money.
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  And that's why the legal tenders laws exist. It's why they say gold can't be used as money.
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  You know, you can't pay your taxes in Bitcoin because they need to be able to control those channels.
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  The world is looking for protection in times of uncertainty.
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  It's not necessarily just a rejection of the dollar. It's kind of a rejection of fiat.
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  This was not only like euro dollars, but it was a potential way for the U.S. to have a kind of world class cutting edge technology version of the euro dollar market that they could actually use as a weapon and control.
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  And that's kind of the dream of every government.
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  And so this scares the heck out of me, to be really honest.
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  I mean, this is not for the faint.
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  This is really big.
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  good to see you brent um thank you for coming back on the show i can't it's nearly a year since
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  we last spoke um and one of the things that you said in the first interview which i think is the
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  perfect place to start is you called for five thousand dollar gold and we got it and i think
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  probably maybe even maybe even you would agree was that quicker than you thought it was going to
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  happen oh yeah i didn't i i didn't think it was going well i i that's a good question actually if
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  you'd asked me 10 years ago, I would have said it would have come quicker. But then the length of
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  time it took to double or almost triple was shorter than I would have expected.
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  So what do you think has been driving this? Because this can't just be sort of retail foam,
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  and there must be some sort of central banks really stacking gold pretty hard right now.
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  Yeah, you know, I think that's exactly what it is. I think it's both central bank demand and
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  demand from overseas. It hasn't been driven dramatically by United States or even Western-based
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  buyers. And I think the thing I would point out, I think a lot of people probably thought gold was
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  going to go to $5,000, but I don't know anybody that thought gold would go to $5,000 and the
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  index would still be in the high 90s. Synonymous with the gold 5,000 call was typically calls for
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  DXY to be in the 80s, 70s, or even 60s. And so, you know, I think the fact that the DXY has remained
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  strong on a relative basis over the last several years, even though gold has been rising, shows
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  that it's not necessarily just a rejection of the dollar. It's kind of a rejection of fiat
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  overall. And it's an indication that the world is looking for, you know, a protection in times
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  of uncertainty. And, you know, at the end of the day, you know, government bonds and fiat currencies
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  are a representation of the country and not necessarily a representation of value. Right.
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  And so I think that's largely what's been driving gold. Yeah. So DXY obviously showing dollar
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  strength, which has kind of been your theory on the dollar milkshake thing for a while is that gold
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  and the dollar can both be strong at the same time. Why do you think that? In fact, let's go
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  back a little bit. Maybe we should start off. We obviously covered the dollar milkshake theory a
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  lot in the last show. Should we just lay that out quickly so everyone has context in case people
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  didn't catch the last one we did? Sure. So this all started in 2018 and then I started talking
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  about it. I did my first interview where I discussed it in late spring, early summer of 2018.
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  And then I kind of started pounding the table on it more in 2019. But what it essentially said was
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  that I thought that for the first time in 40 years, interest rates were going to start to rise.
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  And I thought that because that hadn't happened for so long, that I thought that would cause a
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  number of knock-on effects that markets just weren't ready for. The first thing I thought
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  would happen was that the dollar would get stronger because typically with higher interest
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  rates, the higher interest rates will pull capital into that market. And then combining that with the
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  fact that the United States dollar just has many advantages that the rest of the world doesn't.
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  You know, the system is kind of set up for dollars. I thought there was the opportunity for the dollar
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  to get quite a bit stronger. And at the time, the DXY was around 88 or 89. So it was below 90.
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  And that wasn't so outlandish. But the call that, you know, the people kind of couldn't quite square
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  was I also said that, so I thought bonds would fall, dollar would rise. So interest rates would
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  go up, bonds would fall, dollar would rise. But then I also thought gold would rise and US equities
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  would rise as well, even though we were going to have the stronger dollar. And it didn't all play
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  out like that perfectly. But if you go back to 2018 and look at now, the dollar index is up around
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  nine or 10% from that time period. Gold has doubled or tripled. US equities have tripled.
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  Interest rates are much higher than they were.
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  So from an asset class standpoint, it worked out pretty well.
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  Now, ultimately, what I thought would happen was that it would cause a sovereign debt crisis.
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  And in that sovereign debt crisis, I thought we had the potential for a much higher dollar.
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  You know, the dollar went to like 113 in 2022.
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  So we got pretty close to our sovereign debt crisis in 2022.
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  You know, England had to bail out their government market.
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  The Japanese had to bail out their government bond market.
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  The ECB had to buy periphery country debt to keep it from spiking.
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  So we got very close, but we ultimately did not get the crisis.
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  So from a specific event, the milkshake didn't happen.
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  But from an overall fund flow standpoint, it worked really, really well.
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  And so I just really think of it as a framework for understanding capital flows.
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  okay so we're going to get into that in way more detail and talk about stable coins as kind of a
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  supercharger for that but just before we do like i don't know if you saw recently ray dalio put out
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  a piece which kind of went viral on twitter talking about the collapsing world order do you
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  think part of the gold trade is people sort of buying that framework and thinking that
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  the faith in fiat currencies across the world is declining i do to a certain extent but i think
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  there's a part of it that even Ray has wrong. And that is whenever Ray talks about this stuff,
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  he always talks about it and specifically targets the United States. And the issue is that all the
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  issues that Ray laid out as to why we have this changing world order, we're focused on the United
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  States and all the mistakes the United States has made and all the potential problems with the dollar.
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  What he doesn't do is take a same hard look at China or Europe or Asia or Africa or Japan or
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  wherever it is. And so it's a very myopic view. And the point that I've tried to make is despite
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  all the problems, and there are many, and I don't try to cover them up, the United States has many,
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  many, many problems. But so do all the rest of the world. And the United States has many advantages
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  that the rest of the world doesn't. And as a result, the dollar, despite its issues,
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  is not going to disappear before all the other fiat currencies do. And the issues with the
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  budget deficit and the trade deficit, you know, they're not all just germane to the United States
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  either. And again, the United States has many, many things and levers it can pull that the rest
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  of the world just can't. But I do think the world order is changing. But again, what I think is being
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  missed in many of the commentary on it is that the United States is the one that's changing it.
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  Donald Trump is the one that is changing the world order. That's why everybody hates him.
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  is because he is throwing out the status quo and he's doing things differently than the world has
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  done for the last 50, 60 years. Yeah, I would argue that Donald Trump has done more to upend
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  the global order in the last 16 months than the BRICS have done in the last 16 years.
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  And that creates a lot of uncertainty, right? And, you know, in an uncertain time,
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  gold typically does pretty well. And I think that's what we're seeing, you know, in spades
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  right now. Were you surprised, I know you're not a Bitcoiner, but were you surprised that
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  Bitcoin didn't perform well while gold and silver had a huge run? Not really. And it's because I've
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  just not been a huge Bitcoin advocate to begin with. And I actually, I know we will talk about
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  this more, but I actually think the rise of stable coins is hurting gold, or I mean, it is hurting
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  Bitcoin. And I actually think gold would be even higher than it is if it wasn't for dollar stable
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  coins. So I think that they are cannibalizing some activity that it otherwise would have received.
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  Why do you think that? Because people who are living potentially in the global south,
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  living under high inflation, instead of moving to Bitcoin, they're moving to stable coins.
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  Correct. And I think to some extent, and listen, this is not a criticism solely of Bitcoin on this because the same thing happens in dollars. But, you know, some, I don't want to just say illegal, but some nefarious or gray market activity, I'm sure, was taking place in Bitcoin.
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  but it was a way to move money around
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  when you couldn't move dollars.
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  But now because you can move dollars
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  just as quickly and swiftly and easily
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  and in some cases cheaper and faster,
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  I think some of the flows
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  that perhaps would have gone to Bitcoin before
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  are now going to stable coins.
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• 12:00
  that's ledn.io forward slash wbd i i mean i definitely can see that there's will be people
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  living in the global south that living under high inflation that want to take the u.s dollar stable
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  coin which is obviously it's not a stable coin it's as stable as the dollar but it's far more
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  stable than their local currency um i can i completely understand like why those people
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  would move into that over bitcoin um but like bitcoin it hasn't only slightly underperformed
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  because of people moving to stable coins over Bitcoin.
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  It's like massively underperformed gold.
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  It's not been a debasement trade so far.
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  I mean, it had a very good year or so,
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  but it's down 50% from the highs right now.
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  Yeah, I mean, and this has been one of my arguments for a while
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  is people would tell me that Bitcoin was a flight to safety trade.
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  And Bitcoin, I have never seen Bitcoin perform well
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  when there was some kind of a liquidity event
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  or some kind of a crisis.
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  To me, Bitcoin is a pure play on global liquidity.
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  And as long as people are not worried and there's plenty of liquidity or plenty of money,
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  Bitcoin is a fantastic way to speculate on whether liquidity is going to be plentiful
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  or whether it's going to dry up.
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  And as soon as it starts to dry up and as soon as there's some uncertainty, I think
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  Bitcoin, you know, suffers the consequences of that.
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  Because I don't think that Bitcoin, I don't see Bitcoin as pristine collateral.
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  I know why I completely understand the argument for why some people think it is.
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  I've just never seen it perform that way.
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  And so I'm not saying it couldn't, but that's why I'm not surprised that it hasn't done as well over the last six months.
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  Yeah, it's one of those tricky things where like Bitcoin's only 17 years old.
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  It's still clearly in like trading like a tech stock, even though it has the properties in my mind of being something more akin to gold.
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  Do you think Bitcoin is something that may get to that kind of safe haven asset style gold type thing?
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  Or do you think it's always going to remain a speculative investment?
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  I kind of see it as a speculative thing.
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  I won't be surprised if it does, but I've just never seen it that way.
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  Again, I think if I were to see it hold up well during some kind of a liquidity crisis,
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  I would have to take that into consideration and think that maybe I'm missing something.
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  But I've just never seen that.
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  But, you know, I think another part of the reason why, you know, it's pulled back so much is I think it just got ahead of itself as well.
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  And I would put gold and silver in this, too.
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  You know, gold and silver, silver more than gold has had a pretty, I mean, silver's had a 20 percent pullback from its high, 25 percent pullback from its high.
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  Gold's had maybe a 10 percent pullback from its high.
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  I think in some ways they got ahead of themselves as well.
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  And this is not to say that the valuations aren't justified, but anytime you go somewhere that quickly in a straight line, you are going to have pullbacks. That's just what markets do. All markets do that. And Bitcoin's not special, gold's not special, and silver's not special. They are prone to do the same types of pullbacks as well.
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  And I think part of it was last year, one of the big narratives was this, you know, the debasement trade, right? And all of the world's governments are going to have to print money. And so all you have to do is go out and buy hard assets or things that can't be debased and sit back and ride the waves higher because endless liquidity is going to come.
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  And it's not that that's completely wrong. And if you want to step out and say over the next three to five to 10 years, I would tend to agree with that.
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  But markets don't move in straight lines. And I think to a certain extent, all of these assets got ahead of themselves based on the certainty that the debasement trade and the resurgence of inflation was coming back.
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  And now what we're starting to see is that there's some deflationary forces out there as well.
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  And the inflation certainty is not quite as certain as it was.
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  We have some deflationary shocks that are happening.
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  We have, you know, whether it's AI, which has the potential to drive massive deflation.
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  You have private credit, which is starting to seize up.
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  And that has the potential to cause a credit crisis or even or just a credit contraction.
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  And during a credit contraction, that's that that's liquidity disappearing. Right. And so I think as the narrative shifted from abundant liquidity to a little bit more conservative posturing, those assets that got ahead of themselves are coming back perhaps, you know, to where they should have been initially.
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  it's funny like the in bitcoin there's obviously this kind of like gold bug versus bitcoin dynamic
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  which i don't agree with at all like i think the at least from my perspective the trade is
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  is pretty similar um so we'll give you this one brent congratulations to the gold bugs uh we'll
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  see you in a year and check the scoreboard um the funny thing is is each side each side is equally
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  uh equally uh what's the right word to use um offensive when they're doing well and they're
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  equally defensive when they're not. So, yeah, of course. But we can give you this one.
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  Okay. I'll take it.
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  What do you think of the global macro situation right now? You're saying liquidity might be
• 17:18
  rolling over. It seems like a pretty uncertain time. What's your read on it?
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  Yeah. It's funny because I'm not apocalyptic as some people are. I don't think we're going
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  into another Great Depression. I'm not even convinced we're going to have a recession.
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  I won't be surprised if it happens. I understand exactly why we could. But I think we're overdue for some volatility and overdue for some pullbacks. But as of now, I'm not expecting some cataclysmic dive that leaves the United States or the rest of the world in a five-year depression or recession.
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  I think everything has gotten way ahead of itself.
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  If you take Bitcoin out of it, everything else is kind of near its highs.
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  Or I guess software stocks have pulled back.
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  But the NASDAQ is still near its high.
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  The Russell is still near its high.
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  The Dow and the S&P are still near its high.
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  The DAX is near its high.
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  Brazil's Bovespa is near its high.
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  Hong Kong is near its high.
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  Korea is near its high.
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  You just go around the world, everything is pretty close to either at their highs or
• 18:23
  pretty close to their highs.
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  And that to me, to a certain extent, indicates markets are priced perfectly.
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  And I just think we live in a very imperfect world right now.
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  And I think volatility has been uncharacteristically low.
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  It around 20 now And it funny What funny to me is that VIX is around 20 and people are saying wow the VIX is at 20 as if that like this big scary thing But historically the VIX at 20 is not that big a deal Right But now because we just so used to it being in the low teens or mid teens it even goes to 20
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  We're like, holy cow, what's going on? So I think we're probably overdue for some kind of a shock.
• 19:04
  And it wouldn't surprise me at all if this March and April are very similar to last March and April, where we could have some volatility in a few weeks of down.
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  But then, you know, things turn around and go higher.
• 19:15
  The other thing that we have to remember is we've got, well, there's so much going on, it's hard to address it all.
• 19:22
  But the three big ones are obviously Iran, Central and Latin America, and then the presidential election.
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  Or I'm sorry, midterm elections later this fall.
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  And any of those have the potential to create great chaos.
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  So far, they've caused a little bit of volatility, but they haven't exploded.
• 19:47
  But any of them could cause things to really explode.
• 19:50
  And so I think it's one of these things where you need to have exposure, you need to be invested, but you definitely need to have an eye on the exit and be prepared for those types of drawdowns.
• 20:01
  So those three things are sort of the major geopolitical things happening.
• 20:04
  The one you left out is what's happening at the Fed.
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  Is that because you don't see that as actually that big a deal?
• 20:10
  Or do you think that Kevin Walsh will change things there?
• 20:14
  Well, that is a potentially very big one.
• 20:16
  I happen to think that they are. It's really interesting. My base case is that the battle between the Fed and the Treasury, which I've been saying for years was going to happen and I thought the Treasury would win.
• 20:33
  I think it's been moved to the back burner. The question is whether it will stay on the back
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  burner. And what I mean by that is I can't imagine that Trump allowed them to pick Warsh without some
• 20:47
  kind of assurance that he's at least going to play ball a little bit. Now, I don't expect Warsh
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  to come in and do just anything that Trump or Bessent say, but I have to believe they had
• 20:58
  numerous conversations leading up to this, and they must at least have some common ground on how
• 21:04
  to deal with the challenges ahead. And my guess is that Besant went to bat big time for Warsh
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  because he felt like Warsh was somebody that he could work with and that saw the overall framework
• 21:19
  of what they were trying to do as something that the Fed could accommodate. Now, I'm the first to
• 21:25
  admit that it's easy to say one thing when you're running for office and then do the exact opposite
• 21:30
  once you're in. So it won't shock me if it turns out that Warsh is not on board, but I would
• 21:38
  anticipate him being that way. Yeah, the interesting thing about Warsh, and I'm not going to pretend I
• 21:43
  knew very much about him at all before the nomination, but after looking into him, in 2008,
• 21:48
  he left the Fed because he didn't agree with the idea of money printing. But he's obviously coming
• 21:53
  in with Trump wanting rates at 1% or whatever it is, significantly lower. Do you think something
• 22:01
  has changed there and he will basically just go to bat for Trump and be a sort of puppet there?
• 22:06
  Or do you think he will try and keep some kind of Fed independence alive?
• 22:10
  Well, I think he will try to keep Fed independence alive. And I don't think he will be a puppet,
• 22:14
  but I do think he will be accommodative. And there's one thing that I think people should
• 22:20
  be aware of. Now, I did a show on this a couple of weeks ago on my YouTube channel where I said,
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  people need to be aware of this. I don't know that this is necessarily what they're going to do.
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  But if they did do it, it wouldn't shock me. And it kind of goes along with Trump's, you know,
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  United States economic renaissance thesis or attempt. And that is this concept of the imperial
• 22:45
  circle. I'm not sure if you've ever heard of this before, but this imperial circle is something
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  that Soros popularized back in the 80s.
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  And then this imperial circle is the basis
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  of which the Soros and Druckenmiller
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  and also Besant was working with them at the time
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  when they put the trade on that broke the Bank of England.
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  So if you give me two minutes,
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  I'll explain what this imperial circle is.
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  So the imperial circle was,
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  is let's just go back to the early 90s.
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  In the late 80s, very early 90s,
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  the Berlin Wall came down
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  and German reunification was on the table.
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  And as a result of German reunification,
• 23:32
  the government was gonna have to spend a lot of,
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  the government of Germany
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  was gonna have to spend a lot of money
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  to fund these programs
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  that were centered around reunification.
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  And there was fear that all of this government spending was going to cause inflation in Germany.
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  Because this was before the euro. This is when they had the Deutsche Mark.
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  And so the Bundesbank raised rates in order to keep the Deutsche Mark strong and to counter those inflationary fears.
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  And a lot of people said, well, that is going to crush the German economy that they are trying to revive.
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  and it will be bad and you'd be better off not being in Germany.
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  And Soros said, you have this exactly wrong. Soros said, the fact that you have higher rates
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  on a relative basis than the surrounding area, and you have the government spending a lot of money,
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  that will turbocharge the German economy because the higher rates will pull foreign capital into
• 24:38
  Germany. And then when the government starts spending money, that's going to goose the economy
• 24:44
  that will cause growth to accelerate. People will see growth accelerating and they will want to be
• 24:50
  part of it. So more money will flow in and it will become this vicious cycle or benign cycle to the
• 24:57
  higher level. Right. So he called it the imperial circle. And as it gets stronger,
• 25:05
  it reinforces the flows that make it even stronger. And he said that that liquidity
• 25:12
  would leave the surrounding area and go to Germany and that the countries that were now
• 25:19
  deprived of that liquidity would have to break their pegs because they were all tied to each
• 25:25
  other based on the European exchange rate mechanism. And that's exactly what they did.
• 25:31
  So they said, even though Germany has problems, don't try to take out the king, take out all his lieutenants, right? Go after the weak ones that are surrounding it. And that's exactly what they did. And that's exactly what happened. So money flowed into Germany. The German economy did well. Short term rates went higher. Long term rates fell and the stock market went up. So it was a great success. And so he was invested long in Germany, short the surrounding areas, and he became a legend, right?
• 25:59
  Okay, so that was Soros, Druckenmiller, and Besant.
• 26:04
  Besant was young at the time, but he was kind of on that team.
• 26:08
  So where did Warsh go after he left the Fed in 2015?
• 26:12
  He went and he became an advisor to Druckenmiller, right?
• 26:15
  So I'm not saying that all of these guys have sat around and said, we're going to do the
• 26:20
  imperial circle in the United States.
• 26:22
  I'm just saying these guys know how to use it.
• 26:25
  They understand it. And now they're in positions of power to actually not just see if it comes true, but to make it come true.
• 26:33
  OK, so let's bring that back to the current situation.
• 26:36
  The United States has higher rates than most places around the world, most developed markets.
• 26:43
  So they could cut rates and take them from three and a half to two and a half.
• 26:49
  And they would still be high relatively to the rest of the world or the rest of the developed markets.
• 26:54
  especially when you consider other countries will be cutting rates as well. So my point is,
• 26:59
  I don't think the United States is going to be cutting rates because growth is slowing all on
• 27:04
  their own, right? I think they would be cutting rates in unison. So in other words, Warsh could
• 27:11
  come in, cut rates, do two or three cuts in the next year, have rates at two and a half percent,
• 27:18
  which is still fairly low, but still fairly high on a relative basis. You know Trump,
• 27:24
  is gonna spend money through stimulus
• 27:27
  and the big, beautiful bill
• 27:28
  and all the other things that they're gonna try to do.
• 27:32
  And so you kind of have,
• 27:34
  and you already have everybody needs to be,
• 27:36
  you know, long the dollar anyway
• 27:38
  to operate on the global stage.
• 27:40
  You have the potential for flows
• 27:43
  to continue coming into the United States
• 27:45
  and push this economic renaissance
• 27:49
  that Trump so badly wants.
• 27:51
  And so I think Warsh and Besant kind of understand this.
• 27:58
  In other words, if you take rates from three and a half to zero,
• 28:02
  you know, Trump would probably love that,
• 28:04
  but that would also be a signal that something is wrong, right?
• 28:08
  Why are they taking rates from three and a half to zero?
• 28:10
  And if you don't get paid to sit in the currency,
• 28:13
  you could actually see that currency leave and go somewhere else.
• 28:16
  So again, I'm not saying that this is what they're going to do.
• 28:20
  But I think it's really important to understand it as a concept and why Warsh might not just cut rates immediately and why not doing so might actually still help the U.S.
• 28:34
  I've got so many questions in there.
• 28:36
  So if in this framework, why does percent want a weaker dollar?
• 28:41
  Like, how does that play into this?
• 28:43
  Well, so that's something.
• 28:44
  So I think they do want a weaker dollar.
• 28:46
  And I'm not sitting here saying that Trump wants a strong dollar.
• 28:48
  But I don't think they want a dramatically weaker dollar. So some people are saying that, you know, they want that Trump wants to devalue the dollar and they'll say DXY going to 75 or 80 or whatever it is as a result. Listen, that could happen. And if that happens, then asset prices are probably doing very well because for that to happen, there has to be a lot of liquidity.
• 29:08
  So if that happens, we own a bunch of assets, that will be fine. But I don't think they want it to go that low. Here's why. Okay, I'm going to try to explain this in simple terms.
• 29:24
  but there's a band within which if the DXY trades within this band, everything kinds of works.
• 29:31
  If it goes to the outside higher than this band or if it goes to the outside lower,
• 29:36
  things start to break down in the global monetary system. And I'll explain why. So
• 29:40
  in our current system, money is loaned into existence. And when it's loaned into existence,
• 29:46
  it has an interest rate attached to it. So anybody that borrows money and then puts it to work has to
• 29:53
  get a return that's higher than that interest rate. In financial lingo, that's called a carry trade.
• 29:59
  You're borrowing money. There's a certain amount of carry that you have to exceed. And if you can
• 30:04
  exceed the cost of carry, then you do the project, right? So anybody that does that on the global
• 30:11
  stage typically does it in dollars, both U.S. institutions and non-U.S. institutions. That's
• 30:18
  the euro dollar market that exists outside the United States. So the United States only has to
• 30:24
  do it in one currency, and that's the dollar. Everybody else has to do it in two currencies
• 30:29
  because they use dollars in the euro dollar market, and then they use their local currency
• 30:36
  in their local markets. The problem is that currencies trade relative to each other.
• 30:43
  So if the carry trade is going against them in dollar terms,
• 30:48
  then it's helping them in local currency terms, right?
• 30:53
  And that's fine as long as the DXY remains in the span.
• 30:56
  But if the DXY goes to 103, 105, 108,
• 31:00
  now that dollar carry trade starts to go against them
• 31:03
  and it starts to hurt them, right?
• 31:05
  But if you take the other way,
• 31:07
  let's say that the DXY goes to 82 or 80.
• 31:10
  Now, their local currency is getting very strong, even though the dollar is getting weak.
• 31:16
  And not only is the local currency getting strong, that puts pressure on their exports.
• 31:24
  And as there's pressure on their exports, it makes it harder for them to exceed the cost of carry in their local currency terms.
• 31:31
  So now they start to fall apart because of that.
• 31:35
  So that's why, I mean, the dollar has to stay within this band for the global economy to kind of expand and function.
• 31:41
  If you go too far outside either way, problems start to happen.
• 31:47
  And so that's why I think the U.S. would love it if the DXY went to 90, 91, 88, because, you know, that provides, you know, easier exports for the United States.
• 31:58
  The dollar is not completely collapsed. It's weaker, but it's not completely collapsed.
• 32:03
  And the other currencies are stronger, but they haven't gone through the roof.
• 32:07
  But again, if you go outside that band, either way, problems start to happen.
• 32:12
  And so I think that's why.
• 32:14
  And I guarantee you, again, I'm not saying that Besson is managing based on this principle,
• 32:18
  but I guarantee you he understands it because, again, he was part of the team that made a
• 32:23
  billion dollars in a day doing this.
• 32:26
  Right.
• 32:26
  He understands these dynamics.
• 32:27
  so that that's why i i don't i think this may have been lost on other people i don't think it's lost
• 32:35
  on besan yeah no i i can believe that besan's clearly a very smart person but the other thing
• 32:40
  that he wants is or he said he wants is a weaker dollar and he wants to be able to term out the
• 32:45
  debt so to term out the debt he needs interest rates lower um right if he gets that through
• 32:50
  wash then tell me how this imperial circle is going to work like who is the winner and who's
• 32:55
  the loser? Obviously, US being the winner, is everyone else the loser? Well, it's a good
• 33:00
  question. And it kind of depends on how fast it happens and over what time period. So remember,
• 33:04
  if you go back and you look in the early 90s in Germany, they raised rates on the short end.
• 33:12
  And when that capital flowed into Germany and the economy started to expand, long rates came down
• 33:19
  because it was seen as a growing market.
• 33:23
  If you have what is perceived to be a growing market,
• 33:26
  long-term rates will typically come down
• 33:29
  because it's a safer place to invest, right?
• 33:32
  It's when things start to go bad
• 33:35
  or when there's fear of high inflation
• 33:37
  where the long-term rates would go higher.
• 33:42
  So potentially, and again, we don't know.
• 33:44
  And actually, my base case is not
• 33:46
  that we get dramatically lower long-term rates.
• 33:49
  I think they probably kind of stay where they're at. Maybe they go down a little bit. But I think what Besant and Warsh and Moran and their whole team is counting on is a growing U.S. market that draws in capital from around the world.
• 34:11
  and as an inflation fears continue to come down.
• 34:15
  And if inflation fears continue to come down
• 34:17
  and economic growth picks up,
• 34:20
  you should see lower long-term rates.
• 34:23
  So, you know, and he has said
• 34:25
  he wants to get long-term rates lower
• 34:27
  and then he wants to term out the debt, right?
• 34:30
  I don't think that he's going to wait for zero to do that.
• 34:34
  I think if it gets, you know, it's at three,
• 34:36
  it's at four now, long-term rates are at four.
• 34:38
  I would think if it gets back to two and a half,
• 34:40
  3%, he starts terming some of it out. Because remember, long-term rates at zero is not a great
• 34:47
  indicator either, right? I think his point with Yellen was-
• 34:52
  There has to be a cost of capital. No, exactly. And again, he's a markets guy,
• 34:56
  so he knows that there has to be a cost of capital. Maybe he doesn't want it to be at 5% or 6%,
• 35:01
  but I don't think he wants it at zero either. But if he could get it down to 2.5%, 3%,
• 35:07
  my guess is that they would start terming some of the long-term debt out. And for those who say
• 35:12
  that they won't be able to sell the debt at that rate, I think they will. I think they would go
• 35:17
  around to the world and they say, hey, we are terming out all our debt. We're going to sell,
• 35:22
  we're going to buy back, we're going to sell new treasuries, 50-year treasuries or whatever it is
• 35:27
  at two and a half, 3%, and you're going to buy them. And then we're going to take that money,
• 35:32
  turn around and pay off the debt that's already out there, right?
• 35:35
  and if people say you're not going to buy them, I think they'd turn around and say, yes, you are.
• 35:42
  And if you don't buy them, then you don't get a swap line anymore and you don't get preferred
• 35:46
  trade status and perhaps your tariffs go higher. I think this is the world we're in now. I think
• 35:51
  we're in the world where we're no longer cooperating because it seems like the right
• 35:55
  thing to do. We cooperate because the most powerful entity says do it. And, you know,
• 36:01
  people aren't going to like that. But I think I just think that's where the world is headed. I
• 36:05
  I think we're going back towards power policies as opposed to efficient policies.
• 36:12
  Ray Dalio was talking about that in this piece, saying we're going back to the jungle.
• 36:16
  Yeah.
• 36:16
  In that scenario, if he gets the economy chugging along, things look good, there's less fear
• 36:20
  of inflation or deflationary bursts.
• 36:23
  Do you think that is a scenario where gold starts performing worse and Bitcoin actually
• 36:28
  starts performing well because at the moment it is trading like a tech stock, even though
• 36:32
  I think it's something entirely different?
• 36:33
  potentially. I mean, if you get growth and interest rates start to come down a little bit,
• 36:42
  that could put, then I think you have to remember most people in the world don't want to buy Bitcoin
• 36:49
  and don't want to buy gold. Most people want to buy stocks, right? Now, I think the markets for
• 36:55
  Bitcoin is obviously growing because it's a great debasement trade. And I think, you know,
• 37:00
  people are starting to wake up. They see gold at 5,000. They say, hey, what am I missing?
• 37:04
  But again, when things start to go crazy, the first thought in every person's mind is not,
• 37:11
  let's go to gold or let's not go to Bitcoin. It's not that people,
• 37:17
  there's not people that don't do that, but that's not the first thought of most people.
• 37:24
  And so I not sure that we going to see gold double from here anytime soon We might And listen I not selling my gold I own gold exactly for these reasons but gold came a long way really quick
• 37:36
  Silver came a long way really quick.
• 37:38
  It wouldn't surprise me if they just go sideways for a while.
• 37:40
  Maybe they even go down and sideways for a little while
• 37:42
  until we get more certainty on how things are gonna play out
• 37:45
  in going forward.
• 37:47
  But if Besant and Warsh and Trump and Moran and his whole team
• 37:52
  and Moran and his whole team are able to boost growth and have adequate liquidity, then you
• 38:01
  could see Bitcoin go higher. It wouldn't surprise me. But I think, again, there needs to be
• 38:08
  plenty of liquidity for that to happen. I don't think that that happens as a result of
• 38:15
  a crisis or a deflation trade. In other words, I would not expect Bitcoin to perform well if we get
• 38:22
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• 40:34
  And the only thing I'd push back on there, and I think you'd actually probably agree with this,
• 40:38
  is I don't think most people do want to buy stocks. I think most people want their money
• 40:42
  just to not lose value.
• 40:43
  Fair enough.
• 40:44
  That's fair.
• 40:45
  But I think that ship has sailed.
• 40:47
  One of the other things you said in there
• 40:48
  is you think Trump's going to try and do stimulus,
• 40:52
  whether that's through the Big Beautiful Bill
• 40:54
  or something else.
• 40:55
  Do you think we have some kind of,
• 40:57
  like if he gets this,
• 40:58
  if he gets the economy ticking,
• 40:59
  do you think he will start hitting
• 41:00
  the money printer again pretty hard?
• 41:05
  Well, I don't,
• 41:07
  if the economy's humming,
• 41:09
  then he doesn't need to do money printing, right?
• 41:12
  So I think the only way we get QE coming back is if we get some kind of a crisis, right? So I think people need to remember QE or, you know, quote unquote, money printing. That is a response to a lack of liquidity. If there's plenty of liquidity, they don't need to provide more of it.
• 41:32
  And it would be very hard, you know, to just start doing QE without a really, really good reason to do it, especially after the negative consequences of the last time they did QE.
• 41:46
  Right. They're sitting here calling Jay Powell the worst Fed chair in history, but they're going to do the exact same policies that he did.
• 41:54
  You know, so I'm not saying they won't do it if if if if liquidity dries up and they need to do it, they will absolutely do it.
• 42:01
  But I don't think, first of all, I don't think they want to do it. And second of all, I don't think they would be doing it by themselves. I think the rest of the world would be doing it as well. But I do think they're going to spend money.
• 42:16
  um so and and you got this this big beautiful bill you know that's like three and a half four
• 42:23
  trillion over i think a five-year period or something um that's a lot of money that that's
• 42:28
  already kind of queued up to be spent he's now talking about raising the the the military budget
• 42:34
  from one trillion a year to 1.5 trillion a year first of all one trillion a year is an ungodly
• 42:40
  amount of money. To take it up to $1.5 trillion a year, that's $500 billion. That's about the size
• 42:47
  of a QE program, right? And they're going to do that every year. So, you know, think about,
• 42:54
  and the difference between the big, beautiful bill and, you know, an increased budget,
• 43:00
  military budget, is that money gets spent immediately and goes right into the economy.
• 43:06
  It doesn't have to go through the banks where it then has to get lent out.
• 43:11
  So you remember with QE, they're giving collateral to the banks.
• 43:14
  But if the banks don't turn that into loans, it doesn't find its way into the real economy.
• 43:20
  But with government spending, it goes into the real economy right away.
• 43:24
  And so then this is where you get into this fiscal dominance, right?
• 43:27
  Well, the government is crowding out, you know, it's taking all the money and funding
• 43:32
  its projects and that crowds out other projects that may be more efficient and better allocated,
• 43:38
  et cetera, et cetera, et cetera. So, but I do, but, and I don't, I think a lot of people think
• 43:46
  that the U.S. is not going to be able to fund these budget deficits. I think that they will
• 43:50
  be able to fund the budget deficits. I think buyers will show up. It doesn't mean that rates
• 43:56
  won't reflect that, but I don't think we're going to have a failed treasury auction.
• 44:01
  And if we do have a failed treasury auction, that is a nightmare for the whole world. It's not just a nightmare for the United States because everybody's bonds are priced off of the U.S. Treasury. All corporate bonds in the world are priced off of the U.S. Treasury.
• 44:16
  So the idea that the United States is going to have a fiscal crisis and not be able to fund itself, but England will be able to fund itself and Germany will be able to fund itself and Australia will be able to. That's that's that's that's silly.
• 44:30
  yeah no i mean for lack of a better word i occasionally like we'll check in on what's
• 44:36
  going on in the stock market in the uk and when it opens obviously the us hours everything's closed
• 44:41
  in the us the stock market in the uk looks like it's just guessing what the us is going to do
• 44:46
  until everyone wakes up in the us and then it knows the direction like clearly everything is
• 44:50
  downstream in the us but when when you look at this like imperial circle how does that play into
• 44:55
  your dollar milkshake theory because i i kind of want to do this in two ways where we'll we could
• 44:59
  talk about like the normal system and then let's bring stable coins in yeah so i'm the i will be
• 45:05
  the first to admit that the imperial circle heavily influenced my whole dollar milkshake theory
• 45:12
  um that is you know understanding how and why besant and drucken miller and soros did that
• 45:20
  that's kind of what helped me come to my conclusion that rates would go higher but u.s
• 45:28
  stocks would go higher as well. So again, when I started saying the dollar was going to go higher,
• 45:32
  people said, well, then that's going to be bad for stocks. And I thought, well, no, that's not
• 45:37
  necessarily true. And this imperial circle was a big reason about it. And then they said, well,
• 45:43
  okay, so even though rates are higher in the Germany, and even though money's flown into
• 45:48
  Germany, Germany still has a lot of challenges. But they said, even though, but we're not going
• 45:52
  to try to take out Germany. We'll try to take out the weaker ones. So that's, that influenced me as
• 45:57
  well, I said, okay, so that's smart. No need to try to fight the Fed. No need to try to take on
• 46:03
  the global superpower. Let's just look for the weaker ones around the world.
• 46:07
  And let's stay away. Let's be long the US. Let's be short the other ones.
• 46:11
  If we're going to try to attack one, attack one of the weaker ones.
• 46:16
  And so it was a great influence on the dollar milkshake theory. It's part of the reason why
• 46:21
  I think some of these currency pegs around the world will eventually break. Now, will they break
• 46:27
  for sure. I don't know. Maybe they won't. And the other thing I'd say is the one thing
• 46:31
  I'm going to pivot here just for a second, but I think it's important to say this.
• 46:37
  I think there's a misconception around what Trump and team wants with regard to China and what they
• 46:45
  don't. If they wanted to break the Hong Kong dollar peg or if they wanted to break the CNY,
• 46:51
  CNY's kind of quasi pegged, they could do that. They know how to do that. They have the tools
• 46:56
  that they could use to do that. They don't want to crush China. They want to keep China in a box
• 47:01
  because there's two things that Trump wants more than anything in the world. Number one is he wants
• 47:08
  his face on Mount Rushmore, right? He wants to be the greatest president that ever lived.
• 47:12
  You can't do that if China surpasses you while you're president, right? So he needs to keep them
• 47:18
  under wraps. But he also wants to be on the front page of the New York Times and the Wall Street
• 47:23
  Journal is this great dealmaker that's overseeing this fantastic economy. If you crush China,
• 47:30
  that causes a global crisis and you can't be seen as a great dealmaker if everybody suffers as a
• 47:36
  result, right? So what they're trying to do is actually harder than crushing them. What they're
• 47:42
  trying to do is not let them grow as much as they did and not surpass the United States in certain
• 47:48
  areas, but also not cause them to fail because that and that hurts everybody. And so that's why
• 47:55
  they still want to do business with them. It's why they haven't totally cut them off.
• 47:59
  But it's also, you know, the U.S. and to be clear, the U.S. would be if they tried to crush China,
• 48:04
  I think they could do it. But the United States would get hurt in that as well. Right.
• 48:08
  So instead, they're trying to thread this needle and it's really, really hard to thread that needle.
• 48:13
  But I do think, you know, bringing this back to the imperial circle, I think that they understand that there's a natural gravitational pull to U.S. markets for all the reasons that we've already discussed.
• 48:30
  And if you combine that natural pull with government stimulus, that should be good for long-term rates coming down.
• 48:39
  It should keep the dollar relatively strong, even though they're trying to weaken it.
• 48:42
  and it should be good for growth and overall markets
• 48:46
  and it should be good for the economic renaissance of the United States.
• 48:50
  So what they're trying to do is very hard,
• 48:52
  but I think that's what they're trying to do.
• 48:55
  That makes sense.
• 48:57
  And so when you came up with this theory,
• 48:59
  stable coins were around, I believe,
• 49:01
  but they weren't the behemoth that they are today.
• 49:04
  When did you start properly paying attention to Tether?
• 49:07
  And actually, just to put the size of Tether into perspective,
• 49:10
  I was in D.C. about a year ago.
• 49:12
  And Paolo from Tether did a fireside with Jack Mallers.
• 49:16
  And the scale of their company is insane.
• 49:19
  It's about 400 million users when they were talking at least.
• 49:22
  And they're adding 250,000 users a week.
• 49:26
  It is growing so fast.
• 49:28
  And essentially that is dollarizing the global South without any governments having to change policy.
• 49:34
  Yeah.
• 49:35
  So, okay.
• 49:35
  So first thing I'll say, I don't-
• 49:37
  Actually, I got that wrong.
• 49:37
  It's 250,000 users a day.
• 49:40
  Yeah.
• 49:40
  Okay.
• 49:41
  So Tether is a juggernaut.
• 49:43
  There is no way around it.
• 49:45
  And I've had my problems with Tether for a very long time.
• 49:49
  So I've said this a few times now in the last couple of months,
• 49:51
  but I'm going to say it again.
• 49:52
  So there's three parts of this.
• 49:53
  Number one, I messed up.
• 49:56
  And what I messed up once is I let my opinion of the people
• 50:02
  influence my opinion of the technology.
• 50:06
  So because I didn't like the people that were running,
• 50:09
  and not like I've never met them,
• 50:10
  I don't know them personally, but because I thought some of the things they were doing as a company were less than pristine, I let that influence my understanding of the technology itself.
• 50:22
  And I should have done a better job of understanding the technology despite my personal views of them.
• 50:28
  Right. So that's number one.
• 50:30
  Number two, there was a guy that I used to know in San Francisco.
• 50:36
  His name was Max.
• 50:39
  I cannot, I think he worked for Fidelity.
• 50:40
  I can't remember for sure.
• 50:42
  But he told me back in 2018 that these stable coins are like euro dollars.
• 50:46
  And I agreed with him.
• 50:47
  I thought it was a very good analogy because he was talking about how it's a parallel system
• 50:51
  for dollars.
• 50:52
  It's mainly outside the United States.
• 50:53
  And I thought that's a very good analogy.
• 50:57
  My issue was that I thought, and there's actually evidence to prove this, and I'll discuss it,
• 51:04
  that if and when the United States or other governments around the world wanted to
• 51:10
  stomp these out or stop this parallel system from developing, that they had many tools that
• 51:17
  they could use to do so. And while I wasn't sure that they would be successful in shutting these,
• 51:22
  you know, parallel systems down, I thought they had enough tools to make it interesting and be a
• 51:28
  battle, right? And if you look and you see some of the different actions that governments around
• 51:35
  the world have taken with regard to crypto, that's been proven out. I think the biggest one was,
• 51:41
  I think they called it Operation Chokepoint 2.0, you know, when the Biden administration started
• 51:47
  defunding the ability for crypto companies to operate. They also, it was a pretty big fanfare,
• 51:55
  where Facebook or Meta was trying to launch their own currency, their own token.
• 52:01
  And the Trump, I can't remember if that was Trump or if that was Biden, but they shut that down.
• 52:08
  And so I was saying, while I understand that, you know, this is this parallel system and this is pretty interesting technology,
• 52:16
  I thought it was being run by some fairly shady individuals.
• 52:20
  And I thought the government would not allow it to exist.
• 52:23
  So that is why every time I went down that rabbit hole, I eventually came back out and said, no, I don't want anything to do with it.
• 52:30
  When they started talking about the Genius Act maybe a year or two ago or a year and a half ago, I started thinking, well, this is probably just a way for them to officially regulate it.
• 52:41
  This is an example of them doing what I've always said they're going to do.
• 52:46
  But then they came out and they basically endorsed them.
• 52:49
  And they basically said, this is a new technology.
• 52:51
  It's very powerful.
• 52:53
  We are these are the rules by which we think that they should operate. And then I was like, oh, well, OK, why are they doing that? I didn't expect that. But I have that's new information that I have to at least take account of.
• 53:07
  And when I went back and I started thinking about it again, you know, and I, you know, again, I'd already kind of thought of or had had the analogy given to me that stable coins were euro dollars.
• 53:18
  And I had seen the, you know, the growth of the industry, the ease of use.
• 53:24
  And now the and, you know, the fact that Trump was starting to battle, the Treasury was starting to battle with the Fed, you know, but the Treasury needs the Fed.
• 53:36
  right? But if they didn't need the Fed, it would be much easier to do what they're doing. Well,
• 53:41
  you know, I guess these stable coins, they wouldn't really need the Fed, right?
• 53:45
  And so that kind of made sense. And then I was like, oh, then I started thinking about it at
• 53:50
  issue. And then I got, okay, so it's not really a CBDC, but if they can let the market proliferate
• 53:55
  these, then every place around the world starts to dollarize. And if it gets big enough, they just
• 54:02
  won't be able to stop it. And then they can come in and put their own regulations on top of it.
• 54:07
  And because these are programmable digital rails, it's super fast, but it's also super,
• 54:13
  what's the word, controllable, right? And maybe they go out and they say, okay,
• 54:22
  maybe they will grant five licenses to people that can operate stable coins. Or maybe they'll
• 54:26
  say, you can have a stable coin that trades in the United States, but you have to have these
• 54:32
  issues. It has to follow these guidelines and has to have audits and you need to hold a certain
• 54:37
  number of treasuries. And so the more I thought about it that way, the more I realized that this
• 54:42
  was not only like euro dollars, but it was a potential way for the U.S. to have a kind of
• 54:49
  world-class cutting-edge technology version of the euro dollar market that they could actually use
• 54:56
  as a weapon and control.
• 55:00
  And that's kind of the dream of every government.
• 55:03
  And so this scares the heck out of me,
• 55:05
  to be really honest.
• 55:06
  I mean, this is not for the faint.
• 55:09
  This is really big.
• 55:11
  It definitely is very big.
• 55:12
  But I'm curious,
• 55:13
  how do you think they will use this as a weapon?
• 55:17
  Because they have the ability
• 55:18
  to close accounts of anyone they want.
• 55:21
  Yes, but I think that's further down the road.
• 55:22
  I think they can use it as a geopolitical weapon against small and emerging countries and even some of the bigger countries, because once another country's currency starts to be rejected and instead using dollar stable coins, because as bad as the dollar is, it's better than most other local currencies.
• 55:45
  that starts to strip away sovereignty from those local governments.
• 55:50
  One of the primary tools that any government has to control their population is the money.
• 55:58
  And that's why the legal tenders laws exist. It's why they say gold can't be used as money.
• 56:03
  It's why there's rules around you can't pay your taxes in Bitcoin, because they need to be able to control those channels.
• 56:10
  If they start to lose control of those channels they start to lose control of the economy And if you look around the world and look through history anytime an economy has collapsed or a currency has collapsed
• 56:25
  the government typically collapses shortly thereafter, which makes sense. If you lose
• 56:29
  your primary form of control, then you resort to your only remaining form of control, which is
• 56:35
  violence, right? And when that fails, you're gone. And governments can, they can put down
• 56:42
  revolutions for a while, but if enough people revolt, they eventually fall. And, you know,
• 56:48
  when a country's currency fails, people feel like they have nothing left to lose.
• 56:54
  Let's revolt. Let's get rid of these jokers. Let's put some new guys in power. And that becomes
• 56:59
  very tenuous for the local government. I'm going to give you a perfect real world example right now.
• 57:09
  And that's Iran. Iran, and this is again, you're asking me, why do I think they could weaponize it?
• 57:17
  Besant just came out two weeks ago and said they weaponized the dollar against Iran.
• 57:22
  In a speech he gave, I can't remember where it was at. It might've been in Davos. He said,
• 57:28
  And well, what we basically did was we caused dollar liquidity in Iran to dry up.
• 57:33
  That forced Iran to have to print a lot of money.
• 57:36
  When they printed a lot of money, their local currency fell in value.
• 57:40
  And when it fell in value, the people started to revolt because they couldn't do anything
• 57:45
  with the local currency.
• 57:46
  And it wasn't too long after that before they're out in the streets protesting.
• 57:50
  And here we are today.
• 57:52
  So, you know, you combine all those things.
• 57:54
  And then two days ago, he was in, Besant was in Dallas and he gave a speech and he said, stable coins are a financial innovation that are very important and are going to be part of the system going forward.
• 58:08
  I know I'm paraphrasing, but that's essentially what he said.
• 58:11
  But so when I see a guy who was part of the team that broke the Bank of England come out and say he knows how to weaponize a currency against a country, and then a few days later says stable coins are going to be a big part of the future, you know, he's got my attention.
• 58:28
  Yeah.
• 58:29
  It's not surprising, in hindsight at least, that the U.S. have embraced these because really there's no loss to them.
• 58:36
  I don't think there's any real reason that people in the U.S. are going to be using Tether as their money.
• 58:40
  like you just use totally agree 100 um if if all these countries in emerging markets like if your
• 58:46
  option is a currency that's inflating all the dollar you're obviously going to go to the dollar
• 58:50
  or bitcoin or gold or whatever um but i think it's worth breaking this out into two parts because
• 58:55
  there's there's tether which is like taking some market share of like fiat currency being an actual
• 59:01
  currency but then also on the back end it's propping up the treasury market like which one
• 59:05
  of those two is the most important? So it's my belief that many people are focused on
• 59:14
  stable coins as a way to sell more debt and help the financial fiscal problems of the United States.
• 59:23
  I don't completely disagree with that, but I think it's a much, I think it's a secondary or
• 59:29
  derivative issue. I don't think it's the primary reason. And I think by focusing on that,
• 59:37
  and maybe the government wants people to focus on that because they don't want them to think of it
• 59:41
  this other way. But to me, this is a geopolitical tool that they will be able to use. And I think
• 59:48
  it may create some demand for treasuries kind of on the margin, but I am of the belief that
• 59:55
  there's plenty of demand for treasuries anyway. So I don't think that this is like the white
• 59:59
  knight that's coming in and saving the treasury market. But I do think it will help. And where
• 1:00:05
  it will specifically help is it will help continue to fund the government at the short end,
• 1:00:13
  because the primary backing of stablecoins is short-term U.S. debt. And it gives them a buyer,
• 1:00:21
  It gives them a big buyer of short-term debt while they wait for those longer-term rates to come down like we talked earlier.
• 1:00:29
  So from that perspective, I do think it helps.
• 1:00:31
  I just don't think it's the primary benefit to the U.S.
• 1:00:36
  The other thing, we haven't really talked about this yet, is that, and I haven't fully thought through this all yet,
• 1:00:44
  But it's just something that's kind of I'm thinking about is that this could ultimately, and this goes back to, you know, do you have U.S. dollar stable coins that are issued by U.S. institutions that are regulated by U.S. regulatory agencies?
• 1:00:58
  Or you could have a U.S. dollar stable coin that's issued by, I don't know, a company based in Thailand, right, and is not subject to U.S. regulations.
• 1:01:07
  So then you get into a, and right now, euro dollars trade one for one.
• 1:01:11
  Euro dollars and U.S. dollars trade one for one.
• 1:01:13
  There's no spread, right?
• 1:01:14
  You could potentially get into a thing where there's an onshore stablecoin and there's an offshore stablecoin. And those prices would not necessarily have to trade at par. Right. So you could eventually get into an onshore dollar and an offshore dollar.
• 1:01:30
  And perhaps the U.S. would, you know, in the next time there's a crisis and everybody wants bailed out, they could say, if you are a holder of U.S. regulated stablecoin, you get this preferred funding.
• 1:01:42
  But if you're not, then you don't. Right. So there's a number of different things that could that could come out of this technology.
• 1:01:52
  and again I don't have perfect insight to how this goes I can just see how much money is being
• 1:01:58
  made by them the benefit from a geopolitical perspective the benefit from a fiscal financing
• 1:02:04
  perspective and you know you've got a hegemon that wants to remain that way I don't see why
• 1:02:11
  they wouldn't use it right yeah it's one of the interesting things that came out the genius act
• 1:02:16
  was obviously they basically embraced stable coins but said you can't share any of the interest
• 1:02:22
  i i actually heard david sachs on all in just after that got announced and he said the exact
• 1:02:26
  reason they did that is because there was pushback from i think particularly the regional banks because
• 1:02:30
  they basically saw this as just eating their lunch the interesting thing i think that's 100
• 1:02:34
  i think that's 100 right and i think the thing that will come out of this is tether will likely
• 1:02:40
  at some point have a u.s regulated entity which doesn't issue interest and then they'll have
• 1:02:46
  something else for the rest of the world where you can like have a share of the interest like at the
• 1:02:50
  moment, if they're growing at 30 million users a quarter, like they have really no incentive to
• 1:02:55
  start sharing that. But if that growth slows and they could start sharing the interest with the
• 1:02:59
  users and again, just speeds up the dollarization of every other country. Some people will say,
• 1:03:07
  well, why would the government do this with Tether? You know, they're a fraud. They don't
• 1:03:11
  have all the reserves and da, da, da. Maybe that's true. I don't know. When I did a deep dive on these
• 1:03:18
  guys, you know, five or six years ago, I came to the conclusion they didn't. But, you know, so far,
• 1:03:22
  maybe they've been able to plug those holes. Or maybe, maybe the U.S. government went to them and
• 1:03:29
  said, listen, we know you messed up. We know what you're doing. Here's your choice. You can either
• 1:03:35
  help us or we will crush you. And there's nobody better at helping than the people who have
• 1:03:42
  perpetrated the event, right? Or the thing like, you know, the U.S. government does this all the
• 1:03:47
  time. Somebody who was part of the crime, they give them an easy deal if they help them put the
• 1:03:53
  other guys away, right? Or it's not unusual for governments to do business with either terrorists
• 1:04:01
  or former enemies if it now helps their interests going forward. So maybe they said, yeah, okay,
• 1:04:09
  we know there was some bad stuff that happened five, 10 years ago going forward. This is what
• 1:04:14
  you're going to need to do. And if you do that and you stay within these lines, you know, we're
• 1:04:19
  going to start to regulate these things. You can help us proliferate them around the world. And
• 1:04:23
  when the time comes, we give you the signal and you do what we say. That's I'm not saying that
• 1:04:29
  that's necessarily what they're doing, but it wouldn't surprise me. Yeah. I mean, this is pure
• 1:04:35
  speculation here, but like Tether, when it first came out, wasn't I don't I don't think they were
• 1:04:42
  thinking of tether becoming what it has today it was initially like a way of moving money between
• 1:04:47
  bitcoin exchanges i think to catch arbitrage like because there was a big arbitrage opportunity in
• 1:04:51
  in korea at the time um i don't think they saw tether becoming what it is right now but and i
• 1:04:58
  could totally believe there was a period of time where they weren't fully backed because they used
• 1:05:02
  to have all sorts of like corporate bonds and stuff in their reserves um into a way higher degree
• 1:05:07
  whether the US sort of helped bail them out
• 1:05:10
  or what I think is maybe a more likely scenario
• 1:05:13
  is when interest rates started going up
• 1:05:15
  from essentially zero to where they are now
• 1:05:17
  I think they might have accidentally been bailed out by the Fed
• 1:05:19
  and I do believe they're probably fully backed
• 1:05:21
  I'm almost certain they're fully backed now
• 1:05:23
  in fact I think that they are over collateralized
• 1:05:26
  the interesting thing is that they're also moving into gold now
• 1:05:31
  so Tether have Tether Gold
• 1:05:33
  I think they are the largest owner of physical gold
• 1:05:36
  for a private company, I believe.
• 1:05:38
  I'm pretty sure that's right.
• 1:05:40
  Do you see this as them becoming
• 1:05:42
  sort of a new age central bank?
• 1:05:45
  Well, so what I, potentially, right?
• 1:05:48
  Maybe this, I hesitate to say this out loud.
• 1:05:52
  Maybe they're the new bank
• 1:05:53
  of international settlements, right?
• 1:05:54
  I mean, I don't know, maybe.
• 1:05:59
  But, you know, this brings up another battle
• 1:06:02
  that's coming along too, is that, well,
• 1:06:04
  well, why would people use a US dollar stable coin if they could use a gold stable coin? Because
• 1:06:10
  a gold stable coin or Bitcoin or whatever it is, it's not going to lose value the way a US dollar
• 1:06:16
  is. And OK, there is some truth to that. But to me, that that fills a different function.
• 1:06:21
  You know, the dollars are used for payments, for commerce, for everyday use, for living your life.
• 1:06:28
  You know, the people that are looking for dollars are not looking for the same thing that a holder
• 1:06:32
  of gold or Bitcoin or stocks or real estate is, right? But that doesn't mean that Tether couldn't
• 1:06:39
  offer all these different options. The other thing is, you know, despite gold, gold stable coins have
• 1:06:47
  been around for a while, you know, Paxos has been around, I think, five, six years. But despite that,
• 1:06:53
  99% of stable coins in the world are tied to the US dollar. And the reason they're tied to the US
• 1:07:00
  dollars, that's where the demand is. That's meeting the market demand, right? And so,
• 1:07:07
  but yes, but going back to your point, I mean, Tether is a force now, right? I mean, they're,
• 1:07:13
  and not only that, but Lutnik, as I understand it, custodies a big portion of their treasuries,
• 1:07:20
  right? I mean, that's the U.S. Commerce Secretary. So, you know, you don't have to connect the dots
• 1:07:27
  It's too hard to figure out that there's potentially some cooperation here, right?
• 1:07:31
  I think one of the real telling signs is that Paolo from Tether, it was his first trip to
• 1:07:37
  the US when I saw him in DC last year on stage.
• 1:07:40
  There's probably a good reason that he hadn't come before.
• 1:07:43
  And he's obviously been-
• 1:07:44
  No, totally.
• 1:07:45
  I 100% agree with you.
• 1:07:47
  If I was Paolo and I didn't have like an ironclad guarantee that I was going to be able to leave,
• 1:07:55
  I wouldn't have shown up.
• 1:07:57
  Absolutely. The thing that I do like about it is the Tether people are Bitcoiners. And we always talk as Bitcoiners of being like, you have to have a seat at the table. And I think Tether are giving Bitcoiners a seat at the table because they are becoming just, you can't ignore them anymore. So it'll be interesting to see how this plays out. You wrote a piece recently, The Stablecoin Wars. Is there anything we've not touched on that was in that piece that you want to get into?
• 1:08:21
  I think, so let me just set it up because we wrote our original paper back in October and that basically laid out the geopolitical angle and why I thought they were going to be a big deal.
• 1:08:36
  This is a follow-up which lays out all of the battles going on within this arena.
• 1:08:42
  And the reason all of these, and there's many of them, and they're enormous and they're like knife fights.
• 1:08:47
  And the reason is because the profits are so incredibly huge, right?
• 1:08:51
  The one thing that's in the paper that we did not discuss yet, and again, I do not fully understand this because I'm not a technology guy, right?
• 1:08:59
  But if you believe in the AI trade and you believe that AI is going to become an increasingly important part of the future, stable coins are the currency of the AI trade because there's these bots, there's these AI entities that will trade with each other.
• 1:09:19
  all hours of the day, even when businesses are closed. And they do these microtransactions,
• 1:09:26
  but they do it in such great volume that it ends up being a lot of money. And it's not something
• 1:09:33
  that legacy finance can do because legacy finance is too slow. The minimums are too high. The
• 1:09:40
  regulations are too high. And so it's almost like marrying the base layer of the monetary system
• 1:09:51
  with the currency that goes along with it, right? This is huge. And I can't believe that I was so
• 1:09:59
  slow to the table on it. But now that I see it, I can't unsee it. And I guess if I give myself a
• 1:10:05
  little bit of break about it, it's because I thought that they were going to try to keep them
• 1:10:09
  from developing. But once I saw that they're actually encouraging the development and embracing
• 1:10:14
  it, then, you know, then I understood it pretty quickly. Yeah. The AI using money is a really
• 1:10:21
  interesting one. Like Bitcoiners have for quite a long time said that like Bitcoin will be the money
• 1:10:25
  of AI. And I think it will be for some, but when these are controlled by like such large corporate
• 1:10:31
  entities, there's going to be people in their ear being like, use this currency. And I think
• 1:10:36
  Tether, USDC are going to be at the forefront of that. Do you think, talking of USDC, do you think
• 1:10:42
  this is a race that Tether have already won? Because if you look at the market for stable
• 1:10:48
  coins right now, USDC have a lot of the regulated institutions in the US that have been basically
• 1:10:54
  forced into this because it's the most, quote unquote, compliant stable coin. But Tether are
• 1:10:59
  by far the largest and they're attacking the global south, which is a ginormous market. Again,
• 1:11:04
  maybe less money sort of per capita, but a huge amount of people. Which one do you think wins?
• 1:11:10
  It's a really good question. And I don't know the answer. I will say, I think Tether is going
• 1:11:15
  to be around. There are a couple of caveats. Number one, it's possible that they don't have
• 1:11:23
  all the reserves. And it's possible that there's a crisis and Tether goes away as a result.
• 1:11:29
  But let's just take that as an example. It's possible that if that happens, tether management goes away, but new tether management is installed. The government makes them whole and says, the people were bad. The technology is great. It's a global good. We're keeping it. That's possible.
• 1:11:49
  the other thing is maybe they would use that as an event to say hey this technology is amazing
• 1:11:55
  but it needs to have state backing and it needs to be more regulated and therefore
• 1:12:00
  we're rolling out our own u.s dollar coin and you know buyer be you know the the private companies
• 1:12:08
  are going to have to be more regulated or have a license or whatever it is this is a long way of
• 1:12:13
  saying. And then I think it's very possible, just if you think back to kind of the whole
• 1:12:19
  make America great again, I kind of have a hard time thinking Donald Trump wants a non-American
• 1:12:24
  company to be the main player, right? So maybe Tether becomes the big player offshore,
• 1:12:32
  but playing within the rules that the United States has set up, and Circle or whoever the
• 1:12:37
  next one is, you know, becomes the onshore version. But this is why I think people should
• 1:12:45
  read the paper for a couple of reasons. Number one, I would love to hear how people think this
• 1:12:50
  is going to play out. So if you think I have something wrong, tell me that. If you think you
• 1:12:55
  have an insight of which, you know, and all these different battles going off, which faction's going
• 1:12:59
  to win and why, that would be helpful. Because I can see this going so many different ways,
• 1:13:05
  but regardless of which way it goes i think the technology stays yeah i think that first scenario
• 1:13:11
  laid out is the scariest because while i think tether is over collateralized at this point they
• 1:13:15
  own an incredible amount of bitcoin i believe they'll be fully reserved if the u.s government
• 1:13:21
  don't really need a legitimate reason to try and take over a company right and if this goes from
• 1:13:27
  being like essentially a private bank digital currency to being take being too big to fail and
• 1:13:31
  then taken over by the US, it becomes a CBDC essentially. And that to me is the scariest
• 1:13:37
  potential outcome. Yep. Yep. But it's going to be interesting. Brent, this has been awesome. I
• 1:13:44
  love talking to you. I saw you're going to be at Bitcoin Vegas. You're going to be amongst the
• 1:13:49
  Bitcoiners in the den. I'm looking forward to seeing you there. I'll make sure I link everything
• 1:13:54
  in the show notes, but anywhere else that you want to send anyone before we close out?
• 1:13:57
  No, you know, I think what I would just say is so, you know, I do a show every week on YouTube. It's called Milkshakes, Markets and Madness. If you liked the topic that we talked about today, we do have a special going on right now. If you go to research.santiagocapital.com and go to the promotion tab, you can get both of the reports that we referenced by signing up for an annual subscription.
• 1:14:21
  So these reports are typically for our pro level, which is our higher level service.
• 1:14:26
  But because we think it's so important, we're making them available to premium level subscribers for a limited time.
• 1:14:35
  Awesome. Well, congratulations for being a Goldberg over the last year.
• 1:14:38
  Hopefully next time I speak to you, Bitcoin's got one up on you.
• 1:14:41
  But I really appreciate it, Brent. Thank you.
• 1:14:44
  Thanks for having me.
• 1:14:51
  Thank you.