The Breakdown - The Breakdown Weekly Recap | March 28 2020

Episode Date: March 28, 2020

The full week's episode, in one convenient file.  Monday | Unlimited QE and Why Markets Can’t Price In COVID19 Tuesday | Cronyism, Zombie Companies and the True Cost of the Corona Crisis, Feat. Morgan Creek's Mark Yusko Wednesday | How the U.S.' $2 Trillion Stimulus Will Expose the Monetary System’s Flaws Thursday | How BlackRock Ended Up on Both Sides of the Bailout, Feat. Meltem Demirors Friday | From Corporate Socialism to Dying for the Dow: 7 Themes That Defined the Week  

Welcome back to the breakdown. An everyday analysis breaking down the most important stories in Bitcoin, crypto, and beyond, with your host, NLW. The breakdown is distributed by CoinDesk. Welcome back to the breakdown. It is Saturday, March 28th, and as with every Saturday, I am bringing you an extended edition of all of this week's episodes in one for your long walks around the same 10 feet. that you've been walking around for weeks of self-quarantine now.

But either way, this is a convenient format I found for a bunch of people. And I use it also to just kind of like reflect for myself on what we saw, what I learned. I was trying to think about where I've found myself the last few Fridays. I feel like each of the last couple Fridays I've had somewhat more optimism than I began the week with. Two Fridays ago, it was because for the first time, finally, President Trump was acknowledging the seriousness of coronavirus. We had seen the NBA shutdown. Tom Hanks got it, right? Like things shifted very quickly that Wednesday. And so I felt going into that weekend that at least there was some sense of urgency. Last week, I felt like, again, there was more engagement, right? We were getting more serious about

the closures that needed to happen. This Friday, I find myself much more worried than even I was at the beginning of the week. And I think that's for a couple reasons. The first is that, there has been a major narrative shift from this consensus around voluntary social distancing to a real politicizing of health outcomes on the one hand and economic outcomes on the other, right, as though these are somehow independent variables. And so what I mean by that is that you started to see at the beginning of the week that instead of, again, broad-based support for these closures, you had some people saying that the closures were going to do more harm to people than the disease actually would, and that they should effectively just throw open the gates and come what may.

And the language got incredibly callous at different points throughout the week where, you know, some people were even arguing that our grandparents would, you know, rather die than have us get into economic depression. I think that's obviously an incredibly dangerous narrative. It's an incredibly stupid narrative that doesn't at all understand how health outcomes work. You know, there is an important conversation to be had about how to reopen and reopen and reopen intelligently, right? It's got to be predicated on an incredible testing apparatus that were nowhere near. So for me, it just comes back to the base incompetency of our leaders, which has been the recurring theme from just day one, you know, across the political aisle,

across the countries, international institutions, you name it. If people could find a way to screw this up, they did. So I think that's part of what has me a little bit more glum. I think the other thing that's got me frustrated is that we saw finally, exactly what we expected, which was Wall Street getting enormous, enormous bailouts, while Main Street got kind of a piddling and a scolding that we wanted to make sure that they didn't get used to government handouts, as though the people who have been bailing out corporations for now more than a decade can talk about people getting addicted to handouts. There is a dependency culture.

That's what Mark Yusko called it on our podcast earlier this week. that is far, far more prevalent these days in the walls and halls of big corporations than it is, I believe, in the average American citizen. The epicenter of this, the most emblematic and frustrating symbol of this to me was when news came out that the Fed was tapping BlackRock to administer some of these corporate bond buying programs, which will likely end up with BlackRock purchasing their own assets on behalf of the government. you don't have to be Bernie Sanders to think that that's just fucked. So it's a strange time.

It's a strange week. There was certainly a lot to talk about. So on Monday, we talked through unlimited QE and the shift in Fed policy. On Tuesday, Mark Yusko from Morgan Creek was here, and we talked about cronyism and zombie companies and actually had like a civil conversation about the real costs of keeping everyone quarantine versus opening up and what that might look like. again, that's not a, we weren't trying to score political points, so it's a little bit different than the conversation that's happening elsewhere. On Wednesday, I had Michael Casey and Noel

Atchison back again to talk about the digital dollar that had appeared in all of these proposals for stimulus. And while it was quickly ripped out, that's a really interesting Overton window shift on that. On Thursday, Meltem, Demers and I got frustrated together about Black Rock and how they ended up on both sides of the bailout. And then on Friday, I basically did a recap of the key themes of the week, seven themes that define the week. So I hope that you enjoy this. More than anything, I hope that you are staying safe, both in terms of your physical beings and in terms of your economic well-being. It's a strange time. It's a hard time for everyone. And I appreciate you spending some of that time with me. So hope that you're good

wherever you are. We're back on Monday with another episode of The Breakdown. Peace. Welcome back to The Breakdown, an everyday analysis breaking down the most important stories in Bitcoin, crypto, and beyond, with your host, NLW. The Breakdown is distributed by CoinDesk. Welcome back to The Breakdown. It is Monday, March 23rd, and today we are talking about the era of unlimited QE. The Fed has double, triple, infinity down on its commitment to injecting liquidity into the markets, in ways that are unprecedented and unique, and everyone is trying to now wrap their head around. So what we're going to do today is actually do basically a hot take reaction show

looking at what people from FinTwit and Bitcoin Twitter had to say about this new action. But where I want to start is actually with two contrasting audio clips. The first comes from Travis Kling last fall on the Bitcoin macro podcast that we produced in advance of CoinDesk's Invest New York City event. In it, he talks about how the Fed is basically going to be forced to do ever more exotic forms of QE. So let's listen to that real quickly. But there are problems starting to show up here.

The global economic data is undoubtedly turning down right now. It's all turning down at the same time. It's all turning down at the same time because the whole world is now on this central bank trade and on this cheap money trade. But it's apparent that central banks are going to cut interest rates and juice QE into infinity to either prevent a recession or have the recession be as soft as possible. And those forms of quantitative using are going to be increasingly more exotic

because in the same way that, you know, if you do heroin long enough, then you got to keep taking a bigger and bigger shot of heroin, you need increasingly more exotic forms of QE to get a similar type of effect. Because if you're in Europe and you cut interest rates from from negative 40 bibs to negative 50 minutes, it just doesn't make that big of a difference. The key phrase there is the QE to infinity, right? They're going to juice QE to infinity. Well, now let's listen to Neil Kashgari, who is the president of the Federal Reserve Bank of Minneapolis last night on 60 minutes. Your ATM is safe. Your banks are safe. There's enough cash in the financial system, and there is an infinite amount of cash at the Federal Reserve.

We will do whatever we need to do to make sure that there's enough cash in the banking system. So there it is. QE Infinity is officially real. Now, to get a sense of how everyone reacted at first, I think you can look at Luke Kawa's tweet that says the Fed is almost out of AMMA. Oh, my God. And that's really how this felt, right? So, okay, what actually was announced?

What actually is happening? In effect, the Fed is now saying that the support that they announced last week where they were going to buy at least $500 billion of Treasury securities, so Treasury bonds and at least $200 billion in mortgage-backed securities, they've now said that that is an unlimited capacity. They can do as much of that as they need to. It really is literally unlimited. They also announced that it would begin purchasing a different type of mortgage-back security,

commercial mortgage-back security, issued by government-supported entities, which consists of debt on apartment buildings. So they're expanding as well what they can actually buy. Now, the Wall Street Journal makes the comparison to 2008 pretty bluntly. They say, by point of comparison, the Fed will buy more government-backed debt this week than it did during a controversial round of asset purchases called quantitative easing or QE that it undertook between November 2010 and June 2011 when it bought 600 billion in securities. So I want to go back to this point of expanding the types of assets that it's involved with. The Wall Street Journal again discussing two new lending facilities that are designed to effectively help corporate funding markets. So one is a lending facility for investment-grade companies that provide bridge financing for up to four years,

while a second is actually going to buy corporate bonds by U.S. companies and U.S. listed ETFs in the corporate bond market. So there's a huge new type of intervention, basically. Now, the sentiment all around FinTwit was basically summed up by this summary in Bianco research, which says, it is difficult to find a superlative to describe what the Fed announced this morning. At first blush, it looks like they are nationalizing financial markets, except for equities and high yield. This better work in stabilizing financial markets, and I want to actually continue with this summary because I think it reflects a lot of what I saw on just regular kind of financial

Twitter. So again, from Bianco Research, they say, the world has permanently changed. We are not going back. We are headed to a new reality. Stop thinking about mean reversion. Markets understand this, and they are rapidly repricing to a post-virus world at historic speed. This is causing all kinds of problems as the markets move on from the old pre-virus reality. The Fed is attempting to stop this repricing from going any further.

They are essentially announced that they are nationalizing the markets. They will set the price and provide the credit. They are hoping to stop the completion of the post-virus repricing. Will these new measures work? Can the Fed stop the entire financial world from repricing it to what it perceives as fair value? It is difficult, if not impossible, to know where the market sees fair value at this point. We believe these new Fed facilities will only work if the market is close to a perceived fair value level. If risk markets see still lower prices in a post-virus reality, then they will continue to head lower.

The world has changed. If the Fed is trying to stop the market from reflecting this, it will not work. If the markets are close to what it deems fair value on risk markets, perhaps the Fed's announcement this morning will prove helpful. Okay, so basically, this is arguing that the world has changed and the Fed is trying to stop it from changing, and it might not be able to. So the question is, how did the markets react? For that, let's turn it over to Eric Townsend, who's the host of the Macro Voices podcast and the head of a macro strategy hedge fund.

He says, news of arguably the biggest monetary intervention in world history broke just after 8 a.m. US Fed announced unlimited QE to combat crisis. By 9.45 a.m., both crude oil and S&P 500 had fully retraced the spike higher. The half-life of massive intervention is now less than two hours. A little later, Bloomberg's Joe Wisenthal wrote, stocks are really tanking here.

S&P down 4%. Sven Henrik wrote a few different tweets. He says, Now you know why Bullard went full Armageddon last night with his call for 30% unemployment and 50% drop in GDP. They are screaming fire in a movie theater of panicked people to be granted permission to do anything. What he's referring to is an interview with St. Louis Fed President, James Bullard, who predicted that the U.S. unemployment rate could hit 30% in the second quarter with an unprecedented 50% drop in GDP. So effectively, Sven is arguing that this was a way to scare

people into seeing this Fed action as necessary. Now, going back to Eric Townsend and the fact that the market has sold off this very temporary bump so fast, Sven says the Fed is now zero for 10. Every policy announcement has been sold. Fed to the market. We've thrown everything at this. Market to Fed, it's not enough. Ben Hunt, who was on the show last week or two weeks ago, I can't even remember at this point anymore, said when all is said and done, the Fed will own every conforming mortgage in the United States. Might as well go ahead and pull the trigger on nationalizing Fannie and Freddie. You can't unring this bell. The question then is, why are markets not reacting more? Why aren't they taking this incredible intervention as something that should make them feel better or more secure?

Well, I think Preston Pish gets to the point in a tweet that he had. He says, now the government is going to try and create a new all-time high in the bond and stock markets. All while everyone is at home and not working. The craziest part is people still think these are free and open markets. So the point of this, I think, is that there are a couple things that we don't have answers to, that are causing markets to be fundamentally unable to price in the economic impact of this whole crisis. The first is that we still haven't seen any action on the part of Congress and the Senate to pass relief in a major way, right? We don't know where the chips will fall in terms of support

for regular taxpaying citizens. We don't know where support will fall for corporations who are cast asunder by this whole thing. So that is one major unknown that is causing continued chaos, and that's something that has to come in terms of a fiscal response, you know, pass through the legislature, not just a Fed response. So that's part one. Part two is that we don't have clarity on an end in sight in terms of the actual public health issue in the containment of the virus. And this, I think, is especially scary because we have a situation where there is just so much mixed messaging going on, right? We have mixed messaging about the rights of course of treatment. We have different states who are fundamentally taking different approaches in terms of how serious they're saying it is with

their citizens. You have New York on the extreme end of seriousness and other states that are just basically continuing to blow it off, which creates this chaos, right, in terms of the actual public health issue. You have President Trump who's saying that after 15 days they need to reevaluate because the cure for the virus can't be worse than the virus itself. And that's a huge mixed signal because it doesn't seem clear to, I don't think, anyone right now, how we're going to get from where we are today to having the health dispersal issue solved in that time. Whatever you think about these issues, the reality is that there's no consistency, there's no clarity. And that is an extremely difficult situation for a market to react to, right, to have any

idea about how to price in. This is totally unprecedented. In fact, the longer that this goes, it just feels silly to compare it to 2008 or to 9-11 or to anything. This is a fundamentally new phenomenon. Really, I think, in the history of the world, on March 19th, Naval actually tweeted, for the first time in human history, the entire world is focused on one problem. This really is a truly unprecedented event

in not only our lifetimes, but I think in everyone's lifetimes. So we should expect it to be chaotic for markets to try to understand and price in. However, there are consequences for this action from the Fed. And that I think is what Bitcoiners are mostly focused on. Alex Kruger sums it up really simply. He says, short-term MMT, i.e. modern monetary theory, may have arrived. The devil is in the details. The Fed will be monetizing unlimited government bond issuance, quote, in the amounts needed to support

smooth market functioning. In other words, the government can now spend all at once. This Fed announcement laid the field for the government's $2 trillion stimulus package, currently under negotiations. This is how free money looks. But there is no such thing as a free lunch, is there? Society pays for this via inflation. The price to pay is inflation in the long run. Inflation expectations are popping, and the long end of the Treasury curves is already pricing it in. Meltem de Mirrors added, another day, another $2 trillion on the Senate floor. Mind you, less than 20% of this would go directly to American workers and taxpayers. The bulk would go to private corporations, banks, and hedge funds as a bail,

in. What's a couple trillion among friends? Money printer go burr. Money printer go burr, by the way, is most definitely the meme of the moment as it relates to Bitcoin. This is something we've talked about a bunch over the last couple weeks, but it really does make the point very crisply when Fiat is going through this hugely inflationary period at exactly the same time that Bitcoin is going through its halving. The Bitcoin Twitter account actually wrote, Fed announces unlimited QE. This is why Bitcoin was created. Now, of course, narratives do not a market make. And Larry Sermak was quick to point out that the decoupling narrative that had been kind of trying to come back into play along with this inflation fighting narrative was not necessarily reflected. In fact,

the last 30 days have been the most correlated that Bitcoin has ever been. And even as we saw over the last few hours, Bitcoin has moved pretty in sync with the markets. at least initially. It started to break out and break away a little bit again now, but I think that it's a good reminder that narratives are long-term phenomenon that we constantly add new short-term inputs to, but we should never let those short-term inputs totally make us go wild in terms of how much those narratives have shifted. Either way, I do think that as the unlimited QE idea comes in, there is going to be attention focused on Bitcoin for its sound money properties more than anything else, for the fact that it has this fixed supply, for the fact that there's this

having coming up where that emission is going to get cut in half. It just stands out as such a contrast as opposed to other things in the market. It's interesting, we're already seeing some anecdotal evidence of this. One I pointed out this morning is that for most of the podcasters that I know who are in the Bitcoin space, they've seen significant growth over the last couple months in their podcast downloads, while across the podcast industry, listens are down something like 20% on average across a huge array of different industries and spaces. And maybe that's the lack of commutes, maybe that's whatever, or maybe that's, you know, people who are interested in learning more about Bitcoin coming into the space.

Now, that's not scientific at all. It's just an interesting little bit of evidence. Another one came from Michael Casey, the chief content officer at CoinDesk. In response to a tweet of mine about this over the weekend, he said that that company had seen a pretty big uptick or noticeable uptick at least in its Bitcoin 101 resources. So there are these indicators that there is an interest growing in Bitcoin. And it seems understandable as the Fed gets into this unlimited money printing era. Ultimately, though, we've seen this pattern over the last.

few weeks where the beginning of the week are dominated by news in the markets, and the middle and back half of the week are dominated by news around the actual health crisis itself. So what I'm watching for this week, what's worrying me a little bit is a few things. I think we're seeing frustration at the inability of Congress to do anything. You're starting to see people who are actually voicing this incredible frustration. There was an interview on Farrow TV with Elizabeth Warren, where the host of the show actually said, stop coming on here to blame Republicans because on another network, they're blaming you. And the reality is that you're all to blame. You have to do this. You have to move things forward. So I think that you're seeing that sort of energy and frustration as this drags on.

And I think that that's going to start to spill over into people ignoring rules around lockdown. Because, again, not only do you have that, you have that non-action. You also have the inherent frustration about this. You have legitimate concerns around civil liberties, particularly as it relates to surveillance via technology. And you still have this desperate tightrope walk of getting people to do the social distancing thing to flatten the curve of the actual crisis, of the actual virus, that is, while not wanting to have to use enforcement actions around that. And that's a very difficult spot. If you start to see masses of people in different places, ignore those rules, you're going to see an uptick in enforcement. You're going to see even more state

power exerted and not just state power in terms of kind of surveillance or whatever, but state power in terms of actual violent force. And that scares me a lot. I'm worried that ignoring the rules becomes politicized, that you start to have a subsection of people ignore the rules or say it's fake on the basis of political party, rather than continuing to work to figure this out together. I think that simultaneously to all this, this is the week that we're going to start. to potentially see hospitals overwhelmed, just, again, based on math. Now, in some ways, I think that it's lucky in a way that New York is the farthest out in front of this because I think in a lot of ways it has also had the most aggressive response to it.

It's got FEMA up here transforming hotels into hospitals and things like that. But the point of all of this is that we're talking about this kind of inflationary market narrative while also still in the midst of this hugely fundamentally world-shaping event that is not going anywhere. So if you're wondering why markets are having a hard time pricing it in, it's because we are in totally uncharted territory. It's not just that we don't remember other crazy things. It's that there is no collective memory to draw on for anything like this. So we're just going to have to keep waiting and seeing. All I can offer is that I will be here to break it down every day.

tomorrow. Mark Yusko from Morgan Creek is joining the podcast. It should be a really good one. Later in the week, I have some other really exciting guests. So keep listening, keep subscribing, share this out on Twitter at NLW. I appreciate you listening. I hope you're staying safe. I will catch you tomorrow. Welcome back to The Breakdown, an everyday analysis breaking down the most important stories in Bitcoin, crypto and beyond with your host, NLW. The Breakdown is distributed by CoinDiv. Welcome back to The Breakdown. It is Tuesday, March 24th. And today, guys, I got to tell you,

this is a hell of an episode. My guest today is Mark Yusko. Mark is the founder of Morgan Creek Capital Management and has been investing in markets for decades, has an extremely wide-ranging view on the world. And today, we just let it rip. We talk about why Bitcoin fell with stocks, why there is a difference between price and value, why stocks are of fundamentally manipulated assets, why buyback should be illegal, why cronyism is not capitalism, the cost of propping up zombie companies. We get into the extremely important and painful and all-to-politicized conversation about the cure being worse than the disease and whether that's the case now. We talk about the cost of a zero-risk tolerance in society. We talk

importantly about the polarization of health versus economics as though there wasn't solutions available that didn't have those two things as mutually exclusive. We talk about why Mark thinks there should be a market holiday because it can't price anything right now. We talk about why Bitcoin is the only free market, the last free market. We talk even on the granular level about why big market announcements happen on Sunday. We talk about the future and why we're headed to debt Jubilee, and we talk about why Mark thinks there is a non-zero probability that President Trump tries to cancel the election. There is no one single overarching theme, although I think that there is a palpable frustration that you'll hear from both of us around the trying to box

everything into one extreme reaction or another extreme counter reaction, and why the over-politicization of everything and the scorecard nature of everything for. from our politics to our markets, leads us to these types of scenarios inevitably. In fact, inevitability is a big theme, the inevitability that we were going to get to QE infinity. So this is, I think, one of the most wide-ranging, important episodes I've done. I know that you're going to enjoy it. So without further ado, let's dig in. Now, as always, caveat with long interviews, we edit these very, very minimally to capture the feel and flare of the whole conversation. But that said, let's dive in.

All right, Mark Yusko, thank you so much for joining today. No, Nathaniel, thanks for having me. It's great to chat this morning. Yeah, so we were just discussing this. You know, I told you I was listening to your podcast with David Nage on Base Layer, which was just on March 12th, right? So like 12 days ago. And it literally feels like 100 years since then in terms of how it got all.

It does feel like 100 years ago. And it's so eerie the world in which we're living, and which time is kind of standing still. And you don't see people on the streets. You don't see people driving around. You know, we're still a little bit active here in North Carolina. We're not on full lockdown. But it's a very strange time.

Yeah. So I honestly don't even know where to start. But I was writing down. I was thinking through like what's changed since that conversation. So March 12th was obviously, if you're a Bitcoiner, it's the day that Bitcoin fell from 8,000 to 6. and then the evening dropped to like 3,900 for a time before coming back, right? So that's a day that'll live in Bitcoin infamy. It was obviously a day that was reflective of the broader

market conditions. And since then, we've had a few different things have happened. You've had the introduction of first limited and now unlimited QE. You've had a line of corporations lining up for bailouts and buybacks becoming the boogeyman of this crisis. You've had the complete inability for Congress to do anything in terms of both the Main Street need or the corporate need. You've had the politicization, I think, of the discussion of what's the right way to do things. And as part and parcel of that, the rise just recently in the last couple days of a reopen the economy narrative, which is not, I don't think, informed much by real policy, but just people being sick of being stuck.

And then, again, if you're in the Bitcoin world, you have a slight since that low, you have the start of some science of decoupling and obviously this new narrative emerging around money printer go burr. So, I mean, in some ways, the question is like, where do we even begin? You know, what I'm in mind right now? Like, you know, I know that you've been thinking through all these things, but what stands out about the moment that we're in right at this moment, I guess? No, look, you summed it up so perfectly that this has been just a cacophony of things that are somewhat related, but are so, so discordant in that people are unhappy about things.

They are opportunistic about things. I think the thing that has me the most frustrated is really the lack of understanding or appreciation or just the unwillingness to accept that, you know, the actions that we as a country and as a world have taken in response to the threat. to this virus threat may and probably will be worse than the threat itself. And nobody wants to talk about that and nobody wants to say it out loud and I'll say it out loud because what people aren't taking account of, I mean, the Bitcoin drop 12 days ago was a great example.

You know, I had all these people screaming, you know, what's going on? I thought Bitcoin is a safe haven. I'm like, guys, it is a safe haven as a store of value as an ultimate currency. for the long term. Gold has been a currency for 5,000 years, one ounce buys a fine man suit. You know, 875 paper currencies, three quarters of them have disappeared.

The pound sterling, 374 years ago, one pound note got you one pound sterling, a pound of sterling silver. Today it costs 374 pounds of sterling silver. So paper currencies devalue and go away, and real money, sound money, stays forever. But, but, but we're young, in Bitcoin's life and Bitcoin is owned by two types of people, maybe more than two, but really two.

One is hodlers, right? People who own it, believe in it, want it to be their store of value. And then speculators who are like, hey, this thing moves. I like things that move. I'm going to trade it. And the problem is people bought in sometime after the low back at 3100 in December 18. And they didn't get it right at the bottom. They got it sometime, the $4,000, $5,000. whenever it was. And they rode it up and we had the big rally up through 12,000. And then it starts to roll over again. Be like, wait a second, wait a second. Well, those were weak hands and some of them started to sell. But when this crisis hit and stocks started being liquidated and hedge funds started being liquidated and, you know, individuals started getting margin calls. In a margin call

or in a liquidation, you don't get to sell what you want to sell. You have to sell what you have to sell. You have to sell what's liquid. And there were a lot of hedge funds and a lot of individuals, individual investors, that bought Bitcoin, not really understanding or caring what it was or what it is, but they just wanted it because it was moving. And so the fact that it fell dramatically when everything was getting liquidated should not have been a surprise to anyone. But again, I think a lot of of people in the Bitcoin space, you know, just by definition, I mean, not by definition, but just by happens, it happened to be younger, happened to not have a lot of experience in the markets. And so they weren't there in the 2008 liquidations. They weren't there in the 2002 liquidations. They weren't there in the 1994 liquidations or the 1987, you know, unwinding of portfolio insurance. So that's a long answer. I actually don't do short very well. Nathaniel. Me neither.

Cancelling my next meetings, right? Yeah, exactly. But, you know, I think you bring up so many good points. So one was, you know, Bitcoin is still a safe haven. It doesn't change. The volatility of the price doesn't change the essential nature of the asset. And that's the thing that gets lost in both bull markets and bear markets. You know, people look at Boeing and they say, oh, you know, this was a $400 stock, you know,

just a couple months ago, and now it's $100 and I should buy it. Like, well, no, the price of the stock doesn't reflect the nature of the underlying business. The price of the stock is just what two people will buy and sell something for 100 shares on an exchange. And the value of a company is the value of a company or the value of an asset is the value of an asset. But the price is just an ephemeral reflection of supply in demand. And so when Boeing was going up, it was going up because people saw it going up. And so they bought it and they didn't really understand the value. When the max started crashing, the 737 Macs started crashing. And then they realized, huh, it's an engineering problem. Oh, wait a minute. It got

through approval, government approval, even though it has this engineering problem that causes crashes. How did they do that? Oh, well, they paid a lot of money into lobbying. Oh, well, maybe that's worth less. Maybe the value of that business is lower. And, you know, yeah, maybe they're going to get a bailout that probably are going to get a bailout because they're, you know, they pay a lot of money at the lobbying. And, you know, bailouts, buybacks, you said it. They are the pariah of this cycle. You know, the idea that companies have been manipulating their stock price. You know, again, people talk about Bitcoin being manipulated. Stocks have been manipulated like crazy, like never in my career. I have white hair to prove that I'm old.

It's been a long time coming to get to this point where the stock market is, I tweeted about it yesterday. It's just a casino. And they should close the casino because there's no price discovery going on. We've got financial engineering going on. You got companies borrowing money at basically zero because the Fed has put interest rates to zero, borrowing money to buy back their shares, which financially engineers their earnings per share, and then the sheeple, you know, buy the stock because it's moving and they don't do the math. And my favorite is Apple, right? Apple, you know, went up almost 100% last year.

But their earnings were the same as 2015. How can that be? Well, their earnings per share went up because they bought back stock. Well, why did they buy back stock? Well, because Warren Buffett bought the stock, and he likes to get. at buybacks and dividends because it juices his returns in the levered structure with no taxes. So it's all interrelated. And we're at this very interesting junction where finally with this, you know, Corona crash triggering some realization of way, wait a minute, maybe I need to look at valuation.

Maybe I need to look at underlying cash flow. Maybe I need to look at things that have a durable franchise and just aren't speculative bubbles. And there are so, so many examples, companies that were selling at 20, 30, 40, 50 times revenues. Forget earnings. You know, my favorite to pick on was Beyond Meat. And full disclosure, like, we made a lot of money on Beyond Meat. We were early venture investors. We sold as soon as the lockup ended.

And, you know, we actually made 50 times. our money, which is pretty amazing. That's awesome. But the company was selling at over 50 times sales when it got into the $200 price. And, you know, I think it could fall from here. I think he's down in the 50s. I think it could fall 75% from here and still be overvalued. Crazy. It's funny, actually, Beyond Meat Story. One of the things that we've noticed a lot, We have a mixed dietary household, and so Beyond Meat's are around a lot. And when people started to get real nervous a couple weeks ago around here and the grocery stores started to get kind of cleaned out, there was still breezers of Beyond Meat, which I think

probably reflects that we live in an older town, you know, that's outside of the city more than anything fundamental, but it was a funny little note. I want to go back to Boeing for just a second. I think that there's something interesting about, you know, the buyback conversation. is is interesting to me because it has, it's not totally bipartisan per se, but it is one where there are, you're seeing, you know, folks, you know, prominent right commentators rallying against this as well as kind of far left folks. And I think one thing that makes Boeing so interesting about it is that in most conversations about buybacks, it's largely a financial engineering

question and the dynamics aren't necessarily clear to people. And the cost the cost and the consequences aren't clear. Whereas with Boeing, you had planes crash because of presumably or potentially a lack of, you know, a lack of focus on engineering on R&D. And so people get this contrast rightly or wrongly where if this money hadn't gone to this financial engineering thing, it would have gone into this other thing and the difference is, you know, human lives. And I think that that's a usually when it comes to these sort of boogeyman,

you need some crystallizing force or image, right, that people can hold on to that's not, that's not intellectualized in a way. Yeah, look, I again, I think it's perfectly summarized and, you know, I love how you've done your background research on, on thinking through the great questions to talk about. And, you know, you think about this exactly as you described, you know, buybacks in and of themselves are not completely evil. Now, you know, I'm actually not one of these people to think, oh, they're the same as dividends. They're actually not. And people forget that up until 1982, buybacks were illegal. They were considered insider trading. I actually still believe that they are and they should be illegal again. If you want to dividend out cash to shareholders, that's fine. But buying back stock is very different. I don't want to go into all the details of how it's different. But it's not the same as sending cash back to shareholders.

only the people that that sell the shares benefit from a buyback. So different. All shareholders get a dividend. So ultimately, I think you said it very well in that had the money been allocated to higher and better use, which would have been R&D and safety testing, then we'd have a much better outcome. But this is true across the whole series of, you know, you said people have their handout begging for assistance because we've, we've had this disruption, right? We've had this disruption. And, you know, I'd love to spend some time talking about the disruption. And like said, I think the cure is way worse than the disease. And I'm not saying that the disease isn't a bad thing. It is. But the cure is way worse. And I actually believe more people are going to be

harmed, maybe even pass away from the cure, then the disease over the long term. When we talk about the impact of bankruptcies and homelessness and all kinds of things that are going to happen because of this overreaction. But if you think of just buybacks and bailouts, if you look at the airline industry, the cruise industry, restaurant industry, everybody is now saying, government, give me money to help me. Like, well, whoa, whoa, wait a second. Okay.

Give you money, how? Well, give me money so that my stock price goes up and then everybody wins. Like, well, no, no, not everybody wins. Because again, your stock price wouldn't have gone down as much had you had money for a rainy day to be able to combat some of the impact of what's going on to in order to, you know, get through the crisis. We've had temporal crisis before. After 9-11, people didn't travel, and stocks came back without a bailout. In the great global financial crisis, we did go to the mat for a couple of the automakers, GM in particular, but we did it in a way that the old equity got wiped out. And that's the way it should be, is equity is a contingent claim. It has

risks. You know, debt is a contractual claim. You must get paid back or you can sue. Equity is a contingent claim. Therefore, it has more risk and you get a higher return. That's why equity investors make more money over the long term than bond investors. And the idea that we're going to socialize that risk and bail everybody out, I think is insane because it breaks, then what you do is you break down the entire financial system that we all believe in, which is that is that is if you take intelligent risk, you get compensated for those risks. When you take unintelligent risk or you do unintelligent things, you get penalized. But if you socialize risk and make everybody pay back those that lost money, as if losing money is a bad thing, I just think it's a very

slippery slope. And I think we've been on that slippery slope for a while in that we've kept the stock market elevated by doing, I think, ill-advised things with interest rates. I think, you know, cutting interest rates as quickly as we did back in 2015, 16, 17 was ill-advised. I think we should have been, you know, raising rates and people's, oh, but we would have caused a recession. What's wrong with recessions? Resessions are actually good. They cleanse the system. We get rid of the weak companies. That's how capitalism is supposed to work, right? We're supposed to allow the weak to go away. We're supposed to encourage the strong to survive. We're supposed to give the tools for all companies to compete and build markets. Instead, what we've got is cronyism today,

whereas if you're well connected to the president or the administration, you're going to get a handout and you're going to continue to exist. And the stat I keep going to is zombie companies. 38% of the S&P 1500, so the biggest 1500 companies, 38% can't service their debt with their current EBITDA. Forget paying back their debt. They could never do that. But they can't even service their debt. So interest rates have to stay low.

They have to be zero. And they're going to be zero for a long time because of what I talked to about is the killer D's demographics, bad demographics, too many 65 to 80s. 85-year-old people who don't spend a lot. They like bonds, not equities. Then you have too much debt. And when you have too much debt, you can't afford to service it. So you've got to have low interest rates. And then we have deflation. And deflation comes from, you know, basically competition is one, but also just an abundance of caution and hoarding. And again, that's why I think the response to the crisis is going to cause a more deflationary environment.

because people are going to hoard and not spend. So it's really interesting, the zombie companies idea. It's from a different context, but Paul Graham, you know, who's the founder of Y Combinator, has a famous post where he called companies he says are either default alive or default dead. And default dead doesn't mean they don't have runway. It means that there's no plausible path from where they are to either getting to profitability or getting to another raise, right? And those companies, if you're default dead, the best thing you can do often is pack it up, you know, return what you have left to investors.

This is unbelievably painful. I've been in some, I have dragged default dead companies along as a zombie for way too long. You know, it's very difficult if you're the entrepreneur in that situation. But I do think that, you know, there's a comparativeness here in terms of like that doesn't, it doesn't serve anyone. It just sucks resources out of the system in terms of talent in terms of, I mean, by any dimension, right? And I think that, you know, so let's actually shift into this, the dynamics of this catastrophe that we're dealing with now as you requested. Because from where I'm sitting, there's this fascinating thing happening. And this is, I think, why we can't take our eyes off this thing and why it is so all encompassing, is that you have a cascade of bad decision making in a localized crisis, which happens to be a global crisis, but in a specific crisis, let's say. that are coming into contact with larger structural heavings of the world,

both in terms of the way that the economic system has been post-2008. And I think, in this one we're not talking as much yet about, but also in terms of the way that the global political order has been shifting for really more like the last 30 years, right? And because of that, this coronavirus has actually set off a huge array of additional crises. but let's start, I guess, with the specific response, right? And this cure worse than the disease. From where I'm sit, like, we basically had this window probably

when we saw that the supply chain capital of the world was shut down to maybe try to get out ahead of it, right? Instead, Marcus didn't react. Instead, they went to all-time highs, right? There's hundreds of millions, tens of millions or hundreds of millions, whatever statistics you want to believe, but people locked down. And we're printing all-time highs over here. Meanwhile, we get to a point, we deny, deny, deny, deny.

until we shift literally overnight two Wednesdays ago from denial to terror in a single night. And that was the day, actually, it was right before you talked to David. That was that same night in a half an hour period, Trump finally said this is a thing. Tom Hanks came out as having it and the NBA shut down in literally a 30-minute period. And so you go from denial to terror in half an hour and you can't not get an overreaction. And what's been missing in this whole conversation to me is specificity, right? Like, we're just, we're obsessed with the scorecard of, pick your scorecard, the scorecard of the stock markets, the scorecard of deaths, you know, the scorecard of whatever, rather than saying, like, what does it look like to manage this? And because of that terror, everything has been painted with huge broad brushstrokes.

And unfortunately, I think that you can't, what we're seeing now is that it's, It's very hard to get people to fundamentally change their lives and shut things down this way, A, without conviction, that it's the right approach, and B, without a plan for how you reopen it. And instead, you're seeing neither in my fear is that what's going to happen is that we will have made things worse on literally every dimension for lack of just picking the right strategy intentionally. Oh, no, look, so many great points in that summary. and, you know, I think the really important point is that shift from, you know, denial to terror is nonsensical. But unfortunately, it's reflective of the lack of leadership that we have in this country and reflective of the individual spokesperson at the top. You know, our tweeter in chief, you know, his bombastic approach to everything is this all or nothing, in or out.

you know, all caps. And so for him to be in total denial up to that point, and then to flip-flop and then say, oh, I've always thought it was a crisis. No, no, there's video of your total denial, right? So I think lack of leadership, lack of understanding of how economics work is a big problem. But the real issue for me is that suddenly,

We went from the normal operating process of life, which is in life, there are risks. Every day, right, there are risks that we confront. For example, I got in my car this morning and drove to work. Now, it's not a very far drive. It's about four miles. It takes me about 11 minutes. But every single day, 3,800 people die in car crashes. every single day. Now, I hope I'm not one of them, obviously, but I could have chosen that,

well, I want to have zero probability of getting in a car crash, so I'm just not going to get in a car. Then I have zero probability to get in a car crash. But a zero tolerance standard doesn't make any sense. And that's actually what happened with self-driving vehicles, right? We're going down the path of self-driving vehicles. We're doing some testing. And then there was that one death where the woman darted out from between cars late at night, dressed in black. and she gets hit by a self-driving car. And everybody says, oh, we have to stop. Like, well, wait a second.

Why does self-driving's standard zero deaths and regular driving is 3,800 deaths? That just doesn't make any sense. And I think the same thing's true here is, you know, we have many viruses circulating throughout the world at any one time. And but we don't have a scoreboard. I think your analogy of the scoreboard is exactly right, right? We've scoreboardized the stock market in the past three years since, you know, again,

Tweeter in chief, all he cares about is stock market, stock market, stock market. Although he's not tweeting about it now that it's lower than when he took office, but we won't go there. But here's the crazy thing is by scoreboardizing coronavirus, now we've created this fear and terror that perpetuates and builds on itself. again, one, because people are looking at bad data, right? We know that the data is bad. We know that there's not universal testing. We know that some of the tests have false positives or even false negatives. We know that the deaths are being miscoded in some areas, that there are comorbidity factors. We know that the data is bad. So why are we hanging on every little permutation of the data to stoke this fear. And the one that gets me really crazy is we quote total cases. So, oh, the total cases are up. Well, no, no, no, but a third of those cases have resolved either with a death or with a recovery. And oh, by the way, the recoveries are way bigger than the deaths. So, but the fear is,

is really palpable. And so our reaction to that terror, and I love your word terror, our reaction, our reaction to that terror was had to be, as you said, overreact. So we overreact and we said, all right, we're shutting everything down. Without one thought of what does that mean? What does it mean that an average restaurant has 17 days of cash? What does it mean? I got really angry at this because I was supposed to be going to the ACC tournament on that Friday when everything started to get shut down. And I watched the guy from the NBA get up and cancel the season. They was feeling like, you know, I'm such a good person. I'm such a social justice warrior. I'm like, whoa, whoa, whoa, what about all those vendors who rely on selling all those hot dogs and hamburgers and

Coca-Cola's and T-shirts and Choshkis? What are they going to do with all that inventory? they don't have any money now and they can't pay their bills and they can't feed their kids and how are they going to survive? No one talked about that. No one talked about the impact of those people or that a restaurant, if you close a restaurant and don't let people go to the restaurants, that in 16, 17 days, most of them will be out of money. They won't be able to buy new inventory. They won't be. And so I just think that the lack of thought of what it means, means to shut down a system for a zero tolerance. And zero tolerance was impossible because, as you said, we waited too long to make the decision. Had we closed the borders, which I don't like

the idea, but had we done that right when we knew that there was a problem in China and we didn't let anybody come into Seattle. I grew up in Seattle. My brother was born at the hospital where the first person passed away. I mean, it's kind of freaky to think, you know, Kirkland, Washington, where I grew up was the epicenter of the crisis. But had we not let people come in from Wuhan, we probably could have nipped it in the bud. But we didn't do that. So then we said, well, okay, we're just going to lock everybody down. I heard a great thing this morning.

I know I'm rambling, but I heard a great thing this morning. You know, we closed schools, you know, colleges and schools, and we sent everybody home. Well, no one thought about the fact that the young, population has lower likelihood of getting the disease. They have higher resistance to the disease. And we had isolated all those young people together where, yeah, maybe they would have, more people would have contracted disease, but they have better defenses. But instead, we sent them home to their parents and their grandparents who now are actually having really bad complications and some are dying. That was an unintended consequence that nobody thought about.

And so I'm with you. There's no plan and there's no plan to get out of this. Yet every time we do something in response to the crisis, like we're going to pass this big bill, we're going to give away money to cronies who spend a lot of money lobbying. I'm not sure that's going to fix anything. I know it's not going to increase demand. And, you know, sending money to individuals, okay, that has. some potential to increase demand, except most people are going to use that money to, you know, survive and to pay the rent that is now overdue and to, you know, try to buy some food.

And maybe, you know, unfortunately, they're going to have to pay down some debt because everybody's over indebted. So I don't know that it's going to be enough to get us back to normal. Yeah, it's not George Bush trying to get us to buy an extra TV with a stimulus check. Exactly. I mean. I think the thing that's so frustrating to me, is that because of the lack of a real sincere conversation, like that starts with leadership and, you know, from the top down, but across so many different dimensions, we're creating a situation, too,

where we're painting the economic loss and the health loss as somehow mutually exclusive. And you're either on team health outcomes or team economic outcomes, which is total bullshit. It forces everyone into a camp where you're either, you don't care about people dying or you don't care about the economy, which is so ludicrous. And by the way, the scary thing is because everything in the structure of our media and especially our politics is designed to turn things into a team competition.

What's scaring me right now is I'm watching the rise of the reopen the economy narrative, not from an intelligent like, hey, here's a plan, right? We're watching now what's going on in Singapore and Taiwan. We're going to make sure that every building has thermometers and that's the new thing. We're going to phase this in where every assisted living facility still stays out. There are millions of ways to be specific about this. And instead, it's just, well, that was really annoying that we stayed home for what amounts to a week. I mean, I'm in New York, so I'm in the place that's been in this way for the longest at this point.

And people are just bored with it. So now we're going to shift entirely. That's just as stupid a reaction, you know. And especially because, again, going back to your point, I think, original. about the what the there's no specifics like new diseases are scary but this one we're learning a lot about really fast and really the issue in so many ways is hospital capacity the capacity of our medical system to deal with it it could have been a good decision a month ago to say let's take those 15 days or three weeks or whatever so that we can deploy the army corps of engineers across the

country to set up field hospitals with ICU beds you know and flip the ventilator machine Like, you know, there are ways that it could have been, because that's really the issue here is that over what it does to that death rate if the medical system gets over, it gets compromised, basically. But that's not the conversation we're having. It's all reactive between big broad brushstrokes. Look, again, so, so many great points. And I try to get to them. But the one, the point you make about the polarization is so frightening to me. I mean, I had to step into a conversation. between actually two really good friends who were going at this. And it did devolve into a Twitter debate of life versus back to work. And oh, you don't care about deaths. No, that's not what we said at all.

We're saying that everything that we do in the world has risks. And there are certain risks that are associated with everything from, viruses to driving around to, you know, industrial accidents. I mean, there are all kinds of risks that we face. And to say that you don't want the cure, you know, the clamp down on stopping the economic flywheel to be worse and end up with more deaths and homelessness and bankruptcies and economic carnage than the deaths from the disease itself is not saying that you don't value human life, which is how this devolved. But the echo chamber problem that you talk about is real. And what I don't understand, and this is true about everything, is just because someone has a different opinion than

yours doesn't make them a bad person. And in fact, you may not have the truth. They may not have the truth. Maybe the truth is somewhere in between, or maybe, imagine the other person has the truth and you have an opinion that's wrong. I mean, it does happen. We're all wrong sometimes. But debate and dialogue should be civil and they should be engaging and it should be encouraged. And it shouldn't be this, oh, that person is on the left or that person is on the right. There's nothing to do with left or right or in or out. It has to do with let's seek truth through dialogue and debate. And this discussion of, oh, well, again, we want zero deaths. Well, yeah, that would be great.

That's not going to happen. And this issue of your point on overloading the health care system, that's exactly. We saw that in the data in China, right? Outside of Wuhan, outside of Hubert, we had less than a 1% CFR case fatality rate. Inside where they did run out of beds and they were putting people to. close to each other and they made some errors. You know, we had a 4% death rate. And so they were seized on the 4% said, oh, this is a terrible, awful disease.

Well, now what we're finding is absent a healthcare crisis, it really is more like the flu than not. It has a higher spread rate than SARS and MERS, both of which had really bad, you know, death rates. I mean, SARS was 9%. MERS was a crazy 34%. One out of three people was almost as bad as Ebola at 50%. percent. So, in fact, I've been watching the Jack Ryan series and it just freaks me out

because they have all the stuff with Ebola and all these other things. But this idea that, again, we're keying on the wrong data and we're being afraid of things that might not be there. But to your point, we could set up mass units, you know, mobile ambulatory centers and help solve the health care issue. Or, you know, the patients, while they're still not in critical condition, are mobile, right? Literally, if we had an epidemic in New York and we had hospital beds and ventilators in West Virginia because they only have like 12 cases, forget they have no deaths, but they only have 12 cases, why couldn't we put people on an airplane and move them?

Because they're not in critical condition yet. And I don't know if that's feasible or not, but it seems like a plan or how about we pack up some of the ventilators and move them to New York. Maybe do that. So there are solutions other than just be forced into this crisis. And yet the numbers, at least in the United States, don't add up. We have 160,000 ventilators in the United States. I think there's 62,000 that are one type and then the rest are a little less good type.

But 62,000 is still a really big number. relative to one, even the number of hospitalized cases at this point and the number of ICU required cases. So unlike that little town in northern Italy and unlike Wuhan, I don't see the same risk factor at this point. And everybody says, oh, but what about the exponential growth? Well, again, look at the data where we have the most data. you know, Singapore, Taiwan, Hong Kong, China, Japan, all of those did bend the curve. And maybe they didn't even bend the curve. And clearly, I think they did.

But the curve gets bent with time. This type of virus, a novel coronavirus, doesn't live forever. It's not like HIV. It doesn't, you know, exist forever. It is seasonal. And whether it lasts just this season or whether it, you know, gets a rebirth in the fall, we don't know yet. But if you look at novel coronaviruses in history, they are seasonal. And, you know, unless this is a biological weapon, which I don't believe.

But if it were, then all bets are off. But if it's not, and it's just a novel coronavirus that comes from a bat biting a pangolin and someone ate the pangolin, which I don't understand why anyone would eat a pangolin, actually. But I don't know. It's a long conversation and a lot of permutations on it. I think the frustrating thing is that the window where you could have a reasonable position of basically everything that you just stated, especially at the beginning as it relates to economic policy, unfortunately, what I see now is there is a set of basically the political right in America that is now using this. And you're no longer going to have the ability for people on the left, right, or middle to have the opinion about reopening the economy. It's just going to get polarized into a right thing, right?

When you have the lieutenant governor of Texas going on TV and saying that grandparents would die so that the economy doesn't open, like your calm conversation and structured debate goes out the window. And it's the same, the machine of political discourse in this country just seats everything. But it's a really, really, really important problem and one where the longer we delay, the worse it's going to be. Right. And we're having this conversation here Tuesday morning and everybody's excited because the futures are up and there's been an announcement of the plan. And there's going to be a big boom just like we do every Tuesday. Why Tuesday? It's going to call it turn around Tuesday.

It's weirdly specific how this happens. Fed takes action Sunday. at Monday night. It doesn't really do what it wants. Somehow Tuesday, it gets more exciting again. And then people get scared again by Thursday, Friday. Yeah, it's really kind of interesting. And I have lots of thoughts about that, like the plunge protection team and, you know, the dark pools and all that good stuff. But at the end of the day, that hasn't been enough. And you can see it, right? You can see it every morning from 10 o'clock to 1130, stock market goes up every single morning. why? Well, somebody happens to be buying from 10 o'clock to 1130 and I don't know why they only work an

hour and a half, but that's what happens. And then we get some fear in the afternoon, mid-afternoon, and then from two to three, you know, buybacks are allowed to happen. And there have been less of those, but there's still been some positive pressure. And then, you know, starting at 3.30, the smart money trades. And that's the big institutional money. And then the last minute of the day is the ETFs. And so, you know, yesterday we had the big rally in the last 20 minutes trying to get us back from the, you know, down five to down three. But the problem was the last tick was pretty ugly, right? The ETFs were all selling. And they always doing that last minute.

So, I mean, I was trained in that last minute. Sometimes they're up, sometimes they're down. But they were down big last night. So now we're going to have the inverse. And we're going to have this relief rally and, you know, short covering. And a lot of people have turned and gotten short. But my problem, and the reason I've actually been talking about why I think they should have taken a market holiday and should take a market holiday is you got, you know, human beings been banned from the trading floors. You got, you know, firms that have skeleton crews up.

And so we're basically running with not full teams allocated to the markets. And so the markets were already having trouble with price discovery before this happened. Now I think it really has trouble with price discovery. And, you know, up nine, down six, up four, down seven. You know, that's not normal. And so taking... That's Bitcoin. Yeah, exactly.

That is Bitcoin. All right. There's Bitcoin volatility. And yet, you know, here we are with Bitcoin, you know, recovering nicely from its nadir when people are getting liquidated. and now the hoddlers are back and the people who believe in the long-term story are nibbling. And that is interesting. You know, Bitcoin is the only free market.

It's the last free market. And what I mean by that is, you know, there's no Fed to intervene. You know, there's no one to, there's no dark pools. There's no plunge protection team. You know, it's interesting that every Sunday they make these big announcements. So why are they always on Sunday? Why are the announcements always on Sunday? Bear Stearns was on Sunday.

Lehman was on Sunday. You know, Washington Mutual was on Sunday. And now this time, you know, you got the big announcement by the, you know, Fed cutting rates before the meeting on Sunday. Why is it always Sunday? Well, every Sunday the Council on Economic Stability meets and who is that? Well, it's the Secretary of the Treasury, Secretary of the President of Fed, and the presidents of the four big banks, J.P. Morgan City, Goldman Sachs and Morgan Stanley. And they meet, you know, at the New York Fed and they make these big decisions. And they do them on Sunday because, you know, then they can act ahead of everybody.

else. But we know that there is this pool of capital out there, whether it's driven by the banks or whether it's driven by the government, it doesn't really matter, but we know it's out there. We know that it is functioning to try to keep the markets more stable because they have this goal of stability. Now, the Council on Economic Stability was formed after the 87 crash, so in the, you know, January, February of 88, and it's been functioning really ever since. and they just want to avoid the type of big down drafts that occur in open and free markets. And yet, you know, Bitcoin had that big drop that you mentioned at the top of the pod. You know, two weeks ago, well, yeah, because there was no one there to buy it other than the buyers and sellers, the actual participants in the market.

And free markets are really good. I like free markets. I think they're the best arbiters of value. and it would be nice if we would allow the stock markets globally to go back to a time when they were free again. We could have some price discovery. So it's, you know, 43 minutes into a nominally Bitcoin and Markets podcast. And I haven't been asked you what you, what was your reaction to the unlimited QE, right?

The unlimitization of QE. Was this just inevitable in your mind? Absolutely. Yeah. Look, I even have a hashtag. I'm big on my hashtags and everybody gets mad at me. You don't even understand how hashtags work. I'm like, no, you don't understand.

At least you make them up. I like that you make them up rather than like you're not looking for trending. You're trying to create the trend, right? Well, no, no, I don't even want to create the trend. And that's what people say. You're so arrogant. No, they're a virtual filing system for me. I can do a search on one of my hashtags and I can get every tweet that I've done related

to that topic and I can go back and review really easily what I think about. about second that emotion or, you know, my one is QE infinity, right? Or QE forever. I've been doing hashtag QE number forever for forever for a couple of years. And look, once you start QE, you can't stop. And how do I know that? Well, because I've seen the movie before. Japan is 11 years ahead of the United States demographically. So whatever happens in Japan, 11 years later it happens in the United States. So, you know, there are market crashed in 1989, 11 years later, 2000, our market crashes. So their debt got downgraded in 1996, our debt got downgraded in 2007. So 11 years later, the same thing happens. And so what happened

in 2007 is the Bank of Japan owned 26% of Japanese government bonds as a percentage of GDP on their balance sheet. And they said they were going to stop doing QQE. They call it QQE, qualitative and qualitative of easing. And today, they're at 100%. Well, wait a minute. You said you were going to stop. So how'd you get to 100? Well, we lied. So we can't stop because their debt to GDP kept rising and now is over 220%. And once, look, once a government finds out that they can spend, they will. And you're seeing it today. Remember all of the Tea Party, right, the right, the right, the right, that was going to get elected and we are never going to have a deficit again? those evil Democrats that were overspenders, we have the greatest deficit in the history of

mankind. And we have Republicans in office. But I would say there's no Republicans, there's no Democrats, there's no left, there's no right. There's in and out. If you're in, you do or say whatever it takes to stay in. And if you're out, you do or say whatever it takes to get in. That's all it is. So, and people, you know, switch parties and they run on different parties. Ronald Reagan was a Democrat. He ran as a Republican, you know, Bloomberg. I mean, all these people, you know, Mitt Romney. It's just in and out. People want to be in. But the challenge is, I got on such a rant, I forgot my point, Nathaniel. We're talking about. We're talking about the inevitability of QE. Oh, QI. You can't stop. It basically, Japan got to 100% of

a debt to GGB, that Japanese government bonds as a percentage of GDP on the Bank of Japan balance sheet. So we got to, surprisingly, around 20%, and we said we're going to stop. And we actually did shrink the balance sheet for a little bit. And like, no, this is exactly what happened in Japan. And as soon as the market goes down, which is what happened in 2008, Japan turned around and started buying bonds again. Same thing happened here. As soon as the stock market goes down a little bit, they're going to buy bonds. And we're going to be at 100%. Why? Because it's inevitable. Because we have to monetize the debt. There are no natural buyers of debt of over-indebted countries. The only person is yourself. And so what's going to happen eventually is there's going to be a debt

Jubilee. And Japan will be first. And once they own all the government bonds, once they buy up all the government bonds, they just cancel them. And they start over. And it says, oh, you can't do that. The currency will crash. No, the currency crashes slowly while you're buying the bonds. The yen has been going down for the last seven years, and it's going to continue to go down. And eventually, it will be worthless, like every other paper currency in the history of mankind. And then the euro will follow, and then, you know, the U.S. dollar will follow. I started tweeting lower for longer and headed to zero about two years ago and just got lamb-baseded on Twitter. People say, no, there's no way U.S. industry rates could be zero. They are. And they're going to be negative. And hell, the president

of the United States is calling for negative rates because he doesn't understand economics. But for him, it's all about if I were a real estate developer, I would love to get paid to borrow money. And that's the way he thinks. So at the end of the day, governments spend because that's how they get elected. And they buy votes. And that's where we are. We're in a place now where we're going to buy votes by giving people free money. Wait, that's what happens in dictatorships. That's the dictator playbook. Right. You give away money. to poor people and you cause them to be loyal to you. Well, where are the poor people come from?

Oh, well, you create economic malaise. Well, let's take Venezuela. Venezuela has the highest oil reserves in the world, highest gold reserves in the world. At one point, one of the most wealthy countries in the world, well, what happened? A dictator comes in. He destroys the economy.

He creates a dependency of the people on the government. and he stays in power and it's a kleptocracy. The people at the top get really, really rich, and then you devalue the currency, and they devalue the boulevard. People forget the best performing stock market in the world, the last two years, Venezuela. Would you like to own Venezuelan stocks? Hell no. But that's where we're headed.

That's the path we're on. We've created this destabilizing reaction to coronavirus. Some might argue that that's been the plan all along to create and, foment fear and political and economic destabilization so that you get a dependency culture so the people at the top can stay in place. And I'm going to put one thing out here and people are going to are going to go eight bat shit crazy on this one. I guess bat shit crazy makes that term has new meaning now, huh? Yeah, it does because it's coronavirus. But I'm going to say there is a non-zero probability that the big guy

tries to cancel the election because of the virus. That is a freaking scary proposition. I've said that to friends and family, that the single scariest thing to me from the, like, Ben Hunt has this phrase that he uses. He doesn't have hashtags, but he does a similar thing where this is at Epsilon Theory on Twitter. He'll use these phrases to provide both a rhythm for his readers,

but also you can go back and see all of them. you can't unring that bell. That's one that he uses a lot. And I think that what you're saying effectively, which I agree with, is that once you get into the game of the government propping up markets, the markets will forever say, well, why can't you do that again or a different version of that? It's just natural, you know, and that becomes a force outside of the ability of anyone to control for the political incentive reason.

You know, this is just, I mean, it's just game theory. some ways. It's a dependency culture. And it goes, look, it's the participation trophy problem, right? Everybody gets a trophy. Look, I live in the People's Republic of Chapel Hill. They don't keep score in soccer. I'm like, why not? Well, someone might lose. Like, well, that's why you play the damn game. I mean, losing is okay. Failing is okay. We learn more from failure than success. You know, you talked about it with entrepreneurs and startups, right? We need to fail. We need to have things go down. Not everything is a good idea. Not everything works. But everybody, he gets a trophy. In fact, my wife was horrified. My son, we have a unique family. We have two older

kids and a younger caboose. And, you know, he was in his first soccer league a couple years ago, and they went over, right? They did not win a game. And they had fun, but they did not win a game. And he got a little medal. And I took it and I threw it in the trash. My wife was horrified. Everybody was a horror. I was like, no, you don't get a medal for going over, right? You don't get participation trophies. And that's where we are is from participation trofeism, you get this dependency culture, which is, well, you know, mom and dad will bail me out, the government will bail me out, the school will bail me out, I don't like my grade, I'll just argue it. They'll give me a better grade. I don't like my salary. I'll ask for more. I don't like my outcome in the stock market.

Well, the government will socialize it. No, that's not how it works. But that is how it works. if you're a government agent who wants to become a dictator, you want dependency. You want everyone to not have economic upward mobility and have to depend on government handouts and have to depend on socializing their losses. And we're very perilously close, I think, to that bang point, that shift. Very scary. Yeah. I think for me, the cat out of the bag problem is exacerbated by the potential of this disrupting, you know, an election cycle for sure.

Well, it's crazy, crazy amount to discuss and think through. I've been kind of ending on this question for everyone, just because it's so people are exhausted, too. what's your biggest cause for pessimism right now? What's your biggest cause for optimism? And you can take that in any dimension that you want. It can be political, social, economic. Yeah, you know, pessimism, we've already talked about it. It's from...

It's easy. See the last 53 minutes of conversation. Yeah, I mean, pessimism is lack of leadership. You know, I believe everything comes from leadership. In fact, you know, I believe it so much that, you know, my wife and I created a scholarship program at our alma mater all about training leaders. and giving people the ability to become better leaders. And I think we have a complete lack of leadership at, you know, all levels globally.

And I think it's very scary to me. So I think that's the biggest cause for pessimism is I think there's too much self-interest in people of positions of leadership. And gone are the days of the altruistic, selfless leaders. Now it's all about self-angentizement and wealth creation for individuals, and they don't care about the people. So that's my biggest cause for pessimism. And I think outcomes will reflect that lack of altruism and more focus on self-interest. My reason for optimism is the human spirit, right? We are resilient.

And I think resilience is the most important thing there is, really. I mean, perseverance and commitment and other things are good too, but resilience is really what's all about. And, you know, Seneca the younger said it best, right? Failure changes for the better, success for the worst. And those of us who are able to, you know, look at setbacks and look at untoward outcomes and look at loss in our life and pick ourselves back up and get better and learn from it. And, you know, I live in North Carolina and Chapel Hill. And, you know, the famous coach here, Dean Smith, had a great line. He said, you know, mistakes.

Mistakes happen. Bad things happen. But you have to Ralph. You have to recognize the mistake, admit the mistake, which is hard for most people, learn from the mistake, and then forget it and move on. And, you know, the other coach across town at that other school that I don't like has another great line. He says, you know, great players.

and I use great investors or great people, always focus on the next play. The average player, the average investor, the average person always focused on the last play. So again, a reason for optimism is I think there are a lot of people who are able to focus on the next play. They understand that some bad things have happened. They understand that we're faced with some tough times, but they're focusing forward. They're looking for the next thing. It's how Bitcoin got created. It's how, you know, blockchain technology is going to revolutionize the world and be the greatest wealth creation opportunity we'll ever see in our lifetime. It's why markets will recover. It's why, you know, this two shall pass.

You know, King Solomon's advisors were right and that we will get through this. And it will be hard. And we're going to have to oust some of these bad leaders. And we're going to have to rise up. And so I want to end on an optimistic note because there's a lot to be pessimistic. about, the rise of nationalism, the rise of populism, the pushback against globalization, we're doing all the things wrong. I wrote a long piece about this two and a half years ago called Welcome to Hooverville. And I kind of talked about why 1929 was inevitable in terms of a market

correction and potentially crash because, you know, Sir Isaac Newton was right. For every action, there's an equal and opposite reaction. And the bigger the bubble, the bigger the bust, the bigger the crash. So the 1929-like crash was inevitable, and I think we're in the midst of it right now. But what made it worse was that reaction of the government of Hoover and the administration in 1930. And I unfortunately believe that our current administration, he was only the third president with no experience after Hoover being the second, was going to make the same types of mistakes, the Smoot-Hawley tariff act. He calls himself tariff man. And, you know, we marched Mexicans back to Mexico in the 1930s physically. We had the Mexican Repatriation Act.

So the same playbook is happening, the same culture of fear, the same culture of discontinuity, the same culture of, you know, self-angrandizement. And that we need to rally against. But not in a rise-up populism, you know, nationalism, America-first kind of way, as we did in the 30s where we ended up in the Great Depression, if we want to avoid the Great Depression, we got to think forward. We got to think in ways that are uniting and globalizing and realize that we're in this together and that we can all come together and we can make it, make it better. And we don't need Cold War 2.0 against China. We don't need to make them out like the Ruskis

or the commies. We need to embrace what they did right to nip their, crisis in the bud with the disease. We need to learn from Singapore and Taiwan and not think of them as Chinese. We need to think about unifying. And so I am very hopeful. I am very positive. People listen to me all the time. You're so negative. I'm like, no, I'm a realist. The optimist thinks the winds are going to change. The pessimist thinks they never will. The realist adjust the sales. So let's adjust the sales. Let's get focused on the future and let's make it a better tomorrow. I think the thing that I always think about or want to remind people is that if you didn't have any hope, why would you spend 60 minutes on a podcast talking about this?

Why would you keep going on? Just because you are going deep on the real seriousness of the challenges that we face doesn't mean you're going to stop fighting. And ultimately, it's a, like you said, it's what's next. So thank you so much for taking time today and I really appreciate it. No, it's great to be with you. And I really appreciate the conversation and a lot of fun and hope we'll do it again. Like Mark, there is, I believe, much to be nervous about now. I'm watching even in the hours since I recorded that interview this morning,

the politicization of the open the economy versus the save lives conversation, just getting dramatically torn. This is now no longer two different approaches to how to solve a crisis. It is becoming firmly entrenched in the American left and the American right. And I believe that will be with absolutely disastrous consequences because it is stupid, fundamentally stupid, wrong-headed, and overly easy thinking, overly social media thinking to somehow believe that these are two mutually exclusive outcomes and that you can have one without the other. It is just nuts. but it is, as I said earlier in the intro to this episode, inevitable based on the way that our system is organized right now.

So I hope that you guys who stick around for long enough to hear the outro of these episodes, I know that you're the folks who are trying to think more broadly, who are trying to inform your own opinions and go be active participants in the conversation. And I have so much appreciation for you for that. So thank you for hanging out. Thank you for listening. We will be back with another episode of The Breakdown tomorrow. Until then, stay safe, guys.

Peace. Welcome back to The Breakdown, an everyday analysis breaking down the most important stories in Bitcoin, crypto, and beyond, with your host, NLW. The Breakdown is distributed by CoinDesk. Welcome back to The Breakdown. It is Wednesday, March 25th, and last night, news broke that a huge stimulus package had been reached in principle agreement between the White House and lawmakers. It is set to provide some $2 trillion to individual citizens. affected by the coronavirus in the form of $1,200 checks, as well as, of course, a huge amount of corporate support and bailouts that make the $1,200 look tiny in comparison.

I don't know if the government expected a chorus of cheers or pats on the back, but it is not what they're getting. I don't know anyone who is happy about this from a regular citizen's perspective. Looking across the crypto scene, you have Meltem Demiris from coin shares writing multi-tweet threads that end in, if I seem like I'm angry, it's because I am. I'm in my mid-30s and my government is selling my future to bail out their buddies who run banks, hedge funds, airlines, cruise lines, casinos, and donate to their campaigns.

It's a load of horseshit. Pomp says, so let me get this straight. The government shut down small business and forced record levels of unemployment in a matter of weeks, but Wall Street gets the majority of the aid. Average person gets $1,200 and still has to pay all their bills on time. What a joke. These are Died-in-the-Wool capitalist.

These are investors through and through, and this is radicalizing even them. Now, we are going to be debating the specifics of the stimulus for years to come. We are in a moment of fundamental change. But on this episode of the breakdown, I wanted to get some more perspectives and debates and discussion about just all of the stimulus that we've seen this week, both from the fiscal level, as well as from the Federal Reserve level. And so Michael Casey and Noel Atchison from CoinDesk are back, and where we start the conversation is with a surprise inclusion of a digital dollar in one of the proposed bills earlier this

week. The digital dollar was put in, it seems, as a mechanism to distribute this aid efficiently and effectively to citizens in need. And it wasn't long for this world. As we get into, there are many reasons why the way that it was proposed basically made it DOA, but I do believe that we are seeing a radical increase in acceleration of the timeline at which we will be debating things like a digital dollar. Now, of course, these debates will be in the context of a much larger systemic discussion of the way that governments and economies function together that is going to set the tone for the next decade or more, I believe, end the wake of this. This is a wide-ranging conversation, as I said, it starts with the digital dollar. It ends with my utter frustration at the cynicism

of the government saying, on the one hand, that there's going to be 30% unemployment, potentially within weeks and on the other having a $1,200 one-time check be their answer. But if you want both informed, thoughtful analysis from Noel and Michael, but also some just utter frustration from me, this might be the episode for you. So as usual, with a long interview, it is edited only very lightly. It's very free-flowing. So I hope you enjoy this. And I will be back tomorrow with another episode of the breakdown. Until then, stay safe and figure out what you're going to spend your $1,200 on. Peace, guys. All right, everyone, welcome back. I am joined again by Michael Casey and Noel Acheson. Thanks for being here, guys.

Nice to be here. Hey, thanks to have this, Nathaniel. This week has been phenomenal and unthinkable. Every week is less thinkable than the week previous, it seems. And this week, you know, as we're actually seeing this incredible stimulus package come to fruition, it is fundamentally calling into question a number of relationships that we have historically understood as just, and permanent in terms of citizens vis-a-vis their banks and vis-a-vis the Federal Reserve and vis-a-vis the Federal Reserve to the stock market. And all of these things seem up for grabs in this moment of crisis. And so where we want to start the conversation today is around a very unexpected moment on Monday when Nancy Pelosi's stimulus bill had a digital dollar introduced within it. And the idea of this digital dollar was that it would be a mechanism to distribute stimulus funds directly to the citizens who are going to get them. And this actually didn't last long.

It was only about 24 hours before this thing was ripped out. And there was a huge variety of outcries that I think we're going to get into a little bit about this. But the idea that a digital dollar might be a mechanism as part of this stimulus was something that I don't think a lot of people saw coming. In fact, as we speak and as we record this, although it moved away from the ultimate stimulus bill, it did get reintroduced by Sherrod Brown as a separate independent. bill, which is floating somewhere off in the ether right now. So it's still very up in the air,

but I think that it has accelerated the conversation around what digitization of the dollar and the relationship between regular citizens and the Fed might be. So this was a different problem that a digital dollar was trying to solve than we've previously spoken about. Actually, Michael, this is something you've been tracking for a while. Maybe you could just give us a sense of how this digital dollar was different, maybe than the digital dollar we were talking about three weeks ago or four weeks ago. For those of us who have been sort of covering the crypto world and the digital currency world for five or six years now,

to have suddenly have seen this thing land in a public forum like that in the context of a bill that was like as important as this, it was just stunning. There will be a before and after of this moment, even though whether or not this thing gets killed or not, it is now part of the public debate, and that is a critical thing. We have to also line that up against,

what China's doing. You've got China taking its digital dollar, now there's things out there. But you're absolutely right. This is not to be thought of as a Fed coin, I think, right? As something that is necessarily going to be the digitization of the dollar itself. I think it needs to be thought of at least for now, because it will evolve, if it goes forward at all, as a mechanism for distributing essential emergency fiscal stimulus funds in a very targeted way. And I think that this actually dovetails with some of the projects that were that emerged, maybe three or four years ago, early conversations around how the technology that Bitcoin had introduced could be taken on board by governments.

There's a project called GovConn that I think is still vaguely alive in the UK that was about welfare distribution. And it was all about, okay, how could we use this as a much better way to avoid middlemen, have better control over where the funds are going? It's actually much more of a sort of control mechanism than it is a freedom of access thing. possibly antithesis in so respects to a kind of a more libertarian view of currencies. But the point was this is a much better effective way to deliver value to the recipients. And I think that's kind of where the thinking is here.

It goes in a little bit to what, you know, Rashid Taleb's, what seems like a crazy idea of the trillion dollar coin, Bitcoin is hated. I think it's not as crazy as people think it is. It's just a way to sort of put funds in the hands of the government can then be distributed effectively. We're in a crisis mode. The money has to get out quickly. that's kind of where I think the thinking around this digital dollar actually was.

So, I mean, to use crypto terms, this is an air drop mechanism, right? It's a mechanism to distribute that money quickly to tons of people. Now, one of the parts of the proposal that was in that original bill was that every citizen would get a Fed account. They called it a Fed account all one word. And this was one of the big pieces of consternation for a lot of the folks who quickly came out against this was this seemed to them to effectively totally bypass the normal relationship between commercial banks, the Fed, and U.S. citizens. So maybe you can walk us through

just the implications of that and how to contextualize it, right? Because there was an immediate reaction, and your point, it seems, I think, is that there's a couple different ways to look at really what the implications of this new system were. Yeah, I mean, ultimately all digital currency proposals that are out there, these CBDC, central bank digital currencies, that is precisely why they are important. And there's many reasons why it actually could be a very good thing, right? I mean, forget the level of control and surveillance and all of that. If there's ways to resolve that, that's important. But the other one is the banks are these intermediaries. They impose friction, they impose costs. They have all sorts of political, but the 2008 crisis was all about the fact that

we depend upon these too big to fail banks to keep our payment system running. If we didn't depend on them for payments, we wouldn't care whether they collapsed, right? So removing banks from the system isn't necessarily a bad thing. It just raises all these other concerns about is the government surveilling me and so forth. My sense is that whole structure was badly worded. I mean, I don't know why it needed to be called a Fed account. I think that was just totally leaping the gun because regardless of whether or not, you know, we think it would be good to bypass banks in payment systems. I actually do think it would be. The act of getting there is so, so, so disruptive to the banking system, which we unfortunately still depend upon, that the transition would be, would be horrible.

I mean, you'd have a run on the banks and everything else, right? And as much as that might eventually be a good thing happening fast would undermine everything else. So I'm surprised that they even, I mean, it really should be a direct account to the federal government, not a direct account to the Federal Reserve. That's where I would have thought those funds were being distributed from, which means the relationship that I'm having is with my government, not with this other amorphous thing, which is the central bank, which is the monetary authority. It's a very different relationship.

But by calling it a Federal Reserve account, it really was leapfrogging to this more radical idea of the future. Yeah, so it almost made it DOA. It's like the type of debate that maybe there's a good debate to be had, but in this context, when the idea theoretically is that you're looking for a fast solution that we can all kind of get on board with, it's unlikely.

The implications just seem too, great to even dive into, you know, and so I would imagine that the Federal Reserve had a hand in killing that, right? Yeah, yeah. Okay, well, so the, I think the meta theme in some ways is maybe it didn't get there, but it would have, part of the reason that it couldn't is that it proposed such a different relationship and structure than the way the system works now. But this is not the only time this week that we've seen changes in how, how these different

parts of the market and the government interact with one another. Earlier in the week we saw the beginning of unlimited QE, right? So, Noel, maybe you can walk us into how we went from what we were talking about last week in terms of 700 billion of stimulus, you know, 500 million in treasuries and 200 billion in mortgage-backed securities to where we are now, which is effectively unlimited QE across a huge array of asset classes. Yeah, sure, but before I start going into that and remind me to come back to this point, pulling on what we are talking about now, the Fed account thing, I think part of the problem

that it had to start off with is that so many people don't really fully understand the difference between the federal government and the Federal Reserve. So calling it the Fed account is going to get a lot of confusion there. When it comes to the surveillance, a very small handful of us care about that. My concerns about that are slightly different, and I'll briefly outline them before we get into the QE thing because it is actually kind of related. I would also like to push back on the general sentiment out there that while there is so much whip-like, this week. You're totally right in that. And sure enough, the sudden appearance of a digital dollar in the stimulus package. Yeah, that is whip flash. This isn't too far removed from what we

were looking at three, four years ago when we started looking at CBDCs. The Fed coin proposal originally did talk about enhancing the Fed's ability to manage monetary policy. And I believe it was even hinted that the time would come when we would need that. Little did we expect it would be so soon and little did we expect it would be because of a virus. But that was one of the reasons. But that was one of the reasons why a Fed account in everyone's hands was touted as being something that would help with economic management, monetary management, above anything else, because it does make it possible to have negative interest rates. If we can have cash, you can't really have negative interest rates. However, that's a totally different discussion. My problem with the approach of the

Fed account is who gets one, who decides who gets one, and how is that going to be isolated from from political interference. I mean, even if we just decide that everyone with a social security number gets a Fed account, that I guess by extension means that no illegal immigrants would, even if they have been there for 20 years and paid taxes. And that in itself is a political decision, which I'm sure the Federal Reserve would very much like to stay away from. So that's a different thing to look into.

The QE that you brought up, there's a minefield to unpack there. This is an extension of that, a necessary extension of that. I think we mentioned last week or maybe in some other conversation that the QE that we know and love, and I live in Europe and we've been living with it for as long as you have, if not longer, even at no end in sight, is not about putting money into the hands of the consumers. It's about supporting markets. That's all that QE can do. QE can do nothing but support capital markets.

That's a good thing to do. But it doesn't help put food on the table. And we have to get our heads around the fact that we are at war. and a lot of people are going to lose their jobs. This is a very sad fact of the shutdown that we're seeing across the world at the moment. I don't know if you guys saw the paper or the essay that James Bullard from the head of the St. Louis Fed put out, I think it was yesterday, day before, days are blurring.

I don't know if that happens to you, where he's expecting 30% unemployment in the US, 30% unemployment, a country that doesn't have a great welfare system, is going to push people to the brink of starvation. So this putting money into people's hands is necessary to avoid the social revolt that, let's face it, we know could happen and we definitely want to avoid. So how do you do that? You put money into people's hands. One thing that in Europe we marvel at is that in America you still use checks.

I mean, is the government really going to mail checks to people? I haven't seen a check in decades. Mailing checks to people means you need to have an address that already reduces the potential impact. People who don't have an address, arguably perhaps other people. that most need this help. So, okay, everyone can have a digital wallet, the problem that I just raised. Okay, but who? What about the people who are unbanked, underbanked, that kind of thing? Yes, they're taken into account in this, but exactly how do you get them a digital wallet? Maybe they don't even have a phone. Maybe they're not technologically savvy. Maybe they're not even legal in the

country. And again, I believe perhaps those are the people that most need this kind of handout. But, and then I'll wind down on this rather sobering thought, if we are putting money in the hands of the consumers, however necessary it may be, at a time when supply is tight because of various supply chain restrictions, that is inflationary. That is inflationary at a time that the government has, that the Federal Reserve has no tools with which to combat that. I'm not so sure that it is at this stage inflationary, Noel. Well, you know, I think that this is, there's also a massive demand shock underway, right? I mean, we know that it began with the supply constraints, but all of those conferences that have been shut down, all of those travel orders that have been shut down, all of that's a massive demand constraint, right?

So the excess supply of money is going to be meeting, I could have a shutdown and demand as well. Without that demand, then the inflationary impact doesn't happen. Where I think the inflation comes is down the road, right? I'm not saying that they're not inflationary risks in this. What it does to faith in the entire system itself, such that when demand does come back and the Fed is suddenly sitting there with a massive balance sheet of everything, it owns America, right? It now is sitting on all of that credit risk,

and its independence has been challenged by the fact that it's been buying up everything. That then is where we move into what I call my sort of Argentinization of America. And that's a scary thought. I'm not saying it's going to get there, but that's the inflation vehicle to me. Not right now because I was thinking about this as well. And I was thinking, oh, my goodness, there's going to be inflation because we have a supply shock. And so there's no goods to be purchased. I actually think you've got a kind of synchronous kind of collapse and demand and supply at the same time.

And therefore, it's not now. It's in the future. It's more about the institutional breakdown that creates inflation rather than the macroeconomic circumstances of the current moment. And it's therefore a laid effect rather than an immediate one. Yeah, I don't disagree with you that's going to happen later. It's certainly not going to happen now, not in the US and not in Europe. But it has already been happening in many of the emerging economies, which are increasingly important in this globalized world.

And the withdrawal from globalization, the unwinding of globalization, has already started to push prices up. Globalization brought prices down. You unwind that. Prices of manufacturing are going to start going up. We haven't started to see that yet because the supply chains are constricted. And as you say, there isn't the demand. But the demand that the handout that the Fed is contemplating here in its stimulus package

isn't about let's go on holiday, let's go to the movies, it's about let's not starve. And so that is going to have a kind of different impact on the price of food, which is in the inflation basket. The price of a lot of the things that QE is pushing up, they're not in the inflation basket. The technology is not reflected adequately in the inflation basket. A lot of it is going to be an accounting thing. But that doesn't matter because there's so many policies that are still linked to that number, however badly it may be calculated. The of the banking system going forward like you had in Argentina, it's very safe to say that most of the US banks and European banks are much stronger now than they have ever been.

Even now with the credit crunch that we have coming, there isn't much of a doubt that they'll be okay through their capital requirements as something that you didn't get in Argentina. But it also it's a payments thing. We've talked about that before. It's going to be a get money into the hands of people thing so that they can pay for things, is what we've been talking about here. And the major concern is that should inflation come up, be it soon, be it later, what's the Fed going to do? Key, key debate, right?

So I don't know, I've had, and Noel, you've had this conversations with the economists for a few years as well, but I've always had them to say, okay, what is inflation, right? So there's a one-off inflation, right, which is something that may well and deference. We could see the CPI jump, certainly because of that food basket thing you're referring to. That's always a possibility. That is not inflation, right? That's an increase. The question is, does it then get baked into the cycle?

So that higher prices, we get higher wages, beget higher prices and wages, and it just gets this vicious cycle. And that's why, you know, Milton Friedman always said inflation is, what is it always, and everywhere a monetary phenomenon or something? The end of the day, it's how much money's out there. my view is that addendum to Freeman and say it's that plus institutional confidence in the system of managing that money such that it you know its entire political framework is one that those who use that money trust and so yes it the inflation gets fed by the process of price rises but if it doesn't have the framework of aggregate demand to perpetuate it it doesn't

continue and that then becomes a question of this institutional question. Where I'm really worried is as much as I agree, the banks are in much better shape than they were. I'm not sure that's even the question right now. I actually think the real question is, is the institutional framework of the federal government's management of its money? And by that I mean both the Federal Reserve and the federal government itself. The entire American structure for managing the dollar, is it something that we can have confidence in? And I really think now is the time to ask that question. I know it's a scary, big major question,

but the fact that the Fed is buying up everything, that it is conceding that it doesn't have any tools left to manage this problem, is one plank, if you like, of the question of confidence in that system. The other is the actual federal government itself, the inadequacy of Washington's response to this crisis, the sheer lack of planning. Its model of capitalism doesn't have the vehicles for actually imbueing the confidence of its population. So the fact that we don't have a welfare safety net is actually, at times of crisis, a question of how valid this political structure actually is.

So the dollar existed as the world's reserve currency because the world believed in America, it believed in its strength, that believed in the fact that it would always be there. Stand up its property rights. Stand up its court. what stand up its consistency, and that it would defend the world from all of its various maladies, right, which we thought of as something largely around communism for much of the 20th century. Now, if we look at the United States and all of that structure, does it represent that in the context of coronavirus? That's a big question, and I think it's one we actually have to ask. That's where I see the sort of Argentinization thing coming is because that's, having lived in Argentina for six, because that was it.

nobody trusted the government. No one. You never paid your taxes because why would you pay your taxes? Because the government would steal it. Of course you wouldn't pay taxes. I'm not saying that that's what's going to happen in Washington, but the question of trust is still relevant here. And then the question in Argentina,

when you'd have these periodic every 10 years crisis, the thing that would happen is you'd buy dollars because that's what you trusted. If you're in the United States and you get to the same sort of crisis mentality and you don't trust the system, what do you buy? And maybe I'm being extreme and dystopian. and everything else. And I'm prepared to suggest that I'm not fleeing the country and buying a bunch of spam and guns right now. I'm actually believed that we can get out of this. But I just think that

we've never had a moment like this with that fundamental question of the underlying structure of our monetary system is actually that question. I agree. In fact, I think it goes even deeper and I think it's quite healthy to wallow in some dystopian scenario setting because it does give us an idea of what could come and also how we could get out of it. I agree with you totally on the fractures that we're seeing and trust in the institutions that are supposed to be taking care of. I would say it goes even further as in the trust in money. Right now, money is being thrown around and is that going to protect people's health?

No, it's not. Is that going to keep families intact? No, it's probably not. Is that going to put food on people's table? Maybe, but what kind of food and for how long? I would say that this is going to bring up some very interesting questions in money. What is it for? Is it what we need?

And while we can argue that the institutions that we know and love have done a great job so far in keeping us pretty safe, now I think nobody really feels very safe out there, no matter how comfortable we are in our social isolation. So the questions are going to go very, very deep, and the answers that we're going to come up with are going to be troubling. They're going to cause turmoil, no doubt. But let's face it, this is something that those of us that have been looking at the cryptocurrency sector for a while have been wrestling with for a while.

What does an alternative look like? We also have talked about since we got into this sector, what would it take for global attention to focus on the idea of a sovereign currency? We agreed back then that it would be a pretty ugly world. Were that to happen, I think we can also probably agree. I'm not saying we're there now, but we're the closest we've been since Bitcoin was unleashed in 2008. I do hope that we actually have a chance to think about what money actually is out of this.

because I think that's ultimately it. And that's where it gets really interesting and potentially very hopeful because, you know, we can start to think about money differently. The idea that money is something that we accumulate and some aspects, you know, virtue signal my power, my strength, as opposed to what I always think money is a tool. Yes, yes, it's a store of value. But most importantly, it is a medium of exchange that enables society to actually integrate and deliver the goods and services that we need to each other in a constructive way.

That's what it is. It's a tool. And right now, it is not functioning in that tool. Because what does society, society doesn't need money. Society needs food. Society has always needed food. But outside of crisis, we think we need money, right? So it's almost like the mindset about what money's purpose is.

It's a mind sharing. It's an imagined mechanism for how we distribute our debts and our debits and credits around society. So if we can actually get to a world where we can go, hang on, what do we actually need now? We need systems of value. We need systems of trusted value exchange that have to function in a modern digital economy in a decentralized architecture where the governance is very different from what we currently have in nation states. Then we get into cryptocurrency.

Then we're like, that's why it exists. So I find this really kind of potentially hopeful discussion. It's just that like society is not there, right? I mean, we've built this sort of mythical notion of money. We've raised it to this level of obsession. And now's the time to go. actually, you know, what do we care about? What are we trying to achieve?

Okay, so society is not there yet, definitely, but, you know, a month ago, we would have said society would never shut down. It would never order everyone to stay home. And man, did that happen fast? As I'm talking to you from Spain, where we've been in mandatory lockdown now for a week and a half. I mean, literally, the police will stop you if you go outside.

It is like that serious. We thought that was totally unimaginable. In the ideology that you mentioned as well, that, then you talk about whiplash, ideology is swinging all over the place. We had Boris Johnson and the UK proposed some issues that Corbyn, whose left of left, was escorated for just a few months ago. The exact same things, if not more so. We also have drawing back to QE.

We also have what is almost the Federals are buying the debt, buying bonds of heavily leveraged private corporation. We have what's tantam up to the nationalization of the bond market. Again, ideologically, that would have been unthinkable a month ago. In February of 2010, the Onion put out an article called U.S. economy grinds to halt as nation realizes money just a symbolic, mutually shared illusion. So, of course, the onion got there first.

I tweeted out the other day, this changes everything or this changes nothing. What do you think? And I got like 100 million responses, right? Because it purposely didn't have any in between. And I am firmly in the everything camp. I don't think that a single person on this planet is going to come out of this crisis with a higher opinion of government than they had three months ago in any part of the world. Now, they may be glad that they had a particularly good light in the dark. I think New Yorkers are feeling happy to have Cuomo in office right now as a four example.

But they still had the chance to watch this. You know, Noel, you said that a month ago we couldn't have imagined lockdown. Well, we certainly could have because hundreds of millions of people in the subconscious. supply chain capital of the world were in lockdown or just coming out of it. And we chose to ignore it. And media chose to ignore it and focus on whether Silicon Valley was being silly about handshakes and the entire U.S. leadership on both sides of the aisle chose to ignore it and just hope that somehow American exceptionalism extended to airborne viruses. Like this is just an absurdity. And the anger that people are feeling right now, I mean, I can barely hold my tongue even having this

conversation with you guys about the root baseless cynicism, 30% unemployment and a $1,200 check. Are you kidding me? Where in America is a $1,200 check going to get you more than one trip to the grocery store and rent? In most places, it's not going to get you even close to that. It's unfathomable, right? And it is, I believe, to your point, both of your points, going to call into question everything that we think. And the question is just how we or orient that conversation because the thing that's so difficult in these times of radical upheaval is that what comes into those vacuums isn't nuance and complexity and all this sort of stuff, it's political means and overreactions. And I don't know how to address that. But I hope at

least that there's the conversations, like one of the things that's nice, I think, for everyone who's been in this Bitcoin and crypto space for a while is that these are theoreticals that are now becoming real, but at least we have some context to have that conversation. And now, I guess it's a matter of inviting the rest of the world into that and seeing where we land. Yeah, I totally agree. And this is not something that anyone who works in the sector is happy about. We would really, really rather not have gotten to this point at this stage so fast and have

so many people really suffering out there. And we all know it's going to get worse as well. So this isn't something that we're happy about. But it's here and it's going to change everything. I am definitely in that camp. It's going to change more than just finance. As Michael said, we need food. It's not that we need money, we need food food.

I would add, we also need each other. That's one thing that this crisis is teaching us. We actually need each other. And I think the kind of society we emerge into is going to perhaps be scary for most, but at the same time, we're going to have different priorities. I imagine that's something I'm looking forward to seeing. Looking at this crisis instead of seeing

whether or not how we get out of it, you kind of inevitably start thinking about what society is and how it functions. I had sort of had this thought experiment about, I'm now social distancing with my family for 14 days. Do I have other families in my neighborhood that I can trust who've done exactly the same for 14 days? Can we then build a little kind of commune around that of gatherings and reconstitute our relationships, have dinner parties mixed again, but all under this sort of trust that we're

all doing the same thing, right? And I thought like, okay, that's an interesting way to think about how society. actually formed itself, like where the trust bonds started to be built when we first sort of emerged from the trees, we formed tribes and everything else. This is a fascinating moment to think about the reconstitution of society itself. What I found really inspiring, and I think this is where I flip to the more focal side of it, is the speed with which people have formed distributed organizations to try to grapple with some of the core challenges, the most immediate needs we have. I mean, the PPE one, you know, the protective equipment and clothing stuff for healthcare workers, all the masks, right?

So there are all these factories that are retooling to do things. And yes, they don't always know whether they're doing the right thing. And then maybe some of them are battling with garment workers, garment companies who are saying, no, we need that for the future of supplies. But at the end of the day, there's people doing this. And then, though, you realize, okay, there's a logistical problem. How do we get to where we need them to be and who are not? All of a sudden, all of these supply chain experts and a lot of people in the crypto community who naturally actually act, in these decentralized environments are stepping in and forming these alliances of distributed systems

to actually manage the data so we know how we can, without anybody steering it, there's no federal government, this is a kind of a network of people figuring out logistics so that all of the hospitals that need it desperately can get it. This is what's interesting in some respects. We know that the centralized structure of control of this mechanism of the distribution of emergency needs and foods is incredibly inefficient in this environment, because it doesn't have the vision. It can't actually be there and it has all that bureaucracy in the middle of it. But we're now sort of flattening it all and fearing out how we're going to do it through the system.

Will it happen fast enough? I hope so. But either way, I think it would have been worse if these mechanisms didn't emerge. And that's what I find inspiring because this is organic stuff. This is no one telling them what to do. These are just communities that are popping up and forming these alliances and getting material where it needs to go. But the human capacity to organize in that regard, the sort of Yuval Harari idea of storytelling and like how we actually manage to organize around just a common idea, as it is playing out in

sort of real time in front of us right now is fascinating and I think actually quite inspiring. Yeah, I thought I was going to spend my life in post-conflict reconstruction. And the reason that I was so interested in that is that when you go and rub your nose and the worst things that people have ever done to each other, you also find the most inspiring things that people have ever done for each other. So I do think that there is a bright side. It's just going to be a lot of pain first. And it's especially frustrating

when so much of it could have been mitigated. But we've gone way far from the digital dollar as is want to happen with these guys. I appreciate you being here. Let's do it again. Because next week, who knows, there'll probably be something new. With some whiplash thrown in for sure.

Yeah, exactly. Welcome back to The Breakdown, an everyday analysis breaking down the most important stories in Bitcoin, crypto, and beyond, with your host, NLW. The Breakdown is distributed by CoinDisc. Welcome back to The Breakdown. It is Thursday, March 26th, and last night, after a day of debate and consternation and frustration and examination around the $2 trillion stimulus package, it came out that BlackRock was being recruited. to direct part of the bond buying program. So here's the quick take from Bloomberg. As part of its whatever it takes effort to reduce the economic pain from the coronavirus pandemic, the U.S. Federal Reserve enlisted BlackRock Inc. to direct three of its bond buying programs. It's not the first

time the government has partnered with the asset management behemoth, which under the arrangement could buy some of its own funds on behalf of the central bank. Now, if this sounds to you to be completely insane, the conflict of interest to end all conflict of interests, you are not alone. Last night, the CSO of coin shares, Meltem DeMir's, wrote, they're not even pretending anymore. They are paying BlackRock to bail out BlackRock, and they are patting themselves on the back. But hold on, it's going to take us at least four months to print your check and send you your check. Now, there's an interesting phenomenon in daily podcasting during the coronavirus where at least once a

week, you have to have a conversation that's less normal interview and more drink wine and be angry. And so I pinged Meltem right after this comment and she was in the same mood. And so we got on a video chat and started riffing. What follows is on the one hand, basically a session of Meltem's podcast, what grinds my gears. But on the other hand, a real call to action, I think, for the crypto community to ask, what are we going to do with this moment? We discussed yesterday with Noelle Acheson and Michael Casey of CoinDesk that there is an interesting moment here where for what's likely a very brief window of time, people are having a very different conversation about the nature of money and the nature of the economy. I would argue that it extends as well to the nature

of power and institutions and trust. And in this context, Bitcoin is a gateway for a much wider set of conversations. Now, Meltem's main point, her main frustration is that she thinks that All too often right now, we're squandering the opportunity, the attention opportunity that could be flowing into this. And so this is the real question of this extended conversation is, what are we going to do at this moment? Can we actually transform this into a context for redesigning the world around us in a way that is more equitable in a self-sovereign context, that is more empowering to individuals to have control over their financial lives. It's a big question.

It's a big set of questions, but Meltem's in a great voice to have as part of that conversation, so I hope you enjoy this conversation. Now, two caveats. One, as with all of our long interviews, this is edited extremely lightly to preserve the nature of the conversation. And second, this is a little bit more expletive

than our normal interviews, because, again, as I said, this is after a long day of frustration and many weeks of frustration and involved wine. So I hope that you enjoy the conversation and I'll be back at the end with a wrap up. All right. We're here with Meltem. We are having a wine and what is happening. A wine and rage fueled evening. Yeah. This is a, this is, I've been doing podcasts all week where like today I almost had to stop and like break in because it was such a calm discussion that I was almost losing my mind.

One thing that I want to do beforehand, just because it's really important to me, small businesses around the country are, as everyone knows, going through an incredibly tough time. The godmother of my child, my wife's best friend, has a really awesome boutique in L.A. called Ririku. It's her dream. It's always been her dream to build a store where she can go source the coolest stuff that she can find anywhere. She just got back from a sourcing trip to Morocco, which is like way the wrong time because she really like pushed the budget to make it happen, but came back with some awesome stuff. So instead of like a normal sponsorship, I'm shouting out Ririku this week. Melton, I'll share the screen. For those of you who are listening, Melton and I are doing this view of video because it's going to be more fun to yell together. But I'll put the video up on YouTube as well. And so basically, like I said, Reroku, it's like home goods, vintage finds. She just came back with all these incredible rugs and runners from Morocco. Yeah, it's like rad. She has like the, she's a very like L.A. clean style and like. Keep scrolling. I'm shopping. Keep scrolling.

Okay. All right. So yeah, you want me that. That cheeky BB rug has my name all over it. Right. So super, super rad. Like my living room rug could use some work. It's like a white fuzzy rug, but it's- This is just like the upgraded white fuzzy rug.

I think it's perfect. Also, you know what? Podcasting and like videos from home have made me realize. I did like it over a year ago. And I basically took my furniture for my old place. which was way small. I just threw it in here. I finally got a new couch, but like, I haven't done anything to my walls. So I have just started like accelerated the process of like actually putting things in my house because I feel very self-conscious about the fact that I have their walls. So actually

I bought some canvases and I'm going to make my own art. So hopefully next time I do a video, there will be something on these walls. It'll be. I love it. terrible, but it'll be amazing. Amazing. Well, I'll pick out something from Riruku that I think is good and to get you started. I'll send it over. If anyone who is listening wants to check it out, it's R-I-R-I-Dash-KU.com, and you can use Breakdown 20. I'll put this on Twitter too, but that is my show for the day. 20% off? Oh, that rugs looking extra good. Here's the real question. Did I take Bitcoin yet? I don't think. No, but actually, yes via me. We can do an OTC trade for Bitcoin for this for sure.

So anyways, you know, everyone's going through this. I know Pomp has put small businesses that are hurting on his POMCast this week. I know other crypto podcasters and I have been talking about trying to just, you know, we don't have much, but we do have some amount of audience and everyone can use whatever they can have right now. But speaking of the little guy and the perpetual stomping thereof, Meltem, what, what should we start? being angry about. Where do we even begin? Okay, look, I've been angry for a long time. And I think at this point, it's not even anger anymore. Okay, here's the biggest problem I see. We have gotten to a point where people just do not care anymore. Okay, so I want to lay out, you know, I like my facts, right?

So I want to lay out some really quick facts just to set the tone and the context for what is happening. And I shared this on my Twitter this morning. And I'm going to keep trying to share facts because I think it's really important to use this time to educate. Like this may be the one time that people actually care about how money works and like how finance works and they may actually pay attention. So I'm going to try to give people like good, compelling facts that make them. smarter and help them understand what's happening. That's, that's really my role. I'm like, I'm an educator at heart. Okay. So basically, here's how the world works. So if we think of the government as a business, there kind of is, right? Government started, the way that

governance started is like you had someone, a monarch typically, who would oversee an area. And what they would do is they would have income in the form of taxes. They levied on people and stuff. They would just take from people, and they would spend that on a bunch of different stuff. Okay, so in the U.S., the government's primary source of income is what, Nathaniel? Taxes. Taxes. That's right. Okay, so the government pays for stuff by collecting taxes. They typically collect, like this year, they're going to expecting to collect around $3.7 trillion in taxes, close to $4. Okay, who do you think pays the majority of taxes. Do you know? Not big corporations that you would expect.

Right. So 75% of taxes come out of your paycheck. Okay, here's how it happens. 50% of tax is individual income tax. So it's income tax that you see coming out of your paycheck and it's income tax that you pay at the end of the year. Now another close to 40% of tax is payroll tax. So you get taxed not only once, but you get taxed twice. Because out of every paycheck, when you get your little pay stub, or if you're self-employed, you've had the pleasure of paying self-employment tax, which I didn't even know about until the end of 2018. And I was horrified. So you pay Social Security, Medicare, and Medicaid. Okay? So fully 75% of taxes comes out of your paycheck and comes out of what you earn. Corporate income tax accounts for about 10% of tax income, right? Really teeny tiny. The Fed makes a little bit of money. there's excise taxes and there's some other things thrown in there. But the majority of how the UF government is funded is money from people like you and me. And by the way, the wealthier you are, the less you pay in tax, right? That's a fact. So the tax revenue comes disproportionately

from people like you and me, middle class, upper middle class, maybe the lower end of upper class. But if you're really rich, you're not paying, you know, 45% effective tax rate. Definitely not. Okay, now here's what's interesting. The U.S. government, like many of us, spends more money than it makes. On an annualized basis, the federal deficit or the difference between what we earn and what we spend, is usually anywhere from half a trillion to this year in the budget. It's expected to be a full trillion. We've been at this for a while.

So our overall federal deficit, the amount of money that the U.S. government owes that it has spent, that it doesn't actually have, is over $23 trillion. Our annual GDP or gross domestic product, the sum of everything that's produced in the United States in one year, is $22 trillion. So we owe more money than we can ever reasonably expect to make. Then you add in the fact that there are these things called unfunded liabilities. And what an unfunded liability is, so the $23 trillion of deficits that we've accrued are liabilities that we're aware of. But then there are all these unfunded liabilities in the form of Social Security that needs. to be paid, it's been promised to people, but the amount of money in Social Security won't

fulfill. Medicare, Medicaid. So all of these benefits that people are relying on in their retirement don't, that money is not there. So if you add all of that up, that's $120 trillion of unfunded liabilities. If you take $120 trillion and divide it by $4 trillion a year in tax income, that's 30 years. If you take it and you divide it by the number of taxpaying Americans, that's close to $800,000,000, of taxes per American. The average income in America for an individual is close to 40,000. Okay, so the reason I'm throwing out all of these numbers is not because this is a math quiz. The reason I'm throwing out all of these numbers is because I want people to understand that the system we live in is fundamentally unsustainable. Now, deficits are not funded by taxes. So this is an important thing to

distinguish. The way that governments pay for deficits, if you have debt, that's denominated in dollars, and you also own a printing press that prints U.S. dollars, what are you going to do to pay your debts? Nathaniel? I don't know. I can't imagine anything that you would do. Or is it maybe money printer go bur? Yes.

So you own the money printer. You have the exclusive rights to the money printer. You owe a bunch of money that's denominated in the currency you print. So you do what many countries have done, money printer, go, and you just spit it out as fast as you can print it. Okay? So this is where we're at right now. This is what we see happening. This is the state of the world we live in.

Okay. So that's kind of just a basic understanding of where we're at. And by the way, none of those numbers include the fuckery that has gone on in the last three weeks. Okay? Because I don't even know like where that is going to go. So now let's take what's happening in the markets. So we have a bunch of stuff coming together to basically create a cataclysmic event. Coronavirus, I just read something, I forget what publication, said coronavirus is the biggest

failure in American intelligence ever. Bigger than 9-11, bigger than the Gulf War, bigger than Vietnam. The biggest failure in American intelligence was the piss poor response to coronavirus. What do you think? I mean, I think, so I said in our podcast earlier that I don't think there's going to be a single citizen in any republic in the entire world that when this is done, thinks more highly of government in general or their government in specific. Like, now there may be exceptions where like I'm glad that like the captain of my life raft on the Titanic was doing a little bit better. I think a lot of New Yorkers feel that way about Cuomo right now. But as a whole, as an institution, as a thing that's supposed to be there, like, even.

unless you are a full, like, non-status, there should be no government person. Even people who are like as close to that while still acknowledging that government is important, where you usually draw the line is there's types of things that only like, that state power needs to be able to respond to, right? Like Alex Tabarok is a great example of a person like that. He even had a term, I can't remember I should go find it, that he was talking about where the power of the state needs to be able to deploy for things like this, whatever power it has. Right. But the fact of the matter is, we've known about this since January. the response that the administration arguably longer the the the the this goes back to so going back to

the intelligence apparatus because this is the piece that I didn't talk about their job is to know like way more in advance like when child everything like literally if you think intelligence didn't know about this for months you're an idiot I don't know what else to tell you this is willful negligence to a degree that is so profoundly disturbing okay I'm going to say something that's not politically correct, but I'm going to go ahead and say it. And I think it's all about how the mindset of the average politician in D.C. works, particularly in the current era of politics we're living in and the current sort of administration that we're under. There is only one thing that matters to this administration.

The one thing that matters is number go up. The only thing that Donald Trump cares about, the only thing that Donald Trump cares about, the only thing that most politicians care about is number go up. Because as long as the stock market goes up, they are getting reelected. So we have been living in three years of an environment where number go up at all costs, right? Number go up. Now, what happens when you hit a scenario where you cannot make number go up? The interest rate is at zero. You can't make credit any cheaper. The interest rate said zero. Okay, we are printing infinite amounts of money. The Fed, Congress has basically said, we will print whatever it takes to make number go up, but number is not going up. And so what we're in

now is Trump is literally making press announcements saying, I want people out in the streets by Easter. What he is saying is basically this, and this is a really poor summary of it, but Jesus died for our grandma can die for the Dow. That is basically the callous attitude we're seeing here. And I get it. It's not politically correct. But these people literally care more about the money on the table and stuffing their own fucking pockets full of dollars than they care about the fact that people are dying. I mean, it's completely inconceivable to me. And look, I'm not an epidemiologist. I'm not even going to get into like the coronavirus facts and like, how? How deadly is it really? How many precautions do we need to take? We are talking about making decisions

based on the risk, the information we have. There is a shitload of risk. But these people are so insistent on making the number go up that they will sacrifice anything, including people's lives. It's insane. I mean, unfortunately, I think this is like what we're watching in a hyper-compressed format is the inevitable endgame of a whole lot of larger trends that I think in a lot of ways this administration is just the most pure raw manifestation of that's something that's been happening for a long time, right? Which so one that you identify absolutely correctly is the idea of scoreboarding, right? Like the idea of the stock market as a political scoreboard, not as an actual thing that is a determinant of value, right? And this is something that's like,

this isn't new. Like, you know, people have been looking at the stock market. Hold on. Capitalism isn't real. This isn't capitalism. Yeah, I mean, this is, this is, that is exactly actually the, the, um, the name of Alan Farrington's piece about this the other day. Mark Yusko was on the podcast on Wednesday saying exactly that this is cronyism, not capitalism. I mean, this is like, it's very clear to anyone. It's actually, this is socialism. Socialism is when a group of people appoint themselves leaders and then they take from the

proletarian. That is socialism. Well, it's even worse. That's socialism, not like the road. intellectualized, appealing sounding version, that socialism has actually played out. The version that we all, like, when we are against socialism, that's what we're referring to. The endless pattern of a system of dependency that is created by rulers to keep people in a situation where they depend on the state such that they can, I mean, listen, fascism and socialism are both two different sides of authoritarianism that are effectively the same, which is creating a dependency on the state, period, right? Like, it's just, just whichever, like, practically speaking, if you look across history, which version of those you are, which type of authoritarian, is almost entirely based on which people are going to be more culturally receptive to when you create your nice sounding programs to start with, you know? And that's the real battle.

It's all effectively the same. Well, Bernays perfected it, right? When he wrote the book Propaganda, which subsequently he put into practice what he preached in that book with the Nazis in the late 30s, right, when it was still, you know, in the very early stages of that political movement. This is all about propaganda. You see what's happening. You see the market narrative. I think there are few things that have happened that are so brazen that it makes my head spin. And I think Ben Hunt, aka Epsilon Theory, has done a really good job over the last year or so calling it out.

And I think, you know, what he talks about is like they're not even pretending anymore. Like, it's just insane. So the craziest thing, like every day. I feel like I see three, four, five things that just, it's shocking to me that people were just so fucking brazen at this point. Literally, nobody cares that everybody knows that they're literally the biggest pieces of human shit. Like, nobody cares, right? United Airlines CEO, paying himself tens of millions of dollars in compensation, then arguing with workers who are on strike, right? then asking for a bailout but refusing to accept any strings attached to the bail.

I cannot make this up. But today I saw the best thing ever slash the most depressing thing ever. Okay. So BlackRock, one of the world's largest asset managers, trillions of dollars of people's retirement assets are under their management, mostly passively managed funds. So ETFs, money market funds, things like this. They have not been doing a really good job managing their risk.

They have a lot of risk exposure and they haven't really managed it. And one thing that people don't appreciate is a lot of ETFs have, so a lot of people think like an ETF, okay, if I buy tech stocks, ETF, it's going to have the things in it and it's going to have, you know, the 10 best tech stocks. No, no, no. What they do is they stuff the portfolio, which with a bunch of different assets that have varying liquidity profiles. So in times of crisis, it exacerbates the liquidity crunch in some of the shit assets they shove into the ETF to juice their return, right? And so what you end up having is BlackRock is under duress. Now today, the federal government announced that it was introducing a program whereby it would buy back bonds.

Guess who they appointed to run that program for them and who they're going to pay money to you to do this on their behalf? Okay, just guess. I'm going to go with BlackRock. Right. So basically what you have is a firm that says, we've an advisory firm over here. They're totally independent guys. Don't worry about it. But what they're going to do is they're going to figure out what to buy back.

And by the way, our right arm over here owns a ton of this dog shit. So we're going to have the left arm by the dog ship from the right arm with your taxpayer dollars, but don't worry about it. There's no conflict. And by the way, we're also going to charge massive fee. Like my brain exploded and then it exploded again and then it exploded again. And then I thought about the fact that, number one, small businesses can't get loans unless the owners personally guarantee them, number one.

Number two, when it comes to writing the average American checks, right? So we look at this $2.5 trillion stimulus package, only about two. $200 billion is actually going to go directly to taxpayers, and it's not going to get paid out for four months at least. You can literally print cashier's checks. You could send an armored truck to every street corner and hand out money, and it would be more effective than this bullshit. So again, what I think is so disappointing is in a time when people need it most, nobody's doing what's right. everyone's doing what is politically most advantageous to them and puts the most dollars in their pocket. And I find it so overwhelmingly just depressing and bleak and upsetting. And it's infuriating.

And nobody cares. Outside of the small bubble that you and I live in and we all talk to each other and we all hang out to each other, like you and I are sitting here drinking our wine, talking to each other to each other about it right now, other people literally don't give a fuck. I was talking to some of my friends last night. They've no idea what's happening. They've no idea why it matters. They could care less.

They're like, oh, I'm watching the newest season of like love is blind or whatever dog shit TV show they're watching. And I get it. But like people just simply do not care and I don't know what to do about it. It's it's, so the way that I described it earlier today is that the saying on, on the one hand that it's likely that 30% of the country is gonna be out of a job in the next couple weeks or a few months. And at the other hand, having your answer be this one-time $1,200 check

is so unfathomably cynical to me that it just boggles the mind. But policymakers are patting themselves on the back. That's what's so infuriating is that they're like. $1,200 doesn't even pay a quarter of a rent check, New York. It doesn't cover a mortgage. It might cover one max two months of a mortgage in a different part of the country. But that's not enough. So I think Minnesota just went, just went in full lockdown for two weeks, right? So restaurants are closed in Minnesota. So you're outside,

you're outside of a major city and it's real cheap, right? Let's say that your rent is $700. If you have two kids, that $1,200 is one month of rent and food for a week, week and a half if you stretch it. You know what I mean? Like even if you get outside like the bubble, quote unquote, of New York asset prices or real estate prices or anywhere else, it's still not anything meaningful. And what it doesn't take to an account, I had a couple people who bit back on that post and were like, yeah, but unemployment's going longer. And two, it's like you're not calculating the absolute fundamental disruption of one, how many of those restaurants are going to close forever. Because the average restaurant in America, I think has something like 17 days worth of cash on hand or something like that.

It varies. It really varies. But look, at the end of the day, like, okay, here we are. You and I are talking about all of these facts, right? And we have facts and we have data and we have statistics and we throw them out there. And again, my point is not to make this a fact exercise or like a math exercise. I just want people to understand the magnitude of the problem. And I want people to understand, like, look, I was really excited at the start of January at the Democratic primaries because we had six women. running, right, with six women. We had an openly gay candidate. We had an openly leftist candidate, and we had a non-establishment candidate in Andrew Yang. Three months into the year, we have Joe Biden. There is virtually no difference between Donald Trump and Joe Biden, other than their level of charisma, and Joe Biden's just more political about how he fucks people. There's literally no different. They're fundamentally the same people. They're running the same circles. They're both almost the same age.

They're both in their 70s. Like, how did we go from such a promising run to such a disappointing, like, mediocre group of characters? Well, that's like six podcasts, which we can get into. But like, isn't it part of the problem is just that it's the same set of incentives? It's that it doesn't matter what side of the aisle on. Your incentives are exactly the same. And this is what we were starting to talk about before we hit the record button.

but basically like the what you have to want to become a politician right now in America. Like we haven't, so I think narratives and the stories that we tell matter, right? And the narrative and the story of politics isn't civil service, right? We don't have any conception in America of the civil service story that people used to tell, right? It's the same reason that like we don't hold the military in the type of esteem we should, you know, for what it does. right? Like we don't have that sense of what those things mean anymore. And so when you go in, it's largely and often because you lust after power, right? And the incentive is for you to retain and gain more power, right? You want to get on this subcommittee chair and you want to get ahead. And like advancing your career is an exercise in accumulating power. It turns out that when you accumulate power, it's very easy to start accumulating wealth. And we've designed a system that makes it very easy for those things to flow through one another. But the challenges in some ways from a from a standpoint is that how would you get people to participate in that who don't have an inner motivation or an inner drive for power? Because it seems like such a terrible exercise. So I would argue

having spent a lot of time looking at this generation that you and I are a part of, that the talent is not flowing into politics because people don't want to be a part of this bankrupt, corrupt system. I think in fact it's only since the one weird fallout of Trump being such a surprise to so many people is that for the first time I did start to see people get off the lines who are like, God, I'm going to hold my nose and do this. Now, and that's not to say that either one, they'll make it in the system or two, that they won't become corrupted by it. But I think that, like, frankly, we need a generation of people who hold their nose to get into politics and then make it better. But also a generation of people who are under the age of 70. Like, hello. So what I think is really

interesting about what you just said. So when I think about the world, right, There are three things people want. They want money. If you want money, you go to New York or you used to go to New York. Now it's San Francisco because being a tech founder is the way to make money or being a VC. They want power. If you want power, you go to D.C. Or you want fame.

And if you want fame, you go to L.A. Or you get on social media and become an influencer. Right? So there's three things people want. There's power, money, and fame. And then there's a group of people like, I don't know what I want. I want knowledge, but I also want to live with purpose. And I think that's actually a common character.

When people talk about millennials, one of the common characteristics is millennials aren't as motivated by these traditional paths of money, fame, or power, right? We're motivated by a sense of alignment, a sense of purpose, like a more holistic view of how we fit into this world and the impact that our behavior has and our actions have. And maybe I'm being overly optimistic. but I do think that we view the world through very different lens because we lived through very different times. I started my career in the midst of the worst economic crisis in recent history. And now I'm living it again in my mid-30s. I don't have a lot of capital. I'm not the CEO of a

global corporation that's getting kicked back from the government. I don't have the privilege of being one of the people who gets given a money printer. And I think there, you know, there are just, there's so many fundamental issues with all of the incentives we've built for people in this country. And I do still believe, like looking at the rest of the world, I do still believe that the United States is a place of tremendous opportunity. I do still believe that there is an amazing amount of creativity and talent and just like hotspot in this economy. I think the issue is, is that the flow of capital and the way capital will create, Cruz has been so grossly distorted that the only thing that pays, literally the only thing that pays is to be an owner and a driver of capital. Labor is no longer productive. You cannot make a living

as, you know, a creative. You cannot make a living as a writer. A lot of people joke about that, but I think that's tragic for an independent media. There's so many really important parts of our society that have just been squeezed out by the financialization of everything. And that financialization has only benefited a very narrow slice of people. So two facts I want to throw out. Three men between them, Warren Buffett, Jeff Bezos, and Mark Zuckerberg own more wealth than 50% of all Americans. So that's one.

Two, the second fact I want to throw out is almost 90% of all stocks in the U.S. are owned by 10% of people. And by the way, this liquidity crunch that's happening, guess who's selling stocks for money? People who don't have a rainy day fund, people who need cash. Guess who has spare cash to buy more stocks? People who have capital, right? So each cycle, each liquidity crunch we go through just further exacerbates this wealth disparity. And in every epoch of human history, what has happened when disparity of wealth gets too great?

What happens? Revolution, man. violent overthrow like there's violent then there's nonviolent um but i think like i think the good way to characterize it is we have an exit and voice right like we've been trying to use voice people are screaming i think more people need to scream but now it's time to act so when are the pitchforks coming out have you had the conversation with friends uh who don't at all come from like the bitcoin or world where you try to be like no listen the the the problem isn't exactly as clear as just like rich people or poor people or student loans or anything like that,

you know, kind of like the, again, the popular narratives from the left wing of the Democratic Party, for example, that ran earlier this year, but has to do with like the fundamental structure of the way that asset price, basically like trying to actually dig into the specifics of how asset prices have created a never-ending flywheel where the rich get richer. And it's like, but it's like more complicated than just like student loan forgiveness, you know, and these like, and none of those things are wrong, but like, yeah, but everyone seems to think like, oh, if my student loans got forgiven, then my life would be made.

No, it wouldn't because you still wouldn't buy stocks. You spend your money on some stupid thing, right? Because we don't teach people how to think for themselves. We don't teach people how money works. Like, we teach people to write cursive and we have a home-mat classes. We should be teaching people how to balance a checkbook. Like, what concerns me the most is there is zero financial literacy. there's zero understanding of how the economy works.

There's just people just do not care. And it just, it infuriates me. It makes me sad. The reason I'm so outspoken is I'm trying to get people to care about something that I care about a lot. But it's really hard to do because just nobody cares. And even when they do care, the answer is, well, what do I do with this information? And by the way, Bitcoin is not the solution to the problem.

The answer is not, hey, spend all of your money. on this asset that I own a lot of so that the price will go up. That is also not the answer. That is a fucked up answer. That is also not the answer. Telling someone to buy Bitcoin and telling them that's the solution to their problem is a terrible answer. It's a terribly incomplete answer. It's a it's a it's I would argue that it is a it's almost a dereliction of the duty of Bitcoin in some ways. Like part of like what I want to do with this podcast is I genuinely believe that for so many people that I've met, Bitcoin becomes a gateway drug to think about systems, to think about complexity, to understand how things work. And that doesn't mean that

they go off and get, like, they outgrow Bitcoin in any stretch of the imagination. It has, in fact, most people's appreciation of it. But there's, you don't see this chart anymore, but I want to draw up for it. Give me a second. Okay. There's this amazing chart that would like make their rounds back in like 2016. when there were a bunch of new people, right? It was like eternal September. Okay, hold on. So there's this chart, right, where you have T on the X axis and then perception of knowledge

on the Y axis, right? So basically this is the chart. So this is time and this is your perception of what you know. So you start out and you're like, I don't know anything about Bitcoin. And then you learn and you learn and you learn. And then maybe like a year or 18 months in. You're like, I know everything about Bitcoin. I'm the most amazing Bitcoiner.

There is. Look at me. Blah, blah, blah. Look at all the stuff I know. And then as time goes on, you move down this curve and you realize that actually you still know nothing because there are just infinite levels of complexity, knowledge, thinking. Because the implications are so profound, so many different levels. And there's so many different wrinkles to this.

So I'm like over here somewhere where I'm like, I don't understand. I don't know. And I will never know everything. and I accept that. But I think a lot of people right now are in this phase, right? And they're the people who are like shouting on the internet. And they're also infuriating because nothing they're doing is actually helpful. It's nice to look like a bunch of fucking idiots.

Well, I think the reality is that there's the internet rewards you for acting at that top part of the curve. So for those of you who are listening who are not watching, it is your standard kind of distribution curve where it goes up and then it comes down in a relatively equal pattern. And the point of this analogy is to say like, you start and you're like, holy crap, I know so much now. And then the further on your learning journey you get,

you realize that actually you know, there's so much, there's so infinitely more to know than you can possibly come in, that you start to appreciate how much more there is to have. So it's really, the key thing is the perception of knowledge. It's not actual knowledge. It's a perception of knowledge, right? It's called humility. Also. Yeah.

Yeah. And I think, though, that like one of the things that's really tough is that social media, like, let's go back to scoreboard. So you mentioned Ben Hunt earlier. I had him on the show a couple weeks ago, and we talked to his first article about coronavirus was called body count. And it was about, it was an analogy popped to his mind when he was starting to watch Wuhan report numbers. They had done the same thing, the Chinese government, the CCP had done the same thing that the U.S. did in Vietnam, where they picked this number and that became the scorecard. So in Vietnam, it was how many dead, right?

U.S. dead versus Vietnamese dead. That was the scoreboard. And so they executed the strategy. The tail started to wag the dog. the narrative tale started to wag the tactical dog by having like, okay, well, let's go raid this village because then we can up the body count, right? That's our scoreboard to the American people, not tactically, strategically, whether we're winning the war. He basically made that same analogy as it related to, as it related to the number of infected and dead in the virus. And by the

way, we still are obsessed with these numbers, right? We're looking, I mean, I think that there's something about the human brain, too. We look for these simplifications, right? But I Right, because the whole narratives are compelling, they make you feel safe, right? There's a difference between causation and correlation, and I think our innate instinct is to assign meaning to things which are effectively meaningless, which I think is just this really interesting. It's like, why do people flock to religion, right? It's because people need to feel like their structure like there's order. I view this fetish with the number as the same desire, right? people need structure, people need order, because the reality is we live in a very complicated

world. Yeah, no, I mean, everyone is trying to, like, we are all constantly trying to make sense of everything around us. I mean, like, just the greatest works of literature and philosophy and history are all about ultimately trying to find meaning and chaos and make sense of it all, you know, or on the other hand, rejecting the ability to even do so and appreciating just what is in front of you. Like, right, there's all these different places that people land. But on the way, we do tend to start to fetishize these different goals. Let's switch topics, actually. There's something else.

I just realized, actually, as you were talking, that theoretically, this started as like an episode of the breakdown, sort of. But really, actually, it just is an episode of what grinds my gears where I'm standing in for Jill. In terms of just pure frustration and whines. So I'm down for that, though. Hold on, hold on. Let's flip it. Okay.

So I am optimistic about this as well. And I think what's really cool, I shouldn't say cool, that's the wrong word choice. I think what's really interesting about what's happening right now, people actually care. So the reason I'm obsessed with a meme, money printer go, number one, it's a great meme. But also, it is a viral meme that is about senior age and the debasement of money. there are a bunch of people on the internet talking about learning about understanding, complaining about the money supply and why that matters to the long-term viability of the U.S. economy.

That's never happened before. People can't watch sports. There's no new TV content being produced. So at some point, people need something to do. And the only thing that's really happening right now is the market. And so you see people starting to like actually participate and get educated. And mainstream media is talking about finance topics. So I think it's an opportunity.

I'm interested to see if the opportunity gets taken, a capitalized on or gets squandered. But like this is the moment as a bitcoiner for the last seven years. Like this is the moment we've been training for. I listen. I completely agree. So there's a there's a famous phrase attributed to H.L. Mencken that no one ever went broke underestimating the intelligence of the American people. But I would flip that on its head.

And I would say that no one ever changed anything, betting against the ability for people to learn, grow, develop, you know, it's much less catchy. But I think that we do ourselves a great disservice by assuming that people can't learn that they don't want to have conversations. Now, we've structured a world right now in which you are incentivized for quick hit soundbite scoreboard stuff that eliminates nuance. But anytime you get in conversations with people, no one on the planet has their most fulfilling conversation be the one where they drop a sound bite bomb and then get high five from their friends. They're all things where they're challenged, they're pushed. But here's the thing. The day-to-day sort of like barrage of distraction you're presented

with has basically been removed, right? It's like you took an entire world. of people and you just pulled the plug. And what I think's been really interesting is when you're sitting here at home, right, I wake up in the morning at like 536 and I lay there for like a solid 30 minutes to an hour. And I don't want to go on the internet because it's all the same shit. And like, I can do that later. I don't really have a lot of pressing stuff to do because businesses aren't like running at the same pace. You know, I'm just, I don't have anywhere to be. I don't feel urgency. So I lay there and I think.

And throughout my day, there are these blocks of time that used to be filled with activities and bustle and busyness. And now the busyness is gone. And we are forced to confront ourselves, like our true selves. And I think that is a really incredible thing. Like this is a moment. I don't know if you ever read anything about collective consciousness or this idea of a hive mind, but I definitely believe it.

I believe that like we are all connected by energy and that your energy and the way you interact with people can change the way other people feel, which is why like I'm so animated and like they can literally see when I'm around people. It's like a battery and it charges them up, right? And then I have to go back in my closet for like a day and recharge. But we have this amazing moment where we're actually thinking about what we really care about what's in our hearts. we're forced to confront our reality, the way we live, and we are asking ourselves hard questions.

We're connecting with each other. We're talking to each other. We're having these conversations. I think that is a really beautiful moment. And the question is like, what are we going to do with this moment that has been given to us? What will we do with it? So you have to read. If you haven't read it yet, it's called, there's an essay called The Busy Trap by Tim Kreider from 2012.

And it is so beyond good. It's in the New York Times and it's not paywalled. But it's summed up in this quote, there's this Thomas Pinchon quote, idle dreaming is often the essence of what we do. But he says it so perfectly. He says, idleness is, this is Tim Kreider now. Idleness is not just a vacation, an indulgence or a vice. It is as indispensable to the brain as vitamin D is to the body. And deprived of it, we suffer a mental affliction as disfiguring as rickets.

The space and quiet that idleness provides is a necessary condition for standing back from life and seeing it whole, for making unexpected connections and waiting for the wild summer lightning strikes of inspiration. It is paradoxically necessary to getting any work done. I read this shit and it hit me like a bolt of lightning. I was in the middle of being in San Francisco inside. I think I had just started to advise a startup that was going through Y Combinator, the same class as Coinbase at that time, which then sucked me in like a black hole and destroyed my life voluntarily

through entirely my own fault for like four years before escaping the other side. But I remember reading this and being like, you're right and I'm still going to do the opposite. But I'm going to remember this until I'm ready for its message in a weird way. But I think that you're right. I think that these are one thing that I will say is I studied history in school. I've always been obsessed with history. Let me be very clear. This is an historic moment.

This is not some small blip. This is not something that's going to be written off as just some crazy thing that happened. this is one of those before and after type events. And now a lot of the things that will come after will have been brewing for a very long time. On Friday, actually I have Peter Zahan who wrote Disunited Nations coming on to talk about how this is accelerating forces, geopolitical forces that he's been observing for years, right?

So it's not that there's fundamentally new things, but when you have one of these liminal moments, right, these moments of transition, everything happens in these in-between moments. There's another one of my favorite theories from history is Stephen Jay Gould, who's an evolutionary biologist from Harvard, he had a theory called punctuated equilibrium. And basically he said, or up until him, the post-Kond of Darwin era, everyone assumed that evolution was this kind of steady up into the right exercise.

What he showed is that if you look back at the fossil record, there are these really long periods exactly of nothing really happening. and then these huge jumps up, we are absolutely in a punctuated equilibrium moment. And to me, in some ways, the question is it isn't a little bit how we got here, but it's a lot about what the hell are we going to do with it because it is happening. The rodeo is on and we're all on the call. So here's my challenge to all of the bitquiners out there, right? Stop saying stupid fucking shit and start thinking critically about what do you want to do with this moment.

Here's the thing that people don't understand. people are smarter than you give them credit for. And if you tell someone the solution to this situation where in right now is for them to buy Bitcoin, they're going to dismiss you. It'll get you a lot of likes from the same people who live in the same echo chamber as you, but it doesn't actually create any sort of shared energy. It doesn't actually move anything forward other than your own feeling of self-importance. And I think in our community, we have a big problem with people patting themselves on

the back for doing absolutely nothing of value. And the question is, how are we going to use this moment to drive the conversation forward in a meaningful way that actually helps us get to the things we care about? What are the things we care about? Self-sovereignty, financial freedom, financial permissiveness, the end of draconian authoritarian regimes that are implemented through policy controls and monetary controls. Like the things we care about, the things I came here for, seven years ago were these things. And everyone is too busy jerking off Wall Street and trying to get hedge fund managers to invest in their crypto fund or trying to get money managers to buy Bitcoin that we have forgotten what we showed up for. I didn't show up to build the next, you know,

J.P. Morgan. I did not show up to build the next Goldman Sachs. I showed up seven years ago to build something different. And I think that's been the greatest failure of this industry and the greatest disappointment. But we have an opportunity at a moment here to do something different. And I just, again, everything you put out there, like take a moment to just think, is this actually driving the ball forward? Is this actually making progress? Is this actually contributing to something positive? I think in some ways, too, it's like there's another piece of this, which is like, And by the way, I ask myself this all the time. And so the answer is yes.

And sometimes the answer is no. Like I have to confront my own truth that sometimes I'm full of shit. Well, I also think, too, that this is not binary in the sense of like, do this, don't do that. It's more like what I would say is that there are a huge number of Bitcoiners who actually have figured out the tools that like social media in particular Twitter has a very specific reward structure. and there are a lot of folks out there who have figured out how to, like, win that scoreboard in terms of the points. But you can deploy that against different things. You can deploy that against anti-surveillance measures, right? Like that same thing where you know exactly the way to word that tweet that it's going to blow up and you know, like people know.

Sometimes you do a tweet where you just go surprise viral. I would say more often than not you know what your likely banned to hit is, right? Because you've figured it out. And this is not you, Melton, this is the royal you. Like, you deploy that energy, right? I'm also guilty of this, right? There are times that I look at something and I'm like, I really care about this. I want people to pay attention.

How do I maximize the probability of people paying attention? I don't know. Where do we take all of this? Well, I think one is recognizing that this is a moment of opportunity, right? Like as the world starts to get reconstructed, one of two things. Like when things get broken down, power swings in to fill the gap really, really aggressively. And you're going to see that in ways that are very scary for the things that a lot of the people in the space, regardless of their political

affiliation, share. One of the things that I love about Bitcoin is that you have like left libertarians and right libertarians and like, where everyone kind of meets is not just libertarianism, but just the idea of the empowerment of people, a sense of justice, a sense of voluntarily contributing to make a world better rather than waiting for someone else to do it. We're trying to create a world. What my focus has been is like how do I invest in and promote and advocate for and just sort of drive forward this idea that we are building tools for their evolution. They can be used in different ways.

But at the end of the day, this is about helping people take back their self-sovereignty and building systems that give people choice and give people rights. I mean, like, so here's an interesting prompt. How do we invite people in more? Like, how do we create more doors that people can walk through, right? Because ultimately, like, you know, the old phrase, you can lead a horse to water, but you can't make him drink. It's true. But there's more people who are ready to drink right now than ever before. Yeah. We get them something better than buy Bitcoin. Like if I have $50,000 of student debt, I'm living paycheck to paycheck and I just lost my job. The rallying cry of buy Bitcoin or Bitcoin. Bitcoin fixes this doesn't do shit for me. And I may be interested in Bitcoin. I may be excited about it, but the idea of spending money to buy an asset is not a tangible rally and cry. And that's kind of always been the issue with Bitcoin's like what is the means of participating

in Bitcoin other than being a core developer or other than holding Bitcoin or other than advocating for Bitcoin and being part of crypto Twitter? So I think we need to find ways for people to participate. And I think the ways for people to participate is to care about privacy. The problem is that caring about privacy and giving people tools to preserve their privacy is not profitable. Right. And so there is this interesting thing.

Like what I always think about is the idea of category creation, right? So the way new business models get built, right? When Facebook started building Facebook, social media wasn't a thing. The business model they were building didn't really exist. Maybe MySpace that built it. There were earlier iterations than MySpace, but like the category didn't really exist. So we have this unique challenge where there are new products and services we're trying to build and get out into the market that don't exist yet. The issue is that in order to create a category, you have to do a number of different things.

Number one, you have to educate. Number two, you have to advocate. Number three, you have to build tools and on ramps. And number four, you then have to build a business that can sustain all of those activities. And the issue is, like, a lot of the things that we're trying to do in the crypto space are fundamentally new, particularly in a world where monetization is driven by advertising, right? and selling people's information, which is antithetical to how Bitcoin function, what this community is about. So I think the biggest challenge for a long time has been how do we find business models that are profitable that also allow businesses to engage in category creation and basically fund these new categories and to do that for long enough for these things to come into fruition and for them to become part of people's behavioral pattern

and part of how we function as a culture and a society. And there hasn't really been like a driving catalyst to accelerate that. And so I think the biggest question is like how do we get capital more people than just Wall Street to care about crypto and blockchain? And then how do we actually build tools that solve problems for people other than just saying, hey, by this asset? I don't have the answers, but I think privacy is a starting point. I think self-sovereignty is a starting point. and I think finding ways to help people participate in these networks, maybe as a starting point. But I don't know the answer.

But I also don't think telling people buy Bitcoin is a compelling call to action. Yeah. I also would say, too, just to kind of really enforce that last point, like, memes that serve as a rallying cry for a community to stay in touch with itself and feel like empowered are fine. It's just what I hear you saying is like there has to be more, too, guys, you know? Because to your point, like, people are not dumb. Do you know it's an alliance that I think there's a unique opportunity for? If you look at the last couple years up until coronavirus, and this is something that I actually think is pretty unique about coronavirus,

this crisis specifically, there was this weird intergenerational war almost by default based on politics and economic structure. And so the, like, if you look at Brexit, if you look at Trump coming in, This was a, you could map those political decisions on the basis of age group, like really, really, like profoundly and clearly, right? And this is historically true, like the older you get, the more conservative that you get, but these are really profound and very clear examples of this. You also have this interesting, by default, almost generational economic competition where the people who can afford assets that have had their values continue to go up by more of those assets, they're largely older.

and so the younger class can't participate in that, right? So you can be a millennia with a really well-paying job, but there's no fucking way you're buying a house, especially when you're competing with a million boomers who are buying their second house, right? Like, I'm trying to move to Rhinebeck, man. It's killing me. New Yorkers got to get out of fucking Rhinebeck

so I can buy a house there. But even New Yorkers, like the only reason I can actually port a house in New York is because I took an asymmetric risk reward bet and it's... Exactly. I'm entirely joking. But there's a generational thing where like, because of the way, like, when you're diversifying your portfolio, just by virtue of being older,

like you buy real estate and stuff. But that creates a challenge for younger people who are trying to come into that market, right? This is all inflated by the way that money is cheap. That's the whole kind of conversation that we started with. So long, short, we had this like almost definitional. It wasn't like anyone declared war on a different generation, but in terms of like self-interest and there's just clearly diametrically opposed. We've had this moment now where somehow some way we are debating whether to let people of a certain age demographic fucking die on the basis of it being economically infeasible or difficult. And what it's creating actually is there is more, let me put it this way, I've spent more time with more people talking about, thinking about their families, their grandparents, like what these people actually mean in their lives than ever before. If you want to talk about moments of opportunity, these are people who are, I think all of us, especially

Bitcoiners, have at least one set of relatives who their whole plan is based on a presumption of the stock market returning 7% forever for the rest of their life. And we're sitting here being like, that can't possibly be. Those are moments of opportunity. I don't have a good answer for the last part, which is like, what's the flywheel that makes this profitable that allows it to expand? That's the real difficult part. But when it comes to the conversations that go beyond buy Bitcoin, diversify into Bitcoin, this is a moment to actually start to have those conversations about the structure of society. Like there's the opportunity, basically, I guess I'm what I'm saying, is for an intergenerational alliance between the subset of millennials who actually think that their parents and grandparents

are worth looking out for and being partners with again. You know, like that has given in the context for that. Talking about here is respecting and giving credence to what people, who have lived through different parts of history can teach us, right? I think one of the things that happens in crypto is a lot of intellectual hubris, where people take on this, this aura of sort of intellectual superiority just because they learned about Bitcoin two years before other people did. That doesn't mean anything. And actually in the crypto ecosystem, we're repeating a lot of the same mistakes of like 1980s and 1990s finance. So I don't think what we're doing is really that

impressive. I see a lot of dumb shit happen on a daily basis where I'm like, this is idiotic. And if we had only just talked to some people who've done this before, we would have come up with something different and something better. What's really fun, so in my family, I have a brother who's two years older than me, and I have parents who are in their early 60s. And we have a family chat and we talk to each other every day. But like, I talk to my parents all the time. And they teach me valuable things and they tell me valuable things. Like I have a lot of friends who are in their 40s and 50s and they have things to teach me and they have things to share with me that I don't have. So I think it's like, in our industry, it's like how do we, we don't need to reject everything. We don't need to

reinvent the wheel. There are certain things we want to break, but actually incorporating what we've learned from prior cycles is the best way to advance forward because everything is built on its predecessor, right? We stand on the shoulders of what has come before. and so on and so forth. Like you can't jump from one system to another without any sort of transition stage. And that stage could take 10 years. It could take 20 years. It could take 50 years.

But in that process, you have to build a bridge between the people who built the system that we're living in now who can help us understand how to build the system we want to live in in the future. Nathaniel, you're on mute. I was muted. We're also going to need alliances. Like if we want actual systemic change. you can't do that from one small corner of the world.

What you can do, what we've seen over and over and over again throughout history is that you can start in one small corner of the world and then apostles bring your message everywhere, right? Yeah. I love you, but I have to go do something now that... Be a human and an adult and not think about it. You witnessed me shoveling homemade tacos into my face before this. I'm actually working on a really cool content series about the future of capital markets that's basically translating some of the cool stuff happening in crypto, where we're disintermediating

the different layers of a brokerage firm and how that all works. I'm pretty excited about it's like the first long-form thematic content series I've done in a while, and so I have to go finish making the video that we're going to release tomorrow. That's awesome. Well, let me know before, or this will go out in the afternoon tomorrow. So I'll make sure it's all plugged in, depending on when that's released. Well, thanks for hanging out, taking the time before that.

I appreciate your rants. I appreciate your caring. I appreciate your caring enough to be frustrated. I think... That's to figure out where to put it, right? Like, what do we channel this rage into? I know. And I think that we're all trying to figure that out, too.

You know, and I think that being honest about not knowing exactly where, but knowing we want to do something with it is really important, know. And I will say, too, my one moment of optimism that I have is that like, you know, we complained about certain things that we don't like in this industry, but like, God damn, pound for pound, average person, even who's squawking on Twitter in this industry versus any other that I've been a part of, like the potentiality there is so differentiated, right? Like, the

opportunity is. Like, I will say this about the crypto community. We are giving bunch of people. We are, like, there is an openness here. People are willing to talk to each. other like I DM with people all day, talk to random people on telegram, like people are very quick to iterate, throw random stuff out. The energy is palpable. It's amazing. The question is how do we use that energy to actually potentiate tangible change? That's what we need to figure out next. All right. That's our mission. Ready break. We need an inside woman or inside man. We need a group of people who are willing to go into the belly of the beast. We're going to find out who those people are very soon.

Oh my God, I know. We need some candidates. I'm into it. All right. Pellie Lafleur, though. Oh, God. I was like, well, we don't want to talk for another 20 minutes, so I'm not even going to bring that up.

Jesus. Swinging to miss. All right, guys. Thanks for hanging out. Thanks, Melton. Bye. Bye. I think the most important part of this conversation to me in some ways

was the idea that we need not to underestimate people's capacity to learn and understand what's going. around them. Just because the world that we live in and the context that we live in has lulled so many of us into kind of casual acceptance of the way things are doesn't mean that people aren't smart enough if you take the time to engage and to understand their context to want something more, to want something better, and to be willing to work for it, right? I think there is a moment here that is open to change, but it's going to go fast and into that vacuum will flood all sorts of types of power, including most importantly, the type of power that is trying to preserve itself.

Power adapts to new changing circumstances extremely quickly. It leverages every resource at its disposal to ensure that if the nature of power changes, it is still the set of institutions or the power broker on top. We can't let that happen, or at least we shouldn't just let that happen. So I hope that you're on this journey with me to at least have the conversation about how we might build something different. Thanks for listening. We'll be back tomorrow with an extremely exciting interview. It's one of probably the most excited I've ever been for an interview. It's all about the larger global geopolitical context in which this is happening and what the world might look like from a large-scale political and inter-nation economic perspective when the coronavirus crisis has passed. So stick around for that.

I'll be here tomorrow with that. Thanks for listening again, and I will catch you soon. Peace. Welcome back to The Breakdown, an everyday analysis breaking down the most important stories in Bitcoin, crypto, and beyond, with your host, NLW. The Breakdown is distributed by CoinDesk. Welcome back to the Breakdown. It is Friday, March 27th. And for those of you were listening yesterday, I mentioned that there was going to be a really exciting guest today. That has been pushed back a week, but it's okay because I was feeling the need to

actually try to almost take a step back and gather up my thoughts on what is just another in a sequence of literally insane weeks. It feels like 2020 has been a full decade in just three months. So today's episode is going to be the seven themes that defined the week. And maybe I'll think of a more catchy title before I actually push it live, but seven themes that define the week. So quickly, I'm going to talk about Unlimited QE, CBDCs, Central Bank Digital Currencies, narrative shift to let Grandma die, stimulus as corporate socialism, the lack of failure of institutional trust, surveillance, and the Bitcoin difficulty adjustment. So let's dive in.

All right, so Theme 1, Unlimited QE. There was a remarkable interview last weekend on 60 minutes with Neil Kashkari, who's a Fed Reserve president, where he effectively said, and I think I played this clip on day of this week, that the Federal Reserve had infinity dollars, infinity cash to do what they needed to do. What we heard at the beginning of the week was a new policy of unlimited QE. The week previous, the Fed had come out with $700 billion in market support activities, including $500 billion to buy treasuries and then another $200 billion to buy mortgage-backed securities. Well, they extended that to effectively an unlimited amount this week. What's more, there was a shift in what they allowed

themselves to buy, right? So they weren't just limited to treasuries and mortgage-backed securities anymore. They actually started to go into the corporate bond market, which has just huge implications. It's something that just hasn't been done previously. And again, I think on Monday, I started with a little clip from Travis Kling from last fall where he said that the forms of QE were going to be increasingly more exotic. And I think that corporate bond buying program is exemplary of that. Now, we would find out later in the week that BlackRock would be both the recipient of an administrator of a number of those bond buying programs, which is a whole separate issue, but the week kicked off with unlimited QE. Now, one quick note on that. How did it resolve? Well,

Caitlin Long says, good news, Fed balance sheet up, quote, only 600 million this week, did 5.3 trillion from 4.7 trillion last week. I was expecting more. Prediction. Before crisis ends, it will far exceed $10 trillion. In short term, huge dollar demand because short covering, but it won't last. Then timber? All right.

Next up, CBDC Central Bank Digital Currencies, or more specifically, a digital dollar. So at the beginning of this week, when things got going, one of the big questions was what the stimulus package was going to actually look like. And there was a proposal put forth by Nancy Pelosi on Monday, night that included a proposal for a digital dollar. In this context, the digital dollar was about something very different than we've seen previous digital dollar ideas from researchers and thinkers. This was basically an answer to the how are we going to get money in the hands of people question. So the way that they proposed it is that everyone would have an account effectively directly

with the Fed called a Fed account that would be able to put that stimulus money, whatever it ended up being, directly into those accounts. This got a huge number of people in the the crypto world talking, well, beyond the crypto world as well in the finance world. So this was dead on arrival. Let's just put it out there. It did not make it very long in terms of the proposals. Nancy Pelosi's whole plan wasn't really what ended up being there. But it was a remarkable moment in terms of shifting the Overton window where the digital dollar all of a sudden was something that people were thinking about in a major context as an answer to a real problem rather than as something that was theoretical and in the future. So the problems with this plan

numerous that they were. One, the biggest, I think, had to do with the relationship between citizens, the Fed, and commercial banks. This Fed account would effectively go around that relationship, mitigating the need for that intermediary. And there's a whole conversation to be had about whether that's, one, a good thing or be inevitable, but it also brings with it a whole lot of problems, right? As soon as the Fed can instantly put money into accounts, it can also withdraw it, right? So there's way, way more control inherent in that system. There are questions of surveillance. We'll get to that later. But either way, the key thing here is not that a digital dollar lasted in the conversation. It's that it made an appearance when absolutely no one expected it to. And I think that

will have impacts going forward in terms of how seriously a group of lawmakers think about a digital dollar as an asset they want at their disposal for this and other situations. Theme three for the week, narrative shift to let grandma die. This is a very. is perfectly summed up in a tweet from March 24th by Mary Connor, Jesus died for our sins, Grandma died for the Dow. So basically, we saw a massive narrative shift at the beginning of this week, where all of a sudden this public health crisis became a financial crisis in a narrative sense.

The reality is, of course, this is obviously both, but the point of saying that there was a narrative shift is that there was a small but then loud and then growing group of people, politicians and others, who started to scream about the second order effects of the economy. At the beginning of the week, President Trump kind of gave his blaring semi-endorsement of this by saying that people wanted to go back to work and saying that the cure couldn't be worse than the disease, which is, there's plenty in there that reasonable people can have discussions around. However, the interesting thing has to do with how this narrative propagated itself. And so Epsilon Theory is run by Ben Hunt, who was here a couple

weeks ago. Episelon Theory uses data to actually track narrative sentiment. And what they found in short is that the same people who just a couple weeks ago were saying, this is only the flu, this is a media hoax, are the ones who are now propagating this narrative of, we really need to get the economy started again. There's going to be more people that die from that. Now, there's an underlying piece of this that is incredibly depressing, which is the callous dismissal of a generation. People went so far as to actually tweet things like, my grandparents would rather die than let the economy go into depression and all this sort of crazy, extreme binary thinking. And that's what was frustrating to me.

We talked a lot about this on my podcast with Mark Yusko earlier this week. The idea that somehow these things are mutually exclusive and that you just get to choose health or economy is just lunacy, but it shows the reward structure of social media and media more broadly to have these sort of super simple talking points. It was just a remarkable moment, and a really important narrative shift that I think we're still in the middle of right now. Now, the good that might come of this is that we do need to start having more specific plans for how we come out the other side. But guess what? That's going to involve both health outcomes, specifically testing and a really rigorous testing apparatus, as well as specific

decisions economically around when people can go back to work, which groups can go back to work. That's a conversation that's being had now, but it was jarring to see how fast we went from lockdown to let grandma die. Theme 4 of the week was the stimulus as corporate socialism. So Wednesday night, we got word that a deal had been reached, a $2 trillion deal. that's just the fiscal Congress-approved side of things, not the unlimited checkbook that the Fed has. And it included both $1,200 to individual citizens, plus an extension of unemployment benefits, plus hundreds and hundreds of billions of dollars in corporate bailouts.

Now, as you would expect, people were incensed at this, particularly in our part of the world. There's so much to be angry about. But I think that the narrative that's key here was this idea of corporate socialism. And this was embodied in a blog post of the same name, corporate socialism, by Nassim Nicholas Taleb. So the interesting thing is that he references the fact that the justification for this huge, huge set of bailouts is this pandemic. And for those who watch the markets and who have been watching the markets over the last

few years, everyone feels like the coronavirus was the pinprick, not the balloon itself. There is a fundamental structural set of problems in the markets that this has just exposed and exacerbated. And so now, obviously, in some ways, there is a convenient narrative excuse. Well, there's this black swan event, right? There's this thing that no one could have predicted and no one had seen coming. Taleb slams his foot, slams the door down on this. He says, Furthermore, some people claim that the pandemic is a black swan. Hence, something unexpected so not planning for it is excusable. The book they commonly cite is the black swan.

Had they read that book, they would have known that such a global pandemic is explicitly presented there as a white swan, something that would eventually take place with great certainty. Such acute pandemic is unavoidable, the result of the structure of the modern world, and its economic consequences would be compounded because of the increase. connectivity and over-optimization. The idea that no one could have seen this coming, well, there's two problems with this. One is, to Talib's point, pandemics are something that we need to be planning for more generally. Let's even hold that one aside.

The idea, the notion that no one could have seen this coming when stock markets in the U.S. hit all-time highs while hundreds of millions of people were quarantined in the supply chain capital of the world is ludicrous. ludicrous and that's why people aren't buying it. They're not buying it. But this will go on and it will be exactly as it always is. The question is really how long the health outcomes take to change. There is a chance that this $1,200 buys people enough time and things come back. Like everyone's hoping for V-shaped recovery. The vast majority of epidemiologists, scientists who actually study this, Health professionals who are looking at the growing burden on the health care system don't think so. And, well, that's next week, I guess, to argue about.

But stimulus has corporate socialism. Key theme of the week. Andrew Yang really nailed this one. He says, government may be the only thing that can fail miserably and then get bigger as a result, which of course is not exactly true because the same can now be said for Wall Street. This segues us nicely to our fifth theme, which is institutional trust. Preston Byrne wrote at the beginning of this week, Every intelligent person I know regards coronavirus as a failure of governments everywhere,

run by incompetent bureaucrats, blinded my bunny, who can't protect the country. I actually agree here. I think that there is not a single person in the world who will look at government broadly, as an institution, as an institution that is supposed to be there to support societies in these types of moments and come away with a better opinion than they had when they went in. Everyone's opinion of government around the world is being diminished by the colossal failure, the cascading failures, the completely and totally bipartisan failures of governments in addressing this issue. Just today, just before I recorded this, Boris Johnson, who on March 3rd was bragging about how he was going to continue shaking hands, made the announcement that he had

tested positive to coronavirus. Now, the question is what the actual consequences will be. And, well, there's going to be a variety of pieces to that. First is joblessness claims. We saw 3.28 million people file jobless claims this week, which is four times the previous record. Four times the previous record, an entire recorded history of the U.S. That is a phenomenal statistic.

People are writing this off as though somehow it's just short term. It's more like seasonal labor. It's like a hurricane hit the U.S. at the whole time. That's the narrative that is not stressed out about this. It takes into no account how little runway most small businesses have, how little ability to deal with a hurricane that last two months most people are. It's just a phenomenal abrogation of the responsibility of leadership in this case. So the trust in institutions of government, I think, is hugely low.

What's more, it's not just institutions, right? So yesterday, as I mentioned, those jobless statistics came out. The same day, the Dow rebounded so much. that it was called by the Wall Street Journal in what I believe a tweet that will live in infamy, a new bull market. Now, of course, defenders are just going to say, well, it's just numbers, it's just statistics. It's 20% up or down means bearable, blah, blah, blah, blah, blah. It's lunacy, lunacy that on the same day that this jobless report comes out where four times the number of Americans filed jobless claims that have ever in history, the market had one of

its biggest rises ever. There could be nothing that shows how disconnected, how fundamentally disconnected the markets are from the real economy and the real lived experience of people. Suna Amaz from Token Daily and Volt Capital summed it up beautifully. She said, the stock market is completely divorced from the economy, is completely divorced from money. I would add, is completely divorced from the lived experience of human beings. Now, one last little note on this before we move on, we are starting to already see the political ramifications. Kosovo voted out its prime minister because of the way that they handled this coronavirus outbreak. I do not think this will be the last political head to role in this situation, especially in the context of Christine Lagarde, the president and head

of the ECB, the European Central Bank, banging on the door of European leaders saying that they have to move quickly to stem the economic crisis that's happening. And they gave themselves two weeks to go figure something out after not being able to figure some out this week. Keep in mind that the epicenter of this crisis may be moving to the U.S., but it's been in Europe longer. It's just, there is, again, cascading, catastrophic, systemic failure of leadership that this is exposing, and that I think is really in a lot of ways the straw that breaks the camel's back and institutional trust for a huge number of people.

Theme 6. Surveillance. In the context of crises, centralized power. governments usually consolidate power. They take extraordinary wartime power, crisis time power. The problem is that they don't tend to want to give up that power after they have claimed it. So this is something that many, many, many, many in the Bitcoin and crypto community are watching closely. Well, yesterday, Marty Bent summed it up beautifully with that crispness that only Marty has, we just got patriot-acted freaks, fear wins again. The article that he was referencing was from Business Insider.

titled, the CDC would set up a coronavirus surveillance and data collection system as part of the Senate's $2 trillion stimulus bill. Here's the key line. Of the funding allocated to the CDC, the bill sets aside at least $500 million for public health data surveillance and modernizing the analytics infrastructure. The CDC must report on the development of a surveillance and data collection system within the next 30 days. While it's not clear what form the surveillance system will take, the federal government has

reportedly expressed interest in aggregating data that can. can be gleaned from tech platforms and smartphone use to monitor movement patterns. We are seeing this around the world. It started in China, it moved to Korea, it happened in Israel. This is the way that encryption dies. This is the way that data surveillance of phones becomes normalized. And it's the type of thing that we really have to be vigilant to try to prevent. Now, unfortunately, I would say that as a theme, this is a theme that matters much more to us. in this Bitcoin and this crypto community than it does to lots and lots of other people. And it's hard to know exactly how it would break into the public consciousness and the public

mainstream. For that reason, more than any other, I think that it is something that we need to keep banging the drum on. It's kind of our job, basically, to make it clear that this is an issue. Again, there's not a mutual exclusivity between finding a way out of the health crisis, finding a way out of the economic crisis, and not having to resort to surveilling citizens in a way that just breaches our privacy, breaches the Constitution, et cetera. So surveillance, surveillance, you've heard me talk about it before. You're going to hear me talk about it again. Theme six for this week. All right, the last theme is most definitely just something for this community, but it is a powerful role. reminder of this system that we call Bitcoin. One of the aspects of Bitcoin that is so unique is its difficulty adjustment system. So the idea is that in an effort to keep block times around 10 minutes,

every two weeks, the Bitcoin difficulty adjustment occurs to either make it harder or easier to mine. And usually what it has to do with is if miners have gone offline for some reason. so, for example, price has gone down sufficiently that there's some amount of miners that can't profitably mine, so they turn off their machines for a little while. The difficulty is adjusted down so that the people who remain mining can make more profits, so they pour more hash power on it and incentivizes people to come. Basically, it's this resilient incentivization system that can react with relatively quick order to market conditions. This week, we saw the second biggest difficulty adjustment of all time, almost 16% down. The only time that was bigger was in 2011 before there were

ASIC. So this is the biggest difficulty adjustment of the modern era. But it just kept hanging along because this is an automated system. It was meant to do this. Preston Pish sum this up perfectly better than I could have. He says negative 15% difficulty adjustment is incoming in a few hours. The incentive structure on this thing is so resilient. It's almost laughable. So why I mentioned this in a themes of the week that are all about this larger global context. Well, the vantage point, I would imagine for most of you guys who are listening, who are hanging out on this journey with me, is Bitcoin. That is your gateway into this conversation, or cryptocurrencies more broadly.

This is our starting point to look out across all of these different issues, be they financial issues and the way that markets are structured, be it government issues and power issues, right? Like, the vantage point that we have is Bitcoin. And my goal with this podcast is to be able to be able to, to make that perspective that you have that starts with Bitcoin be a gateway to a wider world, be a lens through which you can assimilate other types of information, restructure it, and figure out what you think and how you think we should act better. So I think that coming back to this

idea, reminding everyone of the resiliency of that system, the resiliency of the starting point that we share in Bitcoin is really important. You know, one of the things that I've thought of frequently over the last few months is that there isn't a community of professional interest, an economic interest, an industry that you could have been in where you would have been better informed about the coronavirus over the last three months than cryptocurrency, than Bitcoin, more than even mainstream medicine in the U.S. It was folks who were seeing what was happening in China, where we obviously have direct connections to that. It was people who watch exponential functions. The first podcast that I did about

coronavirus almost more than a month ago now was about why Bitcoin and Crypto were so interested in it. And I think that the reality is, as I said, Bitcoin is a lens to understand the world around us and to try to have some agency and ownership in the future that is happening to us, right? The unreasonable man adapts the world to himself, the famous George Bernard John, Shaw quote. The reasonable man adapts himself to the world. The unreasonable man is very man-y quote, but you get what I'm saying, right? The point is that Bitcoiners by and large, whatever gender they are, are interested in being that unreasonable person who takes a hand in shaping the future. And when you have a singular global event like this, of course we're going to be interested.

Of course we're going to be involved. So thank you guys for hanging out. Thank you guys for listening. Thank you guys for being a part of this active, engaged, resilient community. That's it for me this week. I'll be back on Monday with another episode of The Breakdown. Until then, stay safe, hug someone you love, drink if you need to, smoke them if you got them. Peace, guys.