TFTC: A Bitcoin Podcast - 674: How Hedge Funds Became America's Largest Creditor with Infranomics

Episode Date: October 22, 2025

Marty sits down with Robert from Infranomics to discuss the Fed's recent revelation that hedge funds hold $1.8 trillion in U.S. debt through the basis trade, the hidden leverage threatening Treasury markets, and why Bitcoin remains the only sound asset in an era of debasement and rising populism. Infranomics Linktree: https://linktr.ee/infraa_ STACK SATS hat: https://tftcmerch.io/ Our newsletter: https://www.tftc.io/bitcoin-brief/ TFTC Elite (Ad-free & Discord): https://www.tftc.io/#/portal/signup/ Discord: https://discord.gg/VJ2dABShBz Opportunity Cost Extension: https://www.opportunitycost.app/ Shoutout to our sponsors: Bitkey https://bit.ly/TFTCBitkey20 Unchained https://unchained.com/tftc/ Obscura https://obscura.net/ SLNT https://slnt.com/tftc CrowdHealth https://www.joincrowdhealth.com/tftc Join the TFTC Movement: Main YT Channel https://www.youtube.com/c/TFTC21/videos Clips YT Channel https://www.youtube.com/channel/UCUQcW3jxfQfEUS8kqR5pJtQ Website https://tftc.io/ Newsletter tftc.io/bitcoin-brief/ Twitter https://twitter.com/tftc21 Instagram https://www.instagram.com/tftc.io/ Nostr https://primal.net/tftc Follow Marty Bent: Twitter https://twitter.com/martybent Nostr https://primal.net/martybent Newsletter https://tftc.io/martys-bent/ Podcast https://www.tftc.io/tag/podcasts/

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. If you're not paying attention, you probably should be. Robert, welcome back to the show, sir. Good to be back. Good to have you back. I've been binging your YouTube channel the last two weeks. Let's tell you, before that, I was checking in once a week. But I think with all the madness going on in markets right now,

uh you've been covering everything going on with great detail it's astonishing the uh the amount of detail that you can go into and the the amount of data that you're able to surface i reached out last week i said hey we'd love to catch up on the show last time you were on we talked about silent depression and sort of the more secular headwinds if you will societally in terms of the the effect that i mean the economy is having on on individuals and society at large in aggregate and i think you definitely touch on that later because i think things are certainly accelerating as ai becomes more prominent and people begin to worry about what the job market is going to look like moving forward but i think just to stay timely and topical you've you've been

covering a Fed report that was dropped, I believe, over the weekend that highlights the dynamics of the Treasury market are not what they were being reported. And it all stems from activity going on in the Cayman Islands, particularly around the basis trade. So what did the Fed just let the markets know? Yeah, so apparently we had suspected, according to the tick data, which is released by the Treasury Department. It's basically the official data on who holds a U.S. government debt and general cross-border capital flows. That tick data had reported that the holders of our debt

were Japan at about 1.1 trillion, UK at about 900 billion, China at about 700 billion, and that has been coming down pretty notably, and then the Cayman Islands as our fourth largest holder at about 400 billion uh but because of this popular hedge fund trade known as the basis trade the cayman islands obviously a hot spot for uh hedge funds domiciled in the cayman islands this has nothing to do with like the cayman government when we're talking about the cayman islands uh we're talking really about the fact that there's so many hedge funds uh based they're domiciled there the cayman islands actually hold 1.8 trillion dollars of our debt um and so that makes them by far the largest holder of u.s government debt and before it was being reported

that they held what around 400 yeah 400 so undercount by 1.4 trillion dollars so what i'm trying to understand is why wasn't this reported correctly before the fed released this report and why did the fed decide to let everybody know oh well actually here's what's going on yeah that second question is one kind of the first one that popped into my head after i realized the implication of this uh my first question is okay well why now um so it has to do with like how they calculate uh the repo because this basis trade is financed in the repo market which makes sofer and what's going on there i think uh pretty important um but it has to do with just the way the methodology with which they use to measure um various cross-border capital flows yeah and so

for anybody who's listening you may need a refresher on the basis trade here what are hedge funds doing when they engage in this? Yeah, so the basis trade is treasury futures. Let's just use a 10-year treasury. There's the cash 10-year treasury, which most people are familiar with. But then there is a futures contract that represents a 10-year treasury. That 10-year treasury futures contract is obviously a contract for future delivery. But there is this optionality that the seller has when you sell a 10-year treasury futures contract. there's optionality there where you get to actually deliver, you don't have to deliver a 10 year treasury at the end, you can deliver six and a half year maturity, seven year,

there's a range. And so the seller gets to choose the cheapest option for them. Maybe at the time, you know, it's a 10 basis point difference between the seven and the 10. So they deliver the seven, even though it's a 10 year treasury contract. And that kind of optionality or uncertainty premium is baked into the futures contract. So it's very small, it's only about 10 basis points, or 0.1%. So that trades at a premium the future. And so what they do is they short the futures contract, and then they buy they long the underlying US cash treasury. And the difference as expiration years, uh, treasury futures, you know, kind of roll expire every three months as you near to expiration that, uh, that difference as the arbitrage kind of gets,

gets worked out, uh, goes to zero. And so you're basically just pocketing the spread between the futures contract and the tenure, the actual tenure treasury. And so it's Delta neutral Cause if, uh, if bond yields go up, well, you're, you're covered because you're, you're short the 10 year futures contract bond yields go down. You're okay because you're long the cash, um, the cash, uh, 10 year treasury. So it's Delta neutral meaning, um, and also it's, it's using probably, I mean, what, at least what the market considers to be pristine collateral. Um, we, you know, have different opinion on that, but, um,

But yeah, so the fact that it is using U.S. treasuries as the collateral for financing in the repo market makes it less risky. And of course, you're delta neutral. So it doesn't matter if bond yields go up or go down. You're just trying to pocket the tiny little difference between that futures contract and the actual 10-year treasury as it approaches expiration. And you lever it up. So if it's only 0.1%, that's not worth anything. That's not worth anyone's time. So what they do is they lever it up 50 to 1 to as high as 100 to 1.

And that might sound crazy, but this is well documented on Google. This has been an issue for years. This has been a risk that the Fed has known about. This has been a risk the SEC has been aware of, the CFTC, various organizations you can find all sorts of academic papers talking about the risk that this basis trade has it's blown up uh 2020 it blew up it also sort of started to blow up in april um during the liberation day so it's a known risk and the leverage is well documented to be pretty insane yeah and you cited it in one of your videos from the last couple of days but the

Brookings Institute came out in June and wrote a paper, I believe, in reaction to the April blowout of this basis trade. I think a lot of people have been focused on the end carry trade as well. And it just seems like wherever you look, there's a ton of hidden leverage on the system. And again, going back to the original question, why did the Fed feel compelled to release this data, particularly after we had the SOFR spasm last week, SOFR spread to Fed fund rate spiked to, what, 0.19 percent, which is pretty high, highest point since 2020, I believe. um yeah it does it does make you wonder um the timing of it and of course uh jerome powell came out and um you know mentioned basically the end of qt uh funding stresses in in the repo market this was i think wednesday um and then yeah we got um data on so far for wednesday and thursday which was quite elevated for wednesday and thursday so far the secured overnight funding rate

was actually above the discount window rate, which is the Fed's attempt at setting a ceiling in the price of money. They actually have a range. They don't set one interest rate. They have this corridor or this range that they use to set interest rates and the lower bound being the reverse repo award rate. That is the Fed's attempt at basically saying no matter how overabundant dollars get, we will always buy them from you at 4%. And then the discount window rate is the upper bound. And that is the Fed trying to say, no matter how scarce dollars get, we will always sell them to you at 4.25. So by doing that, hopefully thinking of it that way makes it a little bit easier for people to understand. But by maintaining those two

different interest rates, they're able to try to keep SOFR, which is the actual funding rate determined by supply and demand of dollars within the repo market. They try to keep SOFR within that range by having those two tools. Yeah. Typically, when you see spasms in these markets, it means of the liquidity crunch is on the horizon like you said jerome powell implicitly seems to believe that may be the case with his comments around the end of quantitative tightening uh there was regional banks last week had a pretty tough middle of the week with many um down more than 10 percent and you saw the sort of re-emergence of a theme that that reared its head a couple months ago with the tricolor auto loan subprime auto loan uh collapse it seems like there's there's other

similar lenders that are out there uh under a lot of stress and you have banks as big as jp morgan with exposure to them i think jp morgan had to write down 200 million dollars in credit loss on one of these deals last week and um that's the quite like is there liquidity crunch well yeah i what what so far so the first video i did on liquidity and repo market and so far and i think it was back in like july um because i think that was about the time when they announced they were going to rebuild the treasury general account or the tga this is the government's checking account just like you would like a buffer in your checking account the government does too uh it was down to I think only $300 billion or so.

So they wanted to build that back up. And basically, when that was announced, I started to kind of warn that that in and of itself would cause a shortage of liquidity, at least compared to what it was before. The reverse repo was dwindling down. And so, you know, normally the reverse repo, it's not a primary method of managing liquidity. it's more one of those i think of it as a shock absorber or a buffer and so as that buffer was drawing down meaning the amount of buffer four dollar liquidity was getting smaller kind of all of it was lining up and you were starting to see some elevation in so for spreads so for minus reverse repo or fed funds you're starting to see that kind of back in june even at the end of june

And it's normal to see at the end of the month or end of the quarter or tax deadline, which we saw a couple weeks ago, I guess about a month ago, it's normal to see SOFR start to kind of blow out. But what has been happening recently, like over the past couple days, is we've seen SOFR notably above, like I mentioned before, discount window rate, IORB, Fed funds, reverse repo award rate. And then you couple that with the credit issues and the fact that credit spreads have started to widen, they're still near kind of all time tights, almost historically tight credit spreads. But so we're starting from a, you know, a pretty stable or decent position. But the fact that credit spreads have started to widen, you couple that with what's going on with SOFR, then you start to kind of factor in this basis trade and an unwind of the basis trade uh threat i guess you could call it um and it's all you know it's like you we found that we we we know that so far we know funding stress in the repo market from so far uh we know the reverse repo is empty the tga rebuild is basically done so that's not shouldn't have any further negative impact on liquidity but it certainly did they they removed half a trillion dollars from the financial system that's not nothing um but that that is done but you know

you have the reverse repo emptied the tga rebuild remove 500 billion bank reserves are declining they're right around three trillion uh last i checked and so yeah you kind of couple it all together and it's like okay so the largest marginal buyer of our debt foreign at least is a bunch of hundred to one levered hedge funds in this basis trade it's extreme that basis trade must be financed every night in the repo market. So you start to get widening of SOFR spreads that could put funding stress on the basis trade, causing an unwind of the basis trade,

which could cause... And what an unwind of the basis trade looks like, remember, you're long the cash treasury and you're short the future. So if you are forced to unwind that position, it puts upward pressure on the future and downward pressure on the bond. you're forced to do the exact opposite of how you got into the trade. So it involves selling

of the bond, which means yield sharply up, and then buying of the future to close your short. And so we've seen this before in 2020. You can look at TLT relative to ZB, which is the long bond futures contract. You can see this happen, for example, in March of 2020. It also started to happen again in april um with liberation day you get yields sharply higher um not good for liquidity either no you know and on top of this last week we had the um standing repo facility tapped for the first first time since covid i believe and it was not that yeah not the first time but what happened was if you think of the reverse repo which is that uh storage tank for kind of excess liquidity you can think of, you take the reverse repo, and you subtract out how

much standing repo has been is being used, that spread kind of gives you an idea, are we in an abundant liquidity regime or a scarce liquidity regime? It's kind of how I think about it. So, you know, previously, we've been in an abundant liquidity regime where the reverse repo has been as high as two and a half trillion dollars uh and that storage tank of that shock absorber has been full of cash of dollars um and what we had recently was standing repos been hit i think it was hit back in um i want to say august might have been june there have been a couple brief moments in the past year or so where it's been hit but what we had recently was uh that standing repo which again, is the opposite of the reverse repo, the standing repo or SRF. That is for when there is

a shortage of liquidity and hedge funds need emergency dollars. That standing repo got tapped and you take that spread, the difference between the reverse repo and the standing repo, that went negative for the first time going all the way back to March of 2020. So freaks, this rip of TFTC was brought to you by our good friends at BitKey. BitKey makes Bitcoin easy to use and hard to lose. It is a hardware wallet that natively embeds into a two or three multi-sig. You have one key on the hardware wallet, one key on your mobile device, and Block stores a key in the cloud for you. This is an incredible hardware device for your friends and family, or maybe yourself

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it's already a good deal their annual deal the tftc25 code gets you 25 more off go check it out obscura.net use the code tftc25 now as you're explaining all this too and you have the the government shutdown in the backdrop of all this too it was the the fed release of this cayman data sort of like a signal like hey uh politicians we've got a pretty massive exposure to this carry trade um by predominantly american hedge funds domiciled in the cayman islands like it may be time to uh turn the government back on so that we can yeah we can solve this crisis if it doesn't marriage? It could be a lot worse if it was a debt ceiling debacle like we had earlier. That I think would be significantly worse. That's probably coming. You know, we go through those debt

ceiling debacles all the time, it seems. It's like a constant thing in American politics. So whether it's a government shutdown or debt ceiling debate, there's always that kind of embedded stress that it seems like it happens every you know year or so yeah well and then i was talking i just recorded with luke roman another variable in the backdrop here is this i want to call i don't know if it's an attack or it seems like china the bricks countries many others are noticing what's going on with the u.s treasury market and not only the treasury market itself but the u.s government which is backing this market and they're saying i don't know if you're a good counterparty um if we're going to be buying your debt and so we've seen massive

transition towards this gold settlement network which is many people are surmising what's happened with china um registering its gold on warrant at the shanghai gold exchange that chart became popular about a month or two ago but i saw jim bianco updated it and seems like that's only increasing at a rapid pace it's almost doubled in the last month the amount of gold on war at the shanghai gold exchange yeah it's vertical yeah right before we hopped on i saw that ethiopia made a deal with china to settle their trades uh in yuan what do they say exactly ethiopian talks with china on converting dollar loans to yuan loans um and so it seems like the u.s treasury the fed are in a very precarious situation where they're walking a tight rope

200 yards above above the earth um trying to make sure that they can manage any liquidity crisis that may be emerging and on top of that they're getting attacked from another angle which is one of the large superpowers in the world china basically opening up a a competing settlement network backed by gold um and trying to use that as a reserve sort of assets and i think luke said something that i've been thinking about um since we've recorded last monday it's been a week now um posted the episode on saturday though and it's like foreign governments now officially hold more gold in reserves than u.s treasuries like is that a signal that the U.S. dollar reserve system has been supplanted? Yeah, I mean, going back to

February, China held about $784 billion. Now, just in the past, what, seven months or so, or I guess it's five months, I'm looking at July data. So just in five months from February to now, that's down to $730 billion. So a reduction of $54 billion. That's significant. And then you couple it with what you mentioned about Shanghai and what China is doing with gold. I think it's interesting because it kind of is what the US needs. Like to go back to the discussion we had the first time kind of on the silent depression and some of the kind of structural issues, It's actually, in my opinion, going to help that situation as countries move away from the U.S. Treasury and into something like gold, something neutral like gold. I think that it will actually improve a lot of the issues that we had talked about with a 4% of GDP current account deficit and, of course, the resulting capital inflows that disproportionately benefit those that have capital, those that have financial assets that are buoyed by about a trillion dollars of forced, mandatory, structural capital inflows into financial markets in the U.S.

I added up from the BEA, the current account data, I added up from I think it was 2011 or 2012, up through 2024. If you look at foreign purchases of real estate, those get recorded under FDI, foreign direct investment. And then you add in the estimated portfolio investment into REITs and MBS, mortgage backed securities, you add that all together. And going back to 2011, 2012, I can't remember exactly which year it was, foreigners have purchased about 700,000 single-family homes worth of real estate. That's significant. And these are price-insensitive buyers. They are buying to balance that current account deficit. So the same thing is true, of course, with equities. We know foreigners, that's one of their favorite places to recycle dollars into.

And of course, treasuries that kept yields very low, artificially low. And so yeah, it a move away from that recycling of the trillion dollars that we send out to the rest of the world in the form of our current account deficit, that trillion dollars is being recycled into dollar denominated assets, less and less. And it's not happening, you know, it's not we're not talking about overnight changes of like 50%. This is around the margin. And it would take years, if not decades for this to fully play out. But if those foreign countries start to, you know, instead of buying equities, or treasuries, or US real estate with those dollars, but that trillion dollars we are running in our current account deficit every year, if instead of dollar denominated assets, like those, they start to buy gold, that'll bid up the price of gold in dollar terms. And so gold can, and this is something Lou Grohman's been super out front on, you know, going back like two years, maybe even more, that gold as there's a shift away from the US Treasury or other dollar denominated assets into some neutral reserve asset that freely floats in all currencies like gold, what you could get is a is a revaluation of some of these currency crosses. Because again, China's not running a trillion dollar current account deficit with anyone. They run a massive

current account surplus, I think it's like 5% of GDP. So there is no country right on the other side from China going, well, yeah, you know, we used to recycle these into I don't know, yuan denominated uh bonds government bonds but now we're going to buy gold so so you don't have that that the gold price in yuan terms at least from foreigners uh being bid up in yuan terms uh there's no there's no offsetting kind of bid in in yuan terms now domestically of course we know they buy gold but uh just kind of generally speaking this is one of those kind of subtle forces that over a decade or two um would eventually lead to a higher gold price in dollar terms in a lower gold, gold will still get bid up in yuan for sure, but to a lesser degree.

And so then what you have, you cancel out the two denominators because they're constant gold, you know, gold to gold, cancel out the denominator, you basically just set a new exchange rate. And this is something Luke has been talking about for a long time now, the need for a revaluation specifically of the dollar-yuan cross rate. There's, of course, other currency issues. The dollar is structurally overvalued. In fact, on a purchasing power parity basis in 2024, the dollar with the Dixie at like 105 was more overvalued than it was 1984, 1985, when the Dixie was 163. And of course, the Plaza Accord was just about a couple months later. we were even more overvalued on a purchasing power parity basis in 2024 than we were back

then when the Dixie was 162 or three. And of course, the Plaza Accord happened right after and we know what happened to to the dollar. So I still think that whether it's kind of a gradual revaluation, like you mentioned, you know, kind of the adoption of gold, it doesn't, it's happening more rapidly than I think some of us thought it would. I expected it to happen around the margin, but kind of more gradually. The degree, the rapidity, the velocity with which it's happening is kind of surprising to me. But whether it happens gradually in the mechanism I just described, where you get a weaker devaluation of the dollar versus gold to a greater degree than devaluation of yuan gold, then that could take 10, 20 years, but eventually you get a new exchange

rate where the dollar is weaker versus the yuan. And of course, you know, China has made it pretty clear in various statements they've been making for five, six, seven years, top CCP officials, that they are trying to number one, internationalize the yuan, and number two, reorient their economy much more in a US model toward domestic consumption, rather than this subsidized overcapacity export dumping sort of approach that they've taken, where it's just gain market share at any cost. There's a recognition in China, just like there's a recognition here in the US, with the current administration, at least, that our structure of debt-fueled overconsumption and insane twin deficits, that that has kind of run its course

and the pendulum has gone too far in that direction. Just on the other end, China has recognized that their model has gone too far. And you don't get public statements by top CCP officials like that unless it has the blessing of, over there, you disappear if you say something. that, you know, over here, we get to have leaks and, right, all this kind of public comments about about, about stuff over there, not so much. So the fact that they have been pretty vocal about that, I think, I think there's a recognition that both, both of our economic models kind of went to their logical conclusion. And we've seen peak globalization, in my opinion, I think that's pretty clear, I don't think it's controversial anymore. And that there's likely to be a meeting

in the middle uh whether that happens by mar-a-lago accord or the mechanism you mentioned where it's kind of a gradual gold adoption in place of the u.s treasury i think either of them have the same end effect which is a weaker dollar stronger yuan yeah and it's very interesting to try to think through which happens i mean i'm looking at the price of gold right now it's approaching uh four thousand three hundred fifty dollars so it's cooling off a little bit after the run that went on last week and the week before but that could certainly accelerate again i think that's one question on many people's minds like is this a blow off top is gold about to correct but i do think we are in uncharted territory in the sense that i think this this bid seems

very different than anything i've seen in my life um not that there's been many material bids undergoing outside of like what was it 2011 and 2012 um obviously the last two years last year has been very good but it seems it seems like somebody's buying hand over fist or multiple people are buying hand over fist sort of seeing the writing on the wall and then you pair this with the sort of geopolitical um saber rattling between u.s and china over the last two weeks specifically with with rare earth metals and are we just getting a sort of show between trump and g where they both recognize like hey we need to get to the table but there's some showmanship or is the showmanship actually public sort of exertion of hey who who has the leverage

at the end of the day and after my conversation with luke he would say that china has all the leverage, particularly for you, believe that we need to go into this hyper-industrialized reshoring era of the United States? I don't understand how anyone could argue that China is not the one with the leverage. I mean, we lost effectively a proxy war to a country with one twelfth of our GDP because we have so completely hollowed out our industrial base that we can't even make the shells and artillery and Patriot missiles needed for our own military to defend our own people. We rely on China for 65% of active pharmaceutical ingredients. So the actual drug that goes into

the medication, those APIs, about 65% come from China. You kind of go down the list, right? China has everything that is actually needed. What do we have? We have a bunch of derivatives traders we got a bunch of meme coin traders we got um you know high frequency trading firms that build the best high frequency trading algorithms we got the most deep and liquid treasury debt market in the world sovereign debt market in the world but like you compare those two china's got commodities they've got the chips they have the active pharmaceutical ingredients they got the rare or go down the list of what they have versus what we have. And I don't know, the deepest, most liquid capital market in the world doesn't seem very

important when you're talking about, you know, what, when you get down to it, look, maybe in 1990 peace dividend sort of world that matters and that has value. But, you know, in a world that is, like you mentioned, more polarized with higher tensions geopolitically, more multi polarity, I think that it matters much less how deep your sovereign debt market is, how liquid your sovereign debt market is, and matters much more, who has the commodities now, we necessarily have energy, which that I think is one of the areas of leverage that we do have over China, they are so utterly reliant on imports, energy imports, much more so than we are. We have abundant oil, natural gas, and, you know, energy resources here in America. And I think that

this administration accurately identified that as being one of the strong suits, one of our pros, you know, one of our benefits here. But at the end of the day, I don't think that, you know, the most liquid capital market in the world is really that important uh especially when you're talking about a world that looks a lot different than the world we might be used to uh in the kind of peace dividend era um but maybe i'm crazy i don't know no i mean i i've been i've had luke on pelagi had uh somebody who's been over in china advising western companies of how to do business in china for 30 years on the show and that's one of the main piece of feedback is like uh these guys are just like pro china like i'm not just to make it super clear i am extremely

patriotic i love america more than anything i i i could not be i do not want to live in china i would i would rather i don't know i'd probably rather die than live in china is not out of a pro china there's such this like knee-jerk reaction nowadays to when it came to the war in eastern europe it's the same thing uh and and what china i i see that sometimes too there's such this like effort to pigeonhole just because you make a criticism about your country i think it was mark twain that said that there's no deeper patriotic duty than criticizing your own country that's kind of how i look at it it's not that i i'm saying these things because i hate america or that i love china couldn't be further from the truth it's more that you know i i want to see

america return to the strength that we all know it has potential for yeah and the reason i bring it up is because i agree with you i think there's people that are just denying objective reality when you look at it like you go through yes we do have liquid capital markets and get high frequency traders and a great services economy at the end of the day but if you do believe that we're moving into a more multipolar world globalization uh has seen its peak and we're going towards a more deglobalized world you're trying to look at the objective facts it's like yeah the the leverage is going to be yeah how many how many lawyers do we need we need less we need probably 10 of the amount of lawyers that exist because i mean yeah so another can of worms

is like the problems they create by writing more laws and regulations and permitting requirements, whatever it may be. But I digress. When it comes to China, people saying you're unpatriotic, never bet against the United States. I completely agree with that. But I think before we even place chips on the table to make a bet, it's like, all right, let's acknowledge objective reality and try to figure out the best solution based off of that objective reality. You can't put your head in the sand and just say ah don't worry about china nothing's going to happen i think the last two weeks have proven that they do have leverage as it pertains to rare earths specifically and that's one thing through these conversations that i've been trying to just sort of tease out

is like what is like ideally in my mind it's like china in the united states trump g however you want to frame it get to the table and get a deal done and i think china just wants to be recognized as a legitimate economic power and political power on the planet they don't want the u.s meddling in things in southeast asia and observing objective reality and um with that in mind saying hey we may need to make some concessions in terms of swallowing some pride and saying hey china yeah we agree you guys are doing some pretty miraculous stuff and let's try to work together and not get into some kinetic war because in 2025 kinetic war or even economic war is not is not good the the leverage in the system is too high and it's it's a a tinderbox for a calamity i want to see

the route where we figure out how to work together and just increase the quality of life for all humans yeah same goes with russia in my opinion i you know i my ideal world is global cooperation, not globalization, not this neoliberal approach that both parties had taken for decades, right? Not that, but peace. I think, well, hopefully most people at least our age are of that mindset. There is certainly a camp that does not wish for peace. It's always yearning for conflict with, you know, some new country every week, it's a new country. But I would like to see tensions with Russia and China decreased. But, you know, I think that we have to be honest about the shortcomings that the U.S. economy, that U.S. society, all again, it kind of goes back to

our prior conversation, like all of those criticisms, when I bring up deaths of despair and the suicide rate and all those various statistics, it's because I think the first step is admitting what the problem is. Most people don't even talk about that stuff. Although I will say that in the past, I don't know, six months, nine months, there's been a growing discourse, a growing conversation when it comes to the kind of silent depression stuff. Someone told me the other day, they're like, what do you call it? That's not so it's not very silent anymore. And I said, well, when I started talking about it was, you know, but I think that that's the first step is recognizing the areas.

Look, I think that like, you know, the average American would, if they were polled, be able to tell you, especially average young American would be able to tell you, yeah, like, I don't know what world you live in, right? If you, if you have $5 million in your 401k, you got two or three homes that are up, you know, 800%, and all the equity, you know, all the wealth created there. Yeah, like the boomers are doing great. Of course, they're not going to see any of these issues. So there's a there's a large amount of generational gap there as well. But I think that the first step is to and I think to some degree, it's going to take some of the younger people starting to come into power

politically um and you already kind of see that um already on both sides i would argue to some degree you're already seeing a bit more representation from the the younger crowd the millennials and uh and to some degree the zoomers and i think that that that's important because there's a huge generational component to it too boomers seem to live like every time And, you know, I see one of these kind of head in the sand type speeches or comments or whatever. It's always a boomer that is living in like 1960s America in their head, 1970s America. And it's not that way. I think that the picture would be a lot different if you spoke to especially younger people.

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layoffs are in the headlines, and rate cuts aren't fixing the core problem. That core problem is that the fiat retirement system is taking on water. On October 28th, Mark Moss and Unchained's Jeff Vandrew will explain why 401ks were built to serve the system, not you, and how fees and hidden risk create an illusion of wealth. You'll learn why Bitcoin's security and growth curve make it a powerful long-term savings asset and how a Bitcoin IRA can let you roll over an old 401k with tax advantages intact. If you want a retirement plan that prioritizes sovereignty and purchasing power, this is the event. Register now at Unchained.com slash TFTC. Unchained.com slash TFTC. Yeah, with that in mind, obviously Trump has surrounded himself with something like J.D. Vance, most importantly, as his vice president, millennial.

He seems to get what's going on, at least domestically. I think he stood up against H-1B visas and really standing up for the American worker. Specifically with that in mind, like in terms of domestic policy to fix these problems, how would you grade Trump's performance so far? Um, not as good as I was hoping, uh, a little disappointed, um, could have been a lot worse, you know, I'll say that. Um, but yeah, I, there was a lot of talk, um, on, on a number of things that we haven't exactly seen follow through on still early. Like the one thing I'll say, you know, I is it's still, he still got some time.

I'm not going to, you know, totally condemn the performance because we still have time. Like you mentioned, J.D. Vance has been pretty vocal on some pretty important issues like the H-1B. So, you know, I'm cautiously optimistic. But unfortunately, I think that due to the fiscal dynamic and due to what's going on kind of economically, I think that we're going to get into a situation where, for example, that K-shaped economy probably actually gets worse. We know Trump wants negative real rates. We spoke about that in the prior conversation.

That's not going to be good to fixing the K-shaped economy. Ironically, kind of go back to early April and Liberation Day chaos, stock market is plummeting. who was on cnn and kind of cnbc in these various kind of you know normie normie mainstream media outlets it was a bunch of rich boomers that were upset that were that were crying the hardest that stock market decline now we know trump capitulated mainly due to what was going on in the treasury market not necessarily the stock market but we know we ended up uh capitulating but But, you know, something like that, I was starting to get pretty optimistic.

OK, Besson, all of the talk about Main Street, you know, it's their time to win. I was starting to get a little optimistic there in that first week of April because, you know, you talk to the average 25-year-old about their stock portfolio. They got like, you know, $200. They're living paycheck to paycheck. They're working three jobs. It's not exactly like they have millions of dollars in some stock portfolio. Um, and, and, and if you look like the top, the top 10% of income earners own 92% of us

equities, right? So the, the bottom 80%, 90%, they weren't really affected that, you know, the average holding in a 401k is like $51,000, um, which is not even, it's maybe a year worth of expenses. It's nothing. It's basically a rounding error. um so yeah you know i think that uh the the bottom 90 percent it was starting to look like okay they're willing to break things they're willing to because really what that would have been was a wealth redistribution um which is funny given the kind of like political implications of that um

that's really what it was you want to fix the k-shaped economy okay you have to be able to tolerate a significant equity market decline. The problem is that, again, Luke has been up front on this. I've done my own fact-checking of it and found it to be correct, which is the government can't afford the stock market to decline in a meaningful, prolonged sort of way, or it so utterly hurts the wealth. The wealth effect starts going into reverse, and you start to negatively impact, you start to impair the capital gains tax revenue, blow out the deficit. As Luke says, the equity market de facto backs the US Treasury market. So, you know, they were never probably going to tolerate a significant equity market decline. But that was one of those areas where

I was like, okay, maybe they are willing to break things. But then as soon as Treasury yields started to go vertical two days later it was capitulation so i think that that's really the governing factor there is the treasury market not necessarily the equity market yeah and this is um this is something i've been saying the last couple months too is i think based off of the scenario or the the reality that you just described that the government sort of cannot afford this so it It looks like we're going the route of melt-up, probably melt-up equity markets, incredible debasement. Individuals need to really take it upon themselves

to protect themselves with assets like Bitcoin. And I've been pointing at Square's release of the Bitcoin functionality in their point-of-sale terminals. It's like, all right, you're not going to go fix this at the polling booth. You need to take advantage of this tool that Square has afforded you as a small business owner. and begin saving some of your revenue your cash flows in bitcoin over time because it seems clear to me that melt up is is the way forward and i think the gold price um is is screaming that as

a leading indicator right now yeah and just to like make it really clear even a bunch of trad fi people don't really get this they look at gold as just a thing like they don't they don't really actually understand what what you're actually looking at, which you have to think of gold as an FX pair, right? So dollar yen, dollar euro, it's the same thing. It's dollar gold, or gold dollar is how people normally look at it, which is how many dollars does it take to get one ounce of gold, but gold price denominated in dollars, but you take the inverse of that gold chart, which is just going vertical, I take the inverse of that. And that is the dollar denominated in gold terms. Gold has been money for 1000s of years that has its flaws, for sure.

All the properties, I think Bitcoin objectively does better each of them. But But that being said, gold has been money for, you know, 100 1000s of years, JP Morgan said, you know, gold, gold is money, everything else is just credit. I think there's some truth to that, even in today's day age. So what is that really telling you? Well, what it's telling you the way that the gold price gets bid up in dollars, is that more people are willing to sell dollars to buy gold, then are doing the opposite, which is selling gold to buy dollars. That that's really what it's telling you. So what that reflects now that you have, you know, now that once you understand that way of looking at it, that lens to view it through, it's a pretty damning indictment

of not only the dollar, but of course, kind of the institutions that back the dollar. And it's not just the dollar. I mean, gold is getting bet up in every currency. But historically, the dollar served as some sort of kind of safe haven asset. And we're not really seeing that too much. I do think that short to medium term, the dollar could show some strength here, just kind of generally speaking. But we've been seeing the yen, the euro and the Swiss franc replacing the dollar in terms of when it comes to those risk off sort of moments, what is getting bid. And this is true going all the way back. I noticed in January, February, I'd wake up, I wake up early here on the West Coast, I'd wake up and see equities would be down,

yields would be up a little bit, and the dollar would be down. So bonds down, stocks down, dollar down uh and why and i started looking okay well what's up and it was gold euro yen and swiss franc um and that's kind of that that theme is holding true which look i don't think that you have to replace the dollar with the yen or the euro i think that we're moving into a world that is much more you mentioned multi-polarity earlier i think that's accurate and i think that we should look at kind of global FX reserves and current, you know, not one global reserve currency, but multiple diversification of the sovereign holdings away from, you know, 65%, I think it was at the peak in terms of dollar denominated assets, mainly US treasuries, and much more to, you know, maybe

we hold 10, 15% in US treasuries and 10% in yen. And right, I think that sort of world with gold and eventually, I think Bitcoin, given enough time, that sort of world, right? Because people always push back so hard on like, nothing can replace the dollar. And it's like, well, gold kind of is number one. Number two, nothing has to be the global reserve currency. There can be multiple reserve currencies. You could imagine a world where dollar, euro, yen, and the yuan are all you know 25 or call it 15 and then maybe the rest gold something like that uh which would take some time to get to it's not going to happen overnight but i think that that's much more where it's going but what i think once people need to really kind of abstract out what the gold

how to think of what the moving gold is actually signifying because once you get it it's red alert you know what's going on in the gold market and also it should be noted that the breakout like this is gold has been breaking out it's not just in this current administration this started before so yeah and that begs the question like how how underexposed are not only governments but institutions i mean how many of these hedge funds in the caymans just trying to leech off this this basis trade, underexposed gold. I think there was a Bank of America report that came out a few weeks ago that something like 4% of hedge funds have any material exposure to gold. And is there like a whole class of institutional capital that's just completely missing this wave when their

fiduciary responsibility is supposed to see it before it comes and benefit from it when it actually does manifest? Yeah, I mean, I think institutions are, at least in the West, probably, I've seen similar similar reports I think institutions in the west firms in the west are are uh under underexposed but uh you know also individuals like you had made the comment before about the debasement and kind of the the run it hot sort of approach and like how badly that's going to crush we're talking about the k-shaped economy getting worse um what I really worry about is the average American getting crushed by a run-it-hot sort of regime, by negative real rates. We know Trump thinks that since our discussion, we had mentioned negative real rates, how Trump

thought that the Fed funds should be, I think back then it was like 1% or something, which would represent at the time a negative 200 basis point real rate. Well, now you have Stephen Myron, who Trump picked to be the chairman of the Council of Economic Advisors, and now on the Federal Reserve, he came out, this was like month and a half, two months ago, and he said, I believe the neutral interest rate is 2%, which is notably below where we are now. And I thought, oh, well, that's interesting. But then like a week or two later, he comes out and says, no, the neutral interest rate is 0.5%, which is just insane to me, when you have inflation at 3%, like solidly at

three percent um and assets at all-time highs you know it i think that they're trying to tell you where which direction they want to go and look like it's not necessarily that they have a ton of optionality or choice in the matter um you know this has kind of been starting to get baked in the cake as luke says years ago so um it's not that they're choosing to do this right and And I wouldn't, it's unfortunately just where we are and just kind of what you have to do. Absent a productivity miracle, we're not going to cut spending because you cut spending. I've done the math. And if you cut spending, if you bounce the budget, it would result in a GDP contraction

worse than 2008 in the GFC. So you can't just bounce the budget, especially given what's going on kind of with the dollars reserve status and what that might do to other assets of course uh in in in mid 90s to late 90s we ran a surplus and that caused all sorts of problems uh in say the equity market and then that got kicked to the to the housing bubble which by the way even the economist uh on the wikipedia article for 2008 and the causes of 2008 even the economist which is a fairly pro-global pro-globalism sort of outlet, even they admitted that the 5% or 6% trade deficit as a share of GDP in the early 2000s led to the 2008 GFC, the bubble, to the housing bubble. So even they're

admitting that. So you have all these other issues with balancing the fiscal budget. But yeah, you would plunge the US into a recession that would be catastrophic. It would be a margin call in the debt. So you can't do that. Like what other option outside of a productivity miracle, which could also bring about mass unemployment, right? And all these other issues, like they don't really have a good option here. Unfortunately, run it hot, devalue the debt in real terms against scarce assets like gold and Bitcoin. And that's kind of the only option that they that they really have negative real rates to try to get the interest expense which is one of the largest outlays uh try to get that under control negative real real rates but that's

going to be stimulatory it's going to be inflationary uh that'll make the k-shaped economy worse they'll fuel the asset bubble even more so yeah it's unfortunate because i don't really think that they have much of a good option outside of a run at hot and they started telling us back in what, May or June, uh, that they were, I mean, it was Scott Besson, uh, David Sachs and Elon Musk all within a week of each other all came out back. And I think it was May, uh, and said, yep, like can't cut, can't cut. That's not how we're going to get out of this. We got to grow our way out of the debt. They all mentioned that nominal growth has to be above the cost of the debt. Um, and unfortunately that's just kind of where we are. That's what we did after world

war ii um and you know inflation was 18 19 at the peak uh coming out of that yeah i know we touched on this last time around but the productivity miracle it's right around the corner have you uh you've seen everything going on with ai all these data centers being built up there's not enough supply of gpus to feed the insatiable hunger for for for tokens in the world Do you believe that there is any hope of an AI productivity miracle actually materializing? I mean, I can say for myself that it has notably improved my productivity. I use it in a very particular kind of way. And it has significant limitations, right?

But it's kind of constantly improving and tends to be getting better. Like, for example, you can tell it to write a Pinescript code for TradingView. And it just spits out like, I could never do that. I'm not coder, I have no idea. So things like that, you know, and it's very quick to certainly boosted my productivity, when it comes to say the YouTube video research or, or, you know, preparing charts, it certainly helped me how much and how quickly the real productivity gains actually appear is totally different story. So like, I've looked for good high quality data on that very issue and not really been able to find a ton of data, which is kind of surprising. I did put out that post job openings to the SMP, kind of as a joke, it ended up going like gigaviral. It was kind of a joke, but, you know, there's probably some amount of I was hoping to spark

some amount of conversation because i do think that there is some amount just from what it's doing personally for my productivity i believe that there's got to be some amount of productivity gains coming from ai uh productivity for q2 did come in significantly higher than expected uh by by a lot i think it came in at 3.3 and the expectation was like 2.6 so it did come in notably hot um q3 i haven't seen yet government shutdown so yeah uh i would imagine that there's some amount of productivity coming but you know then you start creating other problems right which is okay say say it is gonna be as transformative as as some people say okay well now you might be talking about an unemployment rate of 20 well how you just how do you fund that um and so i yeah

I think that that's why, and I think Luke's correct on this, the productivity miracle option has to come at just the right pace, and it has to come at just the right intensity. Otherwise, it actually makes the situation worse. Because we know government's so inefficient. Like, for example, Medicare outlays as a share of tax receipts, when back in the early 70s, it was like 2%. Now it's like 24%, 25%, 26%. So we know how inefficient, and it's the same with Social Security as well, these government programs are incredibly inefficient, allocators of capital and the number of administrators and the bureaucracy and all that.

So it's not like a one-to-one, right? There's probably, for every dollar in unemployment benefits that someone actually makes, there's probably another 50 cents that's getting paid to government bureaucrats along the way. You know, so, yeah, I think that the problem is if it comes, if it does come, if the productivity miracle does come and it is transformative, it'll cause significant dislocations in the labor market. Those people have mortgages and car loans and they go to the local Starbucks to buy coffee and whatever. And so AI being extremely deflationary, I've kind of understood this concept. I've been talking about it for a year and a half. I don't, I don't really know, like, how it ends up resolving. But immediately, I thought, well, okay, if AI is as transformative and revolutionary, as people say, okay, well, that's massively deflationary. And then I was like, okay, but, you know, the government debt to GDP is 125%. Now private household debt, they have de-levered after 2008. But on the sovereign side, we are so highly levered, 7% pro cyclical deficit, 22% of tax

revenue is going to interest, you know, kind of go down the list. So, okay, if it's super deflationary, we're in this highly levered debt-based monetary system. Like I kept telling people, guys, like this is the story is how those two end up resolving. And the only conclusion that I've been able to come to, I keep pointing it out and never really knowing how it ends up resolving, the only thing I can kind of rely on, I guess, or bet on is that they will have to overcome the deflation from AI and robotics by printing even more money. So I think that's kind of where I've landed. I don't really see another option because it's

incompatible with a highly levered debt-based system. Maybe someone can reach out and tell me another solution but the only one i can think of is they print even more money to offset the deflation yeah i mean that's what they've done already for the last five decades i'm sure you saw but the new head of product at x nikita bier or whatever his name is was um tweeting basically making fun of bitcoiners and gold bugs saying i don't know all the bitcoiners and gold bugs are expecting hyperinflation when ai is going to be extremely deflationary it's like well all tech as deflationary have applied the right way for most tech people were nitpicking because i quote tweeted with all tech but we've seen incredible deflation driven by technology advancements over

the last five decades and the cost of living and the has gone up consistently quality of life for the bottom 90 has gone down consistently despite incredible leaps and bounds and advancements and technology that have led to overall deflation in that sector. But it is not enough to combat the money printer, the need to print to keep it up. So despite all this tech deflation, until we pair that tech deflation with a reserve currency that is a sound money, Bitcoin is what I think it ultimately will be, you're not going to reap the benefits societally of that tech deflation. Yeah, or until you've de-levered the sovereign balance sheet. If we could get debt to GDP back down to 50, 60, maybe even 70%, then it's a bit of a different

story. The problem is the leverage is so high that a recession or bout of deflation, sustained deflation, basically acts as a margin call on the debt. In the past three recessions, if you take an average tax revenue in a recession falls by about 25%. Spending goes up by about 15%. Oh, and GDP, the denominator in the deficit as a share of GDP is falling. So you end up talking about like a $5 trillion deficit in just a normal recession. And so yeah, it's a tough situation. They're trying to thread a needle here. And I don't know if it's going to work. Maybe there's some secret technology they have that they've known about uh that could help but i mean absent something like that i think that it's just going to be even more inflation to offset the deflationary forces

um unfortunately yeah well i guess to tie bitcoin into this obviously gold's been running i think bitcoin is a solution for individuals institutions governments alike to a certain extent to sort of protect yourself as it seems obvious that we're going to have these extreme bouts of inflation moving forward as the government needs to inject liquidity into the system to make sure that doesn't completely implode but i think that's one question that's been on many people's minds particularly bitcoiners over the last month is why do something why aren't you doing it gold's running to all-time highs it's sucking the air out of the room and bitcoin uh where it is in the halving cycle if you believe in halving cycles signals that the price should be running

a lot hotter um people are very disappointed how does bitcoin play out into all this what is your short medium long-term view on bitcoin and where it fits into this bigger picture that we've been describing yeah short term is hard um that short term is really hard medium to long term though i'm very bullish uh i look at it i my conviction in bitcoin is so significant um that i like it i like uh pullbacks i i like when it is not ripping higher because when it's ripping higher again going to the prior conversation about gold like my wages or my earnings are getting devalued when gold and Bitcoin are ripping higher. So I actually like when it's not ripping higher, I would like to accumulate more. Because, yeah, inevitably, I know how this all ends up resolving.

And look, it could take longer than we think, you know, it could, it keeps feeling like, okay, hey, well, we're nearing this event horizon, or maybe even past it. Why isn't it feel like we are gold, I would say indicates that we probably are the way gold is the price action on gold. I mean, it was up like 3% on Friday, or Thursday, I think it was had this like 3% monster date, like you don't see that in gold, especially routinely, day after day after day, it's it's every single day, it's like up a percent or more. So I think gold is kind of signaling that we're nearing an event horizon. I think that Bitcoin has too much of a NASDAQ, high beta, you know, aspect to it, unfortunately. So, you know, there's been a bit of kind of volatility

recently short term at least uh in in spying qqq so i think that that's probably not helping with bitcoin although today uh both are uh were up when we started to record um and then you had the cascading crypto liquidation thing that happened a week or two ago and uh there's probably some amount of residual you know deleveraging or um you know going on there uh but medium to long term like i'm grateful for this pullback i wish it would pull back more i want it back at 70k 80k uh because yeah it's like if you have enough conviction you should be wanting you should be enjoying pullbacks you should be wanting it to pull back because you're looking out into the future um and again you have high conviction of that medium to long

term view so that's kind of how i look at it uh the longer that it is not going parabolic the more time i have to accumulate because inevitably you know whether it takes a month or a year or 10 years like it's it's going much higher in my opinion yeah and it is hilarious to people pointing at gold's performance this year particularly and saying oh bitcoin's not catching up it's like if you zoom out at the five-year chart bitcoin's up like 900 gold's up like 130 percent yeah since the etf uh it's up like what 250 percent since the etf was announced so yeah that was just two years ago or so yeah i think it is a signal of the uh the high velocity trash economy of people that are in bitcoin and they i think they have visions of things they

want to buy and things they want to do um and sometimes let those visions and i think i think that illustrates the problem right which is like if if you look at bitcoin as just a number go up sort of phenomenon or asset uh if you're just purely looking at it from that lens and you have a low time low time preference you have that kind of like fiat mindset of i want bitcoin price to go up so i can sell my bitcoin four dollars i think that that is a different camp than a lot of um, a lot of Bitcoiners who don't view it that way and, and view it as the denominator of choice. Um, I use gold and Bitcoin as denominators for a lot of things. And again, plot average hourly wage, anyone with a trading view, plot average hourly wage divided by Bitcoin, your wages are

getting devalued when Bitcoin goes up. Like once you start to realize that, I think that you start to kind of see things in a different uh in a different lens i guess yeah the um what was i gonna say the uh not only the devaluing but the um i lost my thought there when uh talking about the speed at which this happened oh that's what i was gonna ask like then it's one thing we talk about a lot at 1031 is like there's an order of operations to bitcoin's ultimate success and i think again going back to the square point of sale system a lot of people are are excited that you'll be able to pay uh in bitcoin and merchants will be able to accept bitcoin which is interesting but the merchant adoption um meme's been around since

2013 roger ver was out basically trying to convince everybody to accept bitcoin and if i'm being honest with myself i feel like that part of the stack that they just released at square will probably most likely be the least used out of all of it. But the tool to be able to sweep cash flows immediately into Bitcoin and hold that on the balance sheet is probably going to be the most used feature and the most valuable feature, not only for those individuals, but for Bitcoin more broadly. And I do think there has been a degree of complacency

in the broader Bitcoin sphere. People just focus on number go up, number go up. It's like, well, we need to increase the utility of the tools around the Bitcoin stack to make it easier for people to adopt. And so I think people should be focused on that, like where can we begin to fit Bitcoin into these different nooks and crannies and get people exposure to it more easily. i would say even outside i i would agree but then i don't also even on the like number go up part i had someone who sits on a board of a publicly traded company ask me about you this person knows i'm i've been following bitcoin for a while and i'm into it asked me about it a couple days ago and i said well you know what makes you bring it up now they're boomer and older and kind of was

always very avoidant, or, you know, dismissive of Bitcoin is, you know, what made you why you're asking? And she said, Well, our accountant asked us if we had any Bitcoin holdings, this is a publicly traded company. So, you know, I think that there's an element for of course, we know it individually as a as a pretty amazing savings technology individually. But even as you gain adoption of it, just psychologically, once it becomes a more of a valid, once people start looking at it more as a valid form of savings technology, which is the primary method I look at it as, I think even that is a step in the right direction for Bitcoin, because then those people adopt it. And then maybe they can start to play with a lightning wallet or whatever, right? So

I think the primary funnel for most people, whether it be corporations, whether it be sovereigns even, or whether it be individuals, is the savings technology. It preserves your purchasing power because in dollar terms, it goes up in price. But then once you're exposed to it, once you've used it, once you've bought some Bitcoin, Once you've sent it to a wallet, maybe you have a self, a cold, you know, a cold card or old in self custody. And once you understand the concept of like, you know, holding your own keys, once you start to like kind of play with it and go down the rabbit hole, I think that it leads to all of the other benefits, all of the kind of more peripheral sort of benefits that, you know, whether it be like as a means of transaction and that sort of thing. So I think the primary funnel will continue to be the number-go-up component, but that's only because the denominator is melting, unfortunately. Yeah, and then in terms of not the converse, but the other side of the coin, the number-go-up is distributed peer-to-peer cash that nobody can control.

i think governments are doing their best to fund people towards the point of recognition like oh maybe this this makes sense for this reason particularly in the uk where they're launching digital ids and speech laws and i think come from number go up and then trojan horse peer-to-peer digital cash that can't be censored by despotic governments they're doing the job the governments are doing the job behind the scenes to make sure people understand that they need that as well when the times. Right. It's not a pretty looking landscape out there politically, not just in the UK. And, you know, I, I worry sometimes about three years from now, what will the U S look like? Um, you know, we might've bought a little bit of time. I mean, some, some people, um, would argue

that, you know, some of what we're seeing even now is leaning in the kind of technocratic or, you know techno dystopia right with certain companies and stuff so you know you can make the arguments even happening now here in the u.s but at the very least you know if you reject that argument at the very least it could happen here in say three years so uh right now it's the uk but i think that that could make its way over here unfortunately with the rise of populism and Look, if the average American, the average blue-collar American that's been on the lower leg of the K, that has watched the capital class just get obscenely rich and so on and so forth, if that lower leg of the K that elected President Trump, if they don't feel like he has adequately fought for Main Street, as Besson always says, it could get pretty crazy, I think. People dismiss AOC presidency, but I think that they'd be wise to rethink that because I think that populism is not just going to be on the right. We're seeing a rise in populism.

I think if you look at like New York, I think New York's going to be. Luckily, it looks like we're going to have a case study in left leaning populism in New York. hopefully uh they can blow that's uh what's the word i'm looking for uh they're they can mess that city up to a certain extent in a quick enough amount of time that people are able to point out and say look this is what asc wants to do the country let's not go down this route but i mean look going back to 2016 this is not like a new phenomenon i remember um back in 2016 in the rust belt they would go you know cnn msnbc they would go and interview just average people just average blue collar middle of the road you know just average people

and they say who are you voting for who is it between and they would say well kind of i like this trump guy but i also like bernie and it like just completely broke their head these these kind of you know partisan type uh that live in manhattan or live in washington dc like it just completely broke their head that you could be between trump and bernie um but i think that going back that that was a signpost that was back in 2016 so i think it's only going to kind of accelerate from here um unfortunately because populism look going back to what we were talking about debasement And in that whole conversation, populism, the last time the US had populism really was 1965 through 1982. In dollar terms, denominated in dollars, S&P 500 basically went sideways.

In gold terms, the S&P 500 lost 90% of its value. We didn't have Bitcoin back then. But in gold terms, S&P 500 lost 90% of its value. Populism is not good for financial assets. It's not good if you care about inflation. And so, you know, that'll eventually that'll come into conflict, of course, with the bond market, which we kind of have an idea how they're going to resolve that conflict with QE or yield curve control or something. But populism is a period in time where you want to own scarce bearer assets. And I think that, you know, Bitcoin is, is the best, because gold can always be confiscated,

they could kick down your door, and you know, you have to physically hold it, or it's held in a brokerage account. So it's not really your goal. Number one, it's not real gold. Number two, it's not actually yours. So yeah, I think, you know, memorize 12 or 24 words, you know, makes it makes it the best asset to own in a, in a period of time of increasing geopolitical tension, a period of time of increasing political polarization ideological polarization even racial division here in in america um and of course you know the the economic side of it as well i think that it's pretty much the only thing when people ask me they're like you you watch this stuff all the time you this is all you do all day like what what should i do you know i got 10 000

or 20,000, or whatever. And like, I've thought about it a lot. And at least for myself, the only option I keep coming back to is like, the only thing that I'm really that I have high conviction in is Bitcoin, and to some degree gold, although the parabolic run in gold makes me wary of recommending that I was buying some in 22 and 23. But you know, after the run that gold's had, it's like, it's kind of hard to recommend gold. And then so the only thing that you're left with is Bitcoin, because we know cash, cash had been good, right? Money market fund, you get four and a half percent. That's cool. But like, that is a melting ice cube more and more with what they're doing with with the federal funds rate. So like, that was kind of the last straightforward thing

outside of Bitcoin. So now it's kind of like, it's getting to a point where for me, at least The only thing that makes sense is Bitcoin. I'm not going to buy the S&P 500 at a price to earnings of 3,000, whatever it is, price to sales at 3.3 times. I will say, that's not to say the S&P or the NASDAQ stocks equities can't go up. I looked at the price to sales of the Lebanese stock market during their currency collapse. People were making such a big deal about the price to sales ratio of S&P at 3.3 times. that is so historically overvalued. And so I looked in Lebanon, and it reached 62 price to

sales. So you know, like, it's not to say that the equities can't go up in dollar terms. But what you really need to what people really need to start doing, and I've been trying to bang this drum is start changing the denominator, whether you like gold, whether you like Bitcoin, gold is good, because it's been around a long time. So if you're a macro nerd, like me trying to evaluate data you have more price history uh but you know use bitcoin as a denominator denominate stocks in bitcoin whatever you're thinking about investing in housing right denominate the average sales price in bitcoin it's it looks a lot different than in u.s dollars yeah i mean there's two points there like to your point on populism not being good going back to 65 to 82 to your point

If you price everything in Bitcoin going back to 2016 when populism really became as big of a thing as it is here in the United States today, S&P is probably down 95%, 99%. Going back there in Bitcoin terms and gold, obviously, Luke and many others were sharing that chart a few weeks ago. If you price NDX, S&P, real estate prices in gold and Bitcoin, they're down significantly. So this could be a conversation we're having where we're in the middle of the debasement of the populism, whatever it may be. People will look back retrospectively 50 years from now and be like, oh, yeah, they were in the middle of it as it was happening. And then to your point on gold, too, like when China just discovered what a mine with 83 and a half billion. Yeah, the world's largest gold mine. yeah and so supply of gold is not nearly as inelastic as bitcoin bitcoin is perfectly

inelastic no matter how much demand for bitcoin there there ever is at any given point in time you're not gonna be able to create more of it and china just found the largest gold reserve in history that's the consequence of a higher gold price yeah right is you find more gold it'll unlock supply whether it be through people willing to sell their gold to buy fiat currency or whether it be through new supply so that's a consequence to the higher gold price like you mentioned with bitcoin bitcoin could go to 10 million dollars per bitcoin tomorrow and there's no now sellers could be encouraged right long-term holders that go okay well that i'll sell 10 million but there is no new bitcoin supply wise that can come in so that's one of the reasons

it's so much better i think yeah one of the many reasons but fascinating times thank you for uh taking some time out of your monday morning early monday morning to rip it um this is great and uh i really value uh your consistency it was worth talking before we hit record uh it's admirable how consistent you are with the analysis and uh it's been a great infonomics has been a great channel for me to check in once a day and just see what you're thinking what you're looking at and trying to get a better well-rounded view of what's going on in the world of finance i appreciate that yeah i just uh again i you know my my prime goal is to help kind of the average person that i know everyone not very many people

can watch all of my videos because i do release one every day but hopefully you know those that you might find interesting take a look uh because yeah my only hope is to explain some of these very complicated macroeconomic concepts and phenomena to people, normal people that don't have the time to nerd out to the degree that I have. Because you shouldn't have to, you shouldn't have to be so obsessively devoted to, you know, I'm crazy. So shouldn't have to be crazy to understand how your money works, how your economic system works, how the global trading system and global capital flow shouldn't have to shouldn't require that much energy so that's kind of the first i think the first step is for the average american to understand the problem because once you understand

the problem then it makes a solution i think pretty straightforward um so yeah that that that that's the prime goal uh if that sounds interesting you could go check it out passion it's the word i don't think it's crazy i think you're extremely passionate about this uh yeah yeah i always like puzzles from when i was a kid i was a nerd i didn't play with the kids i played i did puzzles puzzle books and stuff and like when i when i kind of came to markets it was like well this is basically the world's biggest puzzle with the most high stakes so it's kind of i look at it fun puzzle to solve yeah um for me it is at least yeah yeah well hopefully we do this again let's catch up uh beginning of next year maybe yeah see uh see how everything's playing out

in the world of bitcoin gold debasement polarization deglobalization all the buzzwords it's a interesting time to be alive and appreciate you joining us today yeah thanks for having me on all right peace love freaks thank you for listening to this episode of tftc if you've made it this far i imagine you got some value out of the episode if so please share it far and wide with your friends and family we're looking to get the word out there also wherever you're listening whether that's youtube apple spotify make sure you like and subscribe to the show and if you can leave a rating on the podcasting platforms that goes a long way last but not least if you want to get these episodes a day early and ad free make sure you download the fountain podcasting app

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