TFTC: A Bitcoin Podcast - #747: Stablecoins Won’t Save the Treasury Market with Peruvian Bull

Episode Date: May 18, 2026

Marty sits down with Roberto Rios AKA Peruvian Bull to discuss Japan’s yen crisis, soaring U.S. debt, AI‑driven inflation, and why Bitcoin may be the only safe haven. Peruvian Bull on X: https://x.com/peruvian_bull Peruvian Bull on YouTube: https://www.youtube.com/@peruvian_bull The Dollar Endgame: https://dollarendgame.substack.com/ 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 that's part of the bull case for Bitcoin. If you're not paying attention, you probably should be. Roberto, it's been a while. How are you doing, sir? Doing good, doing good. How are you doing, Marty? Doing well, all things considered. I think the world's chaotic, but I'm finding the chaos is creating great opportunities. What about you? Absolutely. Yeah, I mean,

we're in a weird spot right now with uh with macro but um bitcoin's been surprisingly resilient so um there's definitely some uh some silver lining to the clouds yeah where are we at right now just below 80 000 popped above it a little bit earlier headed down from uh around 82 but yeah i mean i think that's a well i was excited to talk talk to you when you reached out because the state of macro if you look at interest rates obviously your main not one of your main beats has been japan the yen and the the japanese the jgb uh curve that seems to be they seem to have lost control of that but then you have all this ai infrastructure being built out you have the geopolitical tectonic shifts going on with the war in iran and supply chains being quickly

reshuffled on the go here. And not going to lie, this is the most uncertain I've ever been as somebody who's observing markets and just trying to get a grasp on where the world is going right now. And so I think starting with one of your main beats in Japan, we've always called that the canary in the coal mine. Do you still believe that? Absolutely. I mean, I think Japan is kind of the bellwether for the end game of global central banking. What can happen to a country if you just keep going down the road of fiscal profligacy and debt overhang? And what happens at the end of that road? And Japan is an example of that. But the problem that Japan faces, though, is really unique because not only does it obviously have its own domestic issues,

But whatever happens in Japan, like I've said many times throughout my writings and my YouTube channel, matters for the rest of the world because they're the largest creditor globally, and they're the largest holder of US treasuries and of global sovereign debt in general. Those three, three and a half decades of 0% interest rates and QE and easy monetary policy basically forced the modern Japanese investor to shove all of their savings into overseas investment vehicles. And so whenever there's problems in the Japanese financial system and they have to sell those assets, it immediately causes, obviously, retracements in Bitcoin, gold, U.S. equities, everything. And that is extremely, extremely damaging, obviously, to not only other financial systems, but Japan's own domestic financial system. So I want to come on because there's literally been two interventions in the last two weeks. One of them is more suspected, but it's pretty much guaranteed to have occurred. But the Bank of Japan is panicking again. And this is something that is kind of like an intermittent theme in markets.

I feel like it goes into slumber for a few weeks, for a few months, and then they have a giant move in the FX markets, and bond yields spike, and then everything quiets down a little bit, and then it tests the red line again at 160, and then the Bank of Japan does it again. And it's this continual attempt by the BOJ and by the finance minister, Katayama, and others in the administration to try to stop this slow motion train wreck. But unfortunately, they can't really do so. It's just dropping pebbles or throwing water at a fire that keeps raging hotter and hotter. So, um, yeah, the, the, the situation continues to get worse, but I think the main issue that they face is that these interventions that they've been doing one was on April 30th, um,

shortly after two days after Ueda had signaled that he wasn't planning on doing, uh, for the rate hike at the next BOJ meeting. Um, and the other one was on May 6th. Um, the first one was for around $35 billion roughly. And the second one is estimated to be around 30 billion, bringing the total to 60 billion USD or around 8.5 trillion yen. And that amount, right, is very significant because it's almost the amount that was spent in all of the May and June interventions in 2024, just about two years ago. So just in two weeks, they've already blown through what they previously took two months to blow through. And the other compounding factor that makes this more difficult for BOJ, is that the effectiveness of these interventions is getting weaker and weaker and

weaker. Back in 2024, and even back in 2022, when they would do a yen intervention, it would shock the market enough that it would push, you know, dollar yen from 160 to 155 or to 150 with a single intervention, and it would stay there for weeks. But unfortunately, we're seeing the retracements start to happen much, much sooner at this time. So for example, in May and June of 2024, they did two or three different interventions. And each of them, again, took about two or three weeks for the market digest, and then for the yen to move back up, aka depreciate, and retest that red line before they were able to intervene again. Right now, we're only sitting at about a week after the last intervention. And dollar yen is already at 157.8. So it's already retraced over 50% of the move.

And this time, it took two interventions to get from 160 to 155. B of A analysis previously indicated that for roughly each trillion yen that is spent, the dollar yen should move down by one. So, you know, just do rough numbers. If they spent 8.5 trillion yen on these last two interventions, dollar yen should have gone from 160 to 152, right? Or even a little lower than that. And instead it went to 155 and it's already back at 157.8 or almost 158. So all of this move, you know, all of these moves are proving to be more and more ineffective and And the walls are closing in tighter and tighter and tighter over time as the BOJ starts to finally realize, which is something that we've already all figured out, right, which is that they're trapped and that there's absolutely no way to, you know, avert a fiscal and also a currency catastrophe for Japan. Anything they do just delays the inevitable.

Yeah. Did you catch this? There was a headline, I think it was last week or the week before. uh there was i believe former head of jp morgan in japan was warning uh citizens to prepare for hyperinflation or there was a headline in one of the japanese newspapers at the beginning to recognize this domestically that hey this seems like a a runaway train that we're not going to be able to get back on the tracks yeah no he's absolutely right and even just a few weeks before that, he had said that Japan's fiscal situation is worse than Greece's before the

2010, you know, Eurozone debt debacle. And he's right on both counts, right? Total debt to GDP is over 260%. Private debt to GDP is over 120%. Around 30% of the companies on the Nikkei are estimated to be zombie companies, aka firms that are just surviving via ultra low interest rate financing. And all of this just means that the Japanese domestic manufacturing story, the Japanese domestic economic story has essentially been weak and stymied for the better part of 30 years. And what's been propping up the yen is not so much the fact that BOJ had high rates or was aggressive in hiking or aggressive in their monetary policy. It was the fact that the rest of the world was easing so aggressively. And so that is what kind of

supported the yen between 90 and 110 back three or four years ago. But ever since the Fed started their rate hike cycle in 2022, as you can see here in this chart, dollar-yen just started to blow out extremely aggressively. From March to September of that year, dollar-yen went from like 115 to like 140, 145 to the dollar, which is like a 35% devaluation in just the space of a matter of months. And obviously as it tested the red line in September of that year, they intervened for the first time. But this has been like a continual story, right? It's almost the same thing that the Fed is playing, but it's just on an accelerated timeframe and it's farther out into the future because all they're doing is trying to find new ways to slow this train crash, right? To try to

catch some luggages, to try to catch some people falling off the train. And all of it is successful in delaying it, but it's not successful in actually solving the problem. And so all it's doing is really buying time, which makes me worried because, again, if the Japanese bond market blows up and the Japanese rate complex blows up, then this affects the rest of the world. This affects US treasuries. This affects equities. This affects Bitcoin.

This affects gold. And I think the Japanese need to do something soon or else, obviously, there's going to be much worse currency pain ahead for them. Yeah, sorry. I was looking to pull up another chart here, which is the US 10-year yield. But if you look at all these things in the chart, we just have the USD and JPY. It looks like it wants to break out to the upside. If we pull up the 10-year yield here in the US and the 30-year, it looks pretty similar. it's sort of similar looking chart where it's like consolidating here at the top and it looks like it could break upwards and so to your point what are the next tools of mitigation or what happens once what i guess first question being like what is the critical level that the yen needs to hold against the dollar and what are the ramifications if it breaks up above that and what

do you think the solution to try to manage that is going to be sure so the problem is you know psychologically and historically right 160 to the dollar has been the red line um and the reason why that was chosen is uh kind of complex it's roughly where the yen dollar yen ended up after the plaza accord 19 in the 1980s um before plaza the uh dollar yen was something around 260 250 It was extremely, extremely undervalued, which is what helped boost Japanese trade exports during the 1980s. But after the pause accord in 1985, in just the space of a matter of like 18 months, dollar-yen weakened to 160 and stayed there for a year or two. And then it continued to weaken or strengthen, I should say, against the dollar all the way to like 100 against the dollar, which is where it traded for a large part of the last 20 years, right? But recently, obviously, the 160 line has been kind of a red line because that represents where Japan's foreign exchange bill starts to blow out.

That represents where their energy costs start to rise. And that represents where this entire, you could say, Iran war slash global instability complex starts to really bring home the consequences for Japan. Something really important to note is that Japan imports 87% of their primary energy. And around 93% of their crude oil imports are also imported, along with over 80% of their LNG. So for a country that's extremely, extremely industrious, they're very, very energy dependent. And most of their oil imports, right, over 95%, come from the Middle East, come from Qatar, from Bahrain, from UAE, from Saudi.

And so every time that, you know, Trump is basically prognosticating about the prolonging of this, you know, Iran war and basically hinting that we're going to have more issues going down the road or, you know, for energy security for the region, the Japanese yen pukes, right? And I noted that in one of my sub-stack articles, the correlation for the last 90 days between WTI crude and the Japanese yen is 0.75. So it's closing in on like almost a one-to-one correlation, very, very strong correlation because just because the nature of how, of FX and how Japan has to manage its energy, every, every yen that Japan has, it needs to buy energy, right? And that energy is priced in USD. And so what they have to do is they have to go to the foreign exchange market, sell yen, buy USD, and then use that USD to buy oil imports or to buy LNG.

That weakens the yen structurally. So higher US dollar-based or USD-denominated oil prices weakens the yen structurally. And so dollar-yen, especially with oil above $100 or $110 a barrel, starts to see even more structural headwinds for it, right? More force is pushing it past the 160 line. And that's why Ueda panicked and did these interventions, right? That's why they're like so afraid of what's going to happen. It's because they know now that the pressure is really on. Not only do we have the carry trade issue, but now we have the compounding factor of

the oil issue also adding into the instability. And the really key part to note here is that, you know, the recent BOJ decisions and the recent actions by Sonei Takeuchi, who's the new Japanese prime minister, have made the situation like immeasurably worse. Right. There's that there's that phrase like, you know, from the frying pan into the fire. Right. And that's what I feel like the last 30 years of Japanese monetary policy has been. It's been slowly getting worse and getting worse and getting worse. And this recent administration, Sanai Takeuchi took office back in October of 2025, first Japanese female prime minister. She's extremely conservative in terms of her overall politics, in terms of her views on immigration, but she's very liberal when it comes to fiscal spending. And one of our first proposals was a huge increase to the Japanese budget, including increases in infrastructure spending and military spending, and a cut on the consumption tax, which is one of the main ways that the Japanese government gets their revenue.

For reference, Japan has about this universal 8% consumption tax on all food and beverages and a lot of clothing items as well throughout the country. And obviously, it's mostly the middle class that pays for this, right? They're the ones buying and transacting for most volume of most, you know, purchases. But getting rid of this consumption tax is, although it's popular, means that the government loses a huge section of its revenue, right? We're talking, you know, 20, 30 trillion yen, which is essentially the amount of money that they would spend on the entire country's high school education, public education for the year. So she's planning to do that. She's already passed that through Parliament, and she redissolved Parliament back in January and then called a snap election, which she won on February 8th. And so she's basically cemented her power and ensured that this new power base is going to follow her directive.

And that directive means more spending, more fiscal profligacy, deeper deficits, and lower tax revenue for the government moving forward because of these populist reforms. So because of that, in mid-January, early January of 2026, we saw a huge bond market fiasco. On the 20th, there was basically a very tailed auction on the Japanese 20-year bonds. We saw Japanese long-end yields like the 30-year and the 40-year yields jump 30, 40 basis points within a few hours. And then U.S. Treasuries followed suit very quickly after that. I'm sure you remember that. But the problem is much worse now after her snap election victory because now all of those changes that she had proposed are now basically set in stone, which is why the dollar-yen has been drifting up for the last two months, even despite all these warnings from the BOJ that they're going to intervene and obviously despite these actual interventions. They've blown, you know, what, $60 billion in just the last two weeks on these interventions. And the effectiveness is not there. I mean, they're already back almost at 160 again. And the issue that they face is not only that the energy and the fiscal side, but that their own governors don't want to hike.

The most recent BOJ meeting in April was flat. They decided to hold rates steady. And the Fed didn't help either with their steady flat rate decision recently as well. So the dollar-yen rate complex still has a spread. There's still a huge spread between the Japanese 10-year and the Japanese or the US 10-year yields. That still drives carry traders. And then just thrown to the fire, like, you know, Sanai Takeuchi's spending proposals

and the oil crisis in Iran, like- problems are are bubbling up for the japanese right now which blows my mind because it like particularly for the new prime minister like you would think that she would understand the precarious nature that the japanese government bond market is under in the end is under as a product it seems like she's got very accelerationist policies like do you think there's like a hands-up moment going on where it's like a there's nothing we can do about this so we should try to accumulate as much or reshore as much industrial capacity as possible from a military perspective and rearrange supply chains for for energy i think there was a big deal with

an lng producer out of alaska um to send to send lng um to japan earlier this year last year uh and is it like a hey there's no way we're going to solve this so let's yolo it and try to get as much in the homeland as possible between now and hyperinflation, ultimately? Yeah, yeah, I think that's, you know, that's the goal. The problem is, you know, Japan's energy story has gotten even worse in the last 15 years because of the Fukushima nuclear disaster, right? I think it was April 2011 when that tsunami hit the power plant, wiped out all the backup generators. Obviously, it didn't explode like Chernobyl, but radiation leaked into the surrounding waters, and it caused an international panic. And as a result,

Japan closed most of their nuclear reactors. As of today, I think they have about 13 operational out of 55 total nuclear reactors. And they're trying to quickly, you know, restart an additional like 20 or 25 reactors and, you know, refurbish the old ones that they can be restarted at some point. But the problem is, you know, you can't, you can't just turn, it's not like flicking a switch where you can just turn a nuclear reactor back on to provide electricity, right? It takes a long time to go through all the safety checks and the verifications and to get the heating rods and all the equipment set up for the nuclear reactor to run properly. And because of that, even though they're working on modernizing the nuclear reactors and restarting the other ones

that they have at least somewhat ready, we're still three, four years away from most of these nuclear reactors being on again. And that doesn't help when their primary energy source for electricity is LNG, and they only have like four weeks to six weeks of LNG supply before they run out. And Japan has been basically like pounding the table, like you said, about finding more sources of LNG and crude so that they can provide enough electricity for their citizens. But I think the situation is extremely dire, and they're going to have to start making some drastic moves. And that's obviously already started to happen because I don't know if you saw this headline, but it's just like a week ago in Bloomberg that Japan is considering intervening in the oil markets to prop up the yen as well and to also try to cheapen oil in yen terms. And the main way they do that is they would go on the market and they'd short sell a bunch of futures in the front month contracts to try to drive down the oil price in yen terms and just push out speculators.

And the problem is, obviously, if people took delivery on those contracts, Japan would have to use their reserves to try to buttress those deliveries. So they essentially would be gambling their reserves on a short play on the oil price in yen terms. so that they could try to mitigate the current problem. And I guess that can kind of work, right? Like Japan has around 250 days of oil reserves in both in crude oil and in nat gas. But again, the bigger problem, or not nat gas, but in crude oil

and like refined gasoline products. But the bigger problem is that their electricity generation is mostly nat gas and their nat gas imports are running out. So they need to find more deals like that. They need to get their hands on some quickly. What's up, freaks? This was brought to you by our good friends at BitKey.

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So Secretary of Assent has come out in recent months and mentioned like, hey, the U.S. swap line with Japan is open. We're here to help. I have to imagine that the U.S. is monitoring the situation pretty closely because, as we all know, the Japanese yen market and the U.S. Treasury markets are tied at the hip to a certain degree. What are the biggest risks outside of Japan if this gets out of hand or when it gets out of hand? I would say, obviously, the most immediate risk is, for one, the US Treasury market and the offlaying of US Treasuries due to an offlaying of risk from domestic Japanese institutions. A large part of the flows for the last 20 years into US Treasury markets has been from Japan. And like we said, they're the largest owner of US Treasuries.

they hold $1.2 trillion as of March of 2026. And especially if they use that for interventions directly, then they're going to be forced to sell those securities, which will just drive yields higher. And we're already at a point where the 10-year is elevated. It's at like, what, 4.6%. The 30-year is also very elevated. Warsh has signaled that he wants rates lower, obviously, But he wants to do that without expanding the balance sheet and being able to pull that off without Japan and without their basically steady constant bid that has been there for the last 20, 30 years is going to be very difficult. The other knock-on effects of this are within the Japanese domestic financial system itself. So I don't know if you've read Dario's articles, just Dario on Twitter, but he's been tracking the story of the Japanese life insurers and Japanese pension funds that have loaded up on ultra long-end JGBs. Currently, those funds are around like $8 trillion in the hole, so around $60 billion in unrealized losses on their books for ultra long-end JGBs.

And that's mainly because of that chart you showed earlier. The rate complex in the last few years has just absolutely exploded. It's gone from the zero bound to 3.5%, 4% on the ultra long end. And so that means that those insurers, at least, especially the smaller and more lightly or less capitalized ones, are potentially underwater, which would force BOJ, if they want to save their domestic financial system, that would force them to do QE or some sort of bailout or ask for some sort of outside financing. And again, all of that just results in more yen weakness, more yen printing, and more currency interventions on the back end. So with regard to that, the only thing the US can really do at this point is just supply them with dollars and use that swap line to load up on yen. And again, that can solve the problem in the short term. That can blow out the shorts.

That can basically flush out the speculators. But it doesn't solve the fundamental issue. which is that a large part of the Japanese financial system is now insolvent, and the government itself is insolvent. And so the further you enable it, it's a sick game, right? Because the more you enable it, the worse it gets. Rather than just taking the sick horse and letting it die, you just keep giving it drugs to keep it sedated and keep it kind of moaning and whining and living a sort of half zombie life. And so Besant and others are in a difficult situation because if they decide to help open

up these swap lines for real and actually provide Japan with enough liquidity, let's say $300 billion to move the yen from 160 back to 140, a huge seven standard deviation move, then the US has their hands on $300 billion worth of yen. which the structural problems with japan haven't changed and unless japan makes some serious reforms and allows themselves to go through a serious deflationary cycle and reset all the debts from the 1990 um or 1989 you know cycle high the yen is just going to depreciate again right it's just a matter of time and so the dollar yen usd jpy would just test 160 within a year or and then the U.S. would be standing on basically a slowly sinking ship in terms of the yen that

it has swapped for their USD. So it's hard because from that treasury perspective, you see a reason strategically and maybe militarily to intervene for Japan, but definitely not financially. It doesn't make sense for the U.S. to do that. I do think the U.S. would be open to doing a smaller swap, right? Something that could help them save up for a few more interventions. But again, all of this is just delaying the inevitable. And so I think that's part of the reason why not only Powell, but his predecessor Yellen had been so adamant in finding new ways of financing for treasury bills and treasury bonds is because they knew that we can't rely on Japan forever, unfortunately.

Yeah, and it would make sense why they're pushing stable coins so hard, though. I don't think stable coins will be able to fill the hole that could potentially be left by Japan dumping there. their treasuries as quickly as the government would like and you mentioned it earlier obviously it seems like chairman warsh is on his way in and he'd really like to lower interest rates or keep them relatively low without expanding the balance sheet as you are describing what's happening in japan it's like is that even possible yeah i don't think it is i mean just just off the top of my had like there's that that simple coin funding is like they estimate estimate like what two trillion

dollars like the most aggressive estimate is four trillion over the next 10 15 years that's nothing that's a drop in the bucket in a 40 trillion dollar treasury market that's expected to expand to you know 70 trillion 80 trillion in just like 10 years so um like what they're gonna have to do is something that I've been writing about in my sub stack, which is find ways to do stealth QE. And, you know, unlike what most people think and what most Bitcoiners think, there's actually a lot of ways for them to do that, right?

It's not just, they don't have to just do the typical asset purchases and QE and, you know, outright monetization of debt. They can change bank capital requirements like they did with the SLR. They can change liquidity ratios. They can force money market funds into buying US treasury bills as part of the regulations,

which is what they already did in 2014, they can open up the BTFP again and basically offer loans at 100% par value. There's a lot of stuff they can do. And I'm sure that they'll come up with new ways to stuff balance sheets with these debts. I've heard, obviously not from official channels, but there's even been floated proposals from some people on Twitter who follow this stuff that they could have some sort of legislation to force all bank deposits to be held basically as money market funds or almost in like a USDC or USDT type bank accounts that all that additional depository funding would be basically stuck in ultra short term treasury bills. And that could provide additional funding. And that could be one of the reasons why a CBDC was floated, right? Is

to basically streamline that process and make it easier for the banks to force everyone into owning ultra short-term treasury bills as a liquidity hedge. Yeah, it makes you wonder. I mean, obviously, one of the biggest narratives in the world right now is AI and the build out, the re-industrialization, and that's led to a bad dash for relatively hard assets and commodities world. And one wonder, I mean, it was probably a combination of the two. but obviously we saw gold and silver going a massive run at the end of last year gold still

remaining relatively high at 46 187 right now so 4687 you could see that going back up and were those leading indicators of people looking at what's happening in japanese yen and jgb markets and fleeing for the exits i forget whether like it's it's funny how the news cycle um um how crazy it is how crazy short it is these days but um i forget the justification when gold was screaming above 5 000 i think it was just uh war war um more fears and all that but i think there definitely is a fiscal crisis side to the narrative behind these hard asset runs that we've seen in the last year yeah absolutely and i think that this also it's also going to explain some of bitcoin's recent strength right like um bitcoin always operates on a lag the gold um just because

of the the ways that the flows work you know bitcoin is institutional but still very heavily retail focused the gold market is so huge that even retail buying won't drive it um you know primarily it has to be a combination of central bank buying of institutional buying of hedge fund flows and retail buying. But I really think that the story for the past few years with gold is more about a geopolitical struggle between the US and China. And, you know, this kind of like juxtaposition of the East versus the West, and a return to physical primacy than it is anything else. I wrote about this in a lot of my subsect pieces, but the Chinese have been going through this slow process of basically financializing gold and incorporating it into their economy for

the last 70 years, really. From 1950 to 2003, gold ownership was outright banned, similar to how it was under Order 6102 in the US. And so individuals and institutions could not hold any gold, could not own it, could not transfer it. Basically, the only thing that was allowed was jewelry. But starting in 2003, the PBOC legalized ownership of gold. And then in early 2024, they opened up the Shanghai Gold Exchange, which obviously opened up its international branch in 2014. And that gold exchange was the largest and I believe one of the first in the modern era, physically settled gold exchanges in the world. So what that means is that when you compare their market to COMEX or LBMA, they're actually getting traders who buy contracts through SGEI, the

Shanghai, they actually get the physical metal at the end of the day. The COMEX and the LBMA traders, 99% of the time, just are getting a paper settlement in fiat. They get a wire to their bank account. And that's because, again, the process of custodial ownership in the West, is much more convoluted, much more difficult than it is in Shanghai. In Shanghai, all you need is a corporate trading account and a monthly minimum of purchases, and you can take delivery. And there you go. Now, moving it out of the country, much more difficult. You can't do that. But because of this shift to gold, because of their increasing reliance on gold as a store of value, that's just drawn in more and more demand from around the world into China. Their central

Bank has been buying like 300 tons a year officially and unofficially, according to Jan Noon-Wenhaus, who writes the Gold Observer, which is a great sub stack if you don't already follow it. According to him, they're buying around the same amount in covert gold purchases the last 10 years as well. So although their official holdings from the PBOC are around 2,300 tons, their unofficial holdings are likely 5,000 tons or more. And that's just because the World Gold Council has tracked that there's about 200 to 300 tons a year that disappears off of miners' balance sheets and off of bullion banks that isn't accounted for by other hedge funds or private entities or official central bank buying.

And the only entity that could buy 300 tons of gold a year, which is hundreds of billions of dollars, would be a central bank, right? That's even more than what wealthy people could gobble up, especially for five, 10 years in a row. Yeah. Now my memory has been jogged. I remember exactly why. There were the narratives behind the gold run last year and bringing up the Shanghai exchange reminded me, but the PBOC or I forget who was, whether it was the PBOC or the CCP put a bunch of their gold that they've been accumulating on warrant, which makes it easier to do cross-border settlement. And that was the whole narrative is that we were beginning to see the monetary settlement layer optionality emerge, particularly between the BRICS countries where China could buy oil from Saudi Arabia using the Shanghai exchange. Saudi Arabia could pay in yuan technically, but get the gold delivered if they wanted to do that in the oil trade realm. And so, yeah, it's funny, again, going back to how fast these narratives come and go and everybody's focus shifts, whether it's AI or the war in Iran or what's going on here politically in the U.S. at any given point in time, Hanta virus in the last couple of weeks.

uh but i i do think that is a narrative that has staying power or at least the not even the narrative i think it's just the reality of that happening behind the scenes having gone away but people people seem to have forgotten about it rather quickly yeah yeah and i i'll say this too like um i don't think the run-up in even from like november to january of of this year. I don't think that was central bank gold buying, obviously. Central banks don't chase trends. They don't momentum trade. They don't do VAR signaling or anything like that. They don't run these Momo hedge funds. They are the floor underneath the market that has been slowly edging it up, but they are not the reason for the wild intraday swings and the volatility. That's all

momentum traders and shorts being blown out and speculators taking huge positions and then getting liquidated. That's all almost like euphoria type behavior that occurred in January. There's a great quote I loved, which was the central banks, they don't put a cap on any price or they don't push the top of the price higher, but they make sure that the lows go higher. So they put a floor underneath, a stair-step floor that slowly edges the price higher and higher and higher and higher. And so the current level of what, 4,600, I think that's probably where the central banks feels like a good buying area. And so that's where they're buying and that's helping to keep the overall gold price steady. But all of that volatility, especially in the West,

was a lot of just short squeeze-esque behavior. And the CME obviously responded with multiple changes to margin requirements they doubled the margin requirements in in december for silver futures they did the same with gold later that month um they did it again in january so and they halted delivery of physical right wasn't there more calls for the physical than ever before yeah there were um i don't know if there was calls for an outright like stoppage of deliveries but i know that there were like huge delays yeah and then there were what's what's very funny about cme is that they keep having these glitches every time that there's a huge run-up in the price of you know silver gold or even copper right um in november november of

last year if you remember like right after thanksgiving there was a huge spike in prices it went from like it was on friday right yeah yeah it went from like 45 dollars like almost 60 within the space of like 48 hours and cme had a their longest outage of like 11 hours at one of their server farms in Aurora, Illinois, which is strange because that data center, which is run by, I'm forgetting the name of the company now, but it's run by this company that has about 22 other clients at the same massive data center. None of the other clients reported outages. And what CME was claiming was a failure of the cooling systems.

And there are three backup cooling systems at the, you know, so there's two redundancies, a primary one and a two redundancy backup backup cooling systems at the plant so for all three cooling systems in this data farm to fail and for only their servers to fail it seems like too much of a coincidence right it seems kind of like bullshit yeah exactly it smells like bullshit and when i pointed that out people called me crazy and then it was funny because literally just a month later it happened again and then it happened again at the end of january if you remember when the uh the gold and silver price were in parabolic gold you know briefly touched 5500 silver was past 115 120 and cme had an outage again the price dumped 20 a day and then

they're they were back online after like you know 12 hours so it's just the same playbook over and over again what are they trying to prevent by doing that or what are they worried about when there when they're pulling the plugs i think the problem is until recently the large bullion banks were structurally short both gold and silver in the paper markets and they're worried about one of the large dealers going under right on a on a paper short because that was one of the theories i remember i had josh fair on from scottsdale mint and he was saying that i think it was the thanksgiving uh outage that jp morgan was trying to get on sides specifically they're one of the big dealers yeah yeah exactly i mean the the volumes with with silver and gold are

insane like if you look at so for example on that day of trading and i think it's january 30th of this year um there was something like you know i think it was like 400 million ounces of paper ounces of of silver traded now the global silver mine production annually or no daily is two million ounces a day, like 2.2 million ounces a day. And so in a single day, they were trading 200 times the global silver, you know, daily production. So that should put into scale how much bigger the paper market is than the physical and how out of whack it's gotten, right? And the shorts on that day from, you know, driving silver from 120 to like 85 or whatever it ended up, the shorts on that day, were amounting to about two and a half years of global annual silver production. Again,

not the US, globally, everyone across all jurisdictions, all mines everywhere. So it's just, it's massively manipulated, it's massively over leveraged. And the way that these banks make money, obviously, is by taking on these mines as customers, and then by front running their own customers and short selling gold or silver before it gets to the market. And they have an inline, they have an inside ear on all these transactions because the large mining companies, Newmont, Barrick, all the big guys, they have to use the banks for all their financing. Mining is very capital intensive. They need huge loans. They need bridge financing. They need equity deals. um and so when they you know get a good uh haul of gold and they need you know let's say some

collateral on it they might say hey we have this amount of gold we want x amount of collateral we're going to sell this gold at you know market rate in three months once it's refined and shipped and then boom the bank has information on you know five tons of gold is going to be sold on this date now we know we can short we can paper short um and we can you know basically distort the market in front of our own customer and not and they would be none the wiser yeah and it's like just looking at the silver chart now it's gone on a run last week that's pretty under the radar right now and i hear a lot of people talking about it yeah yeah silver silver has been really resilient recently um along with gold right um but uh again i think the implications of that uh

of what's going to happen with a Warsh Fed and with, you know, the energy crisis is finally coming into view. You know, silver, around 80% of global silver refining capacity is in China. China is also the largest global gold producer. And I think that their second largest silver producer. Silver is obviously used in basically all electronics. It's a key component in most military technology, including Tomahawk missiles, modern Navy warships, F-22 fighter jets, because it's the most electrically conductive metal. And it also has a very low propensity to rust or varnish, right? So silver is a key component in not only manufacturing, but also obviously as a precious metal. And so that means that I think demand, especially as

we try to re-industrialize America, demand is going to be there and there to stay. And the production story isn't going to catch up fast enough to keep the prices at current levels. What's up, freaks? When you take Bitcoin seriously, you start with custody. You want to control your keys, avoid single points of failure, and make sure your savings cannot disappear because you or someone else screwed up. That is what Unchained has been focused on since 2016. Unchained is the leader in collaborative multi-sig custody and Bitcoin financial services that keep you in control. They secure over $12 billion in Bitcoin for more than 12 000 clients that means about one out of every 200 bitcoin sits inside an unchained vault

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it's not health insurance it's crowdfunded healthcare uh as you can tell they negotiate prices for you you pay in cash it's much cheaper overall we're much happier they have incredible perks go to joincrowdhealth.com slash tftc to sign up five years on crowd health not looking back joincrowdhealth.com slash tftc use the promo code tftc once you set up your account you're going to get 99 a month for your subscription for the first three months we mentioned the industrial efforts here in the u.s i mean we've essentially got like a wartime posturing yes they're i don't know if it's a ceasefire we're still in war but uh like a a world war ii scale industrial push domestically like you've got the government taking stakes and intel

uh rollers material companies uh energy companies you got executive orders going out with the The Defense Production Act sort of saying that they're going to support particular industries that are fostering the reindustrialization and the boosting of our energy grid specifically. And we were mentioning stealth QE routes, and that's something that myself and John Arnold, we do a weekly show every Monday. We've been covering for a few months now, and this is just another way to inject liquidity into domestic markets, at least. And it's interesting because I'm a big believer in the fact that we completely messed up our system when we embarked on globalization and exporting the dollar to every nook and cranny of the world at the expense of our domestic manufacturing base. And so I'm a big believer in we need to rebuild that base up. And I catch myself sometimes looking at the efforts of the Trump administration to do just that and be like, yes, this is a good thing. It's a good thing. But to the point of this conversation, is it is it a bad sign? because it's just a recognition of how out of whack things are. And it's a desperate mad dash to try to build everything up

as quickly as possible to try to jumpstart some sort of circular domestic economy that can sustain itself without having to be reliant on global counterparts. Yeah, I think it's like what you said. It's kind of indicative of their level of concern with the speed by which they're going through trying to re-industrialize. The unfortunate truth is that, as I'm sure you know,

like re-industrialization is not going to happen in like a year or two. It's going to take many years. Although I have seen some data recently that shows that they're making really good progress. For example, there's a capital flows ratio between the amount of, you know, the current account of the U.S. in terms of capital goods and consumer goods. So basically saying like, okay, The U.S. is, let's say, earning $4 trillion a year in capital goods, meaning just cash or securities moving into U.S. financial markets, and it's earning, let's say, $3 trillion a year in consumer goods sales to countries that we export to. That ratio used to be about one-to-one, so it used to be about evenly split, and now it's approaching two-to-one, so it's at 1.8, meaning consumer goods as a ratio. yeah i think this is it yeah yeah yeah consumer goods as a ratio is tweeting about this a couple weeks ago yeah yeah um so yeah exactly um i'm sorry i thought i didn't know it was you i just

saw that and i was like oh that's awesome um but yeah so there is obviously progress being made but the bigger problem is that like for real industrialization um and real you know pullback of, of foreign manufacturing, you have to rebuild all of the supply chains. So obviously the, the low hanging fruit, like, you know, uh, making prefabricated, uh, you know, high-end consumer electronics, and that's not super easy, but like that's easier, you know, easier than other things is like the first step, but like doing much more difficult things, like let's say, you know, making a chip manufacturer plants or, uh, even, you know reshoring let's say industrial metal uh refineries like silver or um you know palladium

or platinum or whatever of which we have very little refining capacity is much more difficult it's a lot of capex it's a lot of time you have to have a ton of engineers a ton of sign-offs it can be very pollution heavy um which can bring in the epa and all sorts of environmental groups um and so like to bring those kinds of things back and to bring like raw iron ore manufacturing and raw like almost like raw materials is almost more difficult than some of the higher end stuff just because of the environmental and uh you know infrastructure implications of of the scale of work that needs to be done oh yeah it's crazy what are your views i think is ai throwing a wrench in all this or is it actually a welcome tailwind to expedite this and not only

that but throw some juice on the economy in the way if it doesn't lead to a catastrophe in job markets as quickly as dario thinks it will happen yeah i think um i mean it's obviously like a mixed bag i think you know the domestic consumer spending story is going to weaken considerably in the next three to five years, given the pace of AI development and the speed by which it's starting to take over basically all white-collar jobs. You know, back in February, OpenAI released, just in the space of like two weeks, they released a model that could do COBOL coding better than even huge teams of COBOL engineers can, uh, which obviously IBM stock, which their main, uh, one of their main businesses

is by it's consulting legacy software companies, uh, by, you know, coding their backend with COBOL, um, their stock tanked like 20% within like a week of that announcement. Um, but also they announced the integration, uh, Anthropic announced the integration of, uh, Claude into Google sheets, Excel, PowerPoint, word, like almost all the major, um, you know, we could say like work efficiency tools, productivity tools, uh, that almost all of corporate America uses. And so just those announcements mean that the average person is going to be much more efficient at their job because they can now utilize Claude and other tools like Claude, uh, much more rapidly and quickly within their, within their work

environment. So more work can be done with fewer people, right. Which is why you saw, Was it Square laid off like 20% of the workforce? I think Meta is also planning on laying off the workforce. Amazon's already done some layoffs. But I think that it's going to basically force our economy to shift from that service-orientated white-collar work, desk job, back to some sort of manufacturing story. Because manufacturing jobs are one of the things that's much, much harder for AI to replace.

And also obviously much more marginally expensive. If you need someone to lift something or to move something physically or to look at a car on a manufacturing line and see if the wheels are bolted in properly before it goes out to a dealership, having an AI robot that has to physically move around and do those things is much more expensive and much more marginally pricey than having an AI that can code or having an AI that can write legal contracts without making errors or can proofread. essays or something like that. Anything that has to do with just pure software is obviously much cheaper and much easier from a productivity point of view than anything that has to do in the real world. So yeah, I think long-term it shifts our economy. And unfortunately, I'm worried that even though there will be job growth in, let's say, manufacturing, I'm worried that it won't be enough. And that just like 2008, it'll be like a structural displacement of like five to ten million workers that now permanently cannot find work and are just basically relegated to be you know the neat uh right no no employment education or training uh people who just sit at

home and play video games and contribute to that lost portion of economic productivity yeah it's really scary to think about and then like because i've been going back and forth on this you watch analysis of it and you have the whole jevin paradox side of things where i mean it has led to some or it's being used as an excuse for some layoffs like whether it's block or coinbase or meta whoever amazon whoever it may be and i i bet there's definitely some productivity gains i i mean i i would strongly about to guarantee there's productivity gains being made with at least some of the teams in there but i also think like a lot of these companies were overly bloated and just overhired during during zerp and the insanity of 21 20 and 21

specifically um but the jevons paradox like you hear stories of teens using it and they're actually wanting to hire more engineers because now they realize they can do 100x the work that they they previously could with human labor alone um and then you think of just the natural physical constraints like your point about the robots going around the factories i i would say i'm highly confident that that'll eventually materialize but the road from here there is going to be paved with way more chips than exists today that can be produced today we're going to need more fobs we're going to need more electricity all these things need to be charged and electrified and the grids are not where they need to be to make that happen so i

So I could also see the case for like a gradual transition to a world completely run on AI and the physical and digital spaces. And one would hope that between now and that end state that people could figure out how to produce jobs that can't be taken by AI. But who knows if that's possible because you hear like if the AI is smarter, like why would you even try to start a company if the AI can come up with the idea in the first place? And so, I mean, all this is leading to, I think, a societal existential crisis, whether it's on the fiscal insanity side and the sovereign debt side of things where it's becoming abundantly clear that the train is off the rails and likely won't get on anytime soon. And then you pair that with demand destruction that could be brought about via AI. um but i want to be a doomer because i use it and it's made me more productive as an individual and as a company here at tftc and at 1031 and so yeah there's just a bunch of like i said at the beginning it's there's never been more uncertainty in my mind in terms of

where we go from here what things look like and where the cards fall yeah no i i agree i agree i mean i tweeted this the other day that you know ai has ensured that the marginal cost of software is trending towards zero. I think obviously after these, especially these newest releases with Opus 4.6 and obviously just 4.7 in the last few weeks, that's more true now than ever.

Within the space of a few days, I needed a tool to pull YouTube transcripts from a channel and collate them and put them in order by terms of use and then plug them into another model. And I wrote the entire Python code in a few hours using Claude and ripped it and it worked perfectly.

And so, you know, for me to do that, like five years ago would have taken, you know, six courses on Python, 20 debugging sessions, probably a month of coding. And I did it in literally a few hours of one afternoon and it is still functioning perfectly. And I can even send even send the code to a friend who needs needs it for something else. Um, but I, and I think there's been this view, right? That entrepreneurship is going to explode exponentially because of AI and because it's going to allow anyone and everyone to build products and solutions, especially software products and solutions to the problems. And I think that there will be an increase in entrepreneurship, but I don't think it'll

be to the level that people think. And the reason why is because the moat is lowered so much that now most of the low hanging fruit can easily be solved by anybody with, you know, a couple of brain cells and a cloud subscription. So that means that like, let's say like for this tool, for example, that I created, if I wanted to commercialize this, if I try to sell it, anyone else can just be like, Oh, you just created a Python script to, you know, ping YouTube's YouTube's API and all the transcripts via the captioning tool. Like I can do that. I'll just ask Claude how to do it. And I'll do it immediately. So the barrier of entry is so low now that unless the product is sufficiently

moded or sufficiently complex or plugs into things that most people cannot get public access to, it's not going to result in an actual business, right? Just like with old entrepreneurship, the main gate is the idea, right? Good ideas are hard to come by. There's plenty of people with bad ideas. There's plenty of people with subpar, um, execution and sub subpar business plans, but to come up with a great idea that actually solves a real problem that people have that they're willing to pay for. Um, that's hard. That's hard. And so I think that'll still be one of the main gates. Um, although I do think again, like the overall ease of achieving that is going to be exponentially better because of, because of AI, you know, if I want to eventually make a

YouTube analytics platform and sell it, or if I want to make a macro analysis platform and sell it it's exponentially easier for me to do that now than it was five years ago. And so that'll result in overall more founders being, being born. Yeah. No, I think both you and I unbeknownst to us stumbled into one of the last moats, which is audience and distribution. I think, uh, I think about that a lot and feel very fortunate that I started this show nine years ago. Um, because in a world of AI where anybody can do anything, I think trust is going to be one of the most valued aspects that you have and if you've

been writing content consistently accurately and, um, from a place of goodwill and good intent i think and you've been on this show many times for a reason because i trust your analysis and appreciate it and i like to think that our audience has the same view towards us at least most of them i know there's haters out there but uh uh i don't know it's a one it's like one of the last moats is weird to say like brand and trust and distribution Yeah. No, you're right. Absolutely. It's the fact that people know who you and I were before AI, before Claude, and they know that we were making good content. We were making good analysis. We were doing the work, right? We actually had proof of work. It wasn't all cheap labor from overseas that was writing our own scripts or writing our own analysis. It was us. And so I think that will not be taken away. And I also think that there's been a lot of postulating online that IRL events and IRL in real life activities and everything is going to make a huge resurgence, especially among young people. Because with AI tools getting so good, the amount of slop that's going to be created online for both men and for women is going to exponentially increase until you basically don't know anyone real online anymore.

And at that point, then why would you engage with a bunch of bots online? Why would you follow an Instagram account of some dude who's giving you analysis who's not even real or some woman who you're in love with who's not even a real woman? Then why wouldn't you just go hang out with people in real life and hang out with the one person you know is analog, which is another human being? And so I think that can definitely make a resurgence and we can see like kind of like what one of our friends, Julian Figueroa, calls a Gen Z renaissance, right? A return to tradition and to meeting up in real life, in person, face to face and creating community that way. And all these Bitcoin meetups and all these Bitcoin events are on the same vein, right? Like, I think Bitcoin Twitter has been kind of slowly dying for the last year or two, partially because of AI and partially just because it's like, why do we need to be even be on Twitter as much anymore? All we need to do is meet up with other Bitcoiners, continue to network, continue to grow and stack sacks. Yeah, it's pretty simple.

No, it's funny. There was a local news clip floating around of one of the local high schools. Apparently, the kids were getting back into hacky sacking in the interview of one of the seniors. and he was saying yeah we all put our phones down we go outside and we talk to each other and so like that gen z renaissance that uh you're describing seems to be happening at least anecdotally in this local high school that uh i caught this news clip of and uh yeah it is it is that actually does make me um make me encouraged too because you can see like everybody's like what's what's the like job going to be again physical world plumbing uh engineering physical

engineering electricians all that stuff i think that's the top of mind professions that people are pretty confident are going to have some sense of job security at least for the foreseeable future or the short to medium term the very least uh but then i think about like sports and stuff like that like are we going to get back to just like a hyper competitive world in the physical um sort of combat for lack of a better term i think our support's going to be a massive a massive winner in the ai world as people to your point look to get back to the physical and real life connections and if you can't compete with uh with the computers and digital world maybe people will get back to sculpting their bodies and being uh physical specimens to compete

in the physical world yeah yeah no i think i think all that is going to uh want to continue to drive forward exponentially i think biohacking also is a new a new area that i've been paying attention to but one that's going to have a huge ton of upside in the next you know five or six years i'm worried about them i'm like i'm worried about like the peptide first first mover is going to wake up in like a decade and be like oh shit my balls are falling off well hey i'll say this they just like bill burr uh mentioned with testosterone and with like hair hair implants like let the first people who are brave enough do it and 20 years later once they figure out all the kinks right once they stop it from you know yeah making your balls fall off or you know

giving you huge warts on the back of your ear or whatever like once they get through all those kinks then they can distribute it to the public for mass distribution so yeah the peptides create as i watched that from arm's length i'm like what the hell are you people doing uh we've seen it with like the hair loss thing like i saw a clip floating around this morning of some streamer i I think he was an ETH guy or was at least at one point talking about how he's taken him as finastericide and he can't get boners anymore. I was like, well, you played yourself join me and just letting yourself go bald.

Yeah, I know. It's, it's crazy. Like all those fake hair products and there's a lot of obviously still big pharma solutions to issues that people are trying to use, But I've seen, obviously the biohackers are going really far with trying to solve those problems. I saw one tweet, this was like months ago, but he was saying that bee venom has a compound in it that re-stimulates hair growth. And so he had captured a bunch of bees and he had induced them to sting all over his

head where his hairline was receding and basically was showing results and pictures of his hair were growing back a little bit. And he was really excited about that. he said even though it's painful that it worked and so he was recommending other people do it too so i don't know how effective that would be though natural hair regeneration via b-stars i like it you know a little masochism to you got to earn the hair back by exactly these things yeah uh bringing this back on the rails though i mean we were talking about trust developed by putting content out there for years i think the the first thing we talked about the first time you're on

episode was the dollar end game theory like on on the spectrum where are we are we are we are we cross the event horizon and getting sucked in the black hole and emulsified right now what's happening well again i've i've uh laid this out in a couple threads um but i think obviously there's multiple like there's multiple red lines to cross right and the first one i would say we've already crossed 120% debt to GDP. That's where Heisenberg research puts basically no country that has gone past that level has ever come back without devaluation, hyperinflation, financial repression, meaning like keep interest rates low and keep inflation high for decades or a depression. But obviously the way that it's been playing out has been kind of like complex and convoluted,

especially for people who aren't paying attention. But the main things that I've been tracking are, you could say, not de-dollarization, but de-treasurization, if that's a word. Basically, the offlaying of especially long-term treasury bonds. If you look at the global central bank complex in August of 2025, for the first time in 27 years, the value of overall gold holdings surpassed the value of overall US treasury holdings. The Bank of China, basically Bank of Turkey, Reserve Bank of India, and Poland as well. They've all been offlaying, especially long-end bonds. But Japan has still been holding a large part of the reserves, obviously, as a key ally

of the US and as a hedge against foreign exchange intervention. But globally, the move institutionally has been to get away from the long-end US Treasury bonds. And I think that is due to several factors. one is obviously the convexity, right? Longer dated bonds have much more volatility in regards to interest rate moves than short dated bonds. And even with Warsh signaling that inflation is going to go lower or that rates are going to go lower, I think with the dual energy shock in motion, people understand that PPI and core CPI are both going to stay elevated for the foreseeable

future. And so holding onto those bonds, even if Warsh is somehow able to lower rates without increasing the balance sheet means that you won't be making much of a return anyways. And you'll still be holding onto a huge amount of risk, which could blow up in your face if the Fed decides to reverse course and start hiking again in response to inflation. So globally, the central bank complex is laying off bonds. What I've seen on the institutional side, also appetite for long-end bonds has diminished significantly. Now, a lot of banks and obviously brokers still buy them for collateral and liquidity needs. But most hedge funds that I've seen mostly trade on the short end because none of them want to be caught holding 30-year bonds or 40-year JGBs or whatever

in case those countries respectively decide to hike. So I think that that's the first stage, right? Let's see not the US dollar lose its status as a reserve currency, but let's see the US treasury bond lose its status as a reserve asset. And obviously, the further along the curve it is, the more it is like an asset or like a, you know, a debt instrument, then it's like a form of money. The closer you go in on the maturity, the more money like it is not only in terms of its liquidity, but in terms of its volatility as an instrument. So obviously I think ultra long end bonds, those will be sold off first. Also, that's why obviously the treasury has been shifting their issue into the front end. That's why Yellen was doing this and Powell was doing

this and now uh wars is going to have to start continue or going to continue doing the buybacks uh just last week they bought like seven billion dollars of treasury bills back or treasury bonds it was all i think 20 and 30 year bonds um but they're going to have to continue this kind of card game but as we can as we progress through this you know reserve currency crisis i think other countries are going to lay off more and more long-term debt until they get to a point where they hold basically primarily treasury bills and ultra short-term corporate debt and let's say US dollar debt and just liquid cash. And once we get to that point, then we start to face the reckoning of now do we trust the

dollar itself as a reserve currency? And long-term, obviously, the system breaks, but it doesn't break like Brent Johnson says in the way that most people think. It breaks with the dollar moving higher because all the other currencies start to fail first And then finally, with the dollar breaking at the very end. But I mean, I think that's a couple of decades away. I think a couple of decades. For the full, like when we're talking about complete dissimilation or dissolution of the

US dollar, I would say, yeah, two decades. But for the US Treasury bond losing reserve status, I think that's within the next 10 years because the signs are already on you know on the on the doorstep right yeah i mean it's losing status right now objectively as you mentioned like gold gold reserve holdings surpassing treasury holdings in dollar amount earlier this year obviously all of these um central banks dumping treasuries in favor of other reserve assets so it's in the process of losing it's not completely lost yet the treasuries as a core balance sheet asset for for other sovereigns but it's in the process of it right now and that's like then again like how as an american citizen

who's watched this and covered it for almost a decade now i've watched it for over a decade having worked at a fund out of school when do we when do we say all right we get it like you guys don't want to hold treasuries you know it's a little tiresome to keep the system going like we should transition to another reserve asset to like my biggest worry is like the sunk cost fallacy of just like the u.s federal government clinging on to the treasury market as this reserve asset and trying to make it so even though it's very obvious that it's becoming more and more out of favor with international sovereign investors like at what point are we able to flip and sort of own it be like yeah we don't

like the treasury system either even though it's afforded us all these incredible luxuries or it at least up until the early 2020s um the 40 years previous it was pretty banger but now it's a long wind away saying like when we jump to the next thing and embrace it and i think it be bitcoin and there are signals that this administration at least seems amenable to to embracing bitcoin as a as a reserve asset whether or not it happens is another question but i think the the timing of the embrace and the integration of bitcoin is key if that is going to be successful as american citizen i hope it is and just trying to figure out the best way to foster that which is why i do what i do here and outside of what i do here

on the podcast behind not behind the scenes but interfacing with people close to to policy yeah i mean obviously the trend has been uh has been accelerated in the last few decades something else i didn't mention which is actually i wrote about this in my book but um if you look look at total treasury issuance divided by total foreign treasury ownership, you see a very surprising trend, right? From 2008 to around 2015, the US issued around $9 trillion of additional treasury debt and foreigners bought like 70% of it. So almost $7 trillion. And the main buyers were Bank of Japan and the PBOC. And from 2015 onward, there was a huge shift where not only Russia started to accumulate more gold, but also China and obviously other large central banks.

And from 2015 to 2021, overall treasury debt increased by like $11 trillion. And total, the net buying of foreigners of that additional debt fell to 14%. So from 70% of net new issuance bought by foreigners to 14% within just like a decade or a little more than a decade. So foreigners are no longer the marginal funder of new debt. It has to be, right, like the Fed, it has to be domestic institutions, it has to be money market funds, it has to be hedge funds, it has to be sovereign wealth funds, or it has to be Japan. And like we covered for reasons earlier, like Japan is increasingly unable to fill that

role as we move forward. Now, to move on to your question of what's going to happen, when are we going to give up the sunk cost fallacy? I think you can't solve that side of the equation unless you solve the political spending side. And as long as politicians and their constituents are addicted to easy money and to excessive spending and excessive stimulus, you're never going to fix the debt issue because one creates the other. The desire for spending and consistent free handouts and free goods is what's forcing us to go deeper and deeper into debt. And the brutal reality is that in order to balance this issue, in order to fix the problem, you have to make deep, deep cuts in areas that people are not going to want to see cuts.

um you know both or all so of social security and medicare and medicaid and defense spending and interest expense all three of them are almost set up or around or almost at one trillion dollars and since our our federal deficit is around 1.9 trillion that means you have to get rid of two of the three of those items so we're either going to choose to not pay the interest on the debt which means default or not have a U.S. military, which is a geopolitical default, right, on our allies, or we're going to choose to default on all the baby boomers and, you know, the Gen Xers and whoever else is using Social Security and all the people on Medicare and Medicaid.

And that is extremely politically unpopular, especially as the baby boomers are the largest generation in history and the most affluent and the most active in voting as a percent of their generation. so um yeah because of all that like i think it's going to be very hard to solve this problem without uh a severe course correction and in order for the u.s to come to that point i think there's going to be more pain needed the voter needs to see how severe the fiscal problem is and how much we need to do to uh you know to shift this issue this chart is a good example like you know we're now paying 1.2 trillion a year on interest expense that's more than defense and that's

more than social security and it well i brought this chart up too it's just like to highlight to anybody who's watching and if you're listening and you're not watching we have the interest expense on u.s public debt outstanding charlie ballello great follow on x if you're not following yet um you tweeted out this morning the interest expense on u.s public debt hit 1.27 trillion over last 12 months another record high if it continues to increase at the current pace it will soon be the largest line item the federal budget surpassing social security and just like to highlight going back to 2019 right before covid it was at 584 billion so you think the interest expense on the debt and it took uh more than 100 years arguably since the onset of the republic so 245

years 44 years to go from zero to 584 and it's more than doubled almost tripled uh in a little less than six years and so like this is breakaway dollar end game type scenario where i mean this the scale of the increase on this expense on the debt is insane yeah yeah and without lower rates how does this go lower? It doesn't. With every year that passes, more and more of the old debt gets repriced at higher rates. And it's a dual issue because this is what I call the Peruvian bull debt paradox, one of my more viral tweets. The way historically to solve an issue like this would be to lower rates. But the problem is the only way to lower rates is essentially to do QE, right? It's to buy the 10-year and the 20-year and the 30-year bonds. And doing so floods

the system with new cash. And at a time where we're running $2 trillion deficits, that cash will find its way into the general economy, which will cause inflation, which by necessity pushes up federal spending. Because now suddenly everything the US government buys, whether it's helicopters or oil or burgers for the soldiers or whatever it is, it all goes up and salaries will have to go up to compensate as well for the inflation. And so that means that fiscal spending goes up and more debt issuance is needed and the debt spiral just continues to accelerate. So it's either you die by interest expense or you die by inflation. And so there's not really any way out. And ironically, um the the phrase i had there was like the the higher they hike the further they move behind

the curve so the the worse the problem gets essentially even with rate increases if you're trying to fight it on the uh you know on the inflation side and you're trying to stem that issue and lower the spending you just increase the interest expense and if you do the other the you know the opposite then obviously the inverse happens so there's no solution um other than massive fiscal austerity. And the problem is no politician, especially these weak need ones that we have in Congress that won't even arrest people for the Epstein files. They're not going to go in and cut a trillion dollars of spending tomorrow and cut off the baby boomers from, you know, 20 years of having social security checks sent to them. That's too unpopular.

They won't, they'll never do it. And so they're going to ride this wave until it crashes, unfortunately yeah we need a politician to stand up get behind the podium and say american citizens i come to you in some dire times we are cutting all social security medicare and medicaid and uh you need to have your parents move in with you we're bringing back that two-generational housing uh you need to take care of your parents we need to need to repair this debt issue will never happen but um it is it is insane and i can bring this bring in bitcoin here that's why i think many people are being lulled into a false sense of bearishness right now when it comes to bitcoin uh because if you look at what's going on japan

look at the interest expense on the debt here in the u.s if you look at how global supply chains have either been destroyed or actively being reshuffled right now you look at the demand for electricity it's being driven by an ai complex that has been deemed existential and ultimately necessary by all the geopolitical counterparts in the world they will not stop until they have won which means they will not stop until there are as many data centers and frontier models as necessary to officially win the game all these things are incredibly inflationary whether anybody wants to admit them or not yes the effects of the software that comes with the ai and the lms what they can do may be deflationary in the digital world but everything in the physical world which is actually

what you need at the end of the day electricity gas food all those things i just see no way in which they don't go up pretty dramatically from here and when you layer in the paradox of um defaulting or inflating i think everybody if you understand the incentives of the system knows that they're going to inflate their way out so the real price inflation driven by the supply chain disruptions and the imbalance of supply and demand with demand skyrocketing right now it's going to be a double whammy and in that world you're going to want the most scarce asset that's ever existed in human history, which is Bitcoin. Yeah, I totally agree.

And, you know, the other component of that AI story, right, is imagine not only the demand destruction, but all of the component or like correspondent, you know, destructions of tax revenue and sources of funding for the government, right? Um, most forms of taxation are either a form of taxation on capital, AKA like property tax or capital gains tax, or they're a form of taxation on time. So that's like, you know, hours worked employment taxes, healthcare taxes, because you're working right. Um, and with fewer people working less hours, the overall taxable income of the government collapses, right? If you

have a software company that used to have 100 engineers and now you have 30 and those 30 can do what the 100 used to do well those 70 engineers are no longer getting paychecks which means they're not paying it's gonna be harder for them to pay their mortgages harder for them to send their kids to school or to buy food or whatever but it also means that the tax revenue so you know the federal income tax the state income tax the local sales tax right whatever it is all those things start to disappear from the government um and so they'll run into a more severe fiscal scenario i think in the next few years here as that accelerates as well and that's something that's concerning because you know they're already in the hole so what's going to happen when they just

have to fall deeper faster yeah and you look at like delinquency rates and i'm sure you saw the the chart floating around this week of credit card auto loan student loan delinquency rates and then not only 90 day but like super delinquent i think beyond 90 day approaching 2009 levels and and we're being told that i mean gd because that's the other discombobulating aspect of the ai thing is that like you have this facade of the economy being stronger than it actually is because obviously all these um tech companies that are they're leading this and all the the the hardware companies that are enabling it their stock prices are are screaming higher and it makes it seem like oh yeah gdp is

doing good the stock market these companies are doing other producing more they're more revenue than ever multiples are still in a range that's nowhere near dot-com bubbles so it's pretty strong but i think that is happening in sort of an isolated silo one particular sector of the economy it's it's dragging the the numbers up um outside of the rest of the economy which if you look at the common man average joe it seems like they're going into more and more debt and becoming more and more unable to pay that debt yeah no that's totally true i i think i think gdp is at best a flawed measure and at worst a manipulation of the real economy right for indian economists i mean i put this out like again a couple maybe it was like a year ago

or something but um i hope most people realize that if they undercount inflation which has been you know, very commonly attributed to the CPI, you know, changing the basket every 18 months on average the last 20 years, moving, moving items around, moving weights, right? Like adding in new stipulations and hedonic adjustments so that, you know, an iPhone with three cameras now gets a $200 discount because it has more value than the iPhone before with only two cameras on the back. With all this stuff going on, it means that when they report the GDP figure, they report it nominally, right? And then they discount it by inflation. And so if real inflation is 5%, so nominally GDP goes up by 5%, but real inflation, let's say is 6%, but they report it as

three, then in real terms, the economy shrink by 1%, but they report an increase of 2%. And they do that over and over and over and over again. And so the economy slowly gets weaker and slowly gets more fragile and slowly gets less foundationally based, right? And all these people lose jobs and they get erased from the jobs numbers because once you stop looking for 12 months, you're no longer considered unemployed. And it just slowly eases our economy to this kind of like twilight zone where everyone thinks it's going good because GDP is up, government spending is up, therefore the economy must be strong. But in real terms, It's obviously been stagnant or even slightly declining for the last 10 years.

And that was the subject of one of my pieces I wrote like three years ago. But I think that this manipulation, it's one of those things that you can't see in the numbers because the official numbers will never tell you, but you can see in just like daily observations, right? Just like personal anecdotes of seeing like, oh, this person used to earn this much in real purchasing power and now they earn a lot less or this person has to work less hours that this person has to work two jobs in order to afford their home now

where they didn't used to have to do that. Yeah, I think GDP, again, at best, it's a very flawed measure. And I think, especially with the government spending being included in it, just means that the government has more incentive to spend more so that GDP goes up and they can say the economy is doing well,

even though they're just getting further into debt. yeah when do you think we hit 40 trillion this year dude i mean dude we hit 39 trillion what last month like it was like six weeks ago maybe it was like i think it was early march um we're at 39 and we're adding like 12 billion a day or whatever so i mean i think within this year yeah we're at uh 39 million 238 billion right now okay yeah so we're already 23 of the way towards the next trillion so we'll we'll if since we're well maybe not this year since we're probably more than yeah we're more than 23 of the way through the year but early next year we'll hit 40 yeah um yeah which is way earlier than the cbo projected by the way the cbo was only saying that

we'd hit 40 trillion by like, you know, mid to late 2027, just a few years ago. And now it looks like it's going to be early 27, right, January, February, if those estimates are right. Yeah, it's always crazy looking at the US debt clock. And I think we should pull it up here because it's just, it's fascinating to look at. It's a bamboozlement of large numbers

that nobody could ever comprehend. That's the other thing, like 39 trillion. I think if you were to try to comprehend that, You literally can't. There's some... I saw a viral tweet the other day that was saying that there are more... There's now more US dollars

held as debt by the US Treasury than planets in our galaxy. They estimate that all planets, there's less than 39 trillion of them in our entire galaxy. Yeah, which is insane. We've got a US federal budget deficit of $1.6 trillion already going up.

Yeah, this is the state. How are you preparing for all this? Buying Bitcoin, man. Buying Bitcoin, making content, trying to get the word out there, and stacking. Sage advice, stay humble, StackSats, Roberto. Thank you for reaching out and catching up. It's timely, considering everything that's happened since we last caught up. And I think more to talk about as the year progresses.

Yeah, yeah. No, there's going to be... The Bank of Japan is kind of a clusterfuck. So there's always... It's a fire within a fire with like 15 people trying to throw gas on to throw it out. So there's inevitably going to be more stuff going on. And yeah, we'll catch up then. Yeah.

Well, I mean, I'll end it on this. I mean, that's what would signal to me is that things are going on is that nobody's talking about it. But if you look at everything, like where the yen's trading, I mean, obviously you're talking about it in others, but you don't see the mainstream financial press right now, people worrying about this. Yeah, true, true.

It's very niche. But, you know, I think following is, especially if you're interested in macro, following Japan is one of the key things you have to do to dictate on what's happening in the world. how markets are going to change moving forward yeah all right so if you enjoy this episode make sure you go to dollar endgame.substack.com and check out roberto's um youtube page as well doing analysis and all this and look out for another conversation at some point when uh

when the canary comes out of the coal mine on fire and uh we need to talk about it and figure out what's going on yep absolutely thanks marty i appreciate you having me on and thank you peace and love freaks okay thank you for listening to this episode of tftc if you've made it this far i imagine you got some value out of the episode if so please share it far and wide with your friends and family we're looking to get the word out there also wherever you're listening whether that's youtube apple spotify make sure you like and subscribe to the show and if you can leave a rating on the podcasting platforms that goes a long way last but not least if you want to get these episodes a day early and ad free make sure you download the fountain podcasting app

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