The Pomp Podcast - #1570 Marko Papic | The Case for $250K Bitcoin in a Falling Dollar World

Episode Date: July 3, 2025

Marko Papic is the Chief Strategist at BCA Research. In this conversation we talk about what is happening in the market, why he is bullish, what is happening with the dollar, tariffs, bitcoin, gold, global conflict, and how all these different events impact your portfolio. =======================Simple Mining makes Bitcoin mining simple and accessible for everyone. We offer a premium white glove hosting service, helping you maximize the profitability of Bitcoin mining. For more information on Simple Mining or to get started mining Bitcoin, visit https://www.simplemining.io/=======================Bitwise is one of the largest and fastest-growing crypto asset managers. As of December 31, 2021, the company managed over $1.3 billion across an expanding suite of investment solutions, which include the world's largest crypto index fund and other innovative products spanning Bitcoin, Ethereum, DeFi, and crypto equities. Whether you’re an individual, advisor, or institution, Bitwise provides intelligent access to crypto with your unique circumstances in mind. Visit www.bitwiseinvestments.com to learn more. Certain of the Bitwise investment products may be subject to the extreme risks associated with investing in crypto assets. Visit www.bitwiseinvestments.com/disclosures/ to learn more.=======================Maple Finance is where real money meets real yield. With over $1.5B managed, Maple offers secure lending, Bitcoin yield, and premium DeFi assets like syrupUSDC. Get started today at https://www.maple.finance !=======================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/

This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales. Using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify. 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

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on, guys. Today, we got an amazing episode with Marco Papic. He's the chief strategist at BCA Research, and he is one of the people I turn to whenever I have questions on geopolitics or macroeconomics. Marco, in this conversation, breaks down what he thinks is happening in the market, why he's bullish, what he thinks is happening with the dollar, and why he's bearish. Then he gets into things like tariffs, whether we're actually going to get a recession or not, how he's thinking about the US dollar, Bitcoin, gold, and also whether he is worried about domestic terrorism, the conflict in the Middle East, or what's going on in Russia and Ukraine. This conversation is wide ranging, and it's all focused on how these different events

and these developments affect your personal portfolio and financial markets here in the United States. So enjoy my latest conversation with Marco Papic. All right, Marco, I thought a great place to start the conversation is you are bullish the market, but you are bearish on the US dollar. And you've got some ramifications in the financial world in terms of what assets are going to win and what assets are going to lose over the next five years. But let's just start with what is driving your bullishness in the market specifically? Well, so look, I think there's a huge risk that the U.S. economy is slowing down. I think we're seeing a lot of concern with retail, with consumption. You know, the savings rate has started to tick up. That

concerns me a little bit. So it's not like everything is great. But two things that I think are very important is that I think there's some rationality in fiscal policy. And I know that a lot of your a lot of your listeners are going to disagree with me on this and they're going to say look what are you talking about there's like six percent deficit until the eye can see yes but it's not six and then seven and then eight and then nine and that's what it would have been had president trump gotten all of his campaign promises through and the bond market actually rioted in september october and november in anticipation of president trump winning and then in December and January because he won.

But the truth is that the House of Representatives, particularly the fiscal conservatives, really started pushing back almost right after President Trump's victory. And he has essentially acquiesced to over $3 trillion of additional revenues through tariffs or cuts. And that's something that the market didn't anticipate. So on one hand, what makes me bullish, actually, is that we're done with fiscal policy. And this is counterintuitive, but I think we're at a point where fiscal policy can't drive the U.S. economy anymore.

I mean, we learned this in college when we were like 19. There's a limit to how much you can borrow from the future and how much the government can basically crowd out the private sector. The yields are too high. Nobody wants to buy a house. So the best thing that American policymakers can do is kind of get out of the way and stop spending money. We've reached the beginnings of that process.

the bond market is going to settle down the long end doesn't have to keep bidding higher and so that's the first reason i'm bullish the second reason i'm bullish is that i think something that none of us have really focused on for the past 12 18 months is the fed i think the fed is going to come back in the picture as well pretty dovishly uh from you know pressure from president trump but i would also argue for good reason because inflation is abating in the u.s and a lot of hysteria about tariffs because it's kind of like not really articulated itself. So even if growth slows down, you've got three things happening. Borrowing rates are coming down, both the short end and the long end. That's positive. Second, oil prices, energy costs are not egregiously high.

Folks who are worried about Iran and Israel ushering World War III, that was overstated. And finally, that dollar decline that you're pointing to, that is also stimulative as well for parts of the US economy. Part of the reason that I'm more bullish than I was maybe four months ago is because a lot of the earnings of the tech giants in particular are sourced externally. So the dollar weakness should help them. Let's talk about maybe what's happened over the last three or four months. So obviously, there's all the tariff announcements, there's mass hysteria in the market. We went down, depending on how you count, about 20%. And then we've rallied back to all time highs. Now, for me, the number one reason why I was bullish in April was the fact that

pretty much dissent had been outlawed. If you didn't think that tariffs were going to destroy the U.S. economy, the shelves were going to be empty, you know, although I fear mongering stuff, then you were ostracized. You were yelled at and screamed at. Literally, there's pages and pages of tweets of people being like, you're an idiot. As soon as I saw that, I was like, OK, hold on a second. The odds that actually we get the recovery and there's like reflexivity to this market are much higher. Now, as we record this, we are at or near all-time highs for S&P, NASDAQ, gold, Bitcoin. It's across the board. Everything has rallied. How much of that is just the tariffs not getting put onto the severity that they were

and also potentially these spending bills? Or do you think it literally, we would have gone back to all-time highs if we just said, hey, we're going to put these really stringent tariffs on? Oh, you know what? Let's roll them back a little bit. And that relief alone in the tariff rates, that was going to drive us back to where we are now? Well, look, I think you have to understand that if you have a recession that's caused by a financial imbalance, that's scary. We don't know where a financial imbalance leads.

We don't know where it leads. We don't know how it articulates itself further in the markets. If there is a recession because of some sort of an economic malfunction, like again, we don't really know how that articulates itself. But when there's a slowdown or a risk of recession that's policy induced, when there's a policy induced problem, then you should be trading policy. And so you were absolutely right in April to focus on the tariffs because, you know, all these macroeconomists are telling you like bad things are going to happen because of tariffs. And then you're like, well, tariffs are probably not going to happen at that level. The hard data then is irrelevant for a time being.

When you look at where we are today, it does look like there's this big shift going from fiscal to monetary policy. Obviously, Trump, Besant, Bill Pulte, I mean, all of these guys are just yelling and screaming at the Fed nonstop. Now, one thing that I always call out is this happens under both political parties. Right. Joe Biden called Jerome Powell into his office, gave him kind of like the principal talking to the student who was in trouble, you know, conversation. And so I think also Elizabeth Warren wrote a letter to the Fed saying, hey, you should change monetary policy. So it's not either side of the aisle, but the Fed independence pretty important. how does either Fed independence change or the pressure campaigns change as the United States focuses much more on the monetary policy versus that fiscal policy that really politicians kind of are in the driver's seat on? You know, I got to tell you, I'm kind of a heretic here.

We're probably going to disagree on like a very methodological fundamental view, but I just don't think the Fed is independent. You know, sorry. I think that many of us in the financial community, in our sort of epistemic community, we need the Fed to be independent so that we can reasonably tell our clients that when we read an FOMC statement, we're doing actual good work, you know. And I just think that they're not and they never have been. And your example of the Fed under Biden, you know, like, oh, inflation was transitory in 2021. Sure. You know, there was political pressure not to put a break so quickly after the pandemic. You know, it wasn't even ending but it like looked like it was ending so there was pressure on central banks not just the

fed to take it easy and to allow inflation risk to effectively seep into the macro context so i think that um central banks are always in always political because they are political institutions number one and second i think that there are absolutely going to be other political pressure today because President Trump is a charismatic leader. And I use that term not objectively. I use it subjectively from a Weberian sense. This is Max Weber's classical definition of basically legitimate authority. He is not someone who derives his authority from an institutional legalistic framework. He doesn't hearken to that. He's much more charismatic in his approach. And that means that he's almost always in opposition of institutional authority, something that was built through a set of institutions. He almost always is at odds with it. As such, this idea that some piece of paper is going to prevent him from meddling in the Fed is nonsense. It's not. We've already seen it.

And so I think that that pressure is one of the reasons you have to be very careful in expecting equities to go down. But there are things that are going to go down. And I think that whenever a central bank kind of starts losing its independence, it's the currency that's the escape valve. And equities are a nominal asset, if you think about it. So currency move is going to be positive for equities, not just from that pathway of foreign in sourced earnings, but also from the perspective that you're pricing this in dollars is going to go

higher. There's talk now that they are going to name Jerome Powell's successor and do so in 2025 and essentially create like a shadow Fed chairman. Do you think that'll happen? And what would the ramifications of having this kind of shadow Fed president be? Yeah, no, I mean, that's what I was referring to. I didn't know how deep you wanted to go, but that's where I was referring to. Very deep, Marco. All right, let's go deep. Look, again, I'm a heretic on this. No one's going to agree with me, but I've always thought that, you know, I think we effectively tell ourselves fairy tales in our industry.

By the way, I come from a different world. I mean, my background is political science. I worked in political risk before I joined BCA Research and built their geopolitical research platform. And then I went to asset management and so on. But my background, you know, is I got three degrees in political science with yes, yes, three too many. I get it. The jokes are great. But I got to tell you, when I joined finance and I actually saw my colleagues who are seeped in like mathematical knowledge, something that I thought was like magic. And then they would read an FOMC statement and do basically like

literature, post-Marxist interpretation of verbiage of humans. I was like, wait, is this is this what you guys do here because like i can do this you know this is nonsense um and and that's you know that's seeped in this lore that we pass on to each other in the sort of soft glow of the bloomberg terminal you know you huddle with your young analyst and you tell them like oh and then paul volcker came and he smite the dragon of inflation and we created this narrative that you know we should take these people seriously and not take the macro context that forces them to do what's inevitable. The context today is that you have

a very, very powerful president who is using a very charismatic form of authority and he wants interest rates lower. So the shadow chair is absolutely what I was referring to in answering your last question, which is like, yeah, President Trump is going to put pressure. What is it going to do?

Well, monetary policy is not about the next six months. It's really about the long-term trajectory. And if you think about the 10-year yield, the 10-year yield is ultimately about the 10 years worth of individual forecasts of where growth, inflation, dynamics, and term premium are going to settle. And so I think people are effectively going to stop listening to Jay Powell and focusing on what the shadow chair says, because the dots, I mean, are about the future.

They're not about the present. When you look at the current market, both from a political element, but also a finance element, what is the thing that scares you the most right now? i think what scares me the most is um what scares me the most is that there are pockets of the markets that are not really visible to us um i think that allocation to the private markets has really ballooned obviously over the last 25 years and the you know the disintermediation of banks from corporate lending which seemed like a really smart thing after the gfc has led to an explosion of private credit. And so what worries me a lot is that I have no visibility into that

pocket of financial markets that's absolutely enormous. And I would say that that's probably where we're going to have some pretty significant disruptions when we get the next serious recession. I would say that that's what scares me the most. When you see that recession right now, or maybe six weeks ago, eight weeks ago, a lot of people thought there was going to be a recession. Now it looks like nobody thinks there's going to be a recession. Where do you fall on that spectrum in terms of could we have asset prices at all-time highs and a recession at the same time? How does this play out? You know, that happened to Germany, effectively.

That was the case with the DAX last year. And so German economy was doing extremely bad last year, and yet the DAX was reaching all-time highs. Now you might say, well, look, the DAX is very externally focused, but so is the S&P 500. it. So yeah, you could absolutely have a shallow recession, but where earnings are basically where they hold up. And there's a couple of reasons for that. First and foremost, when we think about a recession, it's really GDP growth and unemployment. I can see some form of a rise in unemployment. I could see that happen. But if it's being driven by AI and robotics, is it really going to cause you to pull money out of risk assets, out of equities?

Because earnings could actually be holding up precisely because unemployment rate is rising. So that's one of the issues that I would say. The second issue is that there is a rebalancing of growth happening in the world away from the U.S. And that's because my view is that over the last five years, the U.S. hasn't really been that exceptional. U.S. exceptionalism is about productivity. It's about ease of doing business, entrepreneurship, technology, R&D. But last five years, the U.S. didn't really outperform the rest of the world because of that.

It really outperformed because the Biden administration became enamored with the pro-cyclical fiscal policy that they learned from the Trump administration, or should we call it the Trump-Pelosi administration of 2020, which really was kind of like a symbiosis of the two parties. And so this like pro-cyclicality of fiscal policy is what I think has allowed the U.S. to outperform the rest of the world as that abates because this bill is in my view not at all really stimulative in any way so we're not going to actually have any more additional physical stimulus the vast majority of one big beautiful bill is really just extending 2017 tax cuts so when you think about that that growth engine in the u.s is slowing down but that's forcing the

rest of the world to pick up the slack. And so in a way, President Trump's focus on tariffs, on aggressive foreign policy, and on quite prudent fiscal policy relative to the last five years is forcing the rest of the world to get their own houses in order to boost investments, to boost fiscal. And so growth could be picking up in the rest of the world, allowing export-oriented American companies to get to take advantage of both the growth reorientation to the rest of the world and a cheaper dollar. Tariffs obviously have been a huge part of the global economy. One of the things that I think you've been concerned with is tariffing kind of our economic competitors is one thing. But when you start to tariff the entire world, there's the potential

that you could push some of the people who may be on the middle ground to give use to India and a couple of other countries as examples to realign their economic alliances in a way that would actually be less advantageous for America. Can you talk through how you view, not specifically tariffs, but maybe the impact of the tariffs that we've gotten so far on these economic alliances? Well, you know, I think, yeah, I mean, in a way, I think the tariffs are going to cause a lot of countries around the world to look within themselves and say, wait a minute, have we been riding America's coattails for too long? And, you know, there's a fiscal side of that story. The U.S. over the last five years has basically just spent like a drunken sailor.

And so, of course, China hasn't fixed its consumption story. Of course, Europe has underinvested. Why would they spend any of their money when they can just produce goods and sell it to the Americans? So there's that. There's also another issue. Structural reform is really important, like constantly seeking to improve productivity domestically. That's something that a lot of countries haven't done. I mean, look at Canada. Canada doesn't have free trade between provinces i don't know how many of your viewers and listeners know this like canada as a country there's actual intra-provincial trade barriers between states and that's been the case for 250 years and mark carney has just submitted the new prime minister just now after 250 years of canada

and by the way it's appropriate we're recording this in canada day july 1st canada has finally decided to actually break those barriers down i think without donald trump they wouldn't have done that. So what I would say is that the first element of tariffs is that it's almost like good for the rest of the world. You know, I call President Trump, I say that for the rest of the world, his cod liver oil. You know, our grandparents used to basically take a spoonful of this really stinky, really bad, foul tasting medicine. It was for their own good. That's what Donald Trump is for the rest of the world. He's forcing the rest of the world to do structural reforms and actually boost productivity and final demand. That's good. On the other hand, your point is, yeah,

but there might be a geopolitical downside to this. U.S. loses allies. And I think that you saw in Brussels with NATO, like that's not really happening. Ultimately, it's not really up to President Trump. It's not up to them. The world is becoming more complicated place. The U.S. is either unwilling or really incapable of just being that kind of global hegemon and a global police force that it used to be in the 90s and early 2000s, even with Iran. I mean, it's very clear President Trump has said, look, we'll bomb these nuclear sites, but we're not going to go any further than that. We don't want regime change. Sorry, Israel, we're not going to do that. And so because of that, I don't think that President Trump is really pushing anyone away.

I think they already got pushed away by the multipolar distribution of power. Now, I want to talk about the dollar, Bitcoin and gold. Obviously, central banks have been buying a lot of gold. The market cap continues to expand very rapidly. The dollar is down about 10% to start the year. It's the worst start since the last 40, 50 years. Bitcoin at one point was lagging gold. I think people were kind of like, hey, why is gold breaking out and Bitcoin's not? Now it seems like Bitcoin's got its engine kind of revved up and is starting to really run. And really, Bitcoin, I think, has significantly appreciated since the approval of the BlackRock ETFs and the institutionalization of that asset. How do you look at those three things? Is there

anything noteworthy to keep in mind as we watch the dollar, Bitcoin, and gold over the next couple of years? To me, gold and Bitcoin are interesting. Bitcoin is risk on gold. I don't know if that makes sense, but it appears that Bitcoin rallies in risk on environments. It's not a great risk off asset um and maybe the underlying logic behind that is that the two sources of demand the demand for gold is more mature literally it's like older human beings more well-capitalized buyers such as central banks whereas bitcoin is a little bit more of a you know saving tool for the less mature part of the financial system the younger part either way that means in risk off environments uh that cohort has less savings to deploy into bitcoin but i am bullish bitcoin

and i'm bullish gold as well because i'm bearish dollar and i mean egregiously bearish dollar like 30 more down over the next five years my target for the euro which is sort of the anti-dollar in the currency in the fiat system is 140 that's where my sort of uh view is it's 117 now so significant more downside to the u.s dollar not because it loses reserve currency just to be clear. It's just that the dollar was very expensive last year, extremely historically expensive. And I think it came from this view that everyone priced American assets in general for perfection. There's a lot of foreign capital that's going to move out of the U.S. as the U.S. financial, as its current account deficit reduces, its capital account is going to have to come down

the surplus. This is going to lead to outflows out of the U.S. no matter what President Trump does or whatever the next president is. And that's going to lead currency to depreciate. This is actually very positive for the U.S. I think that the U.S. dollar was too elevated. And I think that the U.S. dollar in many ways contributed to the manufacturing problems inside the U.S., to investment decisions, to move businesses back into the U.S. It's very difficult to do that at the valuation of the currency that the U.S. had. I think the best thing that can happen to the U.S. is another 25% decline in the currency, that will set the U.S. up for really interesting gains in the 2030s. Now, the parallel to this that I would tell your viewers,

because a lot of them are probably thinking, whoa, that's a lot. It's actually not. This happened from 2002 to 2007. The U.S. dollar went down 34%. It's a trade-weighted version. So these moments do happen. They don't have to be accompanied by some geopolitical calamity or some sort of loss of reserve currency status. And it's not necessarily negative for the U.S. economy. When you see the dollar going down that much, what happens to Bitcoin? Well, definitely, as I said, it's bullish. But I would say that...

How bullish though? I would say quite bullish. Like 250 Bitcoin? A million? 200? not so much a price prediction as much as with the way I think about Bitcoin is you said risk on gold. I've always said it's like gold with wings, right? When they rally, Bitcoin goes up more than gold goes up, et cetera. And so if the dollar is going to go down 30%, it's almost like, is there like a multiplier effect, right? For every 10% the dollar goes down, you should expect Bitcoin to add a zero or go up, you know, double in price or like, how do you think about the

relationship between those two? So the dollar is going to go down, but just to be clear, you know, when the dollar goes down, it's not that people are selling US dollars. Some people are selling US dollars, and then you got to buy something that's alternative to a dollar, which Bitcoin could be a good alternative to a dollar. But if you're selling US equities, you're not going to buy Bitcoin. If you're selling US equities, you're going to buy emerging market equities, you're going to buy European equities. If you're selling US bonds, you might want to pick up an Australian bond, which yields pretty much the same thing, but it's not denominated in a dollar because you're a fixed income investor.

You see what I mean? So because of that, I don't think that when you hear a 30% decline in dollar, it must mean then a million dollar Bitcoin. It just means that, yes, those of us who have like actual cash might decide to diversify it into Bitcoin, but that's a very small portion of the global portfolio

that will exit to the US. And so I would say that I'm not in the million dollar Bitcoin camp over the next five years, but I'm probably in like the 250K. yeah i mean but it's still you know whatever two and a half times from uh from where we are approximately i'm also not i'm also not an expert at that i would just say like so so if anyone out there has a really high conviction of you about a million dollar bitcoin god bless you i'm not

gonna try to dissuade you from that yeah well now let me ask this uh if bitcoin does go up to two and a half times let's say over the next five years what happens to gold does gold continue to appreciate and i ask you from the perspective of what i used to think you know maybe five years ago or so was that Bitcoin would be worth more than gold at some point, but they were actually going to cross somewhere in the high single digit trillion dollars market cap because gold was going to get demonetized and Bitcoin was going to expand. The exact opposite has happened. I was completely wrong. Instead, Bitcoin has expanded and gold has accelerated as well and almost doubled in market cap during that time period. And so how do you think about the relationship between

Bitcoin and gold moving forward in a world where the dollar's losing so much value? you know uh it's not just bitcoin and gold it's also copper it's also um iron it's also uh just commodities broadly it's real assets i think that dollar decline will lead to all real assets um rising in value and in fact uh you know i have one of these very cute uh 150 year charts of like financial assets relative to real assets and we're at uh like 150 year low of real assets relative to financial. And so what you should think of gold is that it definitely should appreciate in this environment. In fact, um, of, of dollar debasement effectively, that's, that's what we're saying, even though it's a non-yielding asset, because ultimately so is,

you know, so is the dollar in many ways, um, and has been for, for a long time. So I think that, i think that gold has a lot more upside i will say though it's difficult to put a price target on it and actually i closed my gold long a month ago not so much for any other reason than profit taking i mean i've been uh off and on long gold for two and a half years and with a high conviction view my conviction is abating a little bit just because i do think that there's a moment when central bank buying might shift from gold to a little bit more crypto and then a little bit more other currencies. In other words, a lot of folks sold their dollars and got gold. But I think going forward, they might start diversifying into other fiat currencies as well. It's interesting to think

about this because that's what you saw individuals do first. Then you saw public companies and financial institutions. It kind of just makes sense, right? It's like eventually central banks are going to do the same thing that was good enough for the people and for the companies. And so naturally, they're going to say, hey, maybe I'm still going to buy gold. I'm just going to buy less of the gold. And I'm going to start adding some of these other assets. Also with Bitcoin, one of the interesting components is like the higher the price goes, the less risky it becomes to the central banks. And usually it's the opposite, right? Like the higher Nvidia stock goes, the more everyone's like, oh my god, it's a bubble, it's going to

crash, whatever. And so there is this like Goldilocks zone, if you will, where as Bitcoin kind of reaches a certain threshold. Now it's big enough to allocate to, but as it gets bigger, it actually becomes safer. And so I don't know how that'll play out, but it definitely feels like that is a key component. Are you looking for a simple way to earn Bitcoin rewards every single day?

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or accessing their premium DeFi assets like Syrup USDC. If you're serious about putting capital to work, then go to maple.finance to learn more. Once again, that's maple.finance. Go check them out today. Well, a lot of my clients are, you know, very much institutional investors, pension funds, endowments, sovereign wealth funds. And I can tell you that many of them have started to embrace digital assets so um especially you know bitcoin as a sort of anchor but even even more than that and there's a there's a whole sophisticated institutional investment you know um ecosystem now for digital assets uh that didn't exist five years ago and so i think you're absolutely correct central banks are going to adopt that as well i think there's going to be

an interesting sort of battle between central bank issued digital assets and sort of privately issued ones. So that's going to be also an interesting battle that maybe some of them are going to favor one over the other. We're certainly seeing some of that in the US. But I think that definitely just as gold has gotten a bid since the Ukraine-Russia war for obvious reasons so gold got a bid as your alternative to the dollar in the vaults of central banks so will uh digital currencies the question for me is when do we cross over to transactions you know because a lot of a lot of your viewers um are going to confuse as many people do reserve currency for literally currency in the vaults that's just one component of what a reserve currency is and i would

argue it's the least relevant one. The least relevant component of the dollar as a reserve currency is that some central bank is holding some dollars in its vaults. That's petty. That's not that interesting. The US dollar could go down to 25% of global reserves, and it could still be a reserve currency in the fact that it's used for financial transactions. We have to price goods and services in something. We price it in dollars. So when I go and look at what's the price of copper. I'm not looking at the euros or remimbis. I look at it in dollars. The United Kingdom, the pound, remained the reserve currency globally really until after Second World War because of the stickiness of that financial transaction and trade transaction usage.

So it wasn't that people were storing their wealth in British pounds. It was that they were using the British pound as sort of the pricing mechanism. And so my question to the digital asset community is like when is it that we start using those assets to price goods and services i'm not sure bitcoin is capable of doing that because it's a little bit too geared towards a store of value role which means it has a deflationary property which isn't good for an expanding growth and expanding economy i think however that there could be some digital solution to a pricing mechanism that anchors itself to more than just the U.S. dollar. I don't know.

I'm not the guy to solve that. Well, what's interesting is stablecoins, I think, have been that digital solution up until this point, but it's just really taking the dollar and saying, hey, now let's go use this on digital rails, right? So in a weird way, maybe stablecoins are the intersection point that is allowing for the old world to get dollar exposure, but do it in this new world. And then obviously the new world, as much as they want to yell and scream and say, Bitcoin And, you know, it's the thing I'm going to use to buy coffee or whatever.

They still want to use dollars because the dollars are going to be worth less in the future. The Bitcoin is going to be worth more in the future. So I hold the thing that I'll appreciate, sell the thing that will depreciate. Do you see any other impacts around the world when it comes to stable coins in particular? Well, we're seeing it here in the U.S. I think that the adoption of stable coins and the legislative push in the U.S. by the White House to really embrace them should create a tailwind to U.S. treasuries. So right now, this administration is clearly focused on keeping the long end of the yield curve down for political reasons, for financial reasons, for fiduciary reasons. It makes a lot of sense.

I mean, obviously, mortgage rates are elevated. Nobody in America wants to buy a home. You've got to bring borrowing rates for the government down if you're going to bring them down for the private sector. And this is the point about the Fed. We're talking about the shadow chair. There's only so much the Fed can do on the short end. The long end can also not respond to those moves, as we saw September, October, November, December of 2024. So I think that what they're doing on the long end, there's macro prudential legislative efforts right now.

There's the SLR, which is the ratios for the banks. There's also this legislation on stable coins. I think all of those are going to shave maybe 20, 30 bps each off of the long end. So it's not like extraordinary, but it's not insignificant. I think there could be a suppression of the term premium, not through usual blunt mechanisms like QE, but rather through creating this demand in the banking system, in a stable coin community for treasuries in general. And, you know, a lot of folks say, well, a lot of that is going to be on the short end, you know, bills, T-bills, not the tenure. But as we know, that doesn't matter. Then the Fed will the Treasury simply will finance itself at a short end and issue less long end, thus, again, reducing demand, reducing supply, which will obviously bring yields down. So I think this is a this is very relevant from a macro perspective, particularly because there's a lot of just bond bears right now, you know, who expected the bond market is going to riot due to deficits and debt levels.

And I don't think the world kind of works that way. And what I mean by that is that I'm not sure that bond yields need to go to 6% for them to extract a tax on the American economy. They're already doing it. Just ask your peers if they're buying a home. There's already a price being extracted through yields at current levels that the government has to start behaving both more responsibly on the fiscal side, which I think actually has happened, ironically, but then also try to use some of this macro prudential stuff to shave off 20 basis points here, 30 there off the long end. Let's talk Russia, Ukraine, and Israel, Iran, and Gaza, Hamas, Palestine, etc. There's kind of two big geopolitical conflicts. One of them, I think, is very direct. Two countries engaged in conflict. The other one in the Middle East is a little bit more messy in terms of there's multiple players.

Some of them are state actors, some of them are not. How do you look at their impact on an economic basis in the United States? Obviously, we're spending money. We're kind of fighting these like proxy wars, we obviously dropped, you know, the bombs in Iran. What's kind of your take on these two geopolitical conflicts? You know, I'm laughing because this is the first time I was asked me that question in that way. It's just blunt. It's to the point like, hey, how does this impact the US economy? And this is what I do for a living. I don't I don't sit around thinking about the importance of a geopolitical event from some sort of a normative moral perspective. My my my anchor is the market so thank you for asking it that way the market is the truth the market is

the truth it is and you know what it is now look look 60 000 people being killed in gaza is a tragedy um even if it doesn't impact the market you know so like that is that is correct uh however we are here to talk about the markets we're not here to make the world a better place that's just a fact and so i always tell investors they need to separate the humanity of observing an issue and what their job is and what their fiduciary duty is. And so let's talk about Middle East first because it's cleaner in a way, even though you're pointing out that it's messier,

but from a perspective of market relevance, I think it's simpler. Anything that happens in the Middle East, if you want to look at it from an investment perspective, you got to ask yourself a very simple question. Will this impact the transit of an oil barrel from oil fields in Saudi Arabia through the Strait of Hormuz?

If the answer is no, you should not care about it. You should not incorporate it into your daily routine as someone with a fiduciary duty to yourself or for your clients. I mean, it's that simple. And so on October 8th, one day after the Hamas terrorist attack against Israel, one day after, I wrote a note to my client saying that the next six months, year, two years, three years of cacophony of geopolitical risk is not going to matter. Why? Because Iran-Israel enmity has to basically boil over and spread into the oil producing and oil transportation parts of the Middle East. And the fact is that in 2022, Iran and Saudi Arabia concluded a detente that nobody talks about, nobody mentions at all. But it's a detente that's held and that works. And it's fundamentally about this. Saudi Arabia has decided to become a modern economy, to undertake very significant socioeconomic reforms. And it has given up a large portion of its former sphere of influence to Iran and just said, look, you want Iraq, go ahead,

knock yourself out, we don't care. Saudi Arabia has effectively said they don't care about the Sunni-Shia split, they care about becoming a modern economy. And it's that detente that has meant that every piece of retaliation by Iran and its allies has not impacted what matters for the markets. You know, so in other words, Houthis are targeting the Red Sea, not because they can't reach the Persian Gulf, but because they don't want to upset this detente. And, you know, the media is just not talking about this because I think in the U.S. we have a very, very discriminatory and honestly a stereotyping view of this region. We see it as very backwards and riven with sectarian violence. And so we cannot possibly imagine that these two countries basically came

down of their own volition, really without any help from the U.S. or anyone else, and said, look, sectarian conflict between us is unsustainable and it's holding us back. And so I am actually very bullish on the region. I would go as far as to say Iran and Israel can go ahead and lob missiles at each other for the next five years. You as an investor should probably not care. Now, Russia, Ukraine, I think that war is effectively already a frozen conflict. And so, you know, there's nothing really, there's no way for it

to really change. Both sides are really stuck. And too many commentators over-indexed on President Trump's role in this. You know, they see him as trying to hold Ukraine back, which is nonsense because Ukraine was already held back by its own troop deficiencies, by its own, you know, material weakness relative to Russia. And I think that a forever war does not serve Kiev's interests because they cannot possibly maintain a forever war with Russia. So in other words, you could just think of President Trump as kind of like the man of the moment. The moment is the war is frozen. And these lines have to be delineated, these sort of sphere of influence lines. So I do think that over the next six to 12 months, we're going to have some sort of a tacit

ceasefire some sort of uh you know frozen conflict peace treaty seems too far-fetched to me but i mean both sides have been talking about it so maybe i'm too bearish on that uh but i don't think that you're going to see more risk emanating out of the russia ukraine conflict and no i don't think russia is going to invade anyone else uh they've had their hands full with ukraine and while they did conquer a fifth of this territory uh you know i would not classify their military performance um as excellent you did not mention whatsoever uh the american technology or the american spending of oh yeah bombs weapons technology etc going there uh which i take as you don't think it's really that important in the evaluation for investors uh in the market is that

true yeah i i don't think so you know it's a little bit of a broken window view i mean yes u.s sends uh money to ukraine but like let's not kid ourselves they're spending it on u.s uh u.s weapons so um i don't think this is a huge drain on u.s treasury uh certainly nowhere near uh the fiscal outlays that the u.s has done on itself you know this is a pittance compared to what the u.s has spent on just woeful spending domestically in many ways on inefficient ways as well uh and also the reason i don't think it's a big deal is because i think it's ending you know effectively the war is ending. So I don't see the trajectory of this going to a further burden, financial burden on the US. One of the geopolitical risks that I don't hear a lot of people talk

about from the finance community, but I hear all of my national security friends, you know, I was in the military, I got tons of friends that were in intelligence positions, all this kind of stuff, is domestic terrorism. And one of the things, there's a gentleman on Twitter, he always says you know how many foreign sabotage teams are on our homeland soil and we're starting to see you know there was obviously the forest fires uh in la where it seemed like some of them were natural and then there was like okay now now people are going to try to start these they're they're actually uh going to destroy property they're going to create problems uh we recently saw a situation i think it was in idaho somebody set a fire they called in firemen they started

shooting at them um yeah there's many of these attacks that have happened kind of across the United States, usually they tend to be fairly unorganized. They tend to have a somewhat controlled amount of people who are affected, a car drives into a parade or whatever. It's very sad. It's very, I think, you know, we wish that we didn't live in that society, but also it's not like, you know, kind of very large events that have happened in American history. And so is that something that you pay attention to? You worry about, is that something from a financial standpoint you think kind of falls in that geopolitical is actually like, it's really domestic, but there's still this like terrorism component to it well you know i actually landed in spokane uh actually

the day that that fire broke out in idaho i'm in interior british columbia spending uh uh july 1st canada day and july 4th independence day out here uh in the woods teaching my uh teaching my kids how to survive in the wilderness you know which is i guess what uh you would expect a geopolitical strategist to be teaching their kids um so to answer your question i'm very familiar with this and I think about it all the time, but as we saw after 9-11 or any really momentous geopolitical calamity, it's very, very, very important not to be bearish.

Like that's my number one advice. Why? Because when there's a geopolitical calamity, particularly a terrorist attack, it's no holds barred. Like, you know, like you can't be like, well, the Fed is going to be prudent because of inflation concerns.

No, they're not. The country just got attacked by terrorists. It's almost invariably bullish for assets and for the economy. It's going to stimulate activity. Things are going to move. Things are going to catalyze. If something was inefficient, it's going to become efficient. I mean, think about COVID and the pandemic. Like President Trump enacted Operation Warp Speed, where he effectively told, he put a general, General Perna, incredible hero that nobody really knows about. But General Perna was put in charge and he said, OK, what do you guys need in the biotech space? OK, you need this. What do you guys need to regulation? How much money?

Let's go. and so um that's why like if you think about 9-11 you know was it bearish for the u.s economy or u.s markets and the answer is absolutely no there's a period where of course markets have to digest the agita and then policymakers react to that and that's why we all have to be that second order investors you know that second and third order we can't be stuck in the first order So should you fear terrorist attacks domestically? Absolutely. But as a human, not as an investor.

Marco, where can we send people to find all your great work online? It's always whenever you put something out, it's kind of like a stop everything and go read. Where can people find that stuff? You know, most of my written work is behind a paywall because, of course, I have to finance these visits to the woods by my children. So most of it goes to clients. However, I do have a podcast. it's called geopolitical cousins so if you want to just listen to some you know it's a mix of humor and i hope useful analysis and it's not really focused on investing on the markets it's more

just my geopolitical thoughts and then i'm very active on linkedin and x as well and of course you can just reach reach out to me um you can go to my website geopoliticaloffer.com or bcrresearch.com and and read up more about what i'm doing amazing well thank you so much for taking the time to do this. I always enjoy talking and the world is a crazy, complex, uncertain and chaotic environment these days. And so somebody like you is obviously very valuable in terms of your insights. So we'll do it again in the future. That's very kind of you. Thank you so much. And happy 4th of July and July 1st.