TFTC: A Bitcoin Podcast - #746: The Digital Euro Is A Trap with Matt Dines

Episode Date: May 16, 2026

Marty sits down with Matt Dines to discuss the European Union's plan to monetize private savings through a digital euro, the Warsh-Powell proxy war for the Federal Reserve, and the mounting credit risks inside Bitcoin-backed perpetual preferreds. Matt on X: https://x.com/LeveredUSTs 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/yHGkvYxdqT Opportunity Cost Extension: https://www.opportunitycost.app/ Shoutout to our sponsors: Bitkey https://bitkey.world/ Aven https://www.aven.com/bitcoin CrowdHealth https://www.joincrowdhealth.com/tftc Unchained https://unchained.com/tftc/ Salt of the Earth: https://drinksote.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 And that's part of the bull case for Bitcoin. If you're not paying attention, you probably should be. Matthew Dines, take two. We meet again a week later after our original two and a half hour recording had some technical difficulties and was unrecoverable, unfortunately.

Yeah, that's that was terrible. It's kind of like I don't know if this is before your time, but there's the Jack band, Jack Black band, Tenacious D. their kind of their hit song the was what's it called the most wonderful the most famous song in the world our best song in the world um but they lost it uh so you know the only thing they could do is give it a tribute so yeah we put down a good rip um two and a half hours but we'll hope we'll condense it here and you know make it better and then this will be the greatest song in the the world um it uh it will be well let's jump right into it we last recorded before last week it was 18 months in the last time we talked it was uh about the debt restructuring uh that was

that was coming to to ukraine a lot has happened since then um we've got some charts you've got enough space in your computer we're going to pull them up uh eventually but i think picking the ball up where we left it uh in 2024 right before the presidential election uh a lot has changed since then particularly in europe absolutely so that's crazy to think about like 18 months just goes by so quickly um it really does uh sink in with you like looking back on on what seems like yesterday right like our kids are growing up time flies so um yeah never never take your time for granted which is, I think, what Bitcoiners appreciate and understand out of their money. But, yeah, to start with, you know, one of the key things that had just happened when I think we recorded it was like mid-September 2024.

Ukraine had just technically defaulted on its sovereign debt, which was largely, I mean, entirely funded by the United States and Europe as well as UK. And, you know, the way these wars go, it very quickly becomes a battle of attrition. We all kind of understand in history, right? It's all about do you have access to finance, access to, you know, money, you know, gold historically as it's been in these big European wars in history. But if you can keep funding your sovereign, keep the state provided with access to resources to not just keep the domestic economy going, chugging along, but to fund the war effort, as soon as you run out of funding, that's the moment you have to call it quits and a winner or loser is determined. And typically the way things go in the, you know, the European version of warfare that we've been in since 1648, the Treaty of Westphalia, you get these nation states meeting. And then whoever, you know, prevails on the military front, which really, you know, is tied to the financial front, right? It's a capital war as well as kind of a military war of attrition as the way these often go.

So but they get together at some palace in Versailles or Vienna or whatever. They'll negotiate a treaty and one side is going to look for reparations on the other. There'll be some gold transfers or capital transfers, and that'll get a system, one side system back to financial solvency. And then the other one, it's kind of a different game. You're in for a long term slog because you've got to pay off this war debt to the other. And that's kind of, in a nutshell, the history of European conflict and where we are today in 2026 and the situation that's opened up with Ukraine. I think it's very much, if it's not exactly copy-paste, like history definitely rhymes. So you can see this playing out in the capital markets.

but to where we were last time we met you know we talk about bitcoin and credit and its adoption as a as a collateral um what we just saw last time we recorded was ukraine defaulted on on its sovereign debt obligations they they suspended payment so uh fit traded them a like technical default and the creditors had to come in and do a workout and what it amounted to It was one of the largest sovereign debt restructurings and write downs in modern history. Like there's only a few that come close. Argentina, some other IMF cases, Greece, for example, with the 2011, 2012 and that aftermath of the European debt crisis. But we saw September 2024 that the creditors who were funding Ukraine, right, they need that international capital inflows to support the war effort. those creditors took a 60 percent write down in their loan so part of it came from a reduction

in principle part of the uh of that loss uh came from uh deferment of interest for you know multiple years into the future so something like till the end of this decade 2029 2030 like the interest payments on ukraine's debt are suspended um and then part of it was attaching like a higher uh discount rate uh to those sovereign bonds but what it amounted to is those those those bonds like you know billions of dollars of capital that's been thrown into that project um took took losses and was you know traded at 40 cents on the dollar effectively amounted to like they were paying 15 yields on the debt to fund this uh ukraine project and that's in dollar terms right it was dollar denominated debt which was very much apples to apples to where we were seeing traded

or priced in market for Bitcoin-backed loans with, you know, credible guarantees of vault structures for minimizing the rehypothecation risk of counterparties moving or collateral doing something else, you know, throwing it into the crypto leverage D5 wood chipper, right? That whole, you know, black hole. um but i think where we are if you take the 18 months and what's transpired we're now at another very interesting point in that process uh for things to get interesting there again in the in the sovereign debt markets so if you think about um you know we talked about who was funding the the ukraine war effort it was a kind of a a joint exercise between the biden administration was

cooperating with the eu powers you know in place the ursa von der leyen uh led era of the european commission and then uk as well although they've gone through multiple prime ministerships at this point changeovers all of that um so that's one of those things that just doesn't change right there in the middle of a potential pm uh uh shift uh right now with with starmer uh you know on the hot seat as well but what happened here that the November elections happened in 2024 and we got a change of of uh administration uh from you know what I'd call like Biden administration representing um kind of kind of U.S. leadership that was willing to keep cooperating with the European order and basically like the the if you think about it it's like the entire structure of you

know the global globalization economy wto you know trade um and then cooperative uh kind of deal making and alignment on on the capital uh markets front uh as well so the trump administration comes in and they very quickly um take a tone well like i'll try to stay as politically out of this as possible but at the very minimum they they they had a mindset that Hey, we I mean, we have our own fiscal deficit, the debt situation in the United States. Everybody knows that at this point. But at the core of it, right, like the if you talk to any good investor, what they say is you don't keep throwing good money after bad. Right. So you just you know, these bonds, you just took a 60 percent haircut. And I think the Trump administration at a very minimum was saying, hey, let's like we're not going to keep dumping our capital markets resources into this.

We're going to have to figure something else out or you're going to have to figure something else out. And that's kind of trickled over and escalated into everything we've seen today with like by this point, by Davos 2026. Right. It was very clear that the U.S. was going one route from its leadership structure and the 200 or 300 people it put in its party and sent to Davos and announced on the world that on the world stage that something like the U.S. role in these legacy institutions is going to change. at the very minimum, and everybody else was just scrambling after that to pick up the pieces, right? So what you've seen now with the U.S. pulling back, it's not going to continue to fund the Ukraine war effort from a financial standpoint, just money printing, all of that. The owner shifted over, and the problem's got to be solved now by the EU and its capital markets as the lead. And that means you're watching what Brussels and Frankfurt do to clean up their

you know address this problem um because at the end of the day if you stop financing the the you know the logistics the military effort all of that at the front um you know the tip of the spear where the the collision between these regional powers is actually a military kinetic conflict if you stop if your capital market stops funding that that means you've lost right so so EU has been in this situation where they've had to come up with some way to keep this war effort going. And right about December this year, we got the make or break fork in the road. And there were two paths and we've clearly chosen one. And the way I view this, the two paths, door number one was the existing custodians, Euroclear, who in the US markets framework, think of them like a

major you know custodian like bank of new york right but then they're also uh the security settlement uh kind of mechanism and structure like the the dtc corporation it's both of those things like merged into one um but the bonds the russian reserve assets right they're they're dollar reserves they're holdings at the end of the day they're just ious in this financial system Those things were parked with the custodian at Euroclear. And the technocrats or the bureaucrats kind of game plan to keep the money flowing to the war front in Ukraine was to get those custodians to essentially allow for those reserves to be used as collateral. And this is a deviation from past behavior, which was taking the interest accruals on those reserves and kind of stripping those out, leveraging them up and using that to ultimately backstop the money printing that was going on to fund the Ukraine war effort. At this point now, it was, hey, we got to go into the seed corn. We got to go into the principle, not just take the interest. The interest is already, you know, that's been consumed. That's spoken for. Take the principle, post it as collateral. That becomes essentially one to one as the funding layer for the euro denominated money printing that's going to pay for the Ukraine, you know, war effort.

So this is where the custodians had a potential problem, because we talked about once this thing gets to the point where we're done fighting and eventually there will be a day where we're back to peacetime. Right. These European leaders, the Russian leaders, they'll show up at the, you know, the treaty of wherever they'll negotiate with each other, whichever side has the advantage they're going to press. And there's a hypothetical hypothetical probability, like it's in the range of outcomes that this doesn't go the way that, you know, the EU wants. And in that case, the custodians would be on the hook for the the potential credit claims or the money printing. It would come out of their their equity. So you got the private business owners or, you know, their their businesses. They they, you know, concern themselves with their own balance sheet capital at risk. They stood up to the technocrats in December and said, no, we see legal risk here to the, you know, you're a clear financial institution. You need to either force us to do this or we're just we're not going to go along with this funding scheme.

So they called the EU's, you know, the Frankfurt called the Brussels' bluff here, essentially. I know that's not quite accurate because you're a clear as a Belgian financial institution, but it's very similar. And I say Frankfurt because that's the financial power structure within within Europe. So they called the bluff. They said, we're not going to be on the hook for this. Like they have they have liability. They have risk. And so the EU didn't say the bureaucrats didn't issue that that order, like directing them to do it, because what you're actually encroaching on is property rights, rule of law. You're saying, all right, custodian, take this property that belongs to another counterparty. In this case, it is the opposition that we're up against in this war, but seize their assets and do this with it or confiscate property to do this with it.

And that's where your custodians, they're concerned about the longevity of their financial business franchise. and these are operations like the people who run them these are businesses that go like centuries right if you look at european banking the italian banks are like the oldest longest standing in the world um i know the u.s dominates the market right now but these uh these executives think extremely long term and so they don't just think about what's the most pressing you know easy way out of this uh like very very dear um and intense situation but they're thinking longer term so they said we're not going to go along with that and that's where you got the the the eurocrats or the the eu's route to go down door number two which is to find a way to

essentially print the money and monetize this so in the in the intermediate term um they found a way to arm wrangle all the you know eu parliament all of that to fund uh the ukraine war out of eu budget so it's coming out of you know eu's fiscal you know headroom um but they know that is going to eventually run into a ceiling because you know background conditions in the european economy it's slow growth we can talk about the ai trend all of that but it's behind in terms of growth potential uh as well energy grid everything that like tftc listeners are very familiar with over the late over the years so this in my mind it's it's putting two and two together here what's happening like why is there this digital euro initiative right and at the end of the day it

comes down to um the eu technocrats need a new custodial solution that would allow them to centralize the savings built up from the eu private economy over you could say at least going back to world war ii but it's like centuries of work right and the eu growth that's been european growth that's been uh really on a on an upswing since 1492 essentially um and and since the existing financial you know custodial um banking institutions have said they're not going to go along with that confiscation of property or that risk in terms of what they're on the hook for potentially and the ultimate outcomes of this military conflict. The EU needs to find a way to monetize and print against the savings of the

EU businesses, households, private sector. And so the answer to that is to build this digital euro that rides the tailwinds of what, you know, Satoshi unlocked and has showed us is kind of the path forward on, you know, moving custodial integrity, but also limiting the ability of one counterparty or say a cartel from manipulating, you know, money supply against, you know,

other participants in the monetary network that Bitcoin, you know, is. And, you know, that's the life in my book. And I think the TFTC audience agrees. But the EU needs a solution built on those same crypto, you know, blockchain rails. But it it can't be Bitcoin because Bitcoin is anathema to what to the task in front of them. Right. And what is that task in front of them? It's to trap the savings of the local economy, print and monetize, you know, to the state's objectives. um and bitcoin which is you know as everybody like why they know is once you take custody of that asset right you move it and you own the utxos that that capital can then leave the borders and

and flee so that the ability of capital to leave um and just walk out the door uh because you know smart money, by definition, can see the degradation of property rights or the potential debasement on behalf of the state's objectives. They see it coming. They're going to flee. So that's why, in my mind, it's always been there. And we realize the EU has been the most antagonistic to Bitcoin. It's all starting to click with me exactly what's going on here. So, yeah, that's how I kind of wrap my head around the digital euro, but also why it's so pressing and you see from the you know the project roadmap they're like oh it's right around the corner it's 2029 and then it's like oh it's 2028 we need to speed this up so they're they're pulling

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Get it into multi-sig collaborative custody with the BitKey. Go to bitkey.world and use the code TFTC for 10% off. it's funny i pulled it up because we wrote about it this morning in the newsletter but i'm not sure if you saw christine lagarde had some comments yesterday rejecting euro stable coins uh and warning of digital dollarization uh christine lagarde told reporters she is skeptical of euro denominated stable coins and ward that warned that dollar stable coins threatened to digitally dollarize the eurozone stablecoin market now sits at 310 billion combined with tether and usdc and is overwhelmingly dollar denominated lagarde's response is not to compete but to reject the

category and push the digital euro instead um she recognizes these these stable coins as like external to her ability to control them yeah she i mean we're used to this from christine lagarde at this point like uh you know she's at the top of the list of uh central bankers or you know legacy monetary authority you know figures who are antagonistic to bitcoin full stop but then you see here now two genius act you know stable coins and what that implies she doesn't ever say why right she doesn't tell you exactly why it is but here's my view right all right they've got this problem they need to trap capital it's it's confined right uh which is a tough thing to do Because everybody, if you can, if you're able, you have the means, you're going to get your capital out of the jurisdiction where it's going to be debased or, you know, treated improperly.

All right. So think about this. In my framework, I think about there's really $3. But to start with, let's go with $2. I could say there's $4 as well. The silver dollar, which is still the constitutional standard for money. it's on the books but it doesn't matter at this point um maybe it does the silver bowls may may end up winning it's kind of like the game of thrones uh solution spoiler alert it's none of

the parties you think are going to walk away at the end it's it's brand right if you've seen the show maybe that's the silver dollar at the end of this i was like all right guys that was that was it now i'll leave the silver dollar side but two the two dollars the main ones from the legacy post-World War II order, you get the onshore dollar, which we talk about fiat dollars here, they're credit IOU dollars, backed by nothing other than the Fed's ability to step in as lender of last resort, but also these other kind of state-run deposit insurance structures, or just really at the end of the day, it's the balance sheet capacity of your United States commercial banking system that prints the treasuries and that that's the risk-free collateral in that

system's concept and just rinse repeat hence by x handle levered usts right it's all turtles all the way down all right there's the onshore dollar um that shows up actually we'll talk about the battle in a second between warsh and powell uh for control the fed and the massive change that's like i think is underway it within that concept of the onshore dollar all right the the What do you call it? Like the complement of that, right, is the fiat dollar standard, but the offshore dollar or the euro dollar. And you've heard, you know, for the last 10 years, you know, this is deep in the mindset now. Everybody's become ramped up on the old, you know, non-U.S. based financial, you know, banking system, all of that, who operate this offshore dollar as a legacy patchwork of IOUs. IOUs, but they're not within the kind of the confines, within the sandbox where U.S. regulation applies or the Fed has control, all of that.

All right. That offshore dollar is actually what's being kind of drained. And this is, you know, you can go into the milkshake guy, all of that. Right. But we've introduced since 2022 the genius stable coin and what that is. So think about all these dollars, what they're at the end of the day trying to do is maintain HAR, which is, you know, a hundred cents on the dollar or the IOU claim from the issuer of that, you know, dollar, whatever entity vehicle, they're, they're imaginary things,

right? So it's hard to nail them down versus silver dollar is easy, right? You just see the coin and you're like, no, that's, it's got intrinsic value because it's a, it's got the metal in it. It's like technically true. But these credit dollars, they're all Fugazi, right? At the end of the day, it's the Matthew McConaughey, you know, Fugazi, Fugazi, that type of thing. It's fairy dust.

Fairy dust, yeah. So Fed and the onshore dollar, they have this kind of very robust mechanism on 1913 technology, right? Or actually, you know, say 1935 technology when the FOMC was instituted in the New Deal. era um they've got a good mechanism for enforcing um the the par integrity of their dollar iou claim and that that allows what what it really enables is all of your banks like my jp morgan dollar is the same thing it trades at par with my wells fargo dollar trades at par with you know the smallest bank uh within the fed fed you know wire system that dollar all right offshore dollar is a a different beast because their counterparty claims that cross-border, you know, your ultimately

your dollar is doesn't have that same kind of backstop or patchwork like to build this thing up or support that par integrity claim. And so this explains, in my mind, why from 1982 to 2020, right, the way that that system got supported, the par integrity of the offshore dollar, every time the global economy goes into recession, this WTO, globalization, trade order, all of that, every time that slows down, what happens? Well, settlement of dollars, financial activity kind of comes to a trickle, and then the international banking system goes into a crisis. And it took the Fed and the onshore economy increasingly costly actions to bail out that giant offshore dollar. Or you can say the same thing, onshore plus offshore, but the global dollar fiat credit bubble that everybody in Bitcoin is, you know. But at this point, probably they put in their 10,000 hours and would be like experts by the was it the Malcolm Gladwell standard at this point. Right. So what that required, though, think about it.

You look at the secular bond bull market every time that system needed to be reflated, like you bail out the dollar and you get back to par by increasing dollars in the system, growing money supply. And what the system does, like in the 80s, you see it, the chart is moving and interest rates from, you know, lower highs to lower lows for 40 years of a secular bond bull market. But as the rate effect starts to diminish, you shift over into QE, right, which is central bank printing and injection of dollars. and that's where you know it starts with ltcm in my mind the the maiden lane uh bailout package which was very uh small in terms of scale and and where these went uh in the successive rounds like that maiden lane doesn't even show up on the zoom out chart anymore uh you get to the immediate qe1 uh you know bernanke years you get you get some yelling qe and then you get the powell qe they all did it right but essentially like covid was a key moment in my mind where um because

we saw the like we saw the the price inflation right i want to be very specific i don't like inflation means my money supply expansion and my definition but price increases cpi inflation That showed up in the massive money printer Go-Burr QE ZERP return. And I think in my mind, the policymakers at that point understood, and you see it in Yellen's comments, like, oh, we didn't get it then, but we get it now. We ran into the boundary constraint of resource capacity, supply chain production capacity of that post-World War II economic growth model. And so I think we've transitioned on to restructuring everything from global supply chains, commodity, supply-demand market linkages, and then money itself. like the dollar itself is going through so what i view i said three dollars i ignored the metals definition um but now besides onshore and the legacy offshore euro dollar you've got the genius

act stable coins and built into that is a very strong mechanism for that yeah i mean stablecoin are they money good in comparison to bitcoin we'd say no but they in the definition of this this dollar liability kind of framework that dominates trade still and global finance, that T-bill backing, right, the one-to-one, 45 days or less, that itself is like a very strong mechanism to maintain the par, 100 cents on the dollar of that system's IOUs. So you've got this big effect taking place. And I think what's going on, like Venezuela, Iran, there's going to be more Cubas around the corner. All of these regional spheres are fighting for kind of access to new, you know, supply demand, you know, marketing and distribution relationships or resource access.

And then on top of that, now you've got like a similar battle going on in the fiat currency space as well. And that's where these Genius Act stable coins come in. U.S. has a policy where, think about it, it's like open adoption. Same as Bitcoin, but not as good, right? It's like Bitcoin, everybody's free to align around this solution to the Byzantine generals problem and coordinate trade through a sound and defensible money. the the genius act stable coins it's like it's not those things right you're still going to other um you know protocol designs or like for lack of a better word on their crypto rails stable coins but in a sense it is open you can just be sanctioned all of that we've seen this in

iran right they've gone after you know nine figures of irgc linked uh you know stable coin balances tether i think there's been headlines on that like uh tfdc the bitcoin brief you've written on this um and i haven't followed it that closely i just saw they were there ofac sanctions are like if you follow uh treasury secretary uh best sense account it's like by the day you're getting like oh 12 new uh ofac uh irgc you know officials linked here and spans into like oil traders in iraq it's sanctions you know galore so it's not censorship resistant at all like bitcoin is but these genius x stable coins offer something better like if you're venezuela right you might settle your oil trade in in dollars and tap into that broader liquidity

pool so the stable coins themselves are uh kind of competing one-to-one as a challenger uh gaining traction with against this legacy offshore dollar market which at the end of the day the central nexus there you know it's it's spread across all these money centers like we know hong kong singapore caymans etc like secrecy jurisdictions all of that that aren't really that secret right the state has the has gained the ability to peer in um and uh censor um you know transactions but that open expansion i think or the adoption of stable coins um dollar stable coins is a direct threat to the digital euro and that's why christine lagarde like it just like it's bad us stable coins bad digital euro good so freaks this rip is brought to you by good friends at

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And another thing, I think that's what Lagarde's going to find is the EU parliaments not going to be able to compete from a tech level with this or a marketing level. And so I think they're already out of their depth um and uh it the desperation to push the digital euro is very obvious and it will be interesting to see if they expedite it how they do it and how we're willing to get at launch in terms of what they allow european citizens to interact with so have you been following the the pac silica kind of project from from jacob salbert yeah i think that's that's a really important so you

highlighted it last week with norway we just signed a deal with them correct yeah all right so the way i think about this right what is it oh go ahead before you get into that yeah because i thought it was really interesting in the lost recording the the parallels with autobahn bismarck does it make sense to bring those in as well or let's do that for another yeah yeah so all right i was i've been reading this uh what would you just call it history it's it's kind of a history book and you go through one of the greats uh out of on bismarck at playing this geopolitical game through like we call this the fourth turning right we get a sense hey the social up uh upheaval is in play the economic uh upheaval is taking place and that's what we just we label it with you know i

the thing that sticks with most people at this point to understand it um is the fork turning right bismarck was going through exactly one of those in the 1800s and i picked up this book um and ultimately like this leads back to ai we can talk about that you know obviously it's important as everybody knows but um i actually went through like thinking through the fiscal deficit situation um you know john arnold actually kind of triggered this idea um when you're looking at the federal government uh def uh you know deficits where are the big line items and there's like the big four um you know or five spending lines military social security health care medicaid medicare and then i guess you could just say like anything else off budget right um but the uh the social

security front like you look at pension schemes and at the end of the day what are they they're just you're getting the public to trust um your government your big structure the state that you're you're what you're trying to do and bismarck realizes i'll get into in a second what you're trying to do is get the adoption or the buy-in from your population to contribute their time resources you know trust their savings in this state-run pension scheme game and what it's doing is it's actually allowing your you know your nation state to scale and in these times of war and that's what he was in um and he was also at war uh domestically between different kind of uh how we call like political factions like we measure on the left right right

so you got the communists over here on the left and then over here on the right maybe the if you believe in horseshoe theory where they start to resemble themselves you get the uh like the libertarian anarchists at the extremes they start to look more like each other it turns into like a pole in the center uh is up there um so the horseshoe theory right uh for those who who ascribe in that simplification but uh what he saw like he he did the same thing as fdr did in the 30s launching social security um you build he he was the first one who launched this modern state pension. And that pulled people away from both camps, but really from the social Democrats, from taking over the reins of government. And Bismarck, I'll go through here, make sure I say

it on record. The reason I found this book was I asked my AI model for examples of, hey, when did Bismarck's pension scheme go broke? Because I know it's not the same one alive today. And it was really the Weimar hyperinflation that that rinsed it. Right. So that was the pension failure. And so what I was trying to do is understand, all right, the Social Security problem, the fiscal deficits problem, how might this thing play out? Because ultimately, the. The monetary problems, the fiscal problems, they're going to work themselves out, right? Like what's unsustainable won't be sustained. So what I did, I found this book and I recommended it. It's called Gold and Iron by Fritz Stern. It's written in 1970. And this book's a gem. Like it's right up there on my favorites now with The Prize by Daniel Yergin.

I like that one because it explains, you know, the state competition as, you know, framed as a resource battle, like for oil and gas, energy commodities that have really defined the global economic order with oil and energy as the base layer of our economies and our financial systems. you know, basically since, you know, Civil War time in the U.S. when we first demonstrated the ability to economically extract oil, you know, profitably with drilling wells, like drilling technologies. All right. So you get into Bismarck. You realize he's taking these actions because he's just navigating into future uncertainty. You don't know how it's going to play out, but you can look to like the masters um to how they ultimately uh prevail and emerge victorious right and like what started as um kind of the legacy order you know then as it is now looks like it's at risk society's going through one of these big upheavals you you figure out how do we get there to the

other side and it and and one of the key things the reason the book's called golden iron right Everybody, you know, in high school history, you know, maybe learned about Bismarck. What do you know him for? He united the German state under, you know, Prussian central rule, which is why modern day capital of Germany is still in Berlin, right, as that center of power. um he his kind of you know famous line that uh that stuck out or one of many was um this this german empire built on you know the prussian monarchy as the you know base foundation uh will be accomplished through blood and iron what he meant by blood was he would use the the kind of the ethnic pull from the Germanic peoples or Aryan, I don't want to, I don't want to throw too hot of terms out there and, you know, get, get us blocked or anything, but he used that desire for these German people to unite. And they were kind of scattered there and they're in, you know,

modern day Germany, they spread up like Switzerland is 70% German or something like that. Even today, Austria was German peoples. They spread into parts of Poland and then, you know, on the main island of of the uk right um those those people are you know the same germanic ancestry so bismarck saw that and this this desire for those people uh which were under the prior feudal order kind of scattered rule you know you had these castles you had the the the noble and the town and everybody kind of pledged the serfs uh pledged their allegiance to the feudal lord he looked after them he like just i don't know kind of a very primitive in our modern day understanding of a social structure hierarchies economic structure all of that uh but that that thing

was all coming like undone like it was on its last legs and everybody could see it and there were these two forces that were really pushing that that whole model into the dustbin of history and that was uh industrialization and then egalitarianism which you saw start with like the french revolution where we're like we're not going to be serfs anymore guys we're like the the masses are going to like demand a say uh in their governance or or like their participation in society the direction the long-term you know um path of how their civilization uh is going to evolved right so bismarck saw those two things but then he himself came from this uh political class of like the top of the top of society they called him the yunker leader like it's spelled

junker it's terrible branding uh today um i guess they didn't think about the english translation of their words but what it was is basically um the landed gentry and it was just like ancestrally passed from you know whenever these peoples first kind of uh expanded and you know know won the land claim like these nobles had these huge tracts of land and then these families were the you know the the central authorities that all the serfs would just pledge their allegiance to and like it showed up in the economics these eucharists were like their their assets their their farmland all that their estates they weren't economically profitable they weren't earning high you know what we would think of as maybe a yield measure or cap rates on on property for

people involved in real estate or return on capital, right? That land asset. It was much lower and they were getting out-competed by this emergent class of industrialists and bankers who were becoming the new wealthy in society. So Bismarck saw the old way of life. It was very soon going to be gone with the wind and the rest of his peer group could see that. But within his little group of the yunker elite this dude was like the most competent like he goes like if you're looking at figures who can navigate these um these bigger processes going on around them the invisible forces right we're in one of those today um i think studying him it's like watching like the the good chess players want to learn from the the old masters right um so the reason

I like this book is it took what Bismarck said, and he said this thing was built on blood and iron. In hindsight, it was actually his banker, this figure, Gerson von Bleichroder, who really funded his, you know, first his Prussian monarchy, but this thing that became the the unified german state um i talked about the importance of you know keeping the the checks cashing uh once you do find yourself in wartime and there's a lot that rhymes in that book of what we see going on today so this trend where we see the government taking federal government taking state stakes and um private enterprise like intel or mp materials or trilogy metals right what that's actually doing the state is funding the resources it needs or it thinks it needs

to win out in this kind of contest of civilizations where ultimately like its objectives are surviving onto the other side of this back in bismarck's day he had um um, you know, similar assets on the government balance sheet. He had this, these shares and the, uh, Cologne Minden railroad that they were in this same budget pickle as well. And I'll go into the military conflict, but they needed to finance. He knew that, that it was going to go to the mats and it was going to hit, uh, military, right. Once, once, um, you know, politics by all other means exhaust itself, right. The diplomats leave and you send in the military men and they solve the problem the the the key constraint was figuring out how to fund him fund it and his banker

like rodeo both got him access like this is actually another important hallmark i think that that um that reflects well or like on our own present uh times in our own situation united states in the same way today we have an executive branch that is not on the same page with both congress and the judiciary and we all learned in our high school civics class right that those are the checks and balances um but they can't if they're not playing well together if you have a congress or you know similar government structures a parliament that is not cooperative or hostile to the executive you have a breakdown in political order and it falls at the like if it keeps going that way same way we're seeing in the u.s right congress um this is like one of the most uh what

you say say it like least active congresses you've ever seen uh out of uh like like how many have there been at this point this is 250 years i think 225 congresses if they're all two-year terms right i don't know if i'm exactly right on that but when you go through these political like these big social upheaval, these these four turnings, if you will, are those things that history has been in in the past. Those those things, the executive branch, the which is the actual government right there at the end of the day, they're the one enforcing laws. You know, Congress is the one who gives them the power to to do those things that the executive branch does and then judiciary reviews and blocks. Right. Bismarck was in the same boat, right, because you had this parliament

that sprung up in the 1800s as kind of a stopgap solution to this social upheaval going on, this political upheaval. And what he actually had was a government like Bismarck was serving. He was the executive, if you will, for this monarchy, right? This old world or this prior political order. But Parliament would not give him budget to do anything. Um, so we had to be clever with financing, um, essentially what needed to be done, right. Uh, from his point of view.

So he used these railroad shares, same way you're saying, Oh, government, like marking up the Intel shares, like writing the AI, you know, semiconductor, uh, uh, demand, all of that, writing the, uh, critical minerals initiative, Bismarck did much of the same things and and this book shows you exactly how his his banker um you know not part of the administration but um the banker was key to the state accomplishing his like its ultimate objectives and surviving uh into the future and then you get into the military right and this echoes what we're seeing today in venezuela but also now iran right um one more thing bismarck was also not popular with the people um before um 1864 to 1866 which were some

um it was like a gradually then suddenly where um winning on the military front just shifted sentiment and popularity um and basically the population getting behind uh his government and the new order that he structured out so what he did like uh 1864 the key thing i talked about he needed to raise funds um to be able to pay the military to conduct these military operations in the same way um you know it feels like the us was picking on uh kind of a small fry in venezuela not quite a small fry in iran that's definitely a bigger fish uh to go after and we're seeing that um that one's going to be a tougher one for us to wrangle to the ground but bismarck used these clever means with his banker to raise the funding to you know wage this war in northwest uh what's

now northwest germany these provinces of schleswig and holstein which are now part of germany um they're you know for for people locally it's like northwest of of uh hamburg um but it was very close it was within this uh danish kingdom right and there was some death of the the prior mona or not monarch the lord you know what have you and then which way these little territories were going to go became like it went under contest and bismarck used his diplomatic manipulations to convince you know what was going into this little turbulent window of history uh where everything happens gradually and suddenly the number one power like within at least the the germanic peoples as far as they were concerned was was the austrian empire um bismarck convinced

them to back uh prussia's claim to go in uh settle this schleswig and holstein situation militarily they cleaned up right it was like a 10-day war or something very similar to the way we just uh uh resolved the venezuela situation and you know it was a day right um hours if that yeah um but then in the aftermath there was this little 12 to 18 month period of all right what's what are these territories going to be integrated into from you know whose sovereignty whose sphere are they going to fall into and eventually uh this is where the financing becomes key and the bankers uh will tell you uh what to do next bismarck realized that the austrian state and their monarch were on unsound financial footing like dire and so this thing that looked like a juggernaut

right he realized hey if we push them into war or if we kind of you know slide into say i think it was saxony right we work on integrating this little territory on the german or prussian austrian border uh that'll that'll pull them in they'll they'll overextend they'll make a mistake eventually he used this and he he um he got the austrian leaders like 1866 uh within two years of the schleswig-holstein wrap-up and victory he gets austria to declare war on prussia and then prussia just goes in and you know cleans their clocks within days you know it was a very short war and uh it was it was like two years 1864 to 1866 bismarck unified all of these germanic peoples essentially into this prussian empire this german state and uh the people went along

with it like the popular sentiment it just shifted if you think about these these fourth turnings how do you get out of it right like what's happening is everybody all the stakeholders down to you know the the people themselves they're just pulled there's divide there's no um there's no consensus everybody's blocked we can't move forward because no one can agree on what's the way forward right but once it results and you see it as well like um the popularity of the institutions will be like everybody's like yeah they're all terrible like nothing's working what do we do well i don't know but that guy is the bad guy or my opponent is the bad guy just no they can't win once you get to like once one side wins that tug of war and that's what like

bismarck on the military victories was from 1864 to 1866 it just turns on a dime everybody gets on the same page and like we're out of it and then you just you know the social systems the economics the finance they just shoot and then so everybody all of these people get behind them uh you think about if you had a measure of his approval rating, I think it would look a lot like Trump's right from 2016 to even 2026, where no matter what he does, he can't get more than like 39%, 40% approval according to these, you know, pollsters. Right. Um, but once, once the population sees what's working and ultimately, you know, I think of this, uh, in sports analogies, right. What, what is the actual glue that you know gives teams good chemistry like it could be the underlying

personalities in the locker room like that helps but at the end of the day winning right you get the interview with the reporter it's like what was the secret ingredient here what made this team you know let them to the whatever the championship it's like uh like they have great chemistry right because of winning like they're on a you know 22 game win streak or something like that it's not hard uh to see here so winning is the key and that's why you get in this situation it's like all right you can see the similarities the the the the the struggle and conflict between these other like external parties prussia schleswig-holstein austria um they start butting against each other military settles it and what it's actually doing is you're

you're establishing um same thing supply chains who's going to trade with who like which bankers have terms uh who's who's going to be the central counterparty uh who has uh ultimate uh sovereignty or rule as rule of law over a jurisdiction we're fighting over those same things right now it started jan at a minimum it started jan 1 of 2026 or it was jan jan 2 with venezuela may even go before that you could say june 2025 the bombings of natanz ford out etc in iran but i think like you can see we're in this process the outcome is uncertain but i see what they're i i get a sense uh this is what the the u.s is now trying to do they're building this new um resource you know supply chain distributions like down to the commodity layer that's why we see gold silver

oil all these commodities are being repriced as kind of the the settlement venues the clearing houses are moving off of this offshore dollar you know system that was someone else's uh ultimately like taking place in their sovereign orbit right we're we're making that bismarckian play today i think is is uh my way of of interpreting what's going on and the monetary layer is a big part of it now i know everybody on tfdc is is uh has a lot of conviction that bitcoin is a part of that right but right now the the way i see it bitcoin is taking a back seat the resource constraint um looks like it's uh the the the binding you know frontier right now and my interpretation so um you know we've been eager to call the the bitcoin nasdaq decoupling

you know we've called it a hundred of the last like two two times it's actually taken place right you zoom out like it is there is out performance there since you know 2009 genesis block um but in this specific like short-term window um and i'm talking like the bear market that's been underway in Bitcoin since, what, October was the highest, 124, 125K. And then if you look at treasury codes, it started earlier, like July, August. I think what the market signal is telling us right now is we're not there yet where Bitcoin is ready to just enter the conversation here for where these big picture geopolitical players are.

but what is the binding constraint is the not just the base layer commodity resources energy metals like silver gold like they're they're marking up and going through just this massive you know move um and then you see it in iran after the ceasefire right the um april 7th um cessation, but isn't really a ceasefire, right? There's still, there's still shots fired on both sides, right? But the market signal there was interpreted as bullish, right? That this situation was moving, the military phase was over, and we were moving towards like negotiations to figure out what the next stage of Iran would look like, whose economic orbit it would enter. and i think if you zoom out like or not even zoom out look at the look at the chart of the triple

q's since april 7th it is just a massive rally like they they go vertical and like and then you're looking at the drivers it's your semiconductors but then if you get into individual names um you start to see this ai uh just capacity constraints showing up and you know stocks like micron and then uh like that's reflecting the uh the memory um we just just call it like us uh production capacity limitations just trying to keep up with demand it's very expensive and it takes a lot of time to put together you know a new fab and uh these projects are they're they're funded they're planned they're online but they're gonna take years to deliver right So right now, the limiting constraint is resources like memory, or you can see it too in equities like SanDisk, Western Digital, Seagate, like it's storage as well.

And that goes back to our video last week, right? You don't realize how much hard drive space this is actually taking up until your system runs into these issues. And we lost the video last week because we're recording so many massive 1080p or, you know, I don't think you record in 4K, Logan, but like these files are huge. Like it takes a massive amount of resources to build up this kind of new economic model of, you know, where we see things going. So the same way, I think that analogy, what Bismarck was doing, how he used the financial system at the time, which by today's standards is like very quaint and antiquated. But back in those days, like railroad equities using that those shares to fund the government or its or its military operations, that was novel at the time. And so you see kind of, you know, if it doesn't exactly copy and paste over, it definitely rhymes what we're doing this battle, not just for resources and access to or like building out supply chains from the, you know, the rare earth, you know, critical minerals and the energy resources, like your base layer, most basic commodities, but all the way up to the semiconductors, you know, RAM, all of that stuff that are really the most sophisticated. complicated products that that humans have ever you know figured out how to how to produce um

that whole battle and what the u.s is doing and setting it like the pac silica is the build out in my mind jacob helsberg's um kind of baby at the department of state bringing in all these nation states into supply chains to build out this new economy yeah that's okay describe pac silica for people okay so this is a program if you want to follow like definitely follow him on on x jacob helsberg uh because go straight to the signal right and he'll tweet new developments as they come in um but uh yeah jacob sell helsberg um as i understand it he's worked he's our age he's he's a young guy so that means like if you're thinking about movers and shakers in this kind of geopolitical game if they like who are the new biz marks um this guy's got the runway

like you know he's 39 he should have a good 30 40 years like bismarck was in this game i want to say till like he got fired uh by the new monarch uh once his old sponsor uh william uh passed away and power transition to uh his son wilhelm ii um who who did not do a good job like spoiler alert walked the uh prussian state or the german uh you know prussian state into its end uh in world war one but um bismarck was in the game until he was like old like 70 80 i don't remember the exact age but um he didn't exit stage left like he he was in the seat for a good three four decade run um and so if you're looking for figures with similar type of impact all right well uh this this figure jacob hausberg follow him because

he may end up being the silica bismarck um as made as you know what i'm throwing out there for for his nickname um we'll see if it sticks but helsberg's program he came up with this um i guess you'd call it an economic um block i don't know the right terms for it but basically it's an open adoption framework for nation states to join led by led by the u.s right it's it's at the end of the day the central authority or you know who's at the helm protocol design here it's in washington dc and new york from the capital markets front what it is is basically Basically, it's a peaceful, hence the word PACS, arrangement or economic order for these sovereign entities to join into and contribute their resources into this new economic framework, which is ultimately, think about the silica part of the PAC silica, focused on building out the 21st century economic model around the adoption of this big AI elephant

in the room that we're all kind of seeing play out and just grow exponentially almost in terms of capability, like before our very eyes, right? So if you think about all the core trends in equity markets like that show up as these charts that just you know hockey spike hockey stick yeah exactly thank you um over the last three four years especially the semiconductors nvidia amd intel now all of those uh the resources the gold miners gdx silver miners copper miners um think about the defense contractors um like energy now like it's all playing into these are all the components the economic supply chains um that are ultimately part of the the the the the new model where nation states focus their economic activities what they're

going to produce is going to plug into this this ai build out so i think this is why you see states like argentina now venezuela like you could japan is in like it's very clear that they're they're friendly to this and so there's a list of i want to say 20 states now norway just joined there you know obviously everybody should should know well besides having a massive sovereign wealth fund and a hard balance sheet that can finance and capitalize these projects or help with it. Norway is rich in energy resources as well as they've got some metals resources, some refinements. And this is where all these critical metals come into play, right? Your nickel, like your gallium, all of these critical resource minerals that everybody is after

because they are a limiting resource for this process. So Norway joins in. You've got logistics hubs like Singapore, like some of those key bottlenecks coming in. You've got financial centers, UAE. You've got oil and gas, like same thing with UAE. They're coming in. But if you look at the list here, you can see at the nation state level, these like a new order emerging. Um, and this is the thing in my mind that is competing with the old kind of, uh, continental European model of like WTO globalization, where we just, hey, we, we, we can just set up manufacturing anywhere in the world based on cheapest resources, cheapest labor, cheapest capital, cheapest land, et cetera. We'll arbitrage that away. That whole model has squeezed all the blood out of the rock, right? There's nothing left there. So that thing's slowly disintegrating. And this is the new. So if you think about it like the trapeze artist, the U.S. now has a real framework to go and show people at these state visits to get, you know,

public buy-in and adoption into kind of a growth model that is, you know, there's always, you know, as you know, Marty and TFTC, you know, there's always a rose-colored glasses way to spend things, and then there's the dark pill, right, or red pill, blue pill, all of that. You could say, yeah, this is just leading to a technocratic authoritarian state. Or it could be, well, these technologies will actually enable people, you know, fund new businesses the same way, you know, 100 years ago or whenever they showed up washing machines meant we didn't have to spend, you know, three out of five, you know, days every week washing laundry by hand, you know, stuff like that. So, you know, as always is the case, I try to be an optimist, not a pessimist. But this is this is what this is, the product that, you know, U.S. diplomats and, you know, the government is now selling on behalf of its own kind of business representation, its business community, but also financial community as well with where things are headed. Stable coins, all of that. And then ultimately, you know, our hope as Bitcoiners is eventually that everybody comes to recognize Bitcoin as the best solution for, you know, a censorship-resistant, open, but I should call it state-resistant, neutral settlement layer for money, for base layer money.

So I think the Bitcoin process and all of this is still somewhere in the future. we're still overly focused on the resource wars the military conflict um so yeah i think uh i mean i'm hopeful but uh i wouldn't be surprised if uh if that moment for bitcoin is is maybe a year or two in the future for for its its role in this process to show up on the scene it's part of an order of operations you get everybody aligned yeah and do some big tectonic shifts and then you have the big whammy at the end and guess what absolutely here we're going to lean into it but i mean in that i mean and this is a good dovetail into the second part of the discussion which is warsh versus powell um and the interests that they both represent and you think there's

got to be a reframe uh in terms of powell and who he's actually fighting against it's obviously been trump versus powell in the headlines since before trump was even elected and i think you just want to slightly reframe that too it's really like warsh and the interest that he represents versus powell in the interest that he represents and um to your point about bitcoin maybe coming later down the line warsh going through the nomination process right now just got through the first leg of the senate yesterday um he's been vocally supportive of bitcoin uh he sits on the board of of Avon disclaimer sponsor of the show, or he's on the advisory board.

At least he was before he was nominated for Fed chair. I don't know what that's gonna look like moving forward, but long story short, seems to be an ally to Bitcoin. At least he postures that way. So let me talk about, I think everybody senses this in the media, but let me show you the frame, which is what I love that you do at TFTC.

uh you look at how what narrative um you know maybe a uh legacy media power structure is trying to push do you still have my audio i think i'm quiet all right scroll down here you see this bloomberg headline this hit this hit sunday so this is part of the media narrative like a push right powell the fed chair who fought back blah blah blah so you kind of get what i'm what i'm saying what the way i read this right like the media is using this this latest development in the jerome powell saga as the world turns if you focus on him as the main character right what was like the last fomc meeting um it would have been um roughly two weeks ago now right the big development wasn't anything about monetary policy right everything was just here we're gonna

hold things here. If anything, the amount of dissent in the FOMC vote was the shocking thing. I want to say there was four dissents recorded, if I remember correctly. There was one from Stephen Moran. We'll talk about his seat in a second. And then the FOMC is actually made up of seven Board of Governors members and then five presidents of the regional Fed branches who come into the FOMC on like a rotating basis. You've got the New York regional Fed, who the president always sits there. He's always on the FOMC just because of New York's central role as the center of capital gravity in the U.S. economy. But then the other four just rotate over time. So you had three of those other four. So you had Kashkari, Beth Hammack, one other might have been

jefferson uh at atlanta i gotta remember this um but three out of the five regional bank uh presidents uh dissented not with policy like it was language right and they they specifically said um in the snippet um the reason was they didn't like the easing bias in the you know two or three paragraph uh note that was you know they they felt was hidden uh and and you know how the sentence was written right and and you've seen in the in the the week aftermath neil kashkari wrote this expose this long blog post of exactly what he meant there so what you're seeing is the the regional banks themselves um speaking up the president's they're speaking up in disagreement with um the direction of policy and then and then so that would have been in the on the left right

framing of dovish versus hawkish that would have been like tilting towards you know the hawkish um uh point of view which i'm going to argue here in a second i don't think the dovish and hawkish even applies anymore like it's it's a completely different game board uh at this point with wars coming in and what the the the actual proxy battle going on implies um but you also saw stephen moran then as he's done since you know his first meeting and it was like november december um he's been voting for cuts uh the the entire time so there's there's four dissents three of them in one way one or the other you've got a board in total you know disarray like it's like the the largest uh number of dissents on a um you know policy memo since i want i said it was the

early 90s is what we saw all right so then we saw jerome powell at the press conference and this was the payload of of the last fed meeting this was the real development he comes out and says uh he intends to stay on as uh a board of governor um on the seven member uh uh you know you know governor's uh seats that that make up the majority of the 12 vote fomc right and so you know we we've heard over the last like four or five months as it became clear uh first it was trump is going to point you know kevin has it right it was framed as a total you know political lackey all of that um you know that in my mind that was just your your pawn you put up uh and uh he takes all of the media scrutiny for two three months in the dc political sound bites

where you were really going to install warsh uh like he was going to be your pick the entire time but in the meantime for a few months kevin hassan just absorbs all the enemy fire as the human shield all right jerome powell comes out at fomc meeting um two weeks ago and says he is not going to uh vacate his seat on the board of governors which are 14-year terms so if you think think about all these roles in the beltway blob right in washington dc like the best job security by far like lifetime permanent employment i think you can get impeached like constitutionally but i'm not sure if it's ever actually been done i should know this but i don't but it's lifetime job security uh for a supreme court justice 14-year terms though for for a board of governor

like that'll get you home right if you're if you're looking for job security like apex type of role um that's uh these things once you're appointed by the president and approved like you're there for a long time like 14 years you're gonna see three maybe four credit cycles you know play out from, from bottom to bottom, all of that. So Jerome, the chair role, I think that's actually a five-year term, double check, it might be four, but the president re-nominates the chair of the FOMC, you know, it's once every four or five years. That comes up for appointment and renewal, but it has to be one of those seven board of governors seats, which the president appoints and then uh the senate confirms uh and then once they're in that's a 14-year term right

and so they're staggered so the the the the 12c board they won't they won't roll off the seven the seven board of governors you only get one rolling off and replacing every two years which explains why and i'll go i'll go into it in a second the proxy war for control of uh the fed itself from like a boardroom battle standpoint that's underway and the reason you can see it like you can see it in the big developments uh in the uh board of governors appointees number one when you say these are like their central bank independence you know that whole rallying cry we got to protect central bank independence doesn't really hold water when the majority of the board, seven of 12 votes are literally political appointees. If you go on the

board of governors website, they'll list the party of the, of the, of the governor, Republican or Democrat, the president that appointed them, et cetera. So they're literally, they're literally party affiliated. Um, and we're going through a big shakeup in the political parties themselves and, uh, how they align in terms of their base and their power factions. Uh, but just leave that just leave that aside for a second zoom out and true these are political animals and you can see it in the the power struggle now that's going on for control of the fed to push it to steer it in a different direction and i'll get into explaining that but this is showing up in the um the public headlines with things like the lisa cook um removal for um mortgage issues or lying on

mortgage documentation so they were mis misrepresenting on uh mortgage application stuff like that so the thing that that the prize is the board seats the seven board of governors um obviously the fed chair like trump's going to get that through but the makeup of the board those seven that give majority and allow the board to take a certain policy direction that's why you see like this context uh escalating to the point where we're likely going to get a supreme court decision where we're going to find out if you know what these justices say if the president has the authority under i don't know what act like federal reserve act of 1913 or whatever the fomc uh instantiation like i think it was 1935 the fdr

law um you could even get like the humphrey hawkins like a legislation and i don't know they'll cite but they're going to give their the court's interpretation of whether trump has the right to uh fire a fed governor for cause and so the key thing these seats take a long time to transition from one power base and political faction towards another but this is why this thing is so hotly contested and then you see the media framing now now you look into jerome powell and what his legacy will be to like think about the wave he was riding on right the the post-1982 secular bond bull market this offshore dollar you know i talked about briefly um where you had this rapid expansion and dollar ious around the globe that will that were funding from a

financial standpoint the economic growth of this post-war economic structure that's now you know going it's transitioning into something else i think is very clear um as i've highlighted with pac silica those fed governors like you can say going back to greenspan but greenspan bernanke yellen what the way i view them as they are part of the legacy technocratic institutional establishment we call them you know broadly um like new keynesians or technocrats and you can see this like it's it's everywhere in washington dc where everything is you know shifted towards you know expert management you can see it in public health policy you can see it like if you look at any one of these little pillars of this modern

and bureaucratic federal government state they're all like the leadership you know the management you know at the helm of these organizations they steer towards uh that that kind of technocratic uh kind of framework and it's like it's like a phd standard is maybe what you call it for the fomc board it's not it's not being run primarily by um men who come or women who come from the financial industry they come from capital markets experience it's usually going to be if you see the people who have been appointed into these roles it's academics they come from the academic establishment or howell is is is a bit of a of a hybrid he's a lawyer so he he knows law he knows um he he comes uh from wall street in the private equity realm he ran industrials for carlisle group

uh like around the time of the dot-com bubble um a little bit before and after so he does come from wall street experience but in his alignment i think he represents a transitional figure who continued this whole technocratic um kind of framework and management of monetary policy and u.s capital markets and what that wasn't what that was essentially allowing was the u.s to you know maybe play nice at the best interpretation uh of its interaction with the rest of the world in a capital market sense and the worst you would say they're subservient uh to foreign interests uh in the you know the capital markets arena and so you know if you think about like he said he wants to um be remembered in his legacy as a like paul volcker

figure and what was Volker kind of what what what is like the the claim to fame that he can hang his hat on right it's um I think to me Volker represents a willingness and uh tolerance to to stomach the pain and do what needs to be done like what did Volker actually do he yeah the inflation the inflation from the 70s right what that actually did is debase the dollar iou um after we broke the silver peg uh the the the the u.s private economy where you and i like would have transacted with the dollar up until 1967 the silver certificate act like the treasury bills like i'm sorry like not a t-bill like those little iou debt things i mean like your thing that you tucked into your wallet it was not a fed bank note it was a treasure it was a silver certificate

issued by the treasury, redeemable for X ounces of silver. And so you would see like a window where these large financial institutions would be managing the arbitrage of the dollar IOUs and enforcing a peg on monetary inflation just based on silver prices and the arbitrage available uh just based on market pricing for for your base metals so we broke the silver uh like linkage hard peg uh on the on the consumer dollar where you know individuals households businesses etc would interact with them with money and then at the bank layer uh for large cross-border capital transactions on breton woods that was still on a gold peg broke that in 1971 we ran up like we we ran up both the monetary inflation in terms of money supply, right? We created more IOUs after

that, but then we had CPI price inflation. What Volcker did, in my mind, his legacy is the willingness of the strong man who is willing to stomach pain and do what needs to be done. But it was really what he did was he jacked rates up to 19%, 20%. The debt-to-GDP problem had already been debased by the 17 years of uh you know escalating you know bull off top inflation right from you can see it in the charts it starts in the 60s vietnam war cpi runs hot it ends uh by by 1980 82 hikes rates up to is like 16 to 20 percent at the at the terminal rate that squeezed out all of the um i guess the the price pressure um of inflations now that we had a free floating managed uh currency not pegged it uh any other you know base at that point commodity all we had was

was uh mining we didn't have hashing right uh satoshi hadn't showed us uh uh the solution uh for for you know a cryptographically enforced monetary ledger so at that time we removed the monetary constraint we blow off all the dollar claims volcker by squeezing out that that last bit of inflation uh actually set the stage for this massive euro dollar you know this offshore credit bubble expansion uh that really we're we're now having to deal with that after effect today so if you think about volker in my mind as this figure what does he actually represent he got the system to a new point of stability was it like the true heroic like reputation like was he actually the hero i don't know like he was just the guy who did what needed to be

done at that point under the saltated triffin's dilemma he said yeah yeah let's put up the roads for it to to effectuate essentially he uh took the system he had the things that were outside of his control and uh he just allowed the thing to carry over into the next thing and uh essentially what it amounted to was a can kicking down the road all right but now if you think about all the fed chairs who who uh followed him right greenspan then bernanke then yellen and then a bit jerome powell talking about powell as a complicated figure those three in my mind uh really fit this technocratic establishment like greenspan would probably disagree with his character characterization as a new keynesian but at the end of the day i don't care what you say about you

know like being a follower of uh ayn rand uh all this stuff at the end of the day you are what your record shows uh in famous denny green speak um and what he did is essentially like he just monetized and accommodated uh this credit bubble right just cut rates whenever you need to uh come in uh it was during his watch that ltcm happened he led uh the he oversaw that stage of the first you know like first first uh what you just call him like echoes kindlings of of this qe phenomenon of just you know let's monetize it with the fed uh with the fed's balance sheet and then that led to the next you know his replacement you know this figure who sat in the seat for for 20 years and if you go back and read uh walter badgett's lombard

street who is uh the bank of england's you know most famous central banker who all of these monetarists uh look up to as like the hallmark they'll be like that's your bible it's even even the MMTers will, you know, foot to him at the end of the day with the, with like the charterless definition of money, where it's the state that determines what money is. They all will look up to, like at the end of the day, like the academic or the institutionalist approach. And that's where you get into like the trans, oh, I was gonna say that I brought up Lombard Street, because he talks about the people leading this institution. If you read about them like he lit he specifically has a chapter of what type of individual uh is is you

should seek out for this role which at the end of the day when your your your monetary structure is dependent on centralized authority and that's the best technology we had right or allegedly uh prior to 2008 who you put in charge of this institution both as chairman but also board members he goes through things you want to look for so number one would be independent means of wealth right they come from enough wealth where they don't have to necessarily work they're not dependent on um the the paycheck associated with this job um so you're attracting someone more out of like civic duty like ben franklin spirit as opposed to like power hungry or status hungry and they're just after the role because it's top of society and you do this you do what the system wants and

once you leave you're going to be hired by citadel to do every cpi conference call or whatever once a quarter with their client base or you're going to be given a book deal for your memoirs all of that stuff badgett specifically warns when he's looking for it's like don't go after that class of individual um don't go after you know like where do they store their wealth is it in speculative assets would a market uh drawdown if they had to tighten monetary policy lead to their fiscal ruling stuff like that are they are they a speculator all of this stuff his answer is like it very clearly gives a guide of like what type of of person to look for in these important rules uh roles and the most direct uh um i would say like um challenge to the the whole greenspan

legacy besides like he laid the conditions for this massive dollar credit bubble uh at the end of the day his reputation hasn't really publicly taken a hit yet but we'll see uh what history or how history treats them you know in 2020 hindsight as we start to absorb the long-term ramifications of like these new keynesians uh monetary policies right as they as society finally has to come do and pay the pay the bill where the actual costs don't show up for several generations into the future um but i think that the social climber um kind of uh labeling um that that people address and even ayn rand said it uh herself about about greenspan he said that will be his his achilles heel that that's the problem uh but you know very similar

you could say about bernanke why was he brought into this role specifically they specifically targeted him for fed share in this era like between the dot-com bubble collapse in 2001 and 2008 i think the the the people in dc and then the academic establishment they knew from a system standpoint that they were going to have to go through this uh this credit bubble digesting itself and this is where ben bernanke's kind of research he was the foremost academic expert except from an accepted standpoint on um what they thought was going to be like a depression scenario so he was the great studier for the the great depression how he would deal with it and you know the saying in military affairs right it's like the generals always or the

losing generals always fight the last war i think that kind of applies here we took all these steps here we had bernanke yelling they were trained to prevent the the the u.s monetary system by all means from falling into another great depression and you can literally see it go read the uh the transcript of the speech that bernanke gave at greed spans uh it was like his 85th 80th birthday something like that it's still live and he says he's just hailing greenspan's like because of your work because of what you've laid out we will you know we will not fail again sorry it wasn't greenspan it was uh milton friedman i'm thinking of he's like because of your work milton friedman we will not fall for this trap the second time around it's like meanwhile you didn't you

didn't you didn't fight the same war twice you just lost uh like like the the the actual war that was in front of you right and so and in my read of this situation i may be wrong this is just my opinion um you saw that academic establishment this institutionalist academia and uh academic management of monetary policy the phd standard the new keynesians etc we've seen as bitcoiners like i think we know what like we know the achilles heel of uh centralized uh money printing uh the cantillionaires problems all of that and ultimately like you can't You can't get your domestic economy to ramp up real capital, like property planning equipment, human capital, like just name it, like actual productive capacity through monetary expansion alone, right? QE is not going to solve that.

Cutting rates is not going to solve that. And so I think, just to bring this home, went way too long explaining that, but hopefully I got it across to the audience. This battle right now, the framing, Powell versus Trump, that's, in my mind, your media, what do you call it? Like, it's a distraction. It's shiny keys to your cat, right? Hey, over here, over here, or your dog, right? The actual thing going on, there's a contest going on for boardroom control of the Fed as an institution within the domestic U.S. economy. This is in America.

There's a war abroad, right? But this one, I'm focused on the domestic impact. And at the end of the day, what it amounts to is who has management authority and board control over these key institutions that this legacy economy, what we've inherited, like for better or for worse, this is what we have. um you're going from one class of people which is this technocratic establishment which doesn't actually reward um you know based on merit at the end of the like we're in the problem we're in today because of what we did in the past right if it was up to like if this was a job interview and you're looking at uh the fed itself maintains this you know two percent uh cpi inflation target and if you look back at the chart since 2020 it's like

they've overshot that by like a massive amount like the jackson hole august 2020 meeting jerome powell comes out with this policy advancement he says instead of doing a two percent always on target so we're going to try to hit two percent every time we know we're going to miss but two percent's what we're always going for he said no it's two percent average over the long run And then you look at what that 2% averaged out. If it's 10 years, you have 20 points of inflation, right? It's like, well, sorry, Fed, you've already used up all of those 20 and beyond that in five years. It's like you need deflation just to cast the checks on that new policy that you were up there on the pedestal at Jackson Hole not even five years ago, right? So. What's actually happening in my mind, you're getting this big swing in history where the the class of people who have kind of control over these key institutions of society, and you can see it like you look anywhere and it's it's it's showing up. right, executive branch, right? Who has the power of the presidency, right?

We've seen this tugging war ever since, you know, 2016. You swing from Trump, who I think represents like a deeper, like you could say there's some populist movement behind it, which just means you have angry people that want something different at the end of the day is what that label means, despite all the negative connotations.

But I view Trump as kind of, He wouldn't be here if he didn't have a power base, both in capital markets and political markets. And I think what I view as his power base, it actually, if you drill down, it's actually like legacy families, like the family, like old stock. We use the term noblesse oblige, the same way we talked about Bismarck as this Juncker class, the legacy claims on land. they were the old guard maintaining like like tasks with managing you know society the state keeping the train on the rails keeping the train schedules running on time all of that i think this transition we saw or this this back and forth and we view it as dims versus maga right or something like that i think what's actually going on is this legacy institutionalist order

which is like technocratic establishment like you can see it everywhere if you look for it Those people are being exited from control of this system and its management, like they're losing the captain's wheel, like they're just, you're out. And we're replacing that with what I view is kind of these noblesse oblige trying to reassert control, right? So what I mean by that, look at this Warsh-Powell debate, and instead of this framing of the narrative that clearly your outlets like Bloomberg are trying to shift the Overton limbo, it's like, no, no, no, no, no, this is Powell versus Trump. It's, you know, you got to resist, right? And you got to hail Powell for resisting an autocrat or a potential autocrat.

Okay. I view this, it's actually Warsh. The thing they don't want to give up is that control of the board. and and warsh is your actual signal and then you dive deep because you were getting in the question that you asked 30 minutes ago at this point warsh look at his background you talked about him being on the board of some i don't know if ave you mentioned them as a sponsor but he's probably okay yeah pro bitcoin i would say uh kind of pro crypto as well right um but what i do focus on warsh's background number one he was previously a fed board of governor

right so he comes from the fed he specifically left it was about 2011 or 2012 he was appointed um in george w bush's second administration i believe and notably like extremely young he was like in his late 30s early 40s like to get to that role that young uh what was um what was something notable back when it happened right but his background all right first he comes from actual capital markets experience like Powell he was a lawyer uh but he was he was in M&A at Morgan Stanley and what that means is to me is he didn't get his credentials his ticket to get in the door here to the fed he didn't earn his stripes you know writing a white paper sitting on campus and just you know uh modeling out like a dsge equation of how the economy works how gdp

works how supply shocks work all of that just based on some equations that may or may not do a good job of actually explaining reality right the map is not the territory type of thing right he comes from a background of actually deal making on wall street so he's seen what it's like to actually raise capital put it to work and risk projects and then structure agreements between investors and say borrowers are the ultimate like that the entrepreneurs who are going to use that capital to hopefully deliver uh something productive uh with their intent but he comes from that background so he actually has an appreciation for what capital is versus is, um, I'd argue, so I was a PhD dropout, uh, at workplace.

I won't go into this, but you realize very quickly as a PhD in finance, um, and economics, there's not a heavy focus on what money actually is like, you just kind of take money as not important. It's, you know, it just, it's the water we swim in. Don't worry about that. And kind of my entire life since, you know, leaving and focusing on um actual building actual businesses running my own business uh but portfolio management and you know fixed income markets stuff like that um i've just kind of come to appreciate that difference

the more i've zoomed out and there's a total night and day we all know this between industry and you know academia right so that's one route where powell or sorry wars differs from this legacy establishment and uh and then a second dimension so jerome powell's background he's he's definitely a man of wealth you can look up his net worth it's i don't know anywhere from 10 million dollars to 100 million dollars type of ballpark seems accurate no one really knows for sure it's on some i think he's had to file some reporting but he's definitely what everybody would consider a man of means but there is a difference um in wealth if if like you've inherited it and passed like built up your family's wealth and then you're able to pass it on multiple generations

and in my reading of the situation that's kind of what kevin warsh represents right so it's been highlighted in the um senate confirmation process like they they've made a big deal this man married into the estela lauder uh fortune core like it's very obvious like he's from uh a very significant means as a family and this is where you see things like like aoc will come out and attack that as a bad thing there's a different version of this like the way to framework uh frameless think about like bismarck the ukulele their view of society like i'm not gonna uh sugarcoat it like he they they clearly viewed themselves as like belonging to different you know strata of society there's clearly an upper class and lower class or pseudo-peasantry relationship but there was some

accepted responsibility that they would oversee and they're responsible for the management and well-being of the society or the ethnic group itself the economy all of that and that's why that like stewardship i think would be the right word for it and i'm not saying these legacy technocrats uh from like the new keynesian establishment don't approach things with stewardship but if you go back and foot to the uh you know the walter badgett you know all of that we're talking about aligning incentives here one you're you're you get a different type of person If you're just chasing status for the sake of chasing status, that leads to certain outcomes. It leads to certain decisions going along with, say, a bank bailout in 2008 or letting the whole thing develop and society go along that path in the first place.

Or if your wealth is tied up in the land and maintaining your ownership claim on the land, it also means you're responsible for the end of the day, the businesses on that land. And so this book, Golden Iron, goes through Bismarck's book of business. And he had companies, people from his little, what do you just call it, territory or whatever, his estates, who were running businesses, timber production, miners, coal mining, manufacturing. And he knew, these people knew that they're only as strong as the community built from the bottom up in their businesses. So he'd say, well, if my timber producer is being outcompeted by foreign imports, that's destructive to all of society. and you pick up on things that you wouldn't see or you turn a blind eye to if you're just managing to a gdp chart or a gdp model so it's a it is a total different viewpoint and and like how you manage uh monetary policy from the ground up um and it also trickles over into how markets actually

work right old school efficient markets hypothesis markowitz theory modern portfolio theory all of that too uh under which understands risk as standard deviation of asset returns versus say um kevin warsh approach or um the people he most directly connects to i think who does he which kind of peer group does he uh which which tables would he sit with if wall street was a lunchroom well he's stan drunkenmiller right like the big macro guys who understand markets from a standpoint of, you know, risk isn't standard deviation necessarily. It's, you know, the permanent impairment to capital, loss of purchasing power, that type of thing. So there's a big handoff. And when there's a handoff going on, there's a major transition. The direction of

travel is the shift toward this class of people that I've called Kevin Morshout as their kind of proxy state he would be their central banking champion that they've you know sent into the game uh to to serve on this board on their behalf jerome powell is you could think about him as maybe a transitionary figure from you know one way or one one cartel of uh you know boardroom figure to the to the to the next uh but he looks like a transitionary figure but at the bare minimum When I look at events, he's going along with the framing or with the legacy institutionalist push and how they want to frame this narrative in terms of it's Trump versus Powell. This is all about standing up to orange man, dictator, no kings, that type of thing.

So it definitely complicates Jerome Powell's legacy. We'll see how this plays out. But the way the way I see it, like once you see the power, like the transition and same thing as a stock chart, once you see the momentum building up, you see those waves, you know, higher highs, higher lows, that type of thing. This camp that Wurst represents is making advances. It's going to be very difficult to stop that underlying wave. And the way this is going to work, it just it just muddies up the process. We're going to be dealing with more chaos at the Fed. chaos is a ladder as was a little finger said so it allows you know certain like these factions to

kind of conduct this war they're having with each other but the way it's going to work so Stephen Moran is sitting on a board of governors seat that actually expired at the end of January 2026 by FOMC policy he's allowed to still sit and vote in that seat until someone else is nominated to take that chair. So there's one seat open right now since Jerome Powell didn't open up and exit stage left and walk into retirement. He chose to continue the fight. So it's going to happen. Warsh will be nominated into the seat that Stephen Moran is keeping warm. And that'll be that'll get washed onto the one of seven board of governors seats. And then, you know, assuming there's no hiccups in the Senate confirmation process, who knows at this point, right? Anybody

and everybody like could throw their stick into the bicycle wheel. But once he passes that, he would become the new Fed chair. And yeah, this this big process like it's not done. There's still major changes coming, I think, to the Fed and that onshore dollar represents that I first introduced what 90 minutes ago well what can we expect when he gets into the position of chair uh so i mean first start you're looking at a sovereign debt market that looks like it wants to uh challenge you know the charts the charts are pretty astonishing do you logan do you want to pull if you can find the 10-year guilt i think that's the key one because we talk about hey the u.s debt chart like 10-year you know hey even the 30-year uh looks like it may be uh running up on

um you know resistance levels on yields but if you pull up the other sovereign debt right we talked about or i've talked about before like this concept of uh think about the allied powers in world war ii the u.s kind of being the the central power structure but it was a partnership with say uk france west germany um like western europe itself japan was in there the of the the other partners in that alignment their sovereign debt markets here showing the uh the gil 30 year here right someone someone's doing some construction also uh bullish for the economy by the way like american economy it just looks uh red hot uh so i'm glad to hear some some construction going on um yeah 30-year uh guilt this says 5.107 like the data here if i pulled it up on bloomberg it's

probably even north of that but this looks like like like 30-year guilt so you can even look at you know german bone yields french oats um they want to break out and you've served you've heard statements from the you know the wall street banking elite jamie oh there we go that's the one 5.795 on on the 30-year kill so we talk about yeah if you go to all it's like this goes back to like 1998 uh yeah like these are the highest yields we've seen since uh 97 98 that was the british handover of uh hong kong back to back to uh uh mainland china at ccp right so so we're looking like we've we've filled in on the chart all of that ground we talk about the secular uh bull market and bond yields lower uh obviously being bullish and bond yields um we've rolled

back kind of 30 years and uh yeah you can just see the pressure showing up on on the sovereign states funding themselves which foots back to what i talked about in the bismarck analogy right once it goes military your only objective is uh from a financial standpoint maintaining your access to capital to continue running your war and that's kind of the state of play we see things in ukraine we see things with the us and iran um so i think yeah if you're looking at powell's first i don't know three months six months first hundred days type of thing um it looks like the financial it looks to me like the the financial markets the sovereign debt markets want to uh challenge him right out of the gate assuming he is approved into that uh chair yeah you see the french yields etc

yeah this is so in the old school um in the secular bond market bond bull market 1982 to 2020 just roughly dating it you'd be looking for um lower lows and lower highs on the chart so if you zoomed out for 25 years uh you would see the kind of secular decline and sovereign debt yields now you got to pay but now if you're zooming or zooming out on the chart it starts to look like like uh yields now the biases they want to go higher as as these governments um the monetary systems the the kind of the market structures that they would tap into uh to finance themselves those old kind of liquidity pools, they're saturated, right? There's too much debt, not enough GDP, there's no more capacity.

So to keep funding the state in this era where we've thrown off the gloves, given each other that polite slap, the old chauvinism. I remember the Chappelle show, was that before your time? you take it to the mats it's like it's time to duel in the old school uh approach uh that i think that's kind of where we are now uh if you don't have new sources of capital to continue funding yourself as a state you've got a problem right so from the u.s standpoint all right number one it starts with mark up your existing assets so i'm not going to be a uh for knox denier just assuming the gold is in it's in the military custody is where it's supposed to be the

treasury's gold is in fort knox and west point and then another military facility in colorado you assume it's there right if not we're we're definitely uh up shits creek uh sorry pardon my language um and then you look at the other assets on the fed's balance or on the u.s treasury's balance sheet you got things like the fannie mae freddie mack that the treasury holds in conservatorship. You're looking at its purchases of equity stakes and Intel critical materials producers that we talked about earlier. Those are new sources of funding that the U.S. Treasury can monetize and tap to perpetuate its activity. As long as your soldiers' checks are cashing, they'll continue fighting. As soon as their checks bounce, they're not going to take up arms

for you and go to the front lines and you know risk their lives and well-being when they're when you can't pay them so i think that's the key thing we're going to see the challenge on and then it and then it uh we're going to see that collision here uh eu's got their means and objectives um they talk about digital euro what they what they see is their game plan it's it's pretty clear at this point they've telegraphed it hard and in the last week i think since we've re-recorded this episode we saw some key developments um you know how we you can see donald trump from time to time he'll go on to like an expansionist uh talking point circuit in the media like we need we need greenland uh we need venezuela we need cuba uh stuff like that eu quietly like under the radar

did a lot of that just in the last week alone so three fronts number one you start off with this massive eu armenia summit um which they didn't come out right and say it but you saw their president say yeah we want eu membership and if you zoom out and look at uh armenia on the map it's um it's on the northern border of iran um it doesn't look like europe uh by any means so you see that push like they're trying to talk about this in terms of like the build out of the new silk roads land-based trade routes um that are going to return to prominence um as the u.s pulls back uh the policing of you know the high seas and say the indian ocean version gulf etc and focuses on more so on pacific ocean for um you know trade from its west coast to let's say the

the growth markets in southeast asia but also the caribbean yeah there's armenia so it's on the It's on the eastern border of Turkey. And so they push for it. Yeah, exactly. There's some big things going on here. It definitely plugs into the power, the balance of power in the region between Iran, Russia, Turkey, and then the EU, which Turkey kind of directionally aligns with. It's notably been wanting EU membership. It's been in process for like 20 years at this point.

But you saw kind of an expansionist push from the EU and Armenia. You saw it showing up in Canada, like right after that EU-Armenia summit, which notably that summit in Armenia, Mark Carney attended, notably not an EU leader or a leader of an EU state. And then you saw NATO Secretary Mark Rutte there as well for the kind of the security guarantees element. So you saw the push from, you know, everybody aligned with that European regional sphere of influence. You saw another meeting in Canada at the end of last week between Mark Carney, Obama was there, just, you know, same thing, same class of people, the globalists, right, at Davos 2026, who were notably flustered with what they saw. Um, but then you saw coming out of that, like same, same things leaking in the press, like Carney didn't come out directly and say that we want, I mean, maybe we should have Canada in the EU, uh, but it was hinted at and then other people, you know, floated that idea.

And then in the social media sphere, you can go in, you know, if you haven't done this yet at TFTC, you can tag the, the EU, uh, kind of, uh, accounts where they're definitely promoting uh these these ideas of say canada integration into eu armenia integration into eu and then you saw the same thing uh with the uk on um sunday uh you can go through times of london a notable newspaper uh for the bitcoin genesis block chancellors on second bail out of the bank uh chancellors on brink of second bail out of banks yeah there it is uh for bloomberg uh so you kind of see the media agenda showing up here as well like which power factions they'll they'll align with or you know which this is a proxy fight it's interesting because you have

the uh the alberta and secession talks as well yeah exactly so there's there's a trap laid there um go in the first hundred days of the fed but let me finish up thoughts on the uk so you saw in the times of london an op-ed so you noticed how here starmer is on the hot seat now there was an op-ed if you can find this search um i don't know logan if you can pull it up uh saying or like arguing that to keep labor and power in in uk they needed to start pushing a rejoin eu agenda so you started saying this all right so pack silica right what is it it's a competition for resources right and it's the it's the u.s version of an open network to you know integrate with the supply chains manufacture there it is um and plug into this 21st century american-led order

well the pushback to that started last week in my mind as i would interpret it with these uh floating of hey we want to push into our sphere into uh armenia which is like middle of the giant asian landmass it's i don't think many people would call it continental eu um you just zoom out if you just look at a globe right uh uk back to rejoining they've always had that love-hate relationship with the continent and then canada which is definitely not you know continental europe so yeah marty you mentioned that alberta um old push the way i see it these are the natural ebbs and flows it's the resistance it's not like with the american like star spangled banner flavor of like you know that type of uh uh resistance to uk or european uh you know integration it's their

own you know flavor of uh pages like i was in alberta at the cornerstone conference in like february march where they're talking about this thing and uh it's very like they're definitely like i grew up in the midwest uh calgary felt to me like it looked like a great plains state economy center they have oil resources right that uh where i grew up in iowa and missouri didn't really have um minerals with the rocky mountains right on their border but the culture felt very midwest to me um but it's their own thing right so that's like within canada itself they're gonna have to deal with that's that pushback of the direction mark carney is he was put in place to do this exact thing so yeah i think that it's like october 19th is the referendum uh we'll see what

happens there but they're serious about it it was very clear to me when i was on the ground yeah it seems so it's so crazy i mean you felt it felt like people actually standing up for their own uh not just political sovereignty but it comes down to economics like in the canadian they should be able to do what they want with the oil like i'm going to be subsidizing the rest of canada i agree and uh yeah the uh the economic extraction that is waged upon them right like they have no say in it in the structure of the financial system where their their own economic output like the base their resource commodities that's a lot of what this um like that's just where the system is right we've outgrown like the system constraints as we've you know laid

them out the boundaries uh the legal structures all of that that we sacrifice millions hundreds of millions of lives to fight and it wasn't just in world war one and world war two like the whole political upheaval in that in the first half of the 20th century like it's in china it's you know just we we don't think about like mao's you know civil war and you know how many extra tens hundreds of millions were added on to the the the the deaths that we think we think about in the west we think about world war one world war two from like the european casualties uh but it was global in scope and i my worry is if we keep pushing this thing towards war um who knows like it could uh it could result in uh some some

really heavy losses in terms of uh human lives which at the end of the day um those are the most valuable things right i i would hopes the audience agrees i think we believe that does everybody else yeah you've been describing believe that is another question um yeah i don't know there are malthusians out there i think we're uh we're a plague on this planet so it's a it's a very sick worldview yeah so do you want to touch the digital credit stuff or yeah let's do it let's do it really quick yeah so um all right just zooming out like we haven't talked too much about bitcoin here and from my sense is like the market is showing like if you think about this as we're out in the ocean right ways marty i know you surf right what do you do

it's all it's a patience exercise right you got to wait until your wave shows up and uh the bear markets are hard because you do have to like it is a patience exercise and to get to work exercise and no nobody likes nobody likes to to write out an asset or like you know when nominally in fiat terms you're just being uh whittled down right so i i think uh yeah the bear market that bitcoin has been in at least since october the treasury cos you would say at least if you actually look at it that the the all-time high on uh strategy was november 2024 their interpretation that the trump second election was extremely bullish they pushed it into a blow off top and you know so you could say that that bear market

it's over a year like we're at almost a year and a half uh for for the uh the undisputed king of bitcoin treasury goes right okay so what am i getting out here all right bear markets have a way of ending like you you can bottom out and it'll be very clear if it's a if it's uh a notable bottom it'll come at a point of full capitulation so we're riding a little liquidity bump here but talked about the bitcoin nasdaq decoupling that we've all been like hoping for eagerly on the bitcoin twitter you know community i'm not talking about it now because if you look at like the the mag sevens or not like the semiconductors the microns of the world they're going vertical as the ai resources everything going into that economy like those are the

binding constraint at this point the rally from where was the low we hit on feb 5th it was like 64k right something like that we topped like 59 yeah we're down there for a little bit um to bounce back to 85 it feels feels good from bottom to top and everybody's bullish in the meantime um but i think that underperformance about like versus those ai semis all of that that's a tell in my book that we're not we're not the the marginal dollar uh deployed is is going into micron or sandisk not or samsung not bitcoin at this point so that's that's a key sign now i think what we're looking at here like rates may want to go lower here but on the the zoom out view right we looked at all those bond yields the long end of the yield curve wants to rise like it is

It is very clearly a pressing problem for like 10-year debt, 30-year debt. Yields want to go up. We're looking at this inflationary impulse in the CPI again today, a print that beat expectations for the April report that bond markets are factoring in. So think about that. The long end wants to go up. Short-term interest rates like SOFR, maybe we'll get a couple more cuts. But eventually, I think the big picture trend isn't that bull market we had from 1982 to 2020, where it's like lower lows. Every time we hit a recession, it's cut rates.

We started 16 to 20 with Volcker. You get to Greenspan. By the dot-com bubble, he took them down to 1%. And then you get into the Bernanke era, Yellen, Powell. They're cutting rates to zero. I don't think in this era, like the policymakers know at this point that if they want to do the same thing that they did in 1982 to 2020, they call it the great moderation is the central banking economist term they use for it. If we repeat the 2020 playbook and we cut rates to zero and QE another $6 trillion, it's going to show up in the supply chains, right? Because we have to totally rebuild the supply-demand relationships towards, right now, the best guiding light I think that we have to understand is the PAC silica framework.

So we're in process of doing that. But if we just come out with some massive Bernanke-style, you know, March 2020-style policy approach, we're going to get like what we got in 2021, 2022, but it would, in my mind, probably be worse. So everybody is broadly aware of that. So I think what we're looking at here, I go into that, long-term rates are rising. SOFR, we may be trending down, but I think as we look three years out, four years out, five years out, my kind of base case is we're looking at higher highs and higher lows. So right now, SOFR pricing right about three and a half. Let's say two years from now, SOFR is tacked on another 100 bips, 200 bips, 300 bips, whatever. All right.

So that's your borrowing rate for treasury collateral in this new sulfur market that's replaced LIBOR since 2022. All right. The next thing, look at credit spreads for corporate borrowers. If you look at both high yield and investment grade, zoom out, you're not going to be able to find this chart, Morgan, or sorry, Logan, on Yahoo Finance or CNBC most likely. But if you look at those, you see credit spreads, the amount of yield between the treasury rate or, you know, risk free in this old system context. I use that in air quotes for the people listening on audio. Because it's definitely not purchasing power debasement risk free, and we all know that. But that credit spread is that extra yield that a corporate borrower has to pick up because they don't have a guarantee that the financial system, the banking system will come in and just monetize, just print the print, the debt, print the money to keep that issuer solvent.

Right. So your corporate bonds can default. So you have to have some extra spread. Now, you look back on the chart, going back to the 1990s where these Bloomberg time series start, the silver up here, credit spreads have, they're at like their 99th percentile right now for tightness. Like the amount of extra yield pickup between a U.S. Treasury bond and a risky corporate buyer has, it's basically like been squeezed down to its all-time lows, right? So for those corporate spreads to continue to contract from here, history says it like markets are going to have a hard time pushing that much further than we've already gotten. Right. And then so if you look at by individual sectors, the most like the widest spreads and this is what the bond market would like the spreads is your measure of the borrower's credit worthiness or their risk of default as a proxy. You have to charge them more yield to get you the return on your capital that that you that the market demands. right? The riskiest borrowers start with investment grade, which means your rating agencies give you a triple B minus or better. The widest spread issuers are going to be in your

financial sector, not necessarily your big banks like JP Morgan, Citi, Bank of America. Those guys will have like A minus A's for the most part, unless it's like a subordinate. Yeah. Here's the high yield. Okay. So if you subtract out treasuries, you can kind of see this, but this is the nominal yield. The highest spread bonds in your corporate borrowers universe are going to be your financials at the frontier of risk. So what do I mean by that? In investment grade, you would think of something like ally financial, like lending out to the, like a middle or lower class like uh type of uh middle or lower uh range of credit scores those will be the bonds with the the fattest spreads like the most incremental basis points above treasury right

now logan has the chart up for high yield um notice okay if you can do a delta here that'll be roughly the difference between short-term rates and high yield but what you see is um when spreads start to rise and it's just a market it's a market phenomenon um when they start to rise they can go uh on on a pretty big run so if you if you were able to back out the differences here it's not it's not quite a pure just straight subtraction because there's some optionality in here it's uh the option adjusted spread is what you would look at in these and like the bloomberg charts but when you see those spreads start to blow out right for the riskiest financial borrowers they will go right they can they can increase 500 bps to 1700 bps is what you see on the back

test the worst case the 1700 bps would be that big uh rhino horn on the chart you see for 2008. what's actually happening there is a um it's a pullback in liquidity there's none of there's not enough dollar capacity in the broker-dealer market-making context or complex to put a bid under these credits. So when someone goes to sell, the bid drops off and when transactions have to take place, and usually it's going to be a for-seller, they'll be at low bond prices or or equivalently high yields, right? And so when that liquidity drop-off occurs, like you can see it, it's accelerating,

it's building up, it's building up steam. It's like the snowball rolling down the hill. Once it goes, it's gonna go until bond prices readjust to find their new equilibrium. And then the time to buy, if you think about it, is like the top of that rhino horn, where you're providing liquidity. This is like Badgett's famous quote about central banking.

Be the lender of last resort. Lend against good collateral at a high penalty rate. What you're doing there is you're stepping in, you're buying low, and then providing secondary market liquidity into the credit space. And then you buy yields down. So I want to call out this chart here, the high yield index. If you think about when you lend your capital to a credit risky borrower, right, typically the more risky the borrower you're looking at, the shorter term you want to put on your your bonds maturity. Why is that? Because you don't necessarily trust management that they'll have the cash to post back to you, like return your principal, like the whole goal of capital preservation.

Right. If they're going out lending into risky credit, say tricolor auto lending, right, things like that, like we're lending used cars, used car loans to borrowers who may or may not be documented, you know, W-2 workers. they may not have a job or they may not even be legally you know authorized to work here in the united states like stuff like that you would say all right the riskier you're lending um as as a lender or the risk of a borrower you're lending into as a lender your natural like protective mechanism is to tighten up your duration or you know the bond's maturity willingly and so that's why you see in high yield typically like the average duration of this index is like three to five years versus if you go into the investment corporate bond space those are businesses that have a little bit more uh they're less exposed to say like the economic cycle their

higher higher credit worthiness buyer or borrowers uh business models stable they have a long operating history good management all of that is what you're kind of looking for that's how they earn the investment grade rating and so they get a little bit more rope like their average duration on like the lqd index might be somewhere like six to ten and so when this liquidity drops off the more duration you have on the bond um your duration being mathematically um the amount uh your the percentage change in price based on a one percent directional movement in yield so like the sixth duration on an ig corporate bonds if rates move up one percent your bond portfolio will go down six percent in value right um the the the offset for higher risk um

issuers should naturally be or the market generally says lower duration all right so getting into stretch like let's start from this environment i'm not gonna like tackle the same things like uh um everybody on x tends to focus i think on management as well hey if we have this much bitcoin the i've heard their you know like the chief risk officer for bitcoin treasury co say oh we've run the monte carlo simulations the one scenario that gets us is if bitcoin price draws down 80% and stays there 10 years. I think the attack surface, like the open flank that everybody's not paying attention to is fiat, money markets, and credit spreads themselves. And what do I mean by that? First, I said, all right, for the bond, for a bond investment,

If you're if you're lending into a fixed income instrument, that is naturally the borrower has to give you your principal back at a certain date. You have you have a claim and you have like, you know, a natural game, like a natural kind of mechanism to get your principal back. Right. And if the borrower can't do it, right, you'll go into a default situation. you'll go into bankruptcy court you'll go into recovery you'll force a capital restructuring um you know and maybe equity is wiped out the bondholders become the equity etc but either way like the the the debt itself the debt investor is there um because they're after uh like a safe positive return with their left tail um risk mitigated right and as a bond investor your your range of of outcomes for potential return it's not like what you invest in at 1031

right where you're after right tail like you're going after we want big hitters right we want that right tail risk with a bond there is no right tail you're going to get coupon and yield or you're going to get, you know, in the worst case, like a debt workout, you're going to take mark-to-market losses like those balance sheets that deployed into the Ukraine debt we talked about that took $0.40 on the dollar. That was just V1 of Ukraine, and there's going to be more money needed to go in to take that situation to victory. Okay, so with the stretch preferreds, what you're actually doing

is you're giving up that uh it's it's kind of like the the airbags as the bond investor instead of the company um having like a natural window where they're going to have to show you their investments were good for it or their management decisions were were sound and you know value accretive uh they don't have to they never with these preferreds have to post your capital back you return your principal back to you and then re-up with new terms we revisit now with the preferreds the perpetuals once they issue once the primary issuance is out there um as an investor your only route if you do need to get principal back for whatever reason you're dependent on secondary markets right and this is where that need for liquidity really starts to show up so

So for a console or a perpetual instrument, instead of a high yield, like if spreads blow out and financials within both IG and high yield are the highest spread instruments usually, if short-term rates are rising, that's going to increase what the market's price you have for their required yield just from the rates impact. And when rates, like if you talk to bond guys, they mean treasuries, sovereign curves. But then from the spreads, if spreads start to rise and the market demands higher yields from corporate borrowers, you got to also attach that on to the infinite duration of the perpetual. So if this dislocation comes in liquidity and it will come from the fiat side, it has the Bitcoin USD spot exchange rate. Yes, it is attached to that and liquidity capacity and it itself itself is a signal. But because the perpetuals are their interest rate instruments, like they're purely attached and going to be priced on the interest rates. This gets into my post about stretch.

What you want to see as a stretch investor, you should actually want to see rates decline instead of this variable floating monthly adjustable rate having to price up. You're seeing slowly those spreads widen over time. And granted, everybody says it's still early. These things are less than a year old. True, right? I accept that. This is early. It's new.

You know, we're floating this idea out there in the competitive arena for market adoption, right? but if we get into this environment and you're looking at it you're seeing it and like what i focus on is sovereign debt rates interest rates corporate spreads all of that if the underlying conditions are saying liquidity wants to tighten we're in this pullback and this is where talk to the michael howells of the world he has his you know the liquidity gurus will tell you they have a two to three year outlet they're like yeah we're kind of in a liquidity pullback window if you're dependent as a secondary market uh or as a perpetual investor you're totally dependent on where the secondary market prices these instruments and that's your only um that's

your only uh ability to sell out of your holding and you know reobtain your principal if that um If that underlying market doesn't does materialize over the coming years where we see, you know, say SOFR wants to start inching up as the sovereigns or as the market just demands higher, higher interest rates for, say, T-bills to not bleed their purchasing power with negative real returns over time. Same thing with credit spreads. This could lead like the infinite duration on the perpetuals. It could be a bigger price dislocation than most of us think if these liquidity circumstances do materialize. The other thing, too, as a stretch investor, if I buy, so here's a good example, the El Salvador dollar bonds, right? Remember, they made the announcement at Bitcoin 2021, we're adopting Bitcoin as legal tender, we're going to grow a balance sheet. First market reaction was to sell the bonds, like yields widened, right?

And then going into the Bitcoin bear market of 2022, I would say bottomed with the FTX implosion, November 2022, I believe. Those El Salvador bonds traded up like fat yields. It was something like 30% all in. You could buy those like pennies on the dollar. They're not like 30-year, 100-year bonds like you see some of these crazy fiat debt issuances out there. They were like 10-year bonds, but you could buy them for the pennies on the dollar. But then as the market realized like, oh, El Salvador's economic story is actually much more bullish than most of us think, those yields start to come down. And in the process, your two sources of total return on a bond are going to be your coupon yield and then your price return, your appreciation.

So if you bought those El Salvador bonds at, let's say, 50 cents on a dollar, wherever they traded, as they mature, they pay off in par. Like the borrower was successfully able to return its principal as the El Salvador growth story has been strong since at least 2021, the Bukele era. That duration carry pulled up your total return as a fixed income investor or credit investor. which with something like stretch if you're buying at 100 100 is the best you're going to get right so let's say the spreads do come down and instead of like 11 and a half 12 or whatever the the monthly coupon is right now or monthly distribution um they're not coupons they're not dividends they're return of capital distributions and i want to make sure i stick to that or i get that right um but let's say that number that yield comes down uh over time as you

know a market decides this this spread shouldn't be that high it shouldn't be so for plus 700 it should be so for plus 400 you know whatever you're not actually going to pick up that price return tailwind the best case your stretch is just going to sit at 100 versus if i went and did like with El Salvador, my total return was something like 30, 40% by buying when there was blood in the streets, right? So if you're buying right here at a hundred, your, your return is just going to be whatever you clip and carry out with yield. And just because all credit, they are not convex payoff functions. They're, they're the opposite. You're either going to get coupon or you're going to take some loss of principle. You've got that heavy negative skew. If that price dislocation

comes uh you're you're buying if you buy a par uh like today do what is your actual margin of safety and then not talking about that from bitcoin perspective um i'm talking on in terms of like fiat interest rates money markets and credit spreads uh so that's the risk i see um Um, and you can run your own scenario analysis. I, you know, put that together. Maybe I'll put it out on, uh, you know, separate thread as, as the stretch topic cools down because anytime you post something, uh, it, it's just a hornet's nest and I don't want to, I don't want to, I don't want to go there right now, uh, with, with the community.

But then, um, one more thing when I see these big developments like, um, Bitcoin 2026 in Vegas. The big takeaway was management is looking to move the return of capital distribution from monthly to semi-monthly. The way I see it presented, it's like, why are you doing this? In the grand scheme of credit, this is arbitrary. As I've dove into this and tried to understand, I've listened to management and I've asked people, why are you doing this? So where the question ends up after I get to the Toyota five whys, why, why, why, why, what it ends up as is we want to print a lower standard deviation on the chart at the end of the day. It's all about lowering the standard deviation the same way I talked about the legacy academic institutionalist technocratic framework viewing standard deviation as risk, not permanent impairment of capital. And what lowering standard deviation does, say you're the broker-dealer's risk management department, they're probably running some industry software.

They go ticker by ticker, and they have the broker-dealer's business. They don't make their money on commissions anymore. It's largely driven by securities lending. Same way in a fiat economy. Everything is just every financial business model is we got to figure out a way to manufacture net income out of yield, right, some way, some shape or form. And so in the broker dealer world, their business model. So think about it. On one side, you have your securities account. You own your stretch. And I'm seeing this a lot on X. You know, both the influencers heard it from management as well. uh hey robin hood's margin rate is five percent stretches eleven and a half borrow against your um your stretch holdings at five buy more eleven capture the spread what could go wrong this is

this is the best thing ever digital credit um and so if you think about the broker dealer's core business model they need to like they need to create loans out of thin air and what they do like literally they charge you a borrowing rate. Robinhood earns the 5% when you borrow dollars by stretch. That's a loan. They're going to carry that net income at 5%. But their skin is covered, right? They're going to have margin and maintenance requirements. So if you do see this left tail price dislocation, if it does appear, I'm not saying it's a guarantee, but with fiat interest rates, money markets, volatility within this fiat credit world, We are beholden to their base layer anchor.

So what happens in fiat land is going to spill over into Bitcoin backlending, digital credit, Bitcoin price, all the above. All right. So when your margin loan, you post your stretch, you get your 11 and a half carry. But if it draws down, depending on how high you margin up, the broker-dealer will set their maintenance requirements, which means effectively how big of a drawdown you can take in your position before they turn you into a for-seller. By lowering the standard deviation, what you're trying to do is get the broker-dealer's risk management software and ultimately their risk officers to ease their lending parameters to access. I mean, it's really money print or like just credit creation. There's no money printing per se because it's within the broker-dealer there. It's not money in the sense that like the commercial banks have the monopoly cartel on money, but it's inflating with credit asset prices.

And when you get the dislocation, so the more you build up the capital inflows on top of the carry trade, the riskier it becomes. So you're actually like just what you're doing here with this management decision to move from monthly to semi-monthly. You're just encouraging more margin borrowing. You're adding blocks on top of the Jenga tower. So that's the risk I'd call out. I hope everything works out well, but like for everybody involved, specifically Bitcoin, too. work like the the hardcore um you know manage your own keys sovereign individuals they're just going to be along for life but along for this ride uh but they're doing so without leverage

so they can't get forced out of their position so yeah i just you know think it's smart at these times for everybody to understand the risk they're taking um and then hopefully we all come out on the other side of this and sound condition once that wave shows up that we talked about marty when you're out on your surfboard it's finally time to stand up let's let's all be out there uh on on the ocean ready to arrive at when when bitcoin's time comes okay so to summarize it looks like just looking at the credits the bank of america u.s high yield index option adjusted spread i mean it looks like it's coiling up and if i'm just looking at the the charts like okay we could have a 2008 maybe a 2020 scenario on the horizon which mean would

mean a liquidity crunch in the credit system that'll blow yields out in other assets which like great buying opportunities there but also drive up yields um associated with margin lending and stuff like that which would compress that that uh that carry trade opportunity but not only that create optionality for investors to push dollars into and reduce demand for stretch at the end of the day is that correct it will yeah your liquidity um from just margin capacity it will it will hit its natural like constraint and if if and when that comes because you talked about 2008 2020 um i don't think it's the same type of problem like 2008 was we the banking system this offshore dollar all of that was incentivized to create this credit bubble on

the back of what turned out to be just bad debt it was non-productive credit creation uh to subprime lending in the u.s and that whole house of cards collapsed 2020 was a different story we manufactured like the system was going into slow down and uh some would argue that a global pandemic that shut down the entire economy and created the the what we just call it the the backdrop or the reason for a massive liquidity print was like that's that's a totally different situation even than in 2008 what i'm saying here i don't know for sure like we don't know to what extent is the bad debt problem existing in the system i don't even think it may not even be corporate credit at this point like i in my view like the big picture the historical developments you talk

about coiling markets exactly yeah it's shifted to sovereign debt and that's where you get into the the capital wars where it's it's last man standing um so we're going to do everything you know we can uh from the united states standpoint the treasury standpoint um to continue uh you know being in the game europe they're going to do the same thing china same thing japan same thing etc but um yeah if rates do rise and maybe it doesn't even have to be a 2008 or 2020 just what does it look like if your preferreds have to price that instead of 11 and a half well price it to 15 what could happen price it to 20 what could happen price it to 25 what could happen because those scenarios they're they're in the deck i don't know if those cards will come into

play but you got to be prepared for them um and i know there's you know say hey what the stretch will just we'll just continue ratcheting up the uh the interest rate higher well eventually like if you're paying a 25% annual effective yield, that's hard, right? You're looking like an emerging market issuer who's been cornered by the IMF at that standpoint. So yeah, there are things that happen here. And I don't even know that we would need a 2008 or 2020 scenario to cause even like a minor problem um so yeah your your your stretch yeah say you just keep jacking up rates double digits or you know high 20 something like that you can try to be paul volcker but there that itself will cause problems it's like the balloon you squeeze the pressure

somewhere, it has to pop out somewhere else. So from a lender standpoint, what your CFO has to do to tackle this problem, it could just be a tough go for where this is going. So I just encourage everybody who is on the stretch bandwagon, at the very least, read up on credit spreads, Put in your models what happens with short-term interest rates rising, high yield, you know, especially financial credit spreads rising. And then read about other issuers who used the perpetual debt instruments. There's famous case studies out there, British Consuls, Ask Your AI, it'll put together a good summary for you. Railroads use them, banks have used them. this isn't this isn't something new like financial markets have seen this before there's there's a lot

of historical case studies so i'd encourage you if you're an investor looking at these things read history make sure you understand uh the risk credit and fixed income it's all about covering your left tail um i just want to make sure everybody is doing that and understands where they are choosing to deploy their savings into, especially if it's their own just nest egg, their built-up personal power. But if you're using leverage and you're borrowing from Robinhood on margin

or you're borrowing from interactive brokers on margin and you think you're clever and smarter than TradFi guy on Wall Street, just trust me, read the history books. um wall street bros uh have tripped over a lot of carry trades in their experience like if you just look if this was like a graveyard right you'd have like the whole thing filled up with every carry trade in uh modern capital markets history that's uh that every time it was this time was different until it uh it was not yeah uh we somehow went longer than the original which

i love but not done yet because i think one point that he made last week uh that we should make again is when you're thinking of bitcoin collateralized lending markets is what are you doing with those proceeds and again are you taking leverage or are you doing something productive with that in the real economy which is i think something we've bonded over over the years because i think that's really important and is something that has gotten lost in the sauce of number go up and digital credit is like why why are you actually using this capital asset what are you using it for um in your everyday life or in the economy more broadly yeah okay so there's different models of like political economy and how it ties into um your real economy and and

financial policy like what do you ultimately what are you going to use your financial system uh to to deliver at the end of the day um if you read into this it's a very interesting topic like the british model the british framework which i would view as kind of like a market making framework you take uh take goods from some supply uh producer country you could show up in their port you shoot your cannons at them and uh you force their factories to load up your ships with goods at cheap prices, and you take those into Europe, and you essentially buy low, sell high. And that's one route of a financial system. It's credit-funded. You'll fund the you know, the ship's voyage. You'll insure it at Lloyd's of London. Your financial system will

make money on the trade, but it's a very extractionist, financialist kind of model. I think if you go back and you look at kind of the history of the U.S. and what we decided to do up front as colonies, like the Revolutionary War, if you think about it, it was a war that was fought at its roots. It's like the cause for war was economics, number one, the taxation without representation. There's a reason the tea they threw out at the Boston Tea Party was the British East Indies tea company. They were rebelling against that British model, the extraction, the taxation without representation, um and uh basically the treatment of the colonies uh as like a feeder of uh of resources and you know low-end economic goods that were ultimately forced into selling only into uh british ports and demand so very similar context to what how alberta and their movement like the things we

saw them talking about at the conference back in February. But we started out as soon as we won the revolution, we figure out the political order, we get the constitution in place. You get the Hamilton, you know, first secretary of the treasury, setting up the first national bank to aggregate the, you know, the bad debt out there that was like Ukraine trading at pennies on the after the action was won. But the approach there in this American system was to use our limited credit capacity towards like the real economy. So instead of just buying yield for the sake of yield, and what you're getting is you're chasing the nominal income stream, and the credit is just purely a financial asset. You say at the end of the day,

Yeah, there's some connection to the real economy with Bitcoin itself, right, because that anchors to the energy layer, which is the base of the real economy. Everything, all value, you know, at the end of the day has to derive, like it boils down to energy input, right? But ignoring that, like if you're Bitcoin treasury companies, preferreds, that type of issuance, if we're using that limited credit capacity purely to mark up assets at the broker-dealer layer, it's really at the end of the day, just we're deriving yield from the financial markup. As opposed to kind of in issuers that, you know, I've found most attractive and aligned with kind of philosophically for lending into like Unchained, notably shifted over to commercial only lending. and I want to say 2023. It's a big policy update. The idea was instead of just lending to people to borrow against their Bitcoin, to lever up and buy more Bitcoin. And the economic rationale is, well, Bitcoin is going to grow at a kegger of whatever number you say, 30, 40, 50, 60. I am going to profit by borrowing at, say, 15 and capture the difference.

You're chasing a financial asset markup. And at the end of the day, like you can see the same logical underpittings, you're falling towards that same tractor babe that your Ben Bernanke's, Janet Yellen's, your Greenspan's fell into, where you think the route out of this monetary problem on a debt-based system, where it's all about finding yield, manufacturing net income, and losing focus on the real economy. So what you're doing with your always finite capacity for credit creation, you're funding financial asset markup rather than funding the entrepreneur, giving him or her your dollars so they can go out, invest in property, plant, and equipment, buy resources to make a good or service something of value. so that humans can you know coordinate trade with each other with his which is what money is all about at the end of the day solving the byzantine general's problem at the you know in my mind what it equates to is your like that is what money is in effect doing as an economic good right you're you're you're you're providing that most liquid good in the economy that can be that one half universally accepted or most broadly as as as you can crank that meter up um

to facilitate that that that human uh conducting of of trade between otherwise non-cooperative counterparties right money is that thing that helps us to cooperate right so if we use bitcoin as the collateral there you find the entrepreneurs who choose to adopt bitcoin as their balance sheet reserve asset um they use that to interact with the fiat capital system to pull in input you know goods resources whatever to then create some new product right output value um i think that is kind of ultimately if you're looking at this from a political economy standpoint this is where you interact or you see the rubber meeting the road with the Hamiltonian model, what it means is you use your credit for infrastructure projects, building out or focusing on industrial capacity.

So in that age, like, you know, late 1700s, you can kind of see the echoes here today in terms of where this Treasury, Department of State, and Department of War want to organize capital directionally. They're spinning up things like the Office of Strategic Capital at the Pentagon to plug in and basically get the resources, enable the entrepreneur to deliver deliver the resources that really at the end of the day are the supply chains of this big picture pack silica thing so my point here if we focus on lending into the real economy as opposed to the financial economy and i heard you know this is where this is why this this version is longer than than last week we've added entropy there's been events but the chat between uh jeff walton

who you know i consider a friend he's here with me in the pacific northwest good guy um He made a point, yeah, we're selling products, right? These preferreds are products, like we're selling an income stream. That's true, but you're operating in that financial layer and you're losing focus on the real economy, which is, I think, I'm not going to say anybody's wrong, but I want to encourage us within the Bitcoin space to focus there. Because ultimately, at the end of the day, all this big picture geopolitical stuff, it's a resource war that we're fighting over on top of like a geopolitical collision between these regional spheres of influence. So if we can fund the entrepreneur to solve the problem for us, I think that gets us out of this historical epoch on the other side intact without society having to potentially take a hard face plant, which is going to be tough, tough for our grandkids to recover from.

And that's that's what I'm most concerned about us trying to steer out of and avoid. yeah and i mentioned it last week and i'll mention it again but if you you're listening if you're still here almost three hours in and you haven't listened to richard werner on tucker basically explained how japan via their banking system became the dominant force that they were in the 80s uh it's exactly this he highlighted like lending lending was focused on business creation uh financial assets it kind of is but it's uh all of these things are a sliding scale um that i that's part of what i would call like the german branch of uh uh, financial and political economy, um, it is a bit different than, than the American

and like what it amounts to is spinning up the state resources, industrializing, uh, very quickly. Like if you want economic growth, that model, the German model and the Japanese model can force your economic input like all of that to run hot like very hot if that's your objective this full use of resources yeah it's different i think the goals are different than the hamiltonian uh vision yeah go ahead yeah i think regardless i think just the broad point is he's making is that lending has a better effect on the overall economy when it is focused on the real economy yeah yeah financialization that's accurate but they're totally different they lead to different places we won't go another hour and talk about that maybe next time but

how you design this system where you focus your lending like what's the charlie munger quote it's like show me the incentives i'll show you the outcome it's kind of that like if you the way you structure incentives um that'll be the output we get for our children and their grandchildren so yeah i just you know i'm focused on um the incentives are you just put a bunch of money in the stretch and you hang by the pool and drink uh pina coladas that's a it's a great incentive no comment all right i wish it all could be that easy but i just i don't i don't think that's reality that's like i mean and i'll co-sign everything you said i like this people i like a lot of the people involved in this i like michael saylor um i have a lot of respect for

many people doing this play but it just i'm left side the bell curve caveman like it just sounds too good to be true to be that's that's where i'll leave it maybe i'm truly a caveman with the uh little with an intellectual capacity that is not big enough to understand the uh the galaxy brain um hack that that has been discovered but i don't know just by gut feeling it's like it sounds too good to be true that's i mean i'll tell you a little towards anybody but that's just that's honestly how i feel i think there's one rule and uh you and you and matt odell have summed it up well uh you you really can't go wrong following the uh the advice stay humble sex ads you can't yeah but maybe you could there's always you know cover my wrist as a you

know a regulated finance professional all that there's always risk involved but uh i find matt odell's uh saying to be uh a good uh guiding advice for my for my personal uh scenario same yeah all right we went longer we covered a lot let's not wait 18 months though i feel like we'll uh we'll have something else to talk about sooner than that sounds good and hopefully uh hard drive storage space isn't uh a thousand dollars per terabyte uh a year from now it might be it may be the way things are going all right yeah thanks marty all right peace and 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

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