TFTC: A Bitcoin Podcast - #272: Evergrande, sovereign debt, and the convergence of bitcoin + the energy sector with Greg Foss

Episode Date: September 23, 2021

Join Marty as he sits down with Greg Foss the boss, of Validus Power, to discuss: - The ongoing Evergrande situation - Will its collapse cause contagion? - Is it similar to Lehman? - Global supply chain issues - Bitcoin + Energy - much more Follow Greg on Twitter Shoutout to this week's sponsors. Cash App. Start #stackingsats today. Use the promo code: "stackingsats" to receive $10 and contribute $10 to OWLS Lacrosse when you download the app. Unchained Capital. Check out their white glove vault concierge service that will take you from zero to secure multisig setup in no time. Use the code TFTC and receive $50 off that package that includes 2 Trezor Model Ts and $1,000 in your vault. Braiins. Braiins are leaders in the mining industry; running Slush Pool, creating firmware to make miners more profitable (Braiins OS+), and building out Stratum V2 to help further decentralize mining and make Bitcoin more robust. Check out their mining profitability calculator. Compass Mining. Compass wants to democratize bitcoins hashrate and give everyone the ability to strengthen the network while mining bitcoin profitably. Thanks to Compass, it’s never been easier to mine bitcoin. Check them out at compassmining.io

what is up freaks it's your boy marty ben here to introduce this episode of tales from the crypt a bitcoin podcast i sat down first time in a long time with greg foss the boss canadian hero expert of credit markets sovereign credit markets and a bitcoiner who's getting into the energy space as well helping facilitate the the merging of the energy sector and the bitcoin mining sector it's a beautiful thing to see we had a great conversation talked about evergrand the state of credit in the world how the fiat collapse is accelerating how energy and bitcoin are merging and much more i hope you guys enjoy this trip was brought to you by our good friends at the motherfucking Cash App. Cash App's here to help you stack sats, send sats,

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any other cash card except that anywhere visa is accepted with their boost program sometimes you get sats back on that i did last week at dinner what else is going on here that's it if you haven't downloaded the cash app make sure you do so using the code stacking sass that's s-t-a-c-k-i-n-g-s-a-t-s you're going to get ten dollars and ten dollars going to go to our good friends at owls lacrosse that's owls lacrosse owls lacrosse this rip was also brought to you by our good friends at unchained capital unchained coming over from rabbit hole recap to the interview series it's a great thing to see unchained capital has a new website it's no longer unchained-capital.com though if you go there we'll redirect you to the main website which is now unchained.com and when

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you've had a dynamic where money's become freer than free if you talk about a fed just gone nuts all all the central banks going nuts so it's all acting like safe haven i believe that in a world where central bankers are tripping over themselves to devalue their currency bitcoin wins in the world of fiat currencies bitcoin is the victor i mean that's part of the bull case for bitcoin sitting back down with the boss greg foss greg how are you probably should be things are great marty thanks for having me it's been a while and uh i'd like to take the opportunity at this point to uh thank you for getting me on the uh the radar yours your podcast the last one we did together got the the ball rolling and i'm uh i'm pleased

to say yesterday i did three podcasts in one day three in a day three in a day man and uh including with your buddy peter mccormick and then jay gould uh who i've come to know and very very respectful of and then at the end we did a live one with uh swan bitcoin brady and uh i was on with andy ed strong hitting the circuit hard these days man yeah you know it's uh i guess i'm in demand you're in high demand i mean there's a there's a lot going on in the world particularly around sovereign credit default swaps that's why i pinged you i sent you a tweet that highlighted china's sovereign five-year credit i believe beautiful the price of their cds's was skyrocketing which signaled to me at least that the participants or market participants were willing to pay a

premium on insurance of a default of some sovereign debt in china is that a correct synopsis of or description of what that price increase means? Couldn't say it better. I think perhaps the best way to interpret it though, Marty, also is that the market is pricing it as the equivalent of a BBB type of credit risk in the CDS market. Now, BBB is not inherently a bad rating. There's certainly other countries that are worse rated according to S&P. I'll just say though that for world's second largest economy. It's not a position of comfort. BBB is one rating level above the so-called junk or non-investment grade rating by S&P. China still has a single A credit rating by S&P, but the market is pricing it much closer to a BBB. You always have to anticipate

that the market is smarter than the rating agencies. Certainly we saw that in the case of Lehman Brothers, the great financial crisis and all the downgrades that happened there after the market was telling you these downgrades were going to happen. So I'm not predicting that China is going to fall off a cliff. I'm just telling people, watch the market. The market is truth and the market is pricing China much closer to a triple B than its implied rating. We've been paying attention to China, particularly their real estate development market for the last decade. I mean, we've all heard the stories of the ghost cities that have been erected by these large development firms like Evergrande, which is the famous Chinese real estate developer that's been in the news for the last few weeks

as they've been approaching default on their loans that they owe a bunch of banks and then a bunch of consumers that they also issued debt to, I guess. were you know what they did is they essentially it's yeah it's a liability that the consumer uh homeowner anticipated owner made a prepayment on a house that uh or an apartment that may or may not ever get completed um but that goes as a liability on their balance sheet correct so how would you describe evergrande situation i mean there's there's a bunch of theories out there uh about the the uh the number of outcomes that could happen from this so right the ones i've heard it's like it all depends on whether or not the ccp steps in and bails out either evergrand

or the the lenders who lent money to evergrand or gave cash for a future development of of apartments and then so there's that scenario and then there's one where the chinese government doesn't step in uh and just lets lets lets it collapse and if that happens does a contagion breakout outside of that niche real estate market within China and it seems like news came out last night or at least rumors that the CCP is thinking about nationalizing Evergrande, splitting it up into three businesses and taking it over. Yeah, so let's start with the facts. Firstly, if Evergrande has approximately $300 billion worth of debt. About $200Bn of it is with the homeowners who have made a prepayment.

Now, so those aren't public debtors, obviously, those are, you know, homeowners that are not in a good spot, but it's not held by large funds. The publicly traded debt and bank debt is under a hundred billion dollars. And to put that in context, the Lehman Brothers on balance sheet exposure at Lehman Brothers was 600 billion. And that was in the great financial crisis. We know that they defaulted. And then after that, another hiccup in the market was the debt restructuring in 2012, and they had about $200Bn of debt. Looking though at Lehman Brothers in comparison, the very important thing that's different between Evergrande and Lehman Brothers was not the on-balance sheet debt, it was the off-balance sheet exposure. Things like the

credit default swap market where Lehman was a counterparty that may have sold insurance to a a a buyer of of insurance or a buyer of protection and then all of a sudden if that derivative contract uh defaults the buyer of the insurance is uh out of luck and it's much like saying you know i bought fire insurance on my house but my house burned down and then i go to collect from the insurance provider and he's no longer in business so it was the off balance sheet exposure in Lehman Brothers that was really the systemic crisis. There was rumors, for example, if AIG was allowed to fail, that would have caused Goldman Sachs to fail as well because Goldman had purchased so much credit insurance from AIG, etc. So you don't have that in the

Evergrande situation. And that is very, very important. So these cross-default concerns don't exist. And $90Bn or $100Bn of publicly traded debt and bank debt is really not a big situation with respect to a global market concern. The reality is, though, there is risk. And using Jeff Booth's expression, you never know what snowflake causes the avalanche. This is not a good thing. But let's analyze other things in the market that would indicate that it is, in my opinion, at this point, still contained to the property developer group in China. So the first thing is this. The market is not signaling distress. The bond market is signaling it's over. So there's an old trading axiom that I used to joke about, or not joke, I lived by

actually, when I traded junk bonds, it was called the 60-40 rule. And the 60-40 rule basically says bonds never live in the 60s for long. They either fall in price into the 60s, at which point they become stressed entities, and they recover to the 70s. Because, you know, the market sees them through this type of crisis, whatever that was causing the crisis, or they gap down into the 40s, which is their, you know, historic recovery rate on subordinate debt is a about a 40 cent on the dollar recovery. Here's the funny thing, every grand bonds are already trading below 25 cents. Okay, so what does it say? Well, if the 6040 rule were to apply, we now have to trade it, change it to the 6025 rule, applying it to China. And one of the reasons it would have fallen that

much is because there's no natural distressed buyers in China, like there are in the United States, where there are these dedicated large funds that are set up to capitalize on opportunities that occur in distressed debt. But understand this, Marty, when someone's buying debt at 25 cents on the dollar, they're not buying it because they actually think they're going to get 100 cents on the dollar back, right? They're buying it as a restructuring candidate where they might be able to work out a situation where they get 45 cents on the dollar back. So the return is not a yield to maturity return. It's a return on capital calculation where you're trying to make 15 or 20 cents on a 25 cent investment. So you're trying to maybe double your money, but it's by no means

a bond anymore. This is now going to be a restructured equity. And assuming this was a North American company where we, you know, understand the court systems pretty well. We know that the government tries to stay out of things like this until they can't. Just putting that in perspective, though, 25 cents on the dollar is quite funny that people still look at the equity for guidance in Evergrande. The equity, yes, it still has trading value, but it has no intrinsic value from a claim in the capital structure. Again, if the bonds aren't worth 100 cents on the dollar, the equity, in theory, is worth zero. Now, there are restructuring workouts where they cram down a solution to the equity holders where there's a small equity

reward. But right now, the equity of Evergrande is a deep out of the money option that's being punted around by people who are hoping for a headline that says the CPP is going to come in and rescue the capital contributors. I'm not playing in that square. And anything I'm talking about right now is not financial advice. But I would just tell you, if you're punting around Evergrande equity, and that was a North American equity, understand you're not trading the equity, you're trading an option. And in my opinion, a deep out of the money option that, you know, if you really thought there was recovery value anywhere, you'd be putting your money in the debt, Right. You know, you hope to buy the debt at 20, 25 cents on the dollar and turn that into a 40 cent on the dollar restructuring under some sort of scenario where, you know, they do have a lot of land.

They do have asset value on the balance sheet. But don't forget, there's also 200 million dollars of of liabilities to Chinese consumers. And I think that's where the bigger contagion rests. But one final reason I'm going to point out from a debt perspective that I think it's largely contained to the Chinese high yield market. Firstly, the Chinese high yield market is yielding over 14% right now. Compare that to the US high yield market, which is around 4%. So there's a delta of 10 percentage points. That's 1,000 basis points.

Um, there's that's huge. But what is the high yield market in China is largely property developers. And secondly, and most importantly, Evergrande is about 15% of that market. Well, when you calculate a yield on a bond that's trading at 25 cents on the dollar, that yield makes no sense. Okay, because it's just a mathematical calculation. in theory, what would be your annual IRR if you bought something at $0.25 on the dollar and let's say it matured in eight years at $0.100 on the dollar with a coupon of, let's say, five? Well, that IRR makes no sense. Well, it's a number, but it doesn't make sense from a market perspective because you're not going to get your $0.100 on the dollar back or the chance of you getting your $0.100 on the dollar back is minuscule. So the Chinese high yield index, though, was calculated based on this yield to maturity calculation for a borrower that accounts for 15% of the market. And that calculation is not the right calculation to be making at this point.

So if I can expand or not expand, but pound the table on something for your listeners out there, spreads and yields are for kids. Spreads and yields are for kids because when it comes right down to it, bonds always trade for a price. And that price, like any other transaction that occurs in any market, is determined and said, that's it sold to me, I buy at 25 and a half, I'm open on more, for example. But that 25 and a half, you're not saying, hey, I'm buying it at 14,000 basis points. No, you don't say that. You say, I'm buying at 25 and a half, you're doing the calculation in your head, whatever it means. But you're not, again, buying it and translating it to a yield that trades on the high yield market in China, except that's what the guys are doing when they

say that the Chinese high yield index yields 14%. So that's one very important point. The other thing is, if you look to the investment grade market in China, spreads there have largely almost contracted. They've actually shown that there's less risk in that market, because they feel that a crisis in the high yield market will dribble down to more people looking for quality. And so this is all part and parcel of me saying there's only $90 billion of debt when I say only imagine only was only a problem is it's not leaking into the investment grade market in China yet.

was accurately reflected in the cds market and we're back can you hear me i can't hear you sorry that's uh i need a new computer that's all my fault sorry freaks we're back i was you were in the middle of describing yeah so so so the contagion hasn't leaked into the uh investment grade market yet but it it was reflected in their five-year cds but let me do a quick calculation for you on what that meant on the value of a contract, where the CDS spread went from 28 basis points, let's say, to 40 basis points on 5-year Chinese CDS. Very quickly, I can tell you that that translates to a price on the contract difference of about $0.50 on $100. $0.50 on $100. You're not going out of business if you've sold protection on a 5-year CDS

on China and your contract is down by $0.50. It's a spread, and again, spreads are for kids. Spreads are what the common person looks at to try and differentiate what's really happening in a market. Bigger problems. I'm told that there's over a million Chinese citizens that have exposure to Evergrande and have put their savings into land. You know how much land accounts for and real estate accounts for in China, it's over 7% of their GDP. So this is a crisis of confidence, if you will, psychological contagion rather than financial contagion. Does that make sense? Yes. And we can talk about some of the implications that I see, but anyone else can figure out what those implications are including a reduction in chinese gdp is almost inevitable

uh so we'll go from there yeah no that's so again having followed this for like a few weeks now and sort of understanding that the like you just mentioned the risk of financial contagion outside the real estate market probably isn't it's not gonna be like a lehman moment even though i've said it possibly could be many times over a couple weeks but now i'm like all right having come to understand what you just described the amount of overall exposure is rather minuscule compared to um what lehman had on the books or excuse me off the books uh but what you just mentioned like the psychological effect there's like something like 1 to 1.5 million people who have exposure whether they they bought uh rights to future development or they're just contractors

that depend on Evergrande for all their business, painting, wood, whatever it may be. And we're already at a point in the global economy where things are very fickle, particularly in the supply chains that are heavily dependent on the China manufacturing hub of the world. If you have a crisis of confidence amongst the Chinese citizens, that leads to people losing jobs

and losing money, does that slow down manufacturing even more over there? And is that the ripple effect that begins to materialize across the world? And I think that's exactly the way that I see that as a bigger risk. So let's play out some scenarios there. You know, the Chinese consumer is now not able to count on land and appreciating value of land. What if the Chinese consumer says, that's it, I'm going to start consuming more? And they become competitive in the global markets for consumer products that we've

relied on them to produce so cheaply uh is there an inflation trickle down there uh around the world if not only does the chinese consumer um want to you know enjoy life more uh what if the government and this is what is i've read in certain places zhi says we want you guys to become consumer focused you know we want to build a bigger part of our consumer of our economy based on the consumption habits of our population then all of a sudden the global supply chain is which used to be just uh uh you know export china export cheap labor export everything becomes oh my god there's a billion citizens that have changed their consumption habits i'm not predicting it but i'll also say it's a non-zero probability that this could have implications for um not just the consumer

but also cheap labor, right? What if that we were relying as a global supply chain on the cheap labor and that starts to dry up? It's just another avenue that global inflation could actually be less transitory than certain people are predicting. I think it's becoming glaringly clear that this inflation is not transitory at all. And again, this situation, while it may not be a lehman moment in the sense that it leads to a financial contagion it could be a just like another snowflake on the the stress of the global supply chain which is heavily centralized in china and it it's scary to a certain extent especially considering here in the u.s like i wrote about in the bent yesterday like we're seeing empty shelves in grocery stores and i saw your i saw

your excellent email on that i think you said it was in a uh was it in a walmart or a wawa it's okay it's a chain uh native to the northeast part of the u.s is starting to spread down the east coast as well but i believe that killer wawa is in florida okay yeah you know you just um what what does transitory mean exactly as well is it just some weak you know uh clown show shop speak is what i like to think of it you know it's it's like it's just if the if the world is is is uh trading on the basis of a lawyer's interpretation of what's going on in the global economy i think we're all in pretty big trouble and we are in pretty big trouble okay um i said uh on a podcast yesterday and i i don't need to you know trade off of different podcasts but here's the truth uh you

know, Powell is a lawyer. I'd much prefer to have a politician in that chair, a guy who's actually sat in a risk chair in his life, understanding how markets can quickly lose confidence and how things can tumble out of control really quickly. You know, the world is in a very precarious state right now because there are no shock absorbers left. Fixed income is no longer an asset class. The Fed has successfully pushed that down to an asset that you're picking up nickels in front of a steamroller on that one. And yet the only other asset that's out there that has a traditional asset that has a semblance of performing, which is equities. I mean, the valuations in equities are at historical crazy levels because there's no other alternative for people to try and preserve

or save their wealth except the alternative that we all know but it is not properly being disseminated to the or educating the the common person yeah and it's it's insane too because this particular situation with evergrand it seems like this week it's funny out like it's the culmination of all these events just the timing turns out to be perfect because the fomc meeting this week a lot of people were expecting some taper talk and the whole it seems like they're they're like pushing tapering down the road the fed has been posturing like they want to taper at some point in the near to medium term uh but this and the reason for tapering they need to raise rates and cut back a little bit just to raise them lower again they needed to create room

to create options for themselves. Mathematically impossible, Marty. Mathematically impossible. The funny thing is a taper, let's even define taper. Does that mean tapering from purchasing $80 billion of securities a month to 60?

Like until you get down to zero, don't even talk about other things that you can do in the market or pretend you're going to do. The math is certain. Fiats are in a debt spiral. It is accelerating, as the physics guys would say. The escape velocity is now impossible to achieve.

Acceleration to the downside is a certainty. Don't talk to me about tapering and what that'll do to the other fiat currencies in the world. When the US dollar strengthens because they stop easing as much as they are or printing as much as they are, the US dollar goes up in value. Emerging markets crater, OK? And the global economy goes in the shitter. it's it's like have people forgot the playbook it's just that simple yeah and it's yeah thank you again empty shelves they can't taper anymore mathematically and

even though they're posturing that they're going to step back from that ledge yesterday uh what where do we go from here i guess we got to find out what well we have a network transfer That network transfer is from a currency, a fiat currency based, call it a store of value that we know is not a store of value. You have a currency, fiat currency network transfer to a Bitcoin standard. And I'm going to borrow this line from Nick Szabo that I saw down in Miami where he says, look, your fiat currency, it still will exist. But think of it as your checking account and think of Bitcoin as your store of value savings account. And this is where I get excited as a guy that's in the energy business, much like you are. China has served up on a silver platter a chance for the Western world to dominate in the Bitcoin mining space that they previously had a large share of.

China has done this historically where they've, you know, in the efforts of keeping communism alive, they destroy an elitist. uh or excuse me they they destroy a advancing technology and i'll throw this example out to you that i learned from a smart young kid in boston who said did you know the chinese in 1500s dominated global trade by merchant shipping because they had the best navigational charts of any uh nation uh and they were able to ensure you know using the stars that their ships would arrive in ports uh at great distance and the elites in china at the time viewed these new up-and-coming merchants as being a threat to the communist regime so they took all the charts and destroyed them and then entered the british sailing fleet and they took over merchant vessels globally

And I actually view this as a similar thing happening with the miner space. Look, China may have known that how powerful dominating or having a high market share in the Bitcoin mining square was, but they also viewed it as a threat to their power, their ability to control their citizens, and the transfer of capital out of China. So they said, okay, we're getting rid of it. And the U.S. and Canada and North America and all the other Western countries, I see that Germany is higher than the USA now in terms of nodes, Bitcoin nodes. This is a gift, you guys. This is like something that you're supposed to take and run with it and thank the good fortune. and also realize that you can have a parallel system that exists where you have a fiat currency, which is your checking account, which is going to debase. We know that it's done that for hundreds

of years. And then you have this beautiful technology called Bitcoin, which is your savings account, your store of value. And you can actually, the two of them can work nicely together, in my opinion. Is it work in process? Yes, 100%. It's better than the alternative, though. If we only have the fiat standard and you think you have this thing called a global reserve currency, which is the US dollar, it could be a global reserve currency, but your US treasuries are not a global reserve asset because those treasury bonds are just a fiat contract that is programmed to debase. I mean, who in their right mind owns a 10-year US treasury at 1.3% when you know that in 10 years, you're highly likely to get your money back, not 100% certain,

but highly likely according to the cds market but when you get your money back in 10 years it's worth like 65 percent of the purchasing power of the money that you put in to begin with yeah what a dumb contract that is isn't it that's uh not a savings account just a leaking account or whatever you want to call it but that's so that the adage or there i had there is that weird thing about china like the there's like every about 500 years they have this chance to dominate and they somehow screw it up uh and obviously the mining is a big thing but one thing i worry about particularly here in north america is that our idiot politicians ruin it with terrible energy policy like and i think bitcoin can help uh fight against terrible energy policy because it helps

make us more energy efficient but that's one thing i worry with trudeau up in canada and biden and and crew down here in the US trying to force industry into a certain energy mix that is unreliable and not sustainable will eventually cause prices of electricity to rise, which could hurt the mining industry if it's too expensive. But I have faith in the entrepreneurial spirit of Americans and Canadians alike to successfully push back against that because it is getting to a point where it's nonsensical. We have a particular politician up here in Canada. Well, two of them, actually. One who's, I can tell you, honestly, I've been in touch with him. Jeff Booth is a friend of his. I would like to call Pierre Poiliev a friend, but we're not on that basis yet. But certainly we're a confidant. He won his riding, so he maintains a seat in the House of Parliament in Canada. he is confirmed he's a Bitcoiner. I'm not taking anything out of context. I helped him buy the

Bitcoin. And I'm happy to say that. But Pierre understands it. Pierre has gone on record as saying it's crazy that Canadians are selling surplus nuclear energy generated electricity. We're not selling it. We're paying Americans in the northern peninsula of Michigan to take our our excess energy marty because as you know you don't power up and down a nuclear reactor right you got to get rid of that energy and and this is she goes uh foss uh doesn't it make sense that we should mine bitcoin with this and i go hallelujah pierre thank you for being you know accepting the the first law of thermodynamics which is the rule of conservation of energy could be the most beautiful thing for canada and we got a lot of surplus uh uh hydro resource

energy up here. That's on the grid though. I like the off the grid solutions. That's the power company that I'm involved with. It's the stuff that you're doing. When you control your energy costs and the certainty of your energy costs, meaning if you're not on the grid, no one can tariff you out of existence, sometimes like what they're thinking of doing in Texas. I'm rooting for Alberta here because Alberta has a similar structure to the ERCOT situation in Texas. But what they also have is an ambient air temperature in Alberta that's 20 degrees Celsius cooler than Texas. Man, oh man, that's a big issue when it comes to Bitcoin mining and the miners themselves, as you know. So I want Texas to succeed. I want Alberta to succeed.

And I know Pierre Poiliev understands the benefits of this to a global or to a nation. The unfortunate part is Trudeau got in power again, and he doesn't understand 11th grade math. So he doesn't understand it, but hopefully his time is limited. Well, not only that, but I just think he's a bad actor. I mean, pushing this build back better world economic. He's part of it. He's part of the establishment, right? The only thing I could ask people to do out there, if you want to read a very interesting

book uh read margaret trudeau who is uh uh justin's uh dad excuse me mom read her book about her uh her experience when she was married to pierre trudeau and then ask yourself this is there a possibility that there's a lot of um concern with uh uh justin's uh um i won't go any farther than that he he is he is uh absolutely endorsing some very foolish policies and you could ask is there a chance that he um you know that that margaret uh did acid when uh when he was in the womb and i'm saying that not because i want it to be true just read her book um there's no question in my mind but i'm not telling other people to uh to uh interpret it that way the reality is this uh justin trudeau is uh uh been he he aspires to be a g7 uh you know um minister

if you will um part of the part of the the establishment there's no question and that's dangerous when you're throwing around policies where you have no understanding of what the uh implications of taking uh all fossil fuels offline right like come on okay you can say you want to do that but how come there's power shortages in central ontario right now have you maybe legislated too much fossil fuel off of the uh off of the grid wow eh i mean especially considering how like canada could be not only energy independent but one of the biggest exporters of oil in the world if they really wanted to be and they should be it's just so the positive thing that's happened is uh sorry to jump over you uh there's actually a uh a uh publicly traded

equity in canada called true energy dr that uh announced they're mining bitcoin with their surplus or stranded energy resources you know it was so beautiful about it was just nonchalant they just had it and yes we're just like hey we by the way we have 11 a little bit canadian of them right a little bit uh okay you know we're not sure how the market's going to react to this So we're we don't want to suck and blow at the same time. So we'll just like we'll release it in this in this, you know, sort of incognito way. I think I predict way, way more energy companies are going to do that. It only makes sense.

Building on Michael Saylor's thesis that Bitcoin is actually digital energy or encrypted digital energy. People will understand that pretty quickly. yeah i mean there was the houston bitcoin meetup last night where it was mainly oil and gas execs meeting with bitcoiners i mean i've seen it in great american mining all the all the big boys are coming it just makes too much sense you have all this wasted energy and you can turn it into a significant revenue stream you can fight back against the polluting narrative and the the onslaught against the oil and gas industry altogether hey we're being extremely efficient with with all of this and i think i think it's time for the oil and gas industry as a whole

whether it be here in the united states or canada to have some confidence have some backbone push back the oil and gas industry provides an immense amount of utility for all of humanity we wouldn't be able to have the products that are we're using right now this mic this computer my cell phone right here this can without petroleum like it makes the modern world go around and for some reason the last couple decades uh the environmental hysterics have uh allowed the oil and gas industry to be painted as this massive villain when they're in reality a massive benefit to humanity in modern world that we have today 100 a chance for me to shout out a very valuable research publication that I subscribe to, Larry MacDonald of the Bear Traps Report.

Great publication. You got to pay for it. But much like any good publication out there, there is so much information in there about how the governments have… it's an ESG catastrophe essentially where you're seeing power prices in the United Kingdom, for example. They've had a very low energy wind year, a wind event, if you will, and all their windmills produce far less or generated far less energy or electricity than anticipated. And you're having shutdowns in the manufacturing sector where the plants have to be taken offline because the grid is unstable. This is ESG backlash, very clear. I mentioned that we're having the same problems in Southern Ontario. That's the manufacturing hub of Ontario where there's no way that the local Hydro One

can provide certainty of meeting the power demands of the manufacturing in the Greater Horseshoe area that's the Southern Ontario. This is very concerning because if a global company has the opportunity to set up in Southern Ontario, and he's comparing that to somewhere in the Midwest United States, he's going to look at that and say, well, I'm going to take the Midwestern option over the Southern Ontario option. And look, I love the United States and everything. I told you guys that, but I also love Canada. And it's just economics 101. And it's always about a network transfer, whether we're talking about Bitcoin to the fiat or the fiat standard to the Bitcoin standard or network transfer from fossil fuel, nuclear to wind and solar. I don't actually think that is a network transfer that makes sense, but you just don't stop one and say we're going to do 100% of the other one, right? It's just bad planning and foolish thought process.

So I love nuclear. I love fossil fuels. Until energy gets to a $0.22 kilowatt hour price, you and I both know, Marty, that wind and solar doesn't make that much sense. uh it's just it's all on subsidies so big problem big problem and in your like completely agree like it doesn't make any sense to make a transition from these reliable to these unreliables and a good friend of mine mac gagliardi who's in the energy industry runs the talk energy energy podcast uh the way he describes is like if you're gonna make a transition an energy transition it has to an order of magnitude improvement on the quality of life or the ability for individuals to leverage

electricity to to produce goods in the economy and how do you do that you lower prices this does the exact opposite we've seen it in germany in the uk in parts of the united states yeah parts of canada uh all over the world we've seen the decommissioning of reliable fossil fuel plants and nuclear power plants uh trying attempting with markets attempting to replace them with unreliable wind and solar and just causing increase in prices and a decrease in reliability of the electricity being delivered to to end consumers and it doesn't make any sense like we're this energy transition the only way we should ever make an energy transition if it considerably lowers uh prices while increasing energy density and this does the literal opposite

it's insanity i hear you and this was another uh call so another shout out to the bear traps report i had no idea not thinking you know we lived in privileged nations uh nations uh only seven percent of indian households india household households in india only seven percent of them have air conditioning can you imagine the uh the draw on the grid when that increases to 40 percent you know do you think and and by the way also our global warming guys we just don't want to allow the indians to increase their uh uh quality of life so they're not allowed to have air conditioning in their house but we are here in north america come on it doesn't work that way you know you so seven percent so imagine the actual gigawatt increase in the global grid that

is required for that to happen. And it's a fact of life. And as you correctly point out in your publications all the time, every single advancement in human productivity and human quality of life and standard of living has been accompanied by an increase in efficient energy usage. That is a fact. Don't overthink it. And embrace the ability of the Bitcoin contribution to the clean energy movement to actually be such a positive to that. And that's what our narrative is up here, what we're trying to help, if we can, educate the population that there are so many other sources of wasted and stranded energy that are not being efficiently used. If you can transfer that into a Bitcoin mining operation that enhances the

wealth of a nation or of a province, but not just a company. So a province or a nation like Alberta, like Texas, you're supposed to support that. Permanent funds, baby. Let's get these Bitcoin permanent funds in we can you can if state has if a state a province a country has energy assets that are being wasted pop a Bitcoin mine on there and roll some of those profits into a Bitcoin permanent fund that can appreciate value as Bitcoin monetizes and you can actually lower taxes and decrease friction increase jobs it's a win-win-win-win all around and it's it's it seems simple right to uh to guys that can think outside the box but uh if you get uh your msn um msm uh information from the from the networks that are biased to the uh to the you know the faulty uh

green narrative uh you know oh yeah hydropower is so pure my partner invalid as power is an indigenous canadian i'm not certain that you can convince a lot of his um family members in and uh community that building a power dam in northern ontario is a beautiful thing because it buries all their land but it's green well come on let's think beyond the the narrative that hydro energy is this beautiful clean resource yeah it is but don't forget of all the land that you buried to build the dam to generate the turbine um i'll you know we i get i get increasing amounts of hate mail marty and one of the good things is that it means that the truth is being told right we need to tell the truth your publication is beautiful at doing that i'm sure

you get tons of hate mail as well but the alternative to listening to the drivel coming out of the mainstream media is listening to people that actually understand things like mathematics things like conservation of energy most importantly people who tell the truth not a narrative that is scripted by i'm not sure who's scripting it but here's a neat thing as a canadian that i've noticed um i used to i don't anymore but i used to watch all three major u.s networks um in canada every single night uh because they come on at different times in canada whereas in the United States, they're mostly on from 630 till seven in your local news area. In Canada, I can get ABC News at 8am, excuse me at 8pm, CBS News at 830 and NBC News at nine. Okay. So over

that period of an hour and a half, I could watch these three shows and you'd think they were somewhat independent. But it was crazy how of the five stories they would cover every single night, three of them were exactly the same the fourth one was you know uh potentially a little of their own um narrative and then the fifth one was oh this is abc is about oh let's celebrate this generation whereas cbs was doing another do-gooder uh idea the point being the top three stories were always the same and always reported with exactly the same um angle towards oh well it's got to be this way because uh you know uh everyone else is saying it's this way and as a canadian i finally had to turn it off and say i i've had enough of this um it is somewhat coerced um and

uh this is why i've it started to embrace the twitter and the bitcoin community in particular i've never met a better source of uh truth than twitter uh now you can argue that there's a lot Fudd and Drivel on Twitter as well. And that's part of the freedom of speech option. But the beautiful thing is I've been introduced to this community. I have never found a community that has so much collective intelligence and integrity. And I'm proud to be part of it. I thank you again for introducing me to this community. I think when I went on your podcast the first time around in uh probably let's say it was maybe eight months ago or something um you know i i might have had a few hundred followers and now i'm actually at a point

where my kids are celebrating my uh my follower count and not because i'm saying anything uh that's outrageously smart but what i try and do is tell the truth as i see it and sometimes the truth hurts right but we need to tell the truth because there's too many people out there who are hiding behind the lies of the imf and the lies of uh lagarde and these people who are totally conflicted to the truth it is well i'm completely flattered that i i helped jump start the no question the greg foss glow up but uh i mean that's that's what i try to do here is find good people speaking truth and i completely co-sign exactly what you said we need more truth in this world i do get a lot of hate now because people don't like that i aggressively say we should not

be transitioning away from fossil fuels these people are trying to maybe they're not trying to but the result the results of their actions is a controlled demolition of the modern economy that we have and i don't want that somebody with an 18 month old son i don't want him to grow up in the world. And it's worse off than the one I grew up in. And I will speak out unabashedly. Luckily, the career I've set for myself and Bitcoin succeeding has allowed me to say things and not worry about the repercussions because I've inoculated myself sufficiently. But somebody's got to do it. Nobody wants to speak the truth. Or Bitcoiners do. But a lot of people don't want to speak the truth. A lot of people don't want to hear the truth. And it feels as if we're at

a point in human history where if more and more people don't understand the truth, we're going to go and devolve into a very chaotic Mad Max world. Luckily, we have Bitcoin. Thank God we have Bitcoin. I'm very optimistic that this message is going to get out there. I think another thing too, this particular time, 2021, heading into 2022, it seems like the powers that be, the little guards, the bank of international settlements uh presidents in the g7 are scaring not scaring but they're they're rushing they can tell things are they're losing control and they're trying to speed up their transition to whatever it may be this central bank digital currency world where they want to put social credits on everybody and control everybody it seems like they're getting

sloppy and they're speeding up and i don't think they're going to be successful just because i think they're too old number one uh it's becoming too obvious that they're lying and they don't actually know what they're doing and it's becoming too obvious that the top-down control of these systems particularly particularly the global economy does not work we need something new and it's i don't know if the onus is on bitcoiners or the individuals we're trying to reach but we need to get this word out there and we need to get more people onto a sane bitcoin standard your your your daily email is a source of uh uh you know as a go-to for me your daily comment at the end is quite funny um good good work on that um uh i laughed the other day you

said something about your wife or something not that you were disparaging her by any means but it was a classic family comment so i encourage everybody who's listening to us right now to go back to marty's uh i think marty maybe share it again if you are just talk about how you got into this business because when your dad you know you sat down with your dad and you said i'm not sure what direction i'm going in and and i've i'm i'm uh so great work on sticking with that i'm being introduced to young kids on a daily basis who are reaching out to me because they want to help make a change i'm i promise you if i said i met five kids like that a week i'm not exaggerating or embellishing. I am meeting some very smart young kids that for some reason are reaching out to an

old fat guy in Canada that basically has some experience in the financial markets. And it gives me hope. Another shout out to a mutual friend of ours, Dylan Leclerc for all the work he's doing. And he opted out of the Keynesian brainwashing that he termed the University of Vermont was educating him with and decided to become his own educator doing work that other people don't get exposed to in school because there's a curriculum that is traditional and it doesn't talk about the fact that banks are regularly insolvent. That's real world experience that you need to live and that's important. So people gravitate towards me when they say FOSS. How is it true that the Royal Bank of Canada was insolvent in 1988 when you started working with

them? And I run through the math and I go, that's sort of scary. That's the fiat Ponzi. Don't think of Bitcoin as the Ponzi, the Ponzi's fiat. It's very simple mathematics. And it doesn't mean that fiat should not exist. It just means understand it for what it is and don't store your value in your checking account store your value in your savings account which is uh your digital energy your bitcoin yes completely agree do you think there's going to be a need for some civil disobedience on the on the horizon as these governments try to clamp down on all this yeah um i'm not one to advocate so i'm a proud uh supporter of all the uh uh first responders and people who volunteer for the military in both of our countries, I support that.

I don't think that I advocate rising up violently against the state in any way. And when I say the state, I say the state in a good way. So a guy like Stoney, who I admire, but has a bit of a different outlook than I have, I'm not saying I'm right and he's wrong. All I'm saying is my preference would be a transition that's a network transition where people appreciate the good that can come from something without having to press the buttons that that requires civil disobedience. I advocate obeying the laws as long as they make sense. I advocate defending our nations when they are being attacked. And if you have to do that with, you know, history shows with with force, then you have to.

But certainly, it wouldn't be my preference, Marty. I want this to be a transition that is beneficial to everybody, including people that don't even understand. They don't get dragged along by the positive benefits of this. There's too many people out there that love staying at home and collecting a check from the government because, you know, it's sort of fun to get money put in your bank account without having to work. But it's not sustainable. It's just not sustainable. You can't print your way to prosperity. And, you know, young kids will learn over time. But one of the things for certain is, you know, there's something to be said for old guys that have gray hair, that have lived through a thing or two that aren't necessarily taught in school. And I'm not saying that's me. I am old. I do have a lot of experience sitting in a risk chair where I saw the world melting down in 1988. I saw the world melting down in 1998 with long-term capital management. In 2008, I think I said this to you before, I was certain it was over. There was absolutely no way the world was going to survive the crisis, but they did. And the Fed did what they had to do. The problem in 2008 is the Fed never paid back the money they pulled forward. And when we had the chance to do it properly from 2008 to 2018, nobody had the guts

and the financial markets basically called the Fed's bluff and had a tantrum every time they said they were going to taper. Well, now it's too late. Now we have reached the point where it is inescapable. It's impossible to achieve escape velocity from the debt spiral. It's only math and it's what happens when you exceed. We are currently at 400% debt to total global GDP. So total global debt to total global GDP is 400% or four times. There was a chance we could have dialed it back when it was manageable but it's no longer manageable and it's a physical you know it's a it's an absolute certainty that this will accelerate and so that's where we are so let's fess up to the truth don't try and uh sugarcoat it you may think you're getting your ubi is it

it's a beautiful thing where you get money put in your bank account i assure you you're just stealing from the future of the kids and we need to solve this yeah a couple things here first off When I say civil disobedience, I mean peacefully, just running your transactions, not like going and hacking people. And I agree there, but your last comment there about getting money dropped in your bank account and just pulling forward future consumption, people are starting to notice this. are like hey i'm getting paid more uh even if it's not getting uh helicopter money from the government in unemployment checks or ubi whatever it be even like going out and working at a restaurant that's willing to pay higher wages because less people are willing to work they're like hey i'm making a lot more money but i'm not getting any more goods because the price

inflation's outpacing that wage growth people are starting to wake up to that normal people are starting to wait up to wake up to that and i do think i like to be optimistic as to obviously on this podcast and the newsletter i do give the doom scenario quite a bit but i do think there are natural forces here that are going to make it inevitable like especially the energy industry getting into this yes there's the base of humanity energy like if we get the the exons the conico phillips the crews the bps all the nuclear generation companies and other utilities like it's it's game over it's like how are you going to tell the base layer of society that they cannot participate in this because it's making them better making them more secure like how so well

two things there marty so first of all let's understand that true energy only has a market cap of 300 million canadians so so that's just like okay thanks for coming out but like you really don't matter but if you got a billions and you know tens of billion dollar energy company like you mentioned the uh the conicos and the exons uh to to start doing this yeah that would be a game changer. The other thing that's important, and I need to state this so I don't get too much hate mail. Look, I'm a capitalist with a heart. I understand the need to support the people who are less privileged. I'm privileged, all right? I think I've worked hard for this privilege, but there's no question I'm a privileged guy. And I want to support the people that don't

have quite as solid, perhaps financial footing as I have. Here's the truth, though. I need those people to also want to work and to benefit, to bring out the best in their own lives, because we just can't be handing money to them and saying, okay, just stay at home. I just traveled across the country with my daughter. And Canada is a beautiful country. I know the US is a beautiful country, but there were pockets of despair that I passed in places like Northern Ontario, places, even downtown Vancouver has its spots that you're just like, wait a minute, this isn't how it's supposed to be. It wasn't like this five years ago. Something is wrong. And we've been printing money pretty hard for the last five years, and things have gone

pear-shaped in certain areas. And that's just the problem right there. So again, Look, I'm a capitalist with a heart. I want to help the less privileged, but you've got to help yourselves as well, including the nation embracing an energy standard and a Bitcoin standard that can solve so many of these problems. So maybe that's a good place to sign off. I just want to say, you know, I'm not a politician. That's a good thing, I guess, because I'm getting increasing amounts of good and bad feedback. Here's what I have is three kids. And my three kids are probably the most, well, they are the most important thing in my life. And I don't want to hand over a world that I had a hand in making unstable, because I never had the guts to speak up against it. When I started at Royal Bank of Canada in 1988, and I saw the fact that Royal Bank of Canada was insolvent, do you think a 26 year old Greg Foss wants to run out and say, the Royal Bank of Canada is insolvent? Like, yeah, that would have done really good for my career, wouldn't it? I never would have worked in finance again. But the facts are the facts. And so now I'm 58. I don't have FU money, but I do have a level of concern for the rest of the world that I believe I need to speak out. So thanks for the platform. I really, really love what you guys are doing, what you're doing in terms of educating the world. and i'm proud to be part of this i'm a proud pleb in this bitcoin community that is optimistic it's intelligent and more than anything it is motivated to make the world actually a better place well thank you for all your contributions which have been immense over the last year uh

it's crazy how anybody if not me then who that's that's your mentality if not me then who you got to come out here we get many people spread the truth and paint an optimistic view of the future it's it's tangible a lot of people are straight doomers there's a lot of ops there's a lot of things to be optimistic about we have the the tools and the capacity to build a better future it's right in front of us it's just whether or not you're going to go out there and get your hands dirty and make it happen i think gentlemen like yourself uh i don't want to blow too much smoke up my own ass but myself as well we're out here we're doing it we're doing it because again we realize that's tangible it can happen and we want it to happen because

when i started this i'd have a child but now i'm more motivated than ever uh to to make a better world for my son hopefully future children that my wife and i have beautiful beautiful get out in those waves surfer jim call out to surfer jim hey so uh thanks for having me guys and uh i look forward to our next uh chance to meet up whether it's at a uh at a bitcoin meetup or uh or something in the energy business well we'll be meeting up and we need to meet up a person it's it's long past due greg greg foss the boss thank you again my pleasure thank you peace and love freaks