Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Jim Bianco: Deep Insights Into the Global Economic Crisis

Episode Date: June 2, 2020

We've heard it over and over again, Covid-19 has plunged us into a crisis like none other we’ve experienced in our lifetime. Although it is primarily a public health issue, it is also having a major impact on the global economy and financial system. Many businesses have been forced to shut down sparking debates on whether this is supply or demand shock. Wall Street proclaims that any increase in economic activity is a good sign. However, Jim Bianco, President and Macro Strategist at Bianco Research, says a return to 90% of pre-crisis level will still not be enough to recover. Bianco Research is a Chicago-based firm that provides research and analysis for institutional finance. Jim started to take serious notice of the Covid-19 outbreak back in January. Since then he has been sharing his views on the long- term, macroeconomic consequences of the pandemic. He brings an enormous amount of clarity and insight into this issue.Topics covered in this episode:Jim’s background on Wall Street and how he transitioned into researchWhy he was so early to talk about the pandemic and the crisisThe lessons learned from this pandemic and what’s nextWhat long-term economic and societal trends we can expectThe FED: their response, the effects on the economy and where we go from hereJim’s views on UBI and the legitimacy of taxes if states can just print moneyThe US debt problem caused by the slowing of international tradeThe US dollar as a reserve currency and how it could be displacedThe prospect of crypto-based reserve currencies and the disruption of central banksHow close are we to Crypto and Bitcoin becoming an asset class in the traditional finance systemJim’s visions for the post virus worldEpisode links: Bianco Research“Is the Fed Making it Better?” Reset Everything TalkJim Bianco TwitterBianco Research YoutubeWTF Happened In 1971?Mainnet 2020 – Messari's Flagship Crypto Event (June 1 to 3)Free tickets to Web 3.0 Forum (June 8 to 10)Sponsors: Least Authority: Learn how Zero-Knowledge Access Passes can help you build a more privacy-minded business by disconnecting payment and user data. - http://www.leastauthority.com/zkapsThis episode is hosted by Sebastien Couture & Brian Fabian Crain. Show notes and listening options: epicenter.tv/342

This is Epicenter, episode 342 with guest, Jim Bianco. Hi, welcome to Epicenter. My name is Sebastian Cuijo. Today, our guest is Jim Bianco. Jim is the president and macro strategist at Bianco Research. They're a Chicago-based firm, and they provide research and analysis for institutional finance. Jim is one of the people that I've enjoyed following the most to understand the long-term macroeconomic consequences of this pandemic. I first heard about him on the Macrovoices podcast back in March, and I thought, this guy brings so much clarity and sensemaking to this entire pandemic. And we had him at Risa Everything in April. If you haven't heard that talk yet, you should definitely watch it. It's quite complimentary to this episode. The link will be in the show notes. So here's what you'll learn in this interview. Jim's background on Wall Street and how he transitioned into research. Why he was so early to talk about the pandemic and the crisis.

The lessons learned from this pandemic and what's next? What long-term economic and societal trends we can expect? The Fed, their response, the effects on the economy, and where to go from here. Jim's views on UBI and the legitimacy of taxes if we can just print infinite money. The U.S. debt problem caused by the slowing of international trade. The U.S. dollar as a reserve currency and how it could be displaced. the prospect of a crypto-based reserve currency and the disruption to central banks, how close we are to crypto and Bitcoin becoming an asset class in the traditional finance system,

and Jim's vision for the post-virus world. So after the interview, Brian and I talked for an extra 20 minutes, and we had a super interesting conversation where we debriefed, we talked about what we learned, where we disagreed with Jim, and we shared our own thoughts about where things are going with this pandemic. You know, some of the most fun and interesting conversations that I have are with other hosts of Epicenter. It's when Mayher, Brian, Sonny, Frederica and I get to just sit down and chat. And this is something you, our listeners, have told us too. One of the things that you ask for the most are episodes where we just talk to each other,

when it's just us hosts expressing our own opinions. We want to give you more of that. Today we're launching Epicenter Premium, which will give you access to exclusive content. Here's what you'll get as a premium subscriber. Number one, overtime content. That's when we keep recording for an extra 10 or 20 minutes after the interview to share our thoughts about the conversation and the project. Number two, epicenter roundtables.

That's where the hosts will come together to discuss industry events, issues, and trends. You've heard episodes like these before. We've done several yearly retrospectives in the past or panel discussions where we discuss specific issues going on in the industry. Sometimes we'll bring in some extra guest hosts, but these episodes will be much more of a panel format than an interview format. And number three, bonus content. So I'm talking about epicenter live recordings, conference interviews, project updates. All the content we've typically released as bonus content will also live on the premium podcast. As a premium subscriber, you'll get access to a private members-only RSS feed, and we're launching

EpiCenter Premium today for early adopters at $150 per year. I think you're really going to like this. And this is just the beginning. This is phase one. We have lots of ideas in terms of what we want to give our premium members and we'll build on top of this initial offer. So the price is likely to increase at some point, but as an early adopter, you'll get to experience it all for just $150 per year. To become a premium subscriber, go to epicenter.orgs slash premium to hear content you won't here anywhere else. And if you've been following over the last couple weeks, we were going to do this on Subststack, but we've decided to use other tools instead. Substack's a great product, but after doing some more research and looking into how other podcasts are managing paid subscriptions,

it didn't quite cut it in terms of what we're trying to build. So for those of you who showed interest on substack, just go to epicenter.orgs slash premium, and you can sign up there. Thank you to everyone who is supporting us in this new, exciting journey. And if you have any you want to share, you can reach me directly, Sebastian at epicenter.tv. A little bit of housekeeping. On the day this comes out in a couple of hours from when this episode is released, I'm moderating a fireside chat with Joe Lubin and Danny Ryan. It's happening at the Mainnet conference and you can still get your tickets at mainnet. Events. And next week is the Web3 Forum. It's part of CogX. It's organized by Fabric Ventures. It's June 8th to June 10th. And I am moderating a panel on the topic of

freedom versus civic duties. You can get your tickets. The link to get your free ticket is in the show notes. Before we go to the interview, I'd like to tell you about lease authority. There are security consulting company that conducts software security audits of all sizes from smart contracts to entire blockchains. And they've worked on some of the most well-known blockchain systems out there, including the Ethereum 2.0, but that's not all they do. They're an incredibly mission-driven team, and since we started working together, I've gotten to know them and understanding their values. And one of the things they're very passionate about is privacy-preserving technologies. And this is the entire premise of one of their latest projects, Zero Knowledge Access Passes or Z-Caps. What are Z-Caps? Well, let's take an example.

Let's say you're a SaaS company and you provide, say, encrypted email or encrypted file storage. You may not have access to your user's data, but if you're taking credit card information, you can still make some correlations about the user, who that person is, their identity, and their account usage, or perhaps some metadata that is leaking from the data itself. Well, ZCAPs allow you to take payment information in the form of a credit card and give access to your customers effectively disconnecting the payment data from the user data. So if you're building a SaaS service and you're concerned about these kinds of privacy considerations for your customers, you should definitely check out ZCaps and Least Authority is leading the charge with this research. To learn more about ZCaps, go to Least Authority.com slash ZCaps, and here you can schedule a call with them and they'll explain everything there is to know about this technology and how you can leverage it for your company.

And with that, here's our interview with Jim Bianco. We're here with Jim Bianco. Jim, thanks for joining us today. Thanks for having me. Why don't you tell us a little bit about your background where you came from and what you do? In the beginning, there was light. Jumping ahead a little bit on the story. Born and grazed in Chicago, I'm a Midwesterner. Attended Marquette University in Milwaukee, Wisconsin, moved to New York.

Got my MBA from Fordham University way back in 1990, 30 years ago. When I was in New York, I worked for credit. Swiss. Actually, I worked for First Boston when they merged with Credit Suisse, so it was originally First Boston at that point. And then I worked for UBS, Phillips, and Drew, when UBS just started their operation in New York. It was less than 100 people. I worked as a market analyst and a technical analyst, as you would call it today, at both of those shops. And in 1990, I came back to Chicago, was affiliated with a brokerage firm that I still am to this day, Arbor Research and Trading. They're my marketing partner. And in April of two,

April of 1998, so 22 years ago, I spun myself off as Bianco Research as an affiliated company of Arbor Research and Trading. We do macro research. My primary audience is anybody who's interested in macro, so that tends to be more of a fixed income type of audience because that lends itself better to macro than equities. Although in recent years, thank you to the ETF universe and also Fed involvement in the markets, macro's become a lot more important because I can remember back in 1998, people would say, well, I don't care what the stock market's going to do. What stocks do I buy? Well, in 2020, I can go buy S&Ps now, so I can just stop there with what I think the stock

market's going to do. So that's the short history of my life in 60 seconds. I'm super excited. We have Yon. I've really enjoyed some of your podcast you did on, for example, Eric Townsend's podcast that I've been listening to a lot during this crisis. I studied economics originally. It's been really nice to sort of rediscover a little bit and spend a lot of time on macroeconomics and stuff like that. And so I really enjoyed your writing new thoughts on that topic. Thanks. Thanks a lot.

Getting into the meat here, so of course, this is a little bit unusual of an interview as well, as we're going to be spending less time on crypto, although we'll get to crypto and more on where the world is heading. Now, the context of this is this current pandemic. So let's start there. Like, how did you first, you know, learn about this? Like, when did you realize, okay, this is going to be a big thing? And what the kind of your engagement with this topic look like? I got onto this topic as far as the pandemic goes in January. And I started talking about it in the last week of January as well, too. I think the big thing that I've learned from the pandemic is that being a researcher, being a guy that works with numbers, I'm just keeping it simple,

I understand exponential growth. And I understood that when China first started reporting, you know, 100 cases or so, I knew that you could be days away from it going to 1,000 and you could be a couple of weeks away from it going to 10,000. And that was what really started to concern me, at least initially, was in the early days of the case growth, in the exponential nature of it. And then when we saw it pop up in South Korea, in Diego, South Korea, that was another warning sign as well, too. And once it kind of got out, I had a feeling that it was going to be one of these things that was going to be very, very hard to contain.

And I also knew that people were going to be arguing and fighting this whole idea that there actually is a pandemic. You know, from the U.S. point of view, you heard as late as the first day of March, President Trump still comparing it to the flu. I used to call them flu truthers at that point, trying to dismiss this as the flu. So that was kind of where I came from it. If I was to just put it simply, it was when I saw the things start to go and I understood the power of exponential growth, I knew that this thing can go and go real fast. Did you anticipate that it would become so politicized? I mean, you mentioned like these flu truthers. Did you think that it would get this polarized?

No, not at all. And it's been the most disappointing thing about it is, and I won't pull any punches here. It seems like this has been used by some as a politicization. You know, in the United States, we now talk about that the left, the Democrat Party wants to keep things shut, the right, the Republican Party wants to open things up. So even the response to this has now become politicized. I've been looking with a wary eye at every biotech company. Look, biotech companies. Look, biotech companies. companies are kind of like oil drillers, kind of like junior miners. There's a lot of hucksters. There's a lot of fraud in that business as well, too, that, you know, everybody's trying to run out some kind of a press release saying that, oh, we're going to phase one. Oh, we're going to this. We got this. We've made this breakthrough. We made that breakthrough just to ramp their stocks up. So everybody's looking to make a buck off of this thing as well, too. And then you've got the massaging of the message. You know, we've got this operation warp speed in the U.S., which is supposed to be one, that they're preparing the ground for being able to mass produce a vaccine.

There is no vaccine. Mass produce what? You put me in charge of warp speed. Okay, great. I'm in charge. Call me when you got a vaccine. I mean, because there's nothing to do that at this point. So it has been a lot politicized as well, too. And you've seen some of that in the UK with the politicization as well. So it has been a bit of a disappointment. And of course, I'd be remiss if I didn't mentioned the ultimate politicization is got to be China continuing to tell us that they've had zero cases for the last 40 days as well, too, or that the country that originated with one billion people that led 11 million people out of Wuhan to travel right before the Lunar New Year claims it stopped at 82,000 cases, where they're like number 16, I think, on the list

right now in terms of countries around the world. So there's a big politicization going on there as well, too. So what's the biggest lesson here that you've learned through this crisis, both in terms of maybe political behaviors, but also just in terms of the economic impact and the economic response? I think the biggest lesson I've learned is the way that the markets after a 20 or 30-year bull market and an 11-year run that we've had that ended in March, it was going to be very difficult for it to die. Let me back up a second. One of the big stories you'll hear from money managers in the U.S. is this is the most hated bull market ever. That is 180 degrees wrong. This bull market is as waringly popular and we have a mania going on with small retail investors as big as it was in the 2000 tech peak, if not bigger. What these money managers fail to recognize is that the public doesn't hate the stock market. They hate you. They are not interested in active managers anymore and that

they're putting their money into the market in a big way. What I didn't anticipate and still am struggling to understand is that throughout March and throughout April when the market was collapsing, the data is showing that the public in the U.S. headlong ran into the collapsing market, opened new accounts, deposited more money, bought stocks, bought ETFs all throughout the entire decline and all into April. And the amount of activity by small retail has been astonishing. And I think it's been one of the big things on the margin that's been lifting the market. I was under the impression, like a lot of people, that when the market broke in March, small retail would run away from the market angry and convinced that they were burned and that they would never come back again.

That's typical of their response. We got the opposite of that. It seems like today, after screaming, there is no alternative, Tina or FOMO, fear of missing out. It's almost like they open up their trading apps and it's like, let's go find something that's collapsed, oil, airlines, retail, and let's buy it. because all the collapsing stuff rebounds, and that's where you make the money, the most amount of money. They sure, they change chase momentum in the big cap stocks as well, too. But if you look at like the Robin Hood app and the Robin Hood API, some of the biggest owners are like the singles dollar of the Fords and the airlines and the Boeing's. They seem to be looking at the airlines and saying, I don't need to know anything about the fundamentals.

All I know is the government won't let them go bust, so I have to buy them because they're going to go back up. That's what's been the biggest surprise to me was the resiliency that investors have had to want to just continue to believe and continue to use every debacle in either a stock or the market in general in March to rush in not to run away. Cool. That's super interesting. I mean, we want to spend a lot of time today talking about the market. but I'm also just curious if, you know, like you learned in January about the virus, the pandemic and started thinking through this. Today, we're almost at the start of June. So quite a few months have passed. Since then, there's been a lot of data. What are your thoughts today about how this will play out in terms of the actual pandemic and reopening and lockdowns?

And what's a trajectory at this point? I don't know anything more than anybody else when it comes to whether or not there's going to be a second wave or whether or not how much we're going to go down. I'll just say that it seems like this is following the pattern of the flu. What you're seeing happen is if you look at the world X the U.S. The U.S. has got the biggest number of cases, so let's put that aside separately. If you look at the world X U.S., it's making new highs. It made its all-time high in terms of daily case count, daily case count. Not obviously every day is a new high, but the daily case count made a new high on Friday, a little over 1001,000 cases.

Most of that's coming from South America. It's coming from Africa. It's coming from the Middle East and a little bit more from Asia as well too. But basically South America is the big one and Africa is the big one. Early on when this case count first started, you weren't getting any cases out of Africa in South America. So it looks like what's happened is as we transitioned to the northern hemisphere's summer and the southern hemisphere's winter, which would be their cold and flu season, the virus is moving south of the equator, which suggests to me that it'll probably move back north of the equator when we get back into the cold weather in the northern hemisphere, you know, in October or November. We'll have to see that. And then in the U.S., if you look at the U.S., if you break it down in the U.S., you can take New York and New Jersey because they're a separate instance.

they've clearly peaked in on the downside. But the other 48 states in the U.S. has been holding fairly steady for the last two or three weeks. There hasn't been any kind of a drop off there as well, too. That suggests that the case count is not over. But I think really the big story that I've been focusing on is the economy itself. We already damaged the economy. We did 39 million people have filed for unemployment in U.S. That's 25 percent of the U.S. workforce. that is the highest unemployment rate since the Great Depression, and when this is over, it might exceed the Great Depression's unemployment rate. The economy's been damaged.

I don't care if we find a vaccine tomorrow. I do care, but I don't think it matters if we find a vaccine tomorrow or by the end of this year. How do we get those 39 million people back to work? How do we get those businesses going again? I fear that the damage has already been done and even a vaccine tomorrow won't undo that. Let me give you a statistic that I've been really championing quite a bit. You look at 2008 and the low point in 2008, outpoint in the U.S. economy was 96% of what it was in 2007. A 4% drop.

That was good to have the stock market get your 10% unemployment rate. You're in a great depression at its worst point in 1933. Output was 74% of what it was in 1929. And that gave you a great depression. So when I hear people like Ross Gerber say, you know, he's a pundit on FinTwit a lot saying, I really think that we're going to get back to 85 or 90% of where we were pre-virus by the end of the year, that's a depression. We got to get back to like 97, 98% to have it be a garden variety.

recession. 95% would be a rerun of 08, 85 to 90% economy. And the economists had a cover story about this about two weeks ago. That is a depression is what that is. And I don't think a lot of people realize that they'll just, you know, in the U.S. here, we'll just get all excited. We'll say, hey, look at this. There's more people in this store this week than last week. This restaurant open. Yeah, well, at 50% capacity, that restaurant's going out of business. There's virtually no restaurant in the United States that can survive at 50% capacity. They need to get back to 95% capacity. Otherwise, they've got to start laying off people in a big way.

And that's what I think is what people, they just want to measure the absolute. Oh, it's better this week than it was last week. We're reopening more. Great. But I need you to get back to 97, 98%. And then a 90% isn't going to cut it. That's going to be a big problem. So that's what I've been struggling with.

How do we have a 90% economy? Because if we do, we're still going to have 13, 14% unemployment. And I don't know if those 13 or 14% that are unemployed are going to be happy with that situation, unless we keep paying them forever like we are now to be unemployed, which case we're going to blow out the deficit. We're going to have this massive amount of borrowing and create a whole other set of problems. As it stands right now, we're scheduled to stop with the extra payments for unemployment at the end of July. So we'll have to see whether or not it gets extended.

I think it will, but I only think it could extend it to the election in November, but not into perpetuity. Yeah, and that kind of opens up, you know, the question about universal basic income and if that is possibly a longer term trend here that gets accelerated. So we come back to this a little bit later. But to what extent has this economic situation been caused by the virus? And rather than just triggering some longer term secular trends that were. going to trigger anyway. I mean, what proportion of the economic impact do you attribute to the virus versus a market that was due to collapse at some point? You're right. The saying you hear a lot is that COVID-19 was the pin, and it wasn't the bubble itself, and that there was a bubble.

Now, the big difference, let's talk about viruses for a quick second. You had SARS. You know why a lot of people don't remember SARS because it was really proclaimed as a pandemic two days after the Gulf War 2003 started. We were too busy watching CNN and watching the United States attack Iraq to notice SARS. The Spanish flu in 1918 happened when the soldiers returned back from World War I. They brought it back with them. In both cases, the economy was already depressed. It was already somewhat of a deflated bubble. So when you have a deflated bubble and you stick a pin in it, you don't get much of a reaction.

But this one was the 11th year of an expansion, three and a half percent unemployment, all-time highs in the stock market, the president tweeting that the, I think, his infamous tweet, the stock market's up 50 percent, you know, since I became president. Why aren't you up 90? Because everybody's supposed to outperform even the market. And then, of course, two weeks after that came the pandemic and completely defeclimate. and completely deflated all of that away by March as well, too. That was the environment we were in.

So it definitely was a pin. The world was waiting for a pin to come. And this was a big one. This was no doubt a big one that came. So I do think that a lot of the problems that we're facing are ones that were there as well. I'll give you another thought, too, about this is when people ask me the question, what kind of long-term trends or long-term impact do you see from the virus? And I like to say, I don't think that this virus is going to create any new trend.

I think what it's going to do is it's going to accelerate existing trends. So there was a trend for people to work at home. And that's just getting accelerated. There was a trend to de-emphasize brick-and-mortar retail. That's getting accelerated. So there was a trend away from studio broadcasts to more podcasts like this. that was in place before it's getting accelerated. So I think everything we're going to see that comes out of this was a trend that was already

in place. We're just putting it on high speed and making it happen a lot faster than it would have otherwise. If you sort of extrapolate a little bit more and look at trends that are brought on by things like artificial intelligence, automatic vehicles and stuff like that, I mean, for years, we've been saying that what percentage of the U.S. workforce is either directly involved in transport and logistics or like a secondary player in that, you know, like restaurants and truck stops and things like that. These are all trends that sort of push us towards presumably more unemployment. Where do you think that this, in addition to other trends can take us?

Like, do you think that UBI is a longer term solution that can be viable in this environment? Take your first part first about the longer term trends. In the U.S., there are one of the the largest job description among tax returns is a job called driver, whether you're a truck driver, a taxi driver, a limo driver, some kind of driver. It's like four and a half, five million jobs that are listed as driver. And obviously, a lot of those jobs are going to be at risk because of a lot of the automation that's coming, not tomorrow, but eventually as well too. The good news about this, though, is that Bob Gordon, Northwestern University, which is in suburban in Chicago and Evanston, Illinois, he's done a lot of work on this. And he said that a lot of

these technologies are net creators of jobs. Uber might have gotten rid of 13,000 taxi drive jobs in Manhattan, but it created 60 to 65,000 Uber jobs in Manhattan as well. So yeah, they're lower paid, but there's more jobs, they're more abundant jobs, which has helped to lower the unemployment rate. So the problem with technology is when a new technology comes, like autonomous driving, we can immediately see those that are going to lose. Oh, those people that have those driver jobs, they're gone. But what jobs does it create? Those are harder to understand. When the iPhone one came out, raise your hand if you thought, oh, this is the end of the taxi business because of Uber, and this is the end of the hotel business because of Airbnb, because you instantly knew that

that's what was going to come out of it. No, you didn't. So these new technologies are going to create new jobs, create whole new industries. We just don't know what they are. And And they're being involved right now. But we can see the jobs that's going to lose. And that's why everybody gets so nervous about a lot of this technology. As far as UBI goes, I'll answer UBI this way. I think there's a lot of it is a political question with UBI. And we're doing a form of it now.

We sent out a $1,200 check. We're giving everybody an extra $600 a week in federal unemployment in terms of and tops of what you get from the state. If you're like in New York State, you're not getting about $1,000 a week in unemployment. If we do that, and there is no economic impact from it, there's no inflation, there's no crowding up for higher interest rates, there's no malinvestment. If there's none of that, there's no reason to stop. The only reason that people push back about the idea about UBI on the right is that it will create inflation. It will create malinvestment. It will create distortions and that those distortions in the long

run will be bad. But if we do this and there isn't, we'll continue to do it and probably do more of it and more of it until we get to that breaking point. Even the Stephanie Caltons of the world, big MMT, modern monetary theory of proponents will tell you there is a limit to what they can do. There is a point that you could go too far and we can find that it will create inflation, their belief is that we could do a lot more than we're doing right now. And what I think is we're on that road. And if we do this and there isn't inflation or there isn't a problem where the stock market holds above 3,000 is now and keeps going, the answer is going to be, oh, good, let's do some more. And then let's do some more. And then eventually we'll

eventually overdo it at some point as well. And I think that's going to be the biggest problem for the Fed. I know that a lot of people are saying, well, the Fed's going to get in there, going to support the markets, get everything back to normal, and then they're going to withdraw. Why? Why are they going to withdraw? If you went in there and you pumped up everything and all good stuff happened from it, why stop? Keep going, especially Trump. Trump loves that the Fed is doing this. He'll definitely be a proponent of buy some more, print some more, go further. Don't stop. Because Trump used to say prior to the pandemic when he was criticizing Paul, the Dow would be 10,000 points higher if Paul had done the right thing, which is basically cut rates to zero

and print money. Well, that's what he did. And the market's going up. We're above 3,000 on the S&P. So I'm sure Trump hasn't tweeted about it yet. I think he's a little afraid to. But I think he definitely wants to say, yeah, Jay, you're doing the right thing. Print faster, if anything else. Don't think about when you're going to get out. Think about getting in deeper. That's what I prefer you to do. What are your thoughts on what the Fed has done? Do you think this is the right response? or how do you wish they had dealt with this? I'm going to say I understand what the Fed did, and I'm going to say I understand what Congress did,

and I'm going to say I understand what most of the governments did. There's an old line that there's no atheist in a foxhole and there's no capitalist in a crisis, right? There is no way they're going to sit there and watch 25% of the workforce lose their jobs in nine weeks. And the stunning statistic that Powell threw out that 40% Of those that make $40,000 or less in the United States, 40% of them lost their jobs in the month of March alone, just in the month of March alone. Now, remember, they're on unemployment.

They're getting an extra $600 a week. So financially, they're not hurting because they're being, that money is being replaced. But there's no way that was going to happen. And they were going to start expousing libertarian or conservative principles and say that we need to let the, markets self-adjust and everything else. I get that. I get that from a practical standpoint, that they were going to step in and they were going to do something. My biggest argument with the Fed is, what is it you're trying to do? Are you taking the attitude that Trump is taking? Trump basically has said, oh, when we get past this pandemic, we're going to go right back to January of 2020. We're

going to go right back to 2019. The S&P is going to go right to a new high. We're going to go right back to 3.5% unemployment and it'll be like it never happened. Nothing will change. That's essentially what Trump has said over and over again. Is that what you're trying to do with the Fed? Are you trying to bridge us to going right back to where we were before with no change? Or do you think there's going to be some kind of post-virus era where things are different, which is what I think? And are you trying to manage us into that period? I don't know what the Fed's trying to do. I don't know if they're trying to get us with Trump. We've got to get back to 3.5% on employment.

We've got to get back to 3,400 on the S&P. We've got to get back to like this never happened. Or are we going to a new era and we need to provide those that make less than 40,000 or those at the lower end, give them some assistance to bridge through to this new era, but we're not going back the other way. I don't know which way the Fed is thinking about this. At times it looks like they're thinking like Trump that this will all go away and we'll just go right back to where we were before. Other times they seem to think like this is, we're going to

manage ourselves to a new environment. Well, if you're managing yourself to a new environment, maybe we need to let the airlines restructure, let the restaurant industry restructure, let the retailing industry restructure, let the oil industry restructure. But we don't allow that. We want to just throw money at them and say, don't change. Just here. Here's some money. Just sit there and wait. we'll all go back to 2019 and you don't have to change. Or are we going to allow them to try and change? So I don't know what they're trying to do. And I think the answer is because they don't know either.

I think that they're just throwing money at this. They're saying, my God, we can't have this many unemployed people. We can't have that social unrest it would have. Here, throw money at them. There, we've done something for it right now. We'll figure out from there. That sort of ties into the thing you said before, right? Like, where is the limit here?

So, you know, if they print money and then it seems to work, then I guess, of course, the question comes about, well, why is your taxation? Why don't you just, like, print money instead of raising tax revenues from the government? Or, like, why not just print money and give it as UBI? Or, like, why can't just the central bank, you know, print money and buy bonds and stocks and all the prices, like, stay up? So, like, where is this heading? Do you think this is in some sort of like this can continue for a long time or if it is going to break at some point in what direction will it go?

That's a good question. You know, because on the right, I've heard a lot of people say and they're factually correct. In the last 10 weeks, the government has promised to borrow and the Fed has printed the equivalent of between four and five years of tax receipts in 10 weeks. If you can print and borrow four and five years of tax receipts in 10 weeks without it producing inflation, without a producing mail investment, without it producing problems, then why do we even have an IRS to begin with? Why do I even have to pay any taxes at all? Just print it up and borrow it whenever you need to spend the money as well too. So it's kind of like I said with UBI. Part of the problem I see with this is that as we keep going, if there isn't a bad response, we're not going to pull.

back from it. Look at QE. We used to call that unconventional policy in 2008. Now it's the most conventional thing we do. We never stopped QE. Why? Because they printed the money. Here's my little printing press. They printed up the money. They threw it at the markets. There was no inflation. There was no bad things that happened. So they never stopped. And when they tried to stop 10 years later in 2018, 2019, the market threw a fit. And they apologized and they went right back to printing money again. So I just think that if there isn't a bad reaction, none of this is going to stop. We're just going to keep adding on to it and adding on to it as well too. Now, you can argue the politics of it, but I do think the politics really comes down to those that are against UBI, those are against

money printing like me, are against it for a simple reason that I think it creates distortions in malinvestment. And if it doesn't, then I was wrong. And the problem that I see is that if $1,000 a month doesn't produce malinvestment, then we'll try $2,000 a month. And if that doesn't produce malinvestment, we'll try $3,000 a month. And we'll keep going until we get to either inflation or malinvestment. Mal investment means we do a lot of dumb things with the money that creates a lot of problems further on down the road. Do you think it creates more inequality? So like, I think maybe one could argue that in the last 10 years, you know, we've created a lot of wealth and equality, perhaps, you know, more than before. Is that a consequence you think of this QE and this money printing?

Or am I missing something here? No, I think it's absolutely a consequence of it. What is QE doing? What are most of the Fed programs designed to do? They're designed to basically support financial markets, that the Fed is printing money, pumping money into the financial markets, and they're lifting the financial markets, which is what's happened. Small retail investors, they see what's happening. They want in on the game as well, too. So that's why they're opening accounts. And that's why you get that perversion that people are like, oh, good, look at this, a couple of stocks that just got crushed by them. Because they always go back up. And as of today, the last week of May when we're talking, that strategy works. It works all the time. Buy everything that's getting annihilated on the verge of

bankruptcy because it always goes right back up at that point. That helps the investor class, all of that. People that have money. It helps them see their wealth go up. And that's why they're not complaining as bitterly as they were in March because the 40% of the American public that owned 98% of the stocks have seen the market go up. The 60% that don't own any stocks, they're not complaining yet because they're getting $600 a week from the government. And they're getting a $1,200 check. And they're being told everything is being reopened and they're being told jobs will be coming back momentarily. Well, if all of that happens, you know, and that's really to me, the big question is now that we're reopening, what level of activity do we get back to? We get back

to 99% and everybody gets their job back. No problem. As well, it'll be an extraordinary period in American economic history that will be studying for generations. But if there is some change and that they're left out in the cold without a job and maybe that these benefits run out, you're going to exacerbate the wealth inequality as well, too. And with it, you're going to exacerbate the social problems that came with it. Last thought for you. Remember, I like to famously say that after the Fed started QE and pumped up the markets in 2009 and bailed out the financial system, we had to pushback from both sides of the political spectrum. First, we had the Tea Party movement, which was on the right, which was, if I had to define it for you,

they were mad about the bailouts and they blamed the government. Then we had Occupy Wall Street on the left. I was to explain it to you, they were mad about the bailouts and they blamed Wall Street. So they were both basically arguing about the same thing, except who they were blaming was completely different. And it was all about inequality. The Arab Spring and a lot of other things were about the inequality. So yeah, it makes it much worse. And this has the potential to make it really bad if it doesn't work out as well as we think.

And what I mean by that is 40% of the public doesn't own any stocks. We're not going to hand them stocks and watch them go up. But what they need is they need their job back. they need their job back this summer. They don't need their job back in two years. And we need to see several million people a month getting jobs back by July, August, September, October. If that happens, and I have my doubts on that, then it worked out. But if that doesn't happen, we're going to have this permanent underclass and an exacerbation of the wealth inequality. We talked about they keep doing this. And if it kind of works, you know, they'll keep printing money. And I totally

agree that's what's going to happen. But, you know, it seems like my take would be in the long run, you don't think that can keep going forever. What do you think the end game is here? It's a good question. I think the end game is going to come fairly soon. And what I mean by that is that right now the market is rallying on this idea that we're going to reopen and everything's going to be good. The market is railing on the idea that there's going to be a vaccine. and that that's going to solve the problems. Taking those one at a time, right now we're in the hope phase. We're just reopening.

We haven't reopened ED past tense. So we can pretend or we can project whatever we think the reopening is going to be. Once we get started on the reopening and we then find what the reality is, I think it might disappoint. Starbucks just recently reported that in their stores in China, which they reopened in late February three months ago. They're at 85% sales. So I don't think Starbucks is going to be able to make a profit in China

with losing 15% revenues in one year. And this is after 90 days and in a country worth the last 40 days, they've essentially reported zero cases. They don't need a vaccine in China. They got zero cases there. They can only get back to 85, 90% of their sales. if that's the reality that we're going to see once we started to reopen, it can be a big, big disappointment. As far as a vaccine goes, I just throw out a thought for you. We just had

the Memorial Day weekend in the United States. And the big thing about the Memorial Day weekend in the United States is lots of examples of people that did not social distance, lots of crowds in beaches, lots of crowds in pools, not wearing masks, all within six feet of each other. Another story that we've seen too is the testing in the United States is now running into an unused problem. We've got a lot more testing than we have people that are willing to get tested and that they're actually now begging people to please come and get tested for COVID. And they're not really showing up. Public doesn't seem to be taking this that seriously. They're all not wearing masks, breathing on each other.

And they can go down the street and get a test for free and they don't even bother to do it. it. So I don't know if we come up with a vaccine if people are going to care. Oh, that's great. You got a vaccine. I'm not taking it. I didn't wear a mask. I didn't go for a test. Why would I bother to take a vaccine? I'm not going to take it. So it seems like I don't know if that's going to be the panacea that the market thinks it is because the market jumps on every vaccine story that we see. I think they seem to think, and maybe I'm wrong on this, that as soon as a vaccine is available, if one is available, and I'll give you a fun statistic real quick, how many coronavirus vaccines has medicine developed in history? Zero. Has never developed one.

They're very difficult to develop. Now, the bullish argument is, well, they've never been as motivated to do one as they are now. Well, I didn't know that it was lack of money or lack of will. I thought it was very complicated to make these things. But I have this feeling that even if they come up with one, it's going to be met with large indifference, meaning that whatever the economy is now in the post-firus period, you can't change it. Can't change it with a vaccine. We've changed it. And we have to learn that there's a new post-virus economy. And we have to now start to understand what that is and what that is. It's probably more work at home. It's probably less brick and mortar retailing. It's a lot of other things that we're going to have to learn less mass transit,

more driving, that kind of stuff, because that's a natural social distance thing. And if we don't like that, if that means New York City is a loser, it's going to be very difficult to change that equation. If that means commercial real estate, people that make office buildings, are hotels, the Trump organization. If they're going to be a loser in that, vaccine isn't going to fix that. People are that indifferent about this disease right now. We have changed the course of the economy. It's going to be very difficult to change it back. One thing that I've been hearing a bunch of times, I think especially like Raul Powell

was like talking a lot about that. But I read a bunch of other articles stuff on this too. It's this idea that, okay, you have a lot of dollar debt that's held outside of the U.S. And then this, you know, there were like revenues from businesses or commodity sales or maybe people were investing in those countries, and those dollars were used to pay, you know, the service at death. And now a lot of that has kind of dropped away. And, you know, they don't get the quantitative easing

or like the Fed asset purchases all over the world for like, you know, normal businesses or governments. So that you then have this sort of shortage of U.S. dollar, which maybe drives up actually the value of U.S. dollar and creates this big debt problem. What are your thoughts on that? And what are your thoughts on kind of the U.S. dollar as a reserve currency in general in the longer term? So as far as the dollar goes, keep in mind, and I've seen Rob Paul's comments on this, and I think he's right on, roughly 80% of all trade in the world is done in dollars.

So if a Japanese businessman meets with a Brazilian businessman to agree to do a transaction by Brazilian wood or something like that, it's done in dollars. They negotiate the price 80% of the time in dollars. So it is the reserve currency. When things go south like they did in February, March and April, what do people say? Well, in order to get business done, I'm going to need dollars. and when I am unsure of the investment environment, I am going to default to the reserve currency, which is dollars, which is why the dollar rallies.

And to me, that makes perfect sense. So when I hear people talk about that the dollar will fall against another fiat currency, the euro, the yen, the one, whichever one you want, the pound. Why? Why would people then prefer those currencies over the dollar? It would only, I think, mean that they think that the crisis is completely over and it's about relative opportunity. But if there's any kind of concern, you want to hide in the reserve currency.

So I could see the dollar being strong against all the fiats. I could see it getting weak against something more stable like gold or a crypto or something like that, which is somewhat what's been happening as well, too. But I also think that they've got a different problem, that they're still inexpertedly linked to the financial system anyway. You can't get them away from the financial system as much as you would like to. As far as the next reserve currency or the dollar's reserve currency, the dollar is the reserve currency because there's no alternative.

There is not going to be a fiat alternative. The euro is not going to be the next reserve currency. The one, the yuan, the yen, the pound. You take whatever fiat you want. It's not going to replace the dollar. I think what will replace the dollar will be a whole new structure, and that will be a global cryptocurrency. Now, that I've said that, because a fiat will not replace the dollar,

I don't think a fiat crypto, the central bank, the People's Republic of China Bank, is going to print a crypto, and that's going to be it. Or the digital euro is going to be it. Well, the paper one would be it if you were going to do that as well, too. But I'm not sure it's going to be Bitcoin or it's going to be ether or it's going to be stable coin or one of those other ones.

Maybe it doesn't exist yet. But I do think that it will come out of that space. That will be the next reserve currency. For a hot second, I thought it might be Libra. It looked like it was very promising, but it kind of stumbled out of the gates. Dave Marcus left, and they're trying to reorient the thing. We'll have to see where that goes as well, too. And the last thought for you about this.

And let me speak to the Americans in the crowd here. If you travel the world, you will see the digital payments wiping your phone, using your iPad, your Apple Watch, like I love to use as well, too, is much more popular in the rest of the world. M. Pesa. in Kenya is a digital payment system that is very popular. There are villages in Kenya where they live in dirt floor huts, the middle of the hut, in the middle of the village is a Honda generator, charging 100 phones overnight. And those subsistent farmers, when they have to send money to each other,

they send it with their phones to each other. It's digital payments in the developing world, and in Europe is much farther ahead than it is in the United States. So if you come up with a global currency, a global crypto that satisfies the needs of a payment system, yeah, you could go to a bunch of millennials in a coffee shop in New York City. They'll be interested in it. Go ask some people in Nebraska and a Walmart and they won't know what the hell you're talking about. But if you go to a hut or you go to a small village in Kenya, they're already full.

it right now. You go to a lot of other places, they're ready for it. So it won't start in the U.S. It will start everywhere else and it will be pushed upon the U.S. as far as the crypto. The world is ready for it. It is getting involved with digital payments. It just somebody needs to develop the structure to replace the dollar for it. Again, let me emphasize. It doesn't exist now. I don't know if that crypto is out there yet, if it's ether or something else. else. And it's not going to happen imminently. But that's where I think we go with this story. So I'm curious here. What do you think when you look at something like Bitcoin, what characteristics of Bitcoin do you think make it kind of like suited for fulfilling that role? And in what regards

you think, okay, no, these are big problems and something that actually fulfills that role has. Like, what would they have to look like? The biggest problem, well, Bitcoin has been mostly compared to gold. I think the biggest problem Bitcoin has is two. One, it's not a stable value of, it's not a stable value. I own Bitcoin and I can't use it to agree to do payments in a fiat world when its value can jump around 10 or 20% a day. If I have to buy my Brazilian wood in a month,

not going to use a currency that could be 50% higher, 50% lower in a month to pay for it. I can't agree to that price. And if I'm pegging it to the dollar and just saying whatever the Bitcoin exchange rate is at that minute, well, then I'm still on the dollar base. I really haven't gotten away from the dollar base as well to. And the other problem Bitcoin has is that it can't handle tens of millions of transactions a minute. There's not enough electricity on the planet in order to handle it. that kind of transactional volume that you would want if you were going to become a true

payment system as well too. But these are known problems. And these are problems people are working on to try and solve. So what I think you need is something that's got a more stable value. You know, my dollar in my pocket is going to be worth, I can buy with it today, what I can buy with it next month, what I can buy with it next year, plus or minus 1%. or 2% at the most next year. I have this belief on what inflation is going to do and I might be off by 1 or 2%. I'm not going to be off by 200% as well.

So, you know, some kind of stable value with it. And the other thing it needs to be able to do is handle mass amounts of payments, you know, efficiently and safely and for very little money. Bitcoin can't really do that right now. The mining costs are way too high. But Bitcoin is 1.0 of this whole exercise, and it's done an extraordinary job of what it was, but we need to move in the other direction. I like to use the analogy that when the Internet first came on in the early search engine, you had Alta Vista, you had Lycos, they all went bankrupt.

And then you had Yahoo, which was very successful as far as a search engine goes. was the fastest company to make the S&P 500 ever. Then you got Google, and that changed everything. So you're kind of like in the Alta Vista, like Osara in the crypto space, and you're hoping that we're going to get to the Yahoo thing soon, but really what we've got to get to is the Google thing. And when we get to the Google of cryptos,

then that becomes the reserve currency, and it changes everything. And that becomes the thing that makes it all different. Yeah, I would tend to agree with that generally. I think that if there is a challenger reserve currency that looks nothing like what we've seen in terms of reserve currencies or like the history of economics, right, it would probably come from something similar to Libra with an existing user base, with large tech companies behind it. And I could definitely see a future where central banks themselves are, are disrupted by this new system. So much like Google has disrupted publishing, Spotify has disrupted the music industry and Netflix, etc. And I could very much see a future where governments start basically delegating their monetary policy and their money to some kind of

a Libra-like platform. Is that something that you think makes sense in this context or is that like a hopeful. No, I think that that's exactly what it is. You know, what disrupts central banking is, you know, every industry that gets disrupted, the industry itself has a monopoly. Newspaper industry had a monopoly on information, you know, the retailing industry had a monopoly on the transportation of goods and services as well, too. And then something comes in and breaks that monopoly. Well, the central bank has a monopoly on money. And as long as they hold that monopoly on money, they have this incredible sway over everybody. Once there, that monopoly of money is broken and they lose that ability, then you've changed and then you've marginalized the central banks.

That's why I found it not a surprise that when Facebook announced the Librope thing, Congress lost its mind. And the first thing they did was they brought Dave Marcus up to the hill and they started grilling him and going crazy over this idea. Yeah, because It's a mortal threat. It's a mortal threat to the way that business is done in this era of the fiat currency run by the central bank. And they don't like this idea at all. The thing that made Libra so interesting, and I love to quote Scott Galloway, the professor of New York University on this, is he says, I'll remind you that there's 2.2 billion Christians on the planet. And there's 2.3 billion Facebook accounts on the planet.

Facebook is more popular than Christianity. So that the minute that it has a payment system, it can start with a user base larger than Christianity to get it going. That is enormously powerful for something like that. And that is what a lot of these tech giants have, is they have these enormous bases of people that can immediately start using something like that. The game changer that will tell you that a crypto is here to stay, it's going to be Amazon Prime. 60%, 60% of the American households have a prime account. The minute that they can start paying for that stuff with a crypto untethered from the U.S. dollar is the day that the U.S. dollar is going to lose its reserve, not that day, but it's on the road to losing its reserve currency status.

That Amazon holds that power. What's holding your back Amazon from doing it? there's not an acceptable alternative. There's too much financial risk for Amazon to take, I think, Bitcoin or Ether as they're currently structured. I have no doubt that when one comes down or maybe Bitcoin or Ether, they have some fork that gets them there that is going, you know, that they've remade their product or their currency crypto into what they needed to be, that people like them will jump on top of it.

and the telegrams and the WhatsApps and the Facebooks, they'll all start accepting it and start using their platforms as mediums of exchange as well too. And it will come very fast. And like I said, the third world, they're already there with digital payments as well. So it could come. We just don't have the structure yet. And they're trying to get it going right now. And we'll see how long it takes.

It might still take several more years before it happens. Sounds like there's an opportunity for the Vatican here to get on the crypto train. Yeah. Start some currency before Facebook gets to it. I think there's some interesting analogies with tech monopolies here. And I wonder if we go into this direction where there are sort of challenger currencies, there are these new currencies that exist that aren't tied to governments. Well, okay, well, that first of all, it very much challenges the power of nation states, I think, for one.

But the other thing, too, is we may see similar dynamics that play out like in tech, right? So, you know, there are, you know, Facebook obviously has a massive user base, but so does Twitter. And so is Instagram. Okay, they're owned by Facebook. But isn't one clear player and one clear winner, you know, Amazon could do its own currency. Facebook could do its own currency. Bidu or, you know, whatever platforms exist in China could do their own currency. And, sure, at some point, you're going to have aggregation and there might be consolidation there.

but we may end up in a situation where these things end up competing against each other. Like this is something we were talking about earlier. You know, we don't know. None of us could figure out whether or not there have ever been, you know, multiple reserve currencies competing against each other in the past. It may be that this opens up competition for currencies in a way that we haven't ever seen before. Oh, I definitely think that's a possibility. And you're right.

I don't think I can't find a period in the past where you've had multiple reserve currencies, you mean, you probably have to go back to, you know, before you even had the concept of currency or something like that. But you could have some loose confederation of these as well, too. But I do think what we're talking about, what you were suggesting is they're all outside of the hand of the government. And when they are outside of the hand of the government, first of all, the government will have to radically change. Not only the central bank lose, but the government loses as well too because in that environment, how do we tax people now? We tax people on money. We tax people on income. If you have a digitally secured outside the government crypto that they can't

touch, they can go to a guy with a big house with lots of cars on his driveway, and they can audit him, and they could come to the conclusion that he has no money because they are incapable of getting to the accounts getting past his encryption to see it. Government will have to change the way that it raises money. It might have to go to a use tax as opposed to an income tax. A use tax is if you have a car, we're going to charge you X to use it a year. If you have a painting on your wall, we're going to charge you Y for it, a use tax as well. So yeah, we're going to have to see things change. And along those ways, we could definitely see multiple currencies along those lines. This is the reason that this is this is such an interesting topic. We talk so much about it is this isn't just shifting

from the pound of the dollar. This is going to be changing the very structure of governments and everything else. So in our earlier conversation, when we were talking about UBI and when we were talking about, you know, 600 bucks a week for unemployment, that's because the government has control over its own currency and can create that money to give to people. And in a future environment, when there's another pandemic that causes a shutdown and you have a global crypto as your reserve, they can't just make that money out of thin air at that point in order to satisfy these needs. So a lot of things are going to have to change along the way.

And that's what makes everybody very nervous about it. because like I was using with my example with technology and jobs, I understand how I lose when this new technology come. It's murky how I win with this new technology. It's not clear to me when the iPhone was made that that was the end of the taxi industry. It was clear to me that there were going to be some jobs that were going to be lost. And that's the same thing here as well too. Totally.

Well, I would love to talk a bit about the topic that, you know, since when I became interested in Bitcoin in 13, there was already, you know, the beginning of this bubble back then where Bitcoin went from like $50 to, you know, over $1,000. And I remember there was this sort of space back then of people will recognize that this Bitcoin's going to be a big thing. And then they will realize, oh, it becomes big. it's very valuable. So I should get some now, right, before that happens. And it will become this kind of asset class like gold. So I think there was already that idea there and that idea that it will become part of, you know, sort of every investment portfolio. And that, of course, it didn't happen back then. Then there was, you know, this bubble in 2017, 18. And it again didn't really happen then.

And, you know, I think we are sort of an similar point again where people are expecting that, oh, this will happen. And, you know, now you have custodians. And certainly there has been some influx from, you know, from institutional investors and from funds. But like, how, where do you see that? Do you think crypto and Bitcoin is becoming, you know,

kind of like an asset class that, you know, is part of sort of any response. portfolio? How is that going to happen? And where are we in that? We're in early stages. I think really what a crypto needs in order to become a true asset class is a function on itself outside of the dollar. In other words, what I mean by that is I own a bunch of a crypto, ether, Bitcoin, fill in the blank. And it goes up a lot. How do I know that I've made money? Because I can convert it back to dollars at a much greater value. I still need the fiat in that system in order for it to work. When it really becomes it's true.

But the same is true for real estate or gold. I mean, maybe land. You can grow stuff. In their cases, real estate gold, stocks and everything else, they are part of the fiat system. They are part of it. They were developed specifically as part of it. A crypto is supposed to be outside of it. It's not supposed to be another version of a crypto. One of the arguments, let me point to this way, one of the arguments people have asked me is, why didn't gold go up a lot more? It went up some, but why didn't gold go up a lot more in March when the stock market was falling apart? And I said, I believe part of the problem with gold is, and I look at gold and I say, this is a way to get my money out of the financial system, but I really can't get my

money out. You know, and everybody winds up buying gold by buying GLD, the big ETF on gold. I used to joke, well, then buy Tesla, because you're still stuck in the financial system. You're buying something on the New York Stock Exchange, and you're still stuck in the same financial system that you're worried about by buying GLD. If you really want to get out of the system, you've got to buy coins and burying them in your backyard. Well, the price of physical gold is up, but not nearly, that's hard to do. Nobody knows how to do it. No one wants to do it. They're not that big a prepper. and stuff like that. So gold has been trapped by too much paper, gold, and that it's in the financial system. It's part of the financial system itself, that if the financial system had a problem,

gold has a problem. Well, the same thing is kind of what's happening with a crypto. I can own a bunch of Bitcoin. And if the financial system goes to hell, it doesn't do me any good. Now, stocks and gold and real estate were designed, I mean, not gold, but real estate and stocks and stuff They're designed to be part of that system. Crypto's designed to be separate from that system, but it can only get so far away from it because you need to go back to it in order for it to ultimately work. Just like you've seen the problems with Coinbase.

You know, when the IRS comes in and says, we're going to tax all the accounts and stuff like that, it destroys their business because they can't get away from it. You've got to get away from it in order for it to really thrive. And we're sort of kind of getting there. But the last couple of years, years after 2017, it really stalled. There hasn't been, you know, I own a bunch of Bitcoin, other than exchange it to dollars. What can, and of course, buy other cryptos with it, but beyond

that, what can I do with it? Can I buy a car with it? Can I buy a home with it? Can I buy an investment with it? No, not really. There's a couple of one-off examples here or there, but it's not widespread and it's not ambiguous. I agree with the premise, but I don't necessarily agree that we're getting there in terms of getting away from the system because like crypto is just becoming more and more of a, I guess like an institutional thing where you need KYC and you have custodians and they're being regulated and like here in France, we have all this regulation for like regulating custodians or anybody who sells crypto or even now, you know, in Europe in a couple of years, it's likely that we'll have even KYC for crypto to crypto exchange,

which we haven't, you know, had previously. Yeah, I don't know how crypto gets away from from the system as you put it? How about it just creates its own system? It creates a parallel system that it doesn't rely on the fiat system. But, you know, if you want a crypto to be the reserve currency, it's got to have its own parallel system so that it doesn't need the dollar anymore. But if it's always going to be, it needs that fiat reserve, then we're never going to get rid of it.

We're never going to get rid of the dollar as to reserve currency. and no other fiat at this point looks like it's ever going to supplant the dollar. Yeah, we see that a little bit in DFI, right? Like, DFI, I think, is trying to build an alternative system. But at the moment, it feels just so early. And I fail to see, like, the real value in what DFI is building, except for interesting financial experiments. I agree that, you know, there are a lot of interesting things that are going on.

I guess really, really what it is is it, what is it that we really want? I think what we really need is a medium of exchange, you know, a payment system, a, you know, others would argue, no, we need a store value. We need a store of value outside of the financial system. I guess we kind of need both. And maybe we need two. We need one to become a store value like the Bitcoin and another one to be in a medium exchange and have them linked together in some ways. But beyond that is, you know, if the idea is

I'm going to buy this crypto and it's going to go up a lot and then I'm going to exchange it back into dollars and then I'm going to go buy a Porsche, we're defeating the purpose of what we're trying to do here. It's, I'm going to buy these cryptos and then I'm going to use the crypto's to buy the Porsche. We're not, we're not there yet. We're not going to be there yet for, I mean, I think we have the capability to get there. and the problem that we're pushing back on is what you just said. We keep pushing back every time somebody makes a step forward. We keep trying to regulate them every time they take a step forward,

just like we saw with, like I said, when Libra was a white paper, it was an idea. It was just an idea from Facebook. We had televised hearings about Dave Marcus being just skewered by everybody in Congress. And that was, you could see it was so transparent. they were worried about the competition. We've got the dollar and we've got our banking system. And I'm the senator on the Senate Banking Committee. And do you have any idea how much these banks put into my re-election campaign?

And you're going to wreck this for me by coming up with a whole new scheme? No, we're not going to have any of that. I know all you did was write a white paper about what a good idea this would be, but that was just too much right there. They didn't actually get to the point of actually creating the thing in the first place before they even started jumping all over them on this. So you can see how worried they are about something like that because it is a big disruptor for them, a big, big problem.

Yeah, I think on that, that's exactly why personally, I'm not particularly bullish on the idea of, you know, Libra or experiments like that because you still have, you know, these companies behind it and, you know, it's just too centralized. And then the governments can basically go in and shut those things down. And of course they will because as you point out, it's extremely threatening. So I do think the way to do this will have to come from more radically decentralized projects like Bitcoin, Ethereum. But yeah, it is a long road. I mean, I think if you look at

Defi, it's very cool what you can do, like things like Maker and, you know, you're taking out these collateralized positions and stuff. But the user experience is horrible, right? The throughput, like it can only support few users. The transactions are way too expensive. There's so many issues. You can't do anything with it. You can't buy anything with it. Right.

It's very hard to do anything with that money that you make, right? Like you have a collateralized position and maybe you make some interest there. But like, then what? Let me throw another idea at you too. Coming back to what we're talking about a few minutes ago. It's an interesting idea, but there's really no motivation because as of right now, the perception by most is the current system. is fine. We had a

pandemic and the Fed came in and promised to print up a, you know, throw 15 kitchen sinks at the problem to use that metaphor and the market's levitated and everybody thinks things are getting better. But if we turn around and we go back down and

it looks like the central banks have a limit to what they could do or it produces the malinvestment that I'm worried about or the inflation that I think we're not going to get inflation this year. We're going to still because we're, you know, the economy's contracting.

But on the other side, 21, 22, you're going to have drop in aggregate supply because 25% less people have jobs. We're not going to be making as much stuff, whether it's restaurants or actual things as we did before. And if we keep giving people 600 bucks a week to spend,

we're going to keep demand up. We're going to have supply down and that produces inflation. You produce financial pain and dislocation. out of this problem, out of this instance, people will be willing to entertain a new idea. And then the cryptos can jump into that space. But if we have a pandemic and a market crash and we print up a bunch of money and we throw it at everybody and we give them UBI and everything seems to get better and no one complains

and there is no inflation or is no malinvestment, why do we need to change it? We don't need to change it then at that point. So if we go to the point of malinvestment or we go to the point of inflation or problems in financial markets that they turn back down south again in a big way, then I think people will be open to the idea of we got to find an alternative. And then that's when the defy experiments and everything else will be taken a lot more seriously. But right now, they're limited by this idea of it's a good idea. It's kind of interesting. It's cool. but it stops there because I don't need it.

I got a system that I perceive is just fine right now. Yeah, maybe one final question before we wrap up. So probably many people also thinking through, you know, how do they themselves manage this situation, what lies ahead? Maybe how do they position themselves from an investment perspective, you know, to make sure they're kind of, you know, safe and protected? Do you have any advice or recommendations for people who are thinking about how to handle what lies ahead in the coming years? Yeah, I'd say, you know, I'm not going to say buy this, sell that or something like that.

But I put it more conceptually. First of all, let's think about the economy. Forget what we've been. We damage the economy. 25% have lost their jobs. And similar numbers in Europe as well, too. Similar numbers in the developed world. how do we get back? How do we get back to that? How do we unwork from home? How do we get two million people to ride the New York City subway a day as opposed to 200,000 ride the subway a day? What is the next time we're going to see a football match in Europe with 70,000 people in the stands? 70,000 people. How do we get back? And if the answer is, it's a long slugging road to get

back to those kind of questions, then there's going to be permanent change. If no one rides and wants to ride the tube in London, London is going to change. If no one wants to ride the underground in Paris, Paris is going to change in a big way. If nobody wants to ride the subway system in New York, it's going to change in a big way. So the first question you have to ask yourself is, is do you think that we can get back all the way back to that? Do you think we can go back to 2019? Is it a vaccine? Or do you? Do you think we can get back to 2019? Is it a vaccine? Or do you You think like me, even if they, even if a red headline came across my Bloomberg in the next two minutes and said, found vaccine, you know, within 30 days, we're going to start vaccinations.

I still think we've done so much change to the economy. I want to say damage that I don't think we can go all the way back. So that's the first question you have to ask yourself. Do you think we can get back? I think we don't. I think the second thing is if we don't get back, human ingenuity means we're going to have to change. It's not we're going to permanently be damaged and never get better again. We're going to change. So that coming out of this, as I like to say, coming out of this, the big companies that

you're going to want to buy that are going to power the market up and power your investments are going to be companies that don't exist right now that are going to be created because of this change. What are those companies? What do they do? Where are they going to go? You know, it's kind of like, like I said, when the iPhone one came out, got to really think hard about what does this mean other than I could call my mother easier? And it did, and you know, and you have to be early on the idea that, wow, it means the end of the taxi business and stuff. So we got to start thinking that way. I don't know what those are. And that's what I'm and that's really where I'm, I'm trying to think about what are going to be those, what are those changes going to be.

I have a hard time believing, like I said, I think every. trend that we're seeing exposed. No one wants to work in the office, work at home, a movement away from retailing, a movement more towards an online world. You know, people that have even said that they don't even want to touch paper currencies anymore because of the transmission of disease and stuff. So we're going to go to contactless payments and stuff. All of those trends were in existence before this. All it's doing is it's making them go faster. And if it's making them go faster, we're not going back. We're not going back.

We're not all going to sit at home and talk to each other on Zoom until the moment becomes that we can all pile into a subway car and breathe all over each other to go into the 48th floor of an office building with 9,000 people in it, 7 or 8 or 9 hours a day, five days a week. I think that that era ended. And with that, the worst business to be in, I think is commercial real estate right now, especially high-end, densely urban commercial real estate, has got a real problem on their hands right now if that's the environment that we're in.

Then after that, what are there going to be the opportunity? So I want to try and answer that question that way instead of saying, buy the S&P until it goes to X or with your stop at Y or something along those lines. That's why I've been struggling with the rally. I understand the rally in the market. I understand small retail. is piling in and helping to support the market.

I'm a big believer of that as well too. But beyond that, really, where are we going with this? I think we're going to a post-virus world, and you've got to start thinking about there's going to be great opportunities in the post-virus world. It may not be by Ford and by United Airlines type of opportunities, those with the pre-virus world.

It might be something completely different, and we'll just have to figure out what that is. that answers your question. If you get any thoughts or follow-ups on it. No, I think that's a great note to end on. And I, for one, am very much looking forward to the next time that I can go to Berlin and pay with my credit card everywhere because currently you can't do that. And maybe this will be the thing that tips the scales. And in Germany, you can finally pay with your credit card. It has. It has. Oh, really? Wow. That didn't take long. I'm just looking for the next time I can go to Berlin. Yeah, me too.

Jim, thank you so much for joining us today. This is fascinating, and I'm sure our listeners will very much appreciate your insights. I certainly have been really enjoying all of your insights on other podcasts and also on, you know, on, I reset everything, which we failed, we haven't mentioned, but yeah, you were also speaking there. So this should definitely check out the talk. We'll leave the link in the show notes and happy to have you back on at some point in the future. Thank you. I enjoyed it. Thanks so much. Thanks.

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