The Pomp Podcast - #1412 James Lavish | Bitcoin & The National Debt Crisis

Episode Date: September 26, 2024

James Lavish is the Co-Managing Partner of the Bitcoin Opportunity Fund, and is the author of the ‘The Informationist’ a weekly newsletter that simplifies financial concepts. In this conversation, we break down the macro environment, how inflation has been ravaging America, national debt & the future impact on the economy, bitcoin, potential solutions, risk of CBDCs, and where the world is going.  ======================= Gemini is the safe and secure way to trade crypto. Gemini is offering eligible new users the opportunity to earn $100 in BTC when they trade $1000 in crypto within their first 30 days of signing up. Head over to ⁠https://www.gemini.com/partners/pomp⁠ and start trading crypto to earn $100 in BTC. ======================= Buy and sell cryptocurrency in a tax-advantaged crypto IRA with iTrustCapital. Enjoy 24/7 access, lowest fees in the industry, and tax benefits for your retirement. Open and fund an account today at ⁠⁠⁠⁠⁠⁠⁠https://www.itrustcapital.com/pomp⁠⁠⁠⁠⁠⁠⁠ to receive a $100 USD funding bonus. ======================= Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ ======================= View 10k+ open startup jobs: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. What's up, guys? Bang, bang. I've got an amazing episode for you today. We've got James Lavish. He is the co-managing partner of the Bitcoin Opportunity Fund, and he's the author

of The Informationist. That is a newsletter on Substack. In this conversation, we break down what's going on with the macro environment, how inflation has been ravaging America, what's going on with the national debt, what could occur if the debt continues, and could the U.S. economy crumble under all this leverage. We then get into why James is so excited about Bitcoin, what the potential solutions are, what the risk with CBDCs are, and overall, we talk about where the world is going. James has a great understanding of both economics, Bitcoin, and much more. And I really enjoyed talking to him because he brought some unique perspectives and lots of data. I hope you guys enjoy this episode. Here's my conversation with

James Lavish. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. Today's episode is brought to you by Gemini. Gemini is a fantastic platform. How do I know? because I've used it for years. These guys get it.

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That's right. Gemini will give you $100 in Bitcoin if you head over to Gemini.com slash partners slash Pomp and you trade $1,000 in crypto within the first 30 days. Today's episode is brought to you by iTrust Capital. Are you buying crypto on an exchange because you're excited about the bull run? Well, I hope you're reporting your crypto gains to the IRS because they want you to pay your taxes. That's right. When you buy and sell crypto on

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advantaged IRA at iTrust Capital only takes a few minutes. You have 24-7 access to the markets with some of the lowest fees in the industry. The bull run has begun and people are starting to see their accounts go up. So start taking advantage of tax benefits with an IRA at iTrust Capital. You can start maximizing your crypto investment today. Go to iTrustCapital.com. That's iTrustCapital.com. All right, James, I thought a great place to start is you had this fantastic tweet. It's so good that I just want to read it directly. You said, a system that relies on exponentially increasing levels of debt for each incremental unit of productivity eventually becomes so unstable that it simply collapses under the weight of its own leverage. You're talking about the U.S.

economy. What is going on? Explain this a little bit more. Yeah, well, it's good to be here, Pomp. Thank you for having me. You're one of the first guys I talked about. We can talk about my orange pilling later through you. But look, I mean, the problem is and people have talked about it. They've been discussing it here and there. I wrote about this two years ago in August. This actually launched my newsletter, The Informationist. And I talked about the debt problem, the debt spiral. At that time, we had $30.7 trillion of debt. Flash forward two years later, it's almost $5 trillion more than that, $4.7 trillion more in just two years. And so what is the problem? The problem is we spend too much. We can talk about taxes. You can talk about

trillionaires, billionaires, millionaires paying their fair share. That's not the issue. The issue is that we spend too much money. And when you do that and you have less productivity out of it, and you're wasteful, you're just wasting money and spending on proxy wars or green energy that is not productive it's just not you know it doesn't give you the the same unit of productivity back that you're spending for eventually you just have to spend so much that you have so much debt that it does it just collapse on itself that there's there's a tsunami of of interest payments and debt that you have to take on that you eventually um you you the as even as the world reserve currency and asset you you eventually lose confidence from your investors globally

worldwide because you're debasing your underlying currency so rapidly to keep up with that and we can go into that because you know what i like to do is kind of keep things simple so um we can talk about more of that to you so when this debt is continuing to increase what are the potential solutions is it literally just uh a single president could come in and say hey stop spending is it there's got to be a remake of congress and the senate is it um some sort of like for the health of america we all need to rally around you know uh kind of spending less it's almost it's like a family budget that's you know now moved to a shoestring like how do we actually get people to stop spending so much yeah well the problem is we're literally in a debt spiral so if you

let's pull back let's pull way back to a hundred thousand feet if if the us uh government was a company on the floor of the new york stock exchange uh for instance they would be considered a zombie company why why is that it's because they're not generating enough income to pay down their debt they're not even generating enough income to pay the interest on their debt so let's just kind of talk through with numbers so people can understand and these are all numbers that come from the congressional budget office they do reports periodically this is from earlier this year they're estimating what 2024 was going to look like so we use their numbers even though uh they're they're worse than this from what i can see so far through the third quarter

uh through through 10 months or almost 11 months through of uh of operating so they say that okay so the the run rate tax revenue that we expect on we so we're taking we're generating about $28.5 trillion of GDP so far. And they expect to take in $4.9 trillion of taxes. And that's actually, that's just money that the government is taking from our productivity. They're not generating anything. They're just taxing that, right? So the tax revenues are $4.9 trillion.

But the problem is that we spend $6.9 trillion. Okay, so you think, okay, so the deficit is $2.1 trillion-ish, $2 to $2.1 trillion. dollars the issue is that we're a zombie because all of the programs that we're paying for that are mandatory these are they're signed into legislation they have to be paid if you don't pay them it's some it's a it's a form of default right so the programs are talking about they're mandatory or social security medicare medicaid you add that up according to the budget that's 4.1 trillion dollars okay so now you remember we took in 4.9 trillion so we've just spent 4.1 trillion that's out the door our defense spending is estimated to be about 900 billion it's closer

probably closer to 950 um and it's probably even more than that that we're not even seeing right so they're kind of tucking some away in other in other areas of of uh of budget but let's call it 950 billion dollars okay so now you're over budget already so now you're over five trillion dollars of spending on $4.9 trillion of income. But we haven't even gotten to the most important part when you talk about debt, which is the interest on our debt. So we're paying over a trillion dollars of interest. We're getting some of that back through intergovernment agencies and debt between government agencies. But let's call it, it's about $900 billion of net interest per year that we have to pay. We don't even have the money. We don't have the money to do that.

So now we're at total mandatory. Now, remember, defense spending is not mandatory, but their long term contracts are signed and they're not going to give up those contracts. They're not going to just end those contracts. So that's going to that's going to continue to, you know, that's going to continue to grow, in my opinion. So now you're six trillion dollars of total mandatory spending. And then on top of that, Anthony, we've got a trillion dollars of discretionary spending. so now we're at about seven trillion dollars so how do you even if you weren't even if you cut out all the discretionary spending you still have a trillion dollars that you're you're net negative on and but what do you do you know so your your question is a good one and it's what people should be asking it's what people should be asking presidents every single debate every single interview what are we going to do about this like this is important we have 35.4 trillion dollars

of debt what are we is this just can we just keep doing this and the answer is no um so and even the the treasury itself puts out this is so bad that the treasury itself puts out a report uh separate from the cbo and a little over a year ago maybe a year and a half ago they put out a report that that had a chart in it and it showed the exponential growth of debt to gdp you remember that chart i i put it on twitter a bunch and lynn all and luke roman that we all put it on twitter it's it's this exponential growth they've since taken it down but the subtitle of that chart was an unsustainable fiscal path this is the report to the treasury you know so they can show it to congress and say we've got to change something because we can't keep doing this

okay so what can they do good question you got kind of three choices you can either cut spending, which neither party is willing to do. They each try to trick each other into doing it to hurt their constituents and their votes. They're buying votes with lobbying and that kind of power. And every time the debt ceiling comes up, we have this fake fight that goes on and they try to trick each other, but they don't do it. The spending just continues. So that's not going to happen. It's political suicide. They're not going to do it. Okay. So what's the second thing can do good so that's austerity you know you remember back in the great financial crisis that greece was forced into austerity by the eu um but there's no way to force us into austerity

so the second thing you do is raise taxes and then you know the laffer curve you've you've probably spoken to arthur laffer i have before in um in my old hedge fund life um but the laffer curve says that as you raise taxes it's kind of a bell curve as you raise taxes at some point it becomes an efficiency uh curve where you're at the top of that efficiency level and the more you raise taxes productivity starts to fall because you disincentivize growth you disincentivize investment of productivity into into expanding lines of business into profitable lines of business into r d research and development hiring people so you disincentivize that by taking taxes from them okay so as you raise taxes eventually what happens is productivity

starts to fall and you have higher taxes on lower productivity, you get to the same spot, except it's worse now because now you have declining productivity. So that doesn't work. So what's the third thing you can do? Well, the third thing you can do is just issue more debt, just borrow more. That's the easy thing to do. Just issue more debt, borrow more, hope for the best, which is what we've been doing. But the caveat to that is the only way we can continue doing this, and you know this, and I know this, and all the Bitcoiners know this, is that you must debase the currency along the way and so that chart is kind of showing you that as as you're issuing more and more debt gdp is is not keeping up the only way we can continue

doing this and if you if you actually chart it against real gdp the the inflation adjusted gdp it's far worse but the reality is we need to have inflation constant perpetual high levels of inflation in order to manage this debt so you have more dollars that you're taxing that are worth less so you know i i loan you uh you know a thousand dollars and in 10 years you're going to pay me back that thousand dollars and some interest along the way and if that interest along the way isn't more than than inflation i've lost money on that trade and you've gained the uh the ability to invest in whatever you're going to invest in. And, you know, you've made money on that trade essentially because the dollar debased under me, like under my feet. And that's

kind of what we're doing. That we're just debasing the currency with perpetual inflation. So you mentioned that there's a certain point on that Laffer curve where productivity starts to fall because people are disincentivized. I've always thought that 50% was a big psychological barrier because now the government is making more money than you are kind of you don't start working to yourself until july is the way that i think about it and so yeah is that a good kind of barrier for people to think about is over 50 150 or are there other ways you think about um you know taxes being raised too much where it actually starts to hurt the economy yeah i mean well it really depends on where the taxes are being taken from you taking them from

small people you know you're talking about 50 yeah that's a big mental barrier you're talking about companies i mean where is their efficiency you know where where are they able to continue to grow and keep their margins um in order to incentivize them to keep keep in that business to stay in that business instead of go someplace else with their higher margins and this is part of the reason we're so financialized because they're high margins in financial businesses So, you know, it really does depend on the underlying economy and what that productivity is. I wonder if we see Elon Musk and President Trump talking about this Department of Government Efficiency that they want to start. And it's basically they just want to go and they want to fire a bunch of people, right?

Cut a bunch of costs. You think that there's $500 billion, a trillion, $2 trillion? dollars like how much could they really save do you think uh by implementing a program like that well i mean what they could do is is divert some of the um wasteful spending to productive spending uh you know trump says we're drill baby drill yeah you know spending on energy that's a good thing spending on nuclear energy would be a great thing you get a ton of productivity out of your marginal dollar invested there you see it in france the the the gdp per citizen has exploded in france because they've stayed with nuclear they've expanded it as opposed to a place like germany

where it's collapsing per citizen because they're shutting down nuclear that's not just one thing but they're they don't have they're not energy independent you know having energy independence that's a big deal it's a it's uh it's important so spending on programs and spending on uh you infrastructure that is productive, that would be a big deal. And that would help that underlying productivity and grow that GDP healthily. But right now, we're not doing that. And that's the problem. When you look, if we go back to the national debt, the debasement of the dollar is to monetize the debt. Describe what are the kind of scary end outcomes here? Is it there is hyperinflation? is it that there is some sort of uh kind of um you know debt reset that needs to occur

um it could there be a default like talk through you know on this path that we are what are the the horrific things that you would warn people you know are possible you're not saying that they're going to happen that they're probable but they are possible yeah i mean i want to be clear here. Because the U.S. dollar is the global reserve currency and the U.S. treasury is the global reserve asset because of that, because countries, sovereigns, central banks have to hold treasuries in order to have access to dollars. They need dollars. Everybody needs dollars. Because of that, this can go on for a very long time. The U.S. and our currency and and our debt is still going to be centerpiece for a long time i want to make that clear i don't think

that we're going to collapse the next few years uh that would be catastrophic it would be damaging to the entire world financially i think that would be terrible um but what can happen we've seen things that have happened in places like zimbabwe um you know lebanon argentina venezuela you've seen hyperinflation occur that is the ultimate end game of this where uh the the the debt this is where the debt collapsed on itself in the future that it just becomes such a large burden and load that you have to issue so much debt just to keep the charade going that eventually it doesn't even matter that's the global reserve currency the investors lose confidence in it and they stop buying your treasuries they stop buying treasuries at a at an interest rate that allows you to

continue to perpetuate the game and so that's ultimately what happens uh when does that happen i think it's decades down the road at least personally um we can keep this going for a long time so uh but you know you're talking about something called um you know debate what you're talking about default i mean we have a hard default would be if you just stop paying interest on your debt stop paying the the the principal back we've seen other countries do that and they have a reset or they paid 30 cents or 20 cents or 40 cents on the dollar to that debt to reset it reset the the currency and then start going again it's a painful period but then they you can you have a lift off again we can't really do that as the global reserve currency um so and we wouldn't

do that you especially wouldn't do that because we we print our own money so any any sovereign that that issues debt in its own base currency that it can print would never hard to fall well what will they do instead they'll just keep printing money and they'll have what's called a soft default every single day we soft default every single day and that soft default isn't the cpi they we we can the cpi is a highly manipulated statistic that is problematic on so many levels but it's helpful to the government to have the the bureau of labor uh services the bls to to be um calculating this in a way that maintains confidence in the dollar so by by saying that the the inflation rates two three percent okay that's not so bad it's kind of what we can get away with is

is what's happening um but they would never hard default but doing that you're soft defaulting every day it's a soft default you're debasing your currency and that's what we're doing and so the next question is why two percent like why why is two percent than the rate that we've all agreed to is the rate that is necessary to have expansion well powell was asked by this uh as asked about this on 60 minutes earlier this year and the the the question was why two percent what's this magical two percent inflation rate and his answer was kind of a word solid answer that he was going back to he kind of did a circle around you can go listen to it again he he went back to what he believes that the uh the nominal the that that rate the long-term rate of of fed

funds ought to be uh where it's the r r star where it's not expansionary it's not contractionary you know and so but he didn't have a good answer and the answer is the real answer is it's because it's what they can get away with people aren't out in the streets and angry and rioting because two percent of their money is being taken away from them you go to a place like venezuela or argentina you see hyperinflation where prices are changing while you sit down for a meal they're on a chalk board they change halfway through the meal you know that's more than frustrating so but we don't have that problem because we've kept inflation at this rate and so we just continue to debase on a soft default and we're going to continue doing that the reality though is that that cpi

is not the real number the real number is if you look back at m2 since 1971 it's been expanding at over seven percent annualized since then and that's really the number of inflation that's the that's the inflation rate the expansion of the money supply why do you look at that as the true inflation number but the government looks at the cpi is it just because they want to manipulate it it and kind of tell a different story or is it just uh you know they don't need that number they're trying to measure other things like why is it that you're focused on the expansion of the money supply and they're like no this basket that we kind of manipulate is is a better signal yeah it's a good question uh think of it as a closed loop system with the uh with a monopoly board

if you have uh if you suddenly every single every single you know um hour that you're playing 20 minutes that you're playing, you add 7% more money to the game. You give it out to everybody or give it out to the richest players is what really happens. But what happens? Well, all the properties go up in value because there's more money to pay for them. I mean, it's just, there's more money in the system. It's just, you go back to first principles. If there's more money chasing after a set supply of goods, then that's, it's inflationary. The issue is that our productivity is now outrunning that inflation right so we need we you know if if we we're in we're actually in a system and you know this because you you've done tons of podcasts on on technology and technology

and this is this goes back to um my personal orange pilling with you talking to jeff booth uh a couple of years ago a few years ago now um we're in we're in a situation where technology is actually deflationary you know it forces deflation because you you have so much more uh you have you have so much more your fingertips with just an iphone instead of having four different devices you know you now you don't need to have an ipod and a camera and a phone like it's all in one now and for arguably a lot you know should be much less price so So, but they're fighting this by expanding the money supply again, because we need to be paying off debt.

And so, you know, the CPI, it's just, it's just a number that the BLS and the government have come up with that they're pointing out and they're using, and that's, that's one of their measures. But just go back to first principles. Do you want to kind of figure out like, well, are people eating steaks or they eating ground beef or are they renting? Is it owner equivalent rent? Like, how are we going to measure this?

Or do you just say, well, there's more money in the system? It's kind of an obvious thing. You know, it's obvious. And if you look at all risk assets, you look at the home prices, Case-Shiller index, they all kind of follow the money supply. Well, they all do follow the money supply long term. How does interest rates play into all of this, given that we know kind of the printing of money, the spending of money is a huge component. it. But there's obviously the central bank kind of quantitative easing that has two components. They have the printing of money, but they also have kind of cheap capital and the manipulation

of interest rates. Yeah. How do those interest rates play into this? Well, it's a good question. And people have talked, I talked about it early on when the Fed started raising rates at a breakneck speed, like they raised rates from just about Zerp, you know, to 5.5 percent on the upper bound. So but let's go let's let's go back. So the Fed has the Fed is basically it has two mandates. Right. The first mandate is the first mandate is stable pricing. Well, they define that as a two percent target inflation rate. That's what that's what they say. And the second is is maximum employment. There's no real target there. It's just as much employment as we can have does it feel right you know so is it four percent three and a half percent

you know um so they would argue now it's less than four percent so uh you know when they raise those rates though the issue is that we a lot of people thought well they're going to raise rates it's going to cause a collapse like things are going to start breaking credit markets are going to go to hell you know you're gonna have uh something's going to break it was the was the big uh phrase that everybody was using and even i had been using it because when you're looking at certain um parts of industry sectors that are that are very sensitive to interest rates things like commercial real estate especially the office real estate when everybody worked from home all of a sudden you had empty offices and you know these uh the cap um rates on these buildings

they they just didn't match up anymore so but here's the problem we we raised those rates after we had 13 years of close to zero interest rate uh policy zerp about two and a half three years of that right before the pandemic they were a little bit higher they were going up but then they they they dropped back down to zero. So you had all those years after the great financial crisis, where people were able to refinance their homes, they're able to refinance loans, personal loans, you have companies that were able to take on long term debt, that was at very low rates, and they haven't really come due, you know, so the issue is that, and that's why you heard Howell say higher for longer, higher for longer, higher for longer for so long, because he's like,

we've got to keep these rates high to get over that hump where everybody had refinanced to nothing, you know? So, and that's why you've seen the housing market just, it's come to a halt because there's no turnover because who wants to give up their two and a half percent or 3% rate when rates are six or seven percent. So it hasn't had as much impact as we initially thought it would. That's one part. The second part is you're kind of seeing two economies, right? You're seeing two economies in that you've got those people who are interest rate sensitive, who are sensitive to the rate of inflation because the percentage of their disposable income that's being eaten away by the price of goods and services that they need. So groceries, gas, transportation,

that's all gone up in price, their housing prices, their rent prices. And so that's taking away the people who are are very sensitive to that inflation rate and borrowing to meet those gaps because now credit card rates are up and personal loans are up um they're they're struggling and you can see that there's kind of two economies going on you know you've got defaults on credit cards going up um and you've got uh and you you see that savings rates are back down below the 2020 levels And so that's one part. The second part of the economy, though, is comes out again. Let's go back to the government spending. We're running $2 trillion plus deficits at a time that we're not even in a recession. Like this is just so mad. Like this is an absolute madness that we're spending this much money in a time that we're not even in a recession. What's it doing? That's fighting the Fed. Right. So the Fed is raising rates. Yet at the same time, you have an inflationary pressure here from the government spending so much money and and running those deficits is inflationary. And so but that's going into projects that are not as as productive, but they're creating inflation in certain areas, especially asset inflation.

But so that's kind of where we're at with the Fed trying to fight it with interest rates. So the second thing they can do is go, you know, you have the two mandates, maximum employment and stable pricing, but then you have two tools. So it's the interest rate tool. And like you said, they've got their monetary management so they can either provide liquidity into the system or they can take it out. And they do that by either quantitative easing, where they actually go into the market using the primary banks to go into the market and to the dealers to go buy treasuries and put them on the Fed's book.

And so they print money to do that. So that's more money going into the system. And the second thing they can do is they can take that back. So during COVID, you saw that we printed almost $6 trillion in the matter of a year and a half going out there buying treasuries and mortgage-backed securities. Thank you so much. So that's also helped the mortgage market and keep housing prices high. But so they were earlier this year and last year, they were selling those treasuries off the books, which would be taking money out of the system. But then they kind of

slowed it down. So this past spring, they went from $60 billion of sales and maturity roll-off. They just let them mature. They don't replace them. $60 billion a month. They took it down to $25 billion a month. That's nothing. So they're essentially not really doing QT anymore. And so what has happened is you've seen inflation kind of stop. It's come down from 9%. It's kind stopped about two and a half, 3%, and it's holding steady there. And that's why, because you've got those two forces kind of playing against each other now. Why do you think Bitcoin is the solution to this problem? Well, long-term solution, because it's an asset that can't be printed. It's got a finite supply. And so in the year, as you know, 2140, the last fraction of Bitcoin

Bitcoin will be mined, minted, created. And so we know how many it's going to be, 21 million Bitcoin, that's the finite number. It's completely decentralized globally and it's immutable. And so the reason that it would be a great reserve asset, and I think it's going to take time for central banks to come around to this this is not going to happen next year trump talks about adding it to the balance sheet as a reserve asset maybe it will happen maybe it won't it will take legislation a lot of fighting it could take all four years if he's elected but um more uh likely is that down the road there will be central banks smaller central banks like el salvador doing what

they're doing and uh and adding it to their balance sheets and so why is that good it's because it can't be expanded it would be like going back to the gold standard before nixon took us off that and if you go look at those charts and on inflation expense the money supply they skyrocket they go exponential after 1971 after we officially taken off the gold standard we would return back to a standard where you couldn't just print bitcoin to make up that debt and to create inflation to manage it and so it would it would be a good thing because it would keep inflation in check and actually ultimately which is going back to the jeff booth conversation you had, which is what ultimately put it all together for me, was that you could allow

for natural deflation from creation of technology and advancement of technology, especially in a world where in the next five to 10 years, we could see AGI, you know, artificial general intelligence, which would arguably be smarter than certainly me and all of us. And so that would be that would be something that would be incredibly deflationary where the productivity per citizen would go up so much that we'd be allowed to benefit from that deflation where things would cost less. We don't have to pay as much. We don't have to work as hard to have all this wealth around us. it would allow for that and so that's why i think it's ultimately the most it it it's got the it's the most um humanitarian salute humanitarian solution out there um in my mind long term but it's going to take a while to get there so one of the critiques of a deflationary system

is that no one will spend money right the whole idea of you know inflation two percent i'm incentivized to spend or invest the money rather than sit on it um Bitcoin to a degree is a deflationary system today. Although we may not know the exact deflation, there's 21 million total coins. There is a disinflationary kind of monetary mechanism that is getting those Bitcoin into circulation. But every day there are Bitcoin that are lost, destroyed, etc. There's some portion that already have been lost and destroyed.

There's estimates of a couple hundred thousand to maybe two million from what I've seen. is it fair to say that the current state of the Bitcoin experiment disproves the critique that a deflationary system will not have people spending money? Or do you feel like we still need much longer in the Bitcoin experiment to be able to show Bitcoin as a counter example to that critique? I think we need much longer. And the reason is we have this in the Bitcoin community, know the hodl mentality we just hold on to it don't spend it don't use it because it's your it is your lifeboat from what's going on here and if this whole system does collapse you want to be in something that can't be manipulated that can't be usurped that can't be inflated away from you

then so but once we get to a model where um or once we get to a system where people are actually using that as as money as using bitcoin as money that i don't see there there's no reason for people not to spend money um you know uh it's not like you're gonna you're benefiting from the expansion of tech the advancement of technology every single day it's not like you're you're gonna be hoarding it to the reason that we hoard money now the reason we have it tucked away in banks trying to get interest rates the reason that we're buying stocks and bonds and and speculative assets is because we're trying to fight that inflation you know you and i work hard every single day well i can't spend every single dollar i have every day to maintain a lifestyle that i

want i need to have some tucked away so you know because things are we move through volatile periods and whatever so we need to have some tucked away so how do you store that energy well you're not going to be worried about that as much anymore and so um you know because you're not trying to fight that inflationary force. One of the things I notice is that there are two different maybe mentalities in Bitcoin. One is hold my Bitcoin, it's going to be worth more in the future. Another is I'm going to spend my Bitcoin, but it's not for an economic reason. It's usually because I want to sacrifice some of my Bitcoin for the betterment of the Bitcoin circular economy. And I think that I'm kind of helping to seed that and I want this to work

and things like that. It's not everybody, but those are the two generalizations. I do worry about a deflationary system where I know my behavior. I don't spend my Bitcoin. I want to hold my Bitcoin because it'll be worth more in the future. But maybe a release valve from that problem is if everything is priced in Bitcoin as well. Right? Right now, it seems like the Bitcoin is going to be worth more in dollar terms. But if my one Bitcoin can buy me one Bitcoin worth of, name your favorite product or service,

now all of a sudden there is no idea of like bitcoin is going to be worth more in dollar terms it's just like will my bitcoin be able to buy me more goods and services in the future and that's a little bit less quantifiable right and that's and that's the point is it's way off in the future you look at way off in the future for me some of our friends would say it's in three years but i don't think so you know so but way off in the future you could say okay if we're on a bitcoin standard it doesn't matter there are no dollars you're not you're not thinking in terms of dollars you're thinking of is okay point zero one bitcoin will buy me that car or point one bitcoin will buy me that house you know that you're thinking in dollar terms instead you and

this is the hard part for people to get out of because we've been conditioned so deeply to think of everything in dollars or euros or whatever but you know across the world dollars you know we quote m2 in dollars um i don't convert m2 to euros i convert to dollars you know um and so even if it's coming out of if it's coming out of sweden or it's japan or wherever it is we're converting it to dollars because that's the way our minds work um but it's hard to think and this is um you know it's hard to think of a system that's different than the system that you've grown up with and have been embedded in and still are entrenched in every single day and so that's the challenge. The challenge is to think about that system, really just step back and think

about the system. And I agree with you. That's what has to happen. We'll have to actually be on the Bitcoin standard. You can't be half in, half out. I could see us running parallel tracks here for a while, where Bitcoin is a very useful store of value, where you have investors. And this is where Michael Saylor starts talking about. You have investors that are, they're not just thinking about Bitcoin as a separate asset class in their portfolios, as opposed to stocks or bonds or even real estate, they're thinking of it as a store of value that's better than long-term bonds. And when that happens, that's a complete game changer. When you have institutional investors now allocating to Bitcoin instead of long-term bonds, why would they do that? Well, they would

do that because they've lost confidence in the system. They've lost confidence that they're going to be able to invest in this long-term treasury and get a high enough interest rate that it'll outpace that expansion of money supply or inflation and sort of give them a real return. And so once they start doing that, then it's a totally different game. And that's kind of the system that I see in the future. Whether or not we get to a Bitcoin standard in my lifetime, well, I'm older than you, so I don't know if it'll happen, but it may happen in your lifetime. What about stable coins? Like stable coins feel like they obviously are competing somewhat in the monetary system.

I think people would generally agree Bitcoin is a great store of value. Stable coins are being used more for transactions. We see transaction volumes higher for stable coins than Bitcoin. I don't know a lot of people who are like, my stable coin is going to be worth more in the future than it is today. And so how do you see them playing in? Are they competing with Bitcoin? they competing with like a traditional dollar no they're really important right now because you

have your you you take your uh you take your us dollars you put them on an exchange to go buy bitcoin well you need something to buy unless you're buying the etfs which is a whole other conversation but if you're buying them in a in a crypto exchange then you use a that tether to to hold your dollars or euros or whatever it is and tethers you know i was up in um i was up in in Congress a few months ago and we were talking to different representatives from from congressmen and senators and educating them on the Bitcoin and and and kind of the landscape. And they are well aware, you know, that Tether is a very important player. They're one of the top 20 buyers of US treasuries right now. And so that is a, it's not like it's just going to go away.

They need Tether to continue to be a buyer of treasuries. And that's important. It's like a money market, a vehicle inside a crypto exchange. It's exactly what it is. So it is, it's an important, definitely important for the system. And I don't see it as competing as much as enabling people to get into uh bitcoin do you worry about central bank digital currencies do you think that there are strength weakness or potential risk they terrify me why uh because they can be controlled down to the right down to the transaction um you know so uh we've seen uh we've seen an agenda in in europe especially in australia that uh that wants to control what the citizens are doing and how they're they're acting um you know i saw uh recently there was

there's a um there's a proposal or they're floating a proposal to tax people 15 cents per mile they drive in the UK. They've talked a long time about carbon taxes and carbon. NatWest Bank just launched a credit card that warns you if you've spent too much money on things that expand your carbon footprint, you've bought too much meat this month, you flew or you bought too much gas. So just FYI, that's the first step, right? And you see in China, they've got central bank digital currencies um a currency and they can control whether or not you have access to that because of your social credit score in fact and uh you know we've seen reports where people get uh they get warned that they're too close in proximity literally physical proximity too

close to somebody with a bad credit score they better get away from them where they won't be able to spend their money they'll go up to a vending machine or a restaurant or whatever and money just is locked they can't use it um so why is that scary it's scary because um that that gives the government or whatever oversight entity the power to say nope you've uh you've bought too much meat this month and so you can buy grains or you can buy these uh this insect product these uh you know cricket chips or whatever and so uh or you've traveled too much or you've left the your 15 mile radius too much you can't you literally can't go outside your fifth time your money is not good outside your 15 mile radius if you've gone out more than uh you know so

it's really insidious uh i don't see it as a good thing and i don't see it happening here in the united states anytime soon i think they i think the as as much grief as we give the legislators um and there are plenty of problems there i mean endless number of problems there and incentive structure is just, it's, it doesn't, it's not really in place for the citizens anymore, but they've heard that you tried CBCs where we are going to revolt. We're, we're not be happy with that. And so they've, they've kind of walked that back quite a bit. So be interested to hear you think. The part that scares me the most, obviously the ones, the risks that are being called out or being called out for good reason, but a personalized monetary policy. If I can give

you a really high interest rate and give somebody else a really low inflation rate. So kind of this, you know, kind of customizable monetary policy down to the individual. I think that that is a very underexplored risk and it feels bad, right? If I can give you a high one and somebody else a low one, maybe based on behavior, geography, income, you know, all this stuff. Yeah, your credit score, which is kept by three agencies that you have no idea what they're looking at. Yeah. Well, I even think about it as like, let's just say it's very crude. If you hold more than

X percent of your net worth in cash, we need to get you to spend that cash and get it back into the system. And so we're going to give you a higher inflation rate. But because Anthony spends or keeps less than X percent of his net worth in cash, then he gets a lower inflation rate because he's actually doing a good job. He's putting his money back into the system. And so that doesn't take that hard like replace x with whatever number you want and like if the technology is available they can do that tomorrow so that that type of stuff scares me um and then i think the other part that we don't really quite understand is just uh money for machines and so this idea of like automation i think is pretty important but having something controlled by the government

that then is basically it's almost like spyware into these automated systems you know we get uncomfortable because a chinese company has software that is remotely accessible in our cranes at the ports in america joe biden just came out and said that he's considering banning any chinese software in our self-driving cars like these are real risks right and so we're uncomfortable with that what is the difference between that and hey i have this automated system that uses the central bank digital currency as the currency that moves within it, but the government at any point can reach their hand in

and say, pause, stop, no. Exactly. It's kind of scary, right? You can't use your car today. Yeah, or that machine is just not, yeah, exactly. It's really scary. So I would push back, anybody who's listening to this, push back on your representatives on that every single day.

Don't even, like that, it would just be awful. And it's not. And that's the that's the hard part, though, Anthony, is that, you know, we hear, you know, you hear people say, oh, we already have digital currency. I mean, everything's digital anyways. They're not thinking through just how powerful it would be for them to control down to the transaction or down to exactly what you said, controlling, manipulating machines like that. That's that's insidious. before i let you go is there anything that you're paying attention to right now that you think is undercovered or under discussed in kind of the global macro world you know i think people are seeing that the fed is now starting to cut rates china saying they're going to cut rates global liquidity seems to be expanding m2 definitely is um what are the things that you're thinking

about or paying attention to over the next you know maybe 6 to 12 months yeah i mean we're in a really difficult period here uh where you know if you just if you step back and you look at uh for you know for instance just look at gold gold is reaching all-time highs right every day for the last few days uh it's in it's just been on a march upwards for a number of weeks here why is it doing that so i think um one of the things that i'm watching is that that just gives an indication you know i i you know i own some gold i own a lot of bitcoin as you know i manage a bitcoin uh hedge fund i mean that's that's my my life is centered around bitcoin but i'm watching these things um because they give us an indication of what people are thinking and how our investors

are thinking well gold could be gold is typically a um it's a flight to safety asset so are people going to the goal because they think that there's a high risk of recession possibly possibly but what else like what's beyond that well what's beyond that is what we're talking about with this incredible expansion of the money supply if there is a recession we expect the money printer to go burr like we expect a massive amount of liquidity to be dumped into the system that's number one so now look back over you look even further if you look at the 10-year treasury it's actually the yield is higher than it was before the fed lowered rates why is that you know is it that people overestimate they were just they're just covering

you know they they were they're selling out their longs because they were doing this for a trade and now they're they're getting out of some of their position possibly possibly um but i think that it means that we have a higher long-term terminal rate and really what it means is i think that people are underestimating investors demanding a higher rate of return for long-term treasuries. I think that the 10-year to 30-year are going to remain higher long-term because of just the sheer amount of inflation that we're going to see. And so what I think is being underestimated is just the amount of inflation we're going to see in the next 10 years to try to manage this debt load. And that's something that's on my radar. And I'm watching the credit markets

carefully to see if something's breaking down, whether we do have a scare in a treasury auction. We've seen some red flags. You've possibly seen me write about it before on Twitter and how to read these things. But we've seen some red flags. And I'm watching to see if the system gets to be to the point where there's enough illiquidity or not enough liquidity that the Fed starts to get nervous and they start ramping up QE again. And then, you know, we could easily slip back into like 1980 style resurgence of inflation. Is that something I'm concerned about? It would be very concerning if we started to go that way. I think that some of the policies being put forward by either presidential candidate depending on which ones actually came into effect

could push us you know that way as well um but i do think that understanding history could mitigate some risks here i just wonder how many people you know do either presidential candidate really understand could they articulate yeah or care yeah probably not that's the problem so that's not that's not really hopeful what is hopeful though is that we didn't you know thank god we have bitcoin i mean truly that gives that that allows me to rest easy at night um it can't be manipulated like gold you know you hear a lot of people talk about manipulation on uh online but it can't be manipulated like gold um and uh you know and it is an extraordinary it has been and i believe it will continue to be an extraordinary store of value long term and so that that allows me to

rest easy no matter what they do so either candidate wins you know um that's uh i think bitcoin is going to benefit either way exactly you said could not agree more that's a great place for us to wrap up thank you so much for doing this we'll definitely do it again in the future absolutely thank you for having me and i look forward to it