The Wolf Of All Streets - Warning! War Threatens $1 Trillion Blow To The Economy! Bitcoin To Explode?

Episode Date: October 30, 2023

Join Dave Weisberger, Mike McGlone, and James Lavish as we break down what's happening in macro and crypto! Dave Weisberger: https://x.com/daveweisberger1  James Lavish: https://x.com/jameslavish  Mike McGlone: https://x.com/mikemcglone11  ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEK DAY! 👉https://thewolfden.substack.com/   ►►OKX SIGN UP FOR AN OKX TRADING ACCOUNT THEN DEPOSIT & TRADE TO UNLOCK MYSTERY BOX REWARDS OF UP TO $60,000!  👉 https://www.okx.com/join/SCOTTMELKER  ►►TRADING ALPHA READY TO TRADE LIKE THE PROS? THE BEST TRADERS IN CRYPTO ARE RELYING ON THESE INDICATORS TO MAKE TRADES. USE CODE ‘2MONTHSOFF’ WHEN VISITING MY LINK.  👉 https://tradingalpha.io/?via=scottmelker  ►►THE DAILY CLOSE BRAND NEW NEWSLETTER! INSTITUTIONAL GRADE INDICATORS AND DATA DELIVERED DIRECTLY TO YOUR INBOX, EVERY DAY AT THE DAILY CLOSE. TRADE LIKE THE BIG BOYS. 👉 https://www.thedailyclose.io/   ►►NORD VPN  GET EXCLUSIVE NORDVPN DEAL - 40% DISCOUNT! IT’S RISK-FREE WITH NORD’S 30-DAY MONEY-BACK GUARANTEE. PROTECT YOUR PRIVACY! 👉 https://nordvpn.com/WolfOfAllStreets   ►►COINROUTES TRADE SPOT & DERIVATIVES ACROSS CEFI AND DEFI USING YOUR OWN ACCOUNTS WITH THIS ADVANCED ALGORITHMIC PLATFORM. SAVE TONS OF MONEY ON TRADING FEES LIKE THE PROS! 👉 http://bit.ly/3ZXeYKd  Follow Scott Melker: Twitter: https://twitter.com/scottmelker   Web: https://www.thewolfofallstreets.io   Spotify: https://spoti.fi/30N5FDe   Apple podcast: https://apple.co/3FASB2c   #Bitcoin #Crypto #Trading The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

The extension of the war in the Middle East could send us into recession and take $1 trillion off of the global economy. But that would be based on the idea that oil could go to $150 a barrel, which is quite a rise from our current state, well under $90 at the moment. As you know, Mike McGlone thinks probably that the price of oil will eventually go down. So we're going to discuss what it would take to get us to 150 and what's actually a more realistic approach to that. I've got, of course, Mike McGlone, Dave Weisberger, and James Lavish, both of whom have not arrived yet. So we're going to start with me and Mike McGlone. It's Macro Monday. Let's go. What is up, everybody? I'm Scott Melker, also known as the Wolf of Wall Street. Before we get started, please subscribe to the channel and hit that little like button right down there below. It's my favorite day of the week when I have to actually be accountable and show up and figure out what is happening in the macro

because it's so easy for me to get lost in the bullish echo chamber of crypto. And it's important to remember that even if Bitcoin is not correlated for the moment, it's very important to understand what's happening in the world. Last update we got from Dave Weisberger was that he was at a stoplight. James, haven't heard yet, but we know he's coming. But I do have myself and Mike McGlone, who you can see not in the Bloomberg offices today. I think you've got a conference, right? Yeah, I took the Brightline, the new train line from Miami to Orlando. So I'm at a conference and you got me for 30 minutes and then I have to go on a panel and do like I do now and act like I know stuff. So thanks. How was the Brightline?

I know it's not relevant, but us Floridians are very excited that we have a relatively high speed rail now from through South Florida. I'm a big fan of sleep is unrated. I love taking naps on trains and I can work. The only thing I'd say is the Internet wasn't good, but it's great. You know, it's just it's awesome. All right. So since it's you and me, let's for the moment, let's talk about oil. Oil drops as Mideast conflict remains limited amid Israeli push. The story here, the story itself obviously is not humorous at all. What's happening over there? But it's sort of funny that we are attaching this narrative that depending on how large the ground invasion is and how likely the event that that involves other countries is what apparently is driving the price of oil here. Can

you speak to that? It's the word hopium for the bulls is what's happening. It's rallying and closing strong on Fridays because people are afraid to be short for the weekend because of what might happen with escalation in the war in the Middle East. Now, remember, when you're people like we are, you've heard that term war in the Middle East since you were children. Unfortunately, it's just something we've grown up with. It's sad. It's horrible. But the thing is, will it do anything to significantly cut the supply of crude oil, like the Arab oil embargo in 1973 and in 1979, the rating of the U.S. embassy. And it's very unlikely. So here we are back Monday. WTI is around $84 a barrel. The average price this year is $77. Most people last year said there'd be a one in front of that handle.

And yes, if you want to blame someone, I think it's going to 50 or below in a normal recession. And that's already what's happening. So crude oil has bounced, but it's up 4% in the year. Gold's up about 10% in the year. So that's a significant, and copper is down about 5%. So from a commodity standpoint, that's a clear recessionary trajectory. The only thing that needs to, the next shooting drop is for crude oil to fall

with the US stock market. So we just got off our morning meeting and something I was completely expected, it is lower prices are getting lower prices, almost all risk assets. So we're at that stage now. It's crude oil is going down because the stock market is going down. And why is that going down? Because the Fed's still tightening. So now we have the Fed on watch still. They are not going to ease. Their fingers are still on tightening. ECB, Bank of Japan, Bank of England, all still probably done tightening, but they're not even started easing. That's been my iteration. Let's get to the first bridge of the start,

take out that price and tightening, and then the start easing. Then we can think about when risk assets will bottom and they're just getting started. So reiteration from our economics team is more in Bloomberg Economics. The recession will hit by the end of this year. I think it's going to start it. And Ana Wong pointed out virtually every time we've had significant recessions, three or two months before that, you see non-farm payrolls plus 300. Now, we've just seen that pretty strong number. I looked from our interest rate team, Ira Jersey pointed out the big deal this week is that refunding. 114 billion treasuries. I remember trading in treasuries. And $40 was a lot.

So what that is, that's a giant black hole of high yields guaranteed. People know, I bet this conference, people saying, where do you put your money? I'm like, well, what's wrong with the two-year note? And that higher yields is sucking that money from risk assets. It's actually pressuring things like housing and anything that's related. So I'll point out that to me is a key thing. And also we have this dollar bull fatigue. So what's it going to take for that wrecking ball of the dollar?

I mean, the yen is about 150 now. It's basically you need yields to fall, US stocks to fall, and that's part of the worst lose-lose. So I'll end with this. Since the US government, too, you know, went above 5% on the first day, really sustained above that level on August 21st, the S&P 500 is down about 7%. Gold's up about 5%.

And crude oil is still hovering up 3% or so. I think everything is going to tilt lower. And that's what's good for gold. And the bottom line is Bitcoin is showing divergent strength in this environment. Back to you. Okay, we will get to Bitcoin. James, I want to talk about something Mike just brought up here. Obviously, I have this pulled up. The big bond market event Wednesday is at Treasury and not the Fed. And that's an idea I think that we've been sort of beating the drum on here on this show

is that we're all watching monetary policy. We're all watching the Fed. But the reality is it may be more important to be watching the Treasury and what's happening over there. And as Mike said, on Wednesday, we have this quarterly refunding announcement. It's really going to tell us what their approach is going to be, how many more bonds we're going to be seeing long and short end and how they're going to approach us. What do you think is going to happen and why do you think that this is important? Yeah, it's super important because last week we learned that we are in fact running a $2 trillion deficit. And so we have to refund that. And these deficits we're running, regardless of what Janet Yellen says, they are pushing long

term, longer end of the yield curve rates higher. You have investors who want to be compensated for that term premium, basically. And so exactly what Mike said is that the Fed is not the focus this week. The Treasury is going to come out and give their game plan for how they're going to refund this quarter. And over another $100 billion, I think it's $114 billion we're looking at, they may grow that. We don't know. But the big question is, how much are they going to issue on the short end versus the long end?

And are they going to pull back the long end because they know that it's just difficult to get liquidity on that long end without having to pay that term premium to the investors? What would that mean for the yield curve? Do we finally see it normalize here or is it go the other way? Well, it's not normal. A normal un-inversion would be the short end coming down, but the short end is not coming down. And so all it's happening is both ends are going up. It's just the long end is going up at a steeper rate. And so that's not normal. It will not normalize until we get some sort of correction. And so they try to bring that long end down. You're saying we become more uninverted again. Right. When we're about to normalize, then we become it becomes further inverted. Excuse me. Inverted. That's right. That's right. So it's not normal. Yeah. It's not it's not normal activity. So, yeah.

Yeah. It sounds like one of those F'd if we do, F'd if we don't sort of situations for the treasury here. Yeah. They're in a real tight spot. They're in a tight spot. There's about a trillion dollars left in that reverse repo. We've been watching that. We've talked about this for weeks now on the show. And they're going to continue tapping that. And once that's out, they're going to have to either change rules or change the leverage ratio rules or something for the banks and or maybe require banks to hold longer term treasuries. They're going to do something. Yeah, we know how well that went last time. Yeah.

Because the treasury is going to, they're going to keep the market highly liquid no matter what happens. And so but they will pull out all the stops to do that. So, OK, Dave, what happens when all the stops are pulled out? Well, I mean, I've been saying on this show for 18 months that the Fed is manipulating the market is the only way they can and they need to keep long rates down. And it gets harder and harder to do when people realize that can and they need to keep long rates down and it gets harder and harder to do when people realize that's what you need to do so it it requires instead of using you know a gun you use a bazooka instead of a bazooka you use a howitzer instead of a howitzer you use a you know one of those you know those those massive bombs you know Etc at some point you know yeah

the people people are they're they're are, they're, they're, they're imagining or they're envisioning the fed here with a scalpel and they're really holding a chainsaw. Yeah. Chainsaw. I don't know. I've seen people do ice sculptures with chainsaws. I think they're, they're doing it with, you know, with, with sledgehammers. You know, look at the end of the day, the there's, there's only one way out.

And this administration is not going to do it. The only one way out is to grow your way out. The only way to grow your way out is to take Elizabeth Warren and say, thank you. You've done a great service to the economy. You've slowed us down. We need to deregulate and we need to unleash American innovation. End of chat. But we know they're doing the opposite. This morning, an executive order on AI, for Christ's sake. Oh, my gosh. End of chat. But we know they're doing the opposite this morning, an executive order on AI for Christ's sake. Oh my gosh, I saw that. Give me a break. The fact is on a macro show, we need to understand growth is constrained by government regulation, full stop. You can argue that it's a good thing or not, but you can't argue that it doesn't happen. And so we are in a low growth environment because we

have an overly aggressive government is exactly what's happened in Europe. The difference is, is the German jet debt to GDP doesn't even approach ours. Now, one could argue the reason why is they don't spend as much on defense, yada, yada, yada. But the fact of the matter is they're not in the same situation we are. Our debt to GDP, especially if you include unfunded liabilities, is unsustainable. Full stop. The only way out when you get to 200 percent and we're at least at that level with to cut Social Security or raise the age from 65 to 80 or whatever the hell they're going to have to raise it to. We're sitting at 200 percent, 125 on the standard stuff and, you know, another 75 or so from that. So when you look at that, the only answer is full manipulation, yield curve control, what Japan is doing. It's actually more palatable politically than pretty much anything else, which has been my base case. So when I listen to Mike, I agree with him. I just think that it misses the fact that the Fed wants the yield curve to be inverted. They desperately need

the yield curve to re-invert. They need to push it as much as possible. And all roads to that lead to quantitative easing, full stop. They're going to do it one way or another. There is no choice. I've been on record. That's a bet I would make far bigger than the other bet. Yeah, I mean, Powell could try to do what he's going to do on the short end. But the truth is, is he's fighting a losing war. And I'm sure he's frustrated. There was a great meme the other day saying, and why did I re-up for a second term? Why did I want to take this job again? You know, he's trying to fight inflationary expectations with short-term yields, while, as we've said, wage push inflation is being cheerleaded by this administration. Not just,

you know, not pushing it, not trying to talk it down, not mediating, but literally cheerleading wage push inflation with unions at the same time as James talked about the deficit. So, I mean, there is no answer other than QE unless they want to let the yield curve go to where the market would push it, where frankly, debt service becomes the largest line item in our budget. Now, that sounds like a very clinical term. Let's see what that means. When debt service is the largest item in your budget, getting to 50%, that means you have to have a 50% budget cut to even think about, even think about a balanced budget. That's just not sustainable. I mean, it's just, and by the way, you know, we're rapidly approaching the point where, you know, actually we may even be there, James.

Defense plus debt service. Is that 100 percent of the of tax revenue? I think it's more. It's it's you're you're over. You're over. Yeah, it's over a trillion dollars. You're going to be over a trillion dollars of debt service here in the next quarter. So so think about what a recession means. If a recession, if Mike is correct, if we go into recession and tax receipts drop 20, 25% because GDP contracts and people are making less money in an environment where the debt service is locked in and defense is locked in and entitlements are locked in, what does that do to a budget deficit? Just ask yourself that question. So there's a good bull market. I got to piggyback on that. And to me, this is part of the,

let's look at, there's many bridges to cross. That's the next bridge to cross. I'm going to use that word plausible deniability, but I'm completely guilty if we don't go to the recession. I'm going with some of the top economists on the planet, the people I work with and leading indicators. It's a hundred accurate for 100 years, and it's down 7.8%. That is about what the deficit for a little while this year was this year was on 8%. Now that the students have to start paying back the loans, it's dropped closer to six. But that to me is the significant David spot on. But here's the iterations I'm looking for. One of the worst performing assets last year was GBTC. It's one of the best performing this

year. I think, I don't, I still bullish that asset, but TLT has been one of the most, the biggest surprises, particularly here. Guilty, wrong. I didn't think long bond 10 years ago, about 4%, but now they're 5%. I think they're going to drop on the elevator towards 3% with the deficit ballooning, with QE that you mentioned. Now that's a bridge to come to. And then it's after that that I don't know what's going to happen. We're going to pop, unfortunately, we might get austerity. Republicans coming, they're talking austerity already with the new Speaker of the House. So what does that mean? That's a depression. And that's kind of what they did in the 30s. And we raised taxes, we had Smoot-Hawley tariff act and things like that, but we're tilting that way. in the macro right now i think this is

pretty significant that we're seeing this asset that's three times the volatility stock market and go bitcoin doing well when everything else is tilting lower now the key thing about the stock market if you look right now is yes 14 day rsi is oversold when have you ever seen a bear market that doesn't get oversold and yeah of of course. Those are the power zones. Those are the power zones. I was saying last week. So I was saying last week something very simple. I said on Wednesday of last week, I was talking internally with the guys, and we commented on our weekly recap on Friday, that a week like last week, if it based as of Wednesday morning, looked a lot like the week before the 87 crash, you and I are old enough to remember it. Had Thursday been a down day and Friday been an accelerating down day this morning, we will be talking.

Oh, my. There would be you know, we would have a show that would be almost as epic as the fake Bitcoin rally show, which will go down as in the history of Scott Melker podcasts as the most epic because it all happened live while we were on. From top to bottom. To bottom to top. Top to bottom. Bottom to top to bottom. But seriously, it didn't happen. And now we're into a different seasonal period where window dressing

theoretically is done as of tomorrow night. If we don't see a significant correction, I'm not saying we're out of the woods because I kind of understand, but it's the wrong time of year for it. I wouldn't be surprised to see a pretty horrific January in the stock market. But I think that all your economists are all missing the financialization over the last 50 years. We're in a much more manipulated economy, not manipulated necessarily by people pulling the strings, although there is some of that. At least in the bond market, it's manipulated. There's no question about that.

In the stock market, I mean, maybe, probably not. The question is, is people are stuck in a world where, you know, they're drowning. I mean, what happens to a drowning person? They flail, right? Flailing people don't look for 5% yields. Flailing people say, oh, fuck, I can't serve. I can't feed my family at 5%. I need more. And so they reach for yield. It's just like, I've seen this my entire life. I grew up, my grandfather was a bookie. My father had a rule. My father was a poker player who was net up in his lifetime. He retired as a local pro at the Mirage before his health gave out and he couldn't play anymore.

But the truth is, I've seen more degenerate gamblers in my life than I care to admit. And it's a sickness. And unfortunately, it is a sickness that most of society, most investors, many investors have some elements of that. It's like, well, if only it goes to here, I'll sell, right? Never do. My family. And they never do. It's the old expression. It's like how many investors turn a turn trades in the long term holdings. We all know what that happens. I just think there's still a lot of that in the economy. There's still your I'm going to use your word, Mike, hopium word. And it actually tells you what's going on. There are many people who are in risk assets that are at valuations that are incredibly stretched, who hope and are addicted to that hope

and holding it. Now, will eventually they be disabused of this notion? Yeah, probably. What will happen when that happens? Well, I mean, I think at that point, you'll be right. I just don't know if we're ready for that yet. And that's really the issue. Now, as far as Bitcoin and gold go, I think it's different. I think that the macro for Bitcoin and gold is about as overwhelmingly positive as you could possibly be. You have mass geopolitical uncertainty and it's a big deal. Portability of being able to take one's assets and leave a country or move has never been more important. I mean, hell, if I were in New York, if I hadn't been smart and relocated to Florida, I would be terrified on I were in New York, if I hadn't been smart and relocated

to Florida, I would be terrified on the streets of New York now being a Jew. Now, what we've seen over the last week is serious. It is a big, big deal. And if you think that people with money, whether you're Christian or Jewish, and you see mass riots calling for Jews to be gassed in places like New York City, If you think that that isn't a big deal for Bitcoin, then you are not paying attention. If you think that people in Argentina and Turkey and other places who are seeing this, seeing the U.S. government having to go into forever wars, people calling about another hundred billion dollars going into finance wars, they're going to use that as an excuse. It's nothing now. It's nothing now. It's just another hundred.

They're not going to be able to do austerity. They're going to talk about it, but they're going to use it as a justification. We've seen this script before. They're going to use geopolitical uncertainty as a justification for spending money and for liquefying the economy. They're going to claim it's national security. That's what's going on. I really believe that. I think that's what we said a week ago, Dave, we said it weeks and weeks, well, like three months ago, we were talking about how it's an election year. There will be a crisis. There 100% will be a crisis. And so here we are. Right. And so, you know, I know I'm enormously

cynical and James, you and I fight for the, who's the most cynical on this show. Not sure which one of us is, you know, everyone, we call Mike, Mike McGloom, but I think you and I are more cynical than Mike is. I think Mike still, you know, is more, you know, American innovation will come to the rescue than we are. Cynically eternal optimists. Right. Yeah, that's right. I just look at this as a very simple situation. The reason that our little tiny market of Bitcoin hasn't broken is because the macro side is saying that people are going to have to reliquify. They

may leave short rates higher, but they have to push the long end down. They have to. And we are getting much closer. Every month we get closer to the election season. That's a month. If you think the Federal Reserve is going to be able to tighten after, say, April or May of next year, they can't. Or maybe they can, but if so, the pressure will be overwhelming. Really quickly, Mike has to go in about four minutes. So Mike, I want to give you a chance to unpack and give some final thoughts before you do have to go. But that's one thing I love about this show. You provide a lot of cannon fodder. So one thing I do enjoy, I'll be speaking at the Money Show, and this is a classic old white person retired conference. Nothing wrong with that. I love to get old and retired and white. I mean, whatever color, but that's what this is. And so I love using these terms I've learned and

Scott show like hopium and I'm going to use definitely use boomer rocks when I talk about gold because people look at me with three heads like man, we are cryptos you hear these terms all the time. But the thing I want to point out is this is historic and epic. And the key thing I want to point out my presentation is never forget where you came from. And to simple fact that you use a simple Warren Buffett model versus the S&P 500, just a year ago was the most expensive since 1936. We're just simply reverting the most

historic period in history of low interest rates, the facts have changed. Okay. And here we are working on a day-to-day, everything that's a risk asset is supposed to go down in the environment, and that's why the federal government is part of the problem now. They've borrowed so much. We're at the limit now. You mentioned, Dave, at some point there's going to be QE because the Fed can do it, but they're going to have to. And also, a lesson I learned last year, I remember with some of my colleagues who were bearish, bullish crude oil right before the midterms. I'm like, don't underestimate what the world's largest producer, what helps get a sitting, sitting people, sitting electors, politicians elected, they need lower crude oil, things like that. So expect it, expect pretty strong austerity, not austerity, but pump, priming the pump. And at some point, this is, I mean, this is epic,

but this is a, this is, this to me right now, the situation I think around is very kin to 1930. Stock market went down 50% in 1929, rallied 50% and rolled over and everything, everybody thought it was over. All the indicators we have, it's just getting started. That was just a warning sign. Mike, before I let you go, you mentioned TLT. I brought up the chart before, obviously massive selling. As you said, this has been historic, actually selling in volume on TLT.

I mean, to me, this is for full transparency. i've said it on market mavericks on thursday i'm massively long tlt this is one of the few things that i'm actually trading um what does wednesday mean for tlt for people who are trading this because i know that there are quite a few of them what does it mean for me mike that's what i'm saying so be careful with what to say the key thing about TLT is I think you're supposed to have a couple-year horizon. Of course. And be careful with letting them- I'm not day trading. To be clear, I'm also buying this long-term.

Gareth was on the show. He's trading it by the hour. I'm accumulating a position here. That's what I'll tell you. So the key thing is they're supposed to issue 3s, 10s, andirties securities, $114 billion. And if they issue a little bit less thirtiers than the market anticipates, which I think they will, that will give you a signal that, okay, well, we're starting to focus on this spike in long bond yields, and we think it's serious, and we'll see what happens.

But right now, the market's already expecting that. I mean, it's expecting the supply. The key thing is when the supply comes on, if it spikes yields shorter term, that's just a black hole for risk assets. You see the lose lose here. The Fed's going to keep borrowing. The Treasury is going to keep borrowing. And at some point, this is going to be overwhelming when people realize, OK, well, these yields are just too attractive and I got to lock up and protect myself. And every, every time they inch higher, I pointed out what happened with the two note above 5%, all risk assets. They might, they have, they just have that ceiling, that wall of resistance above them for this massive need for borrowing from the safest risk assets on the planet. Yeah. And if they, if they do, like you're saying, Mike, I might see me.

I just got to go. You can just go. Mike's going to disappear. Mike's going to disappear slowly. He's going to do the Austin Powers elevator slowly down to the bottom. if the Treasury, if they decrease the amount of the 30-year that they indicated earlier, and they decrease the amount that they issue there, it is an indication that they are concerned with the level of the rates here. And like Dave was saying, that is quasi, they're starting to do a little bit of yield curve control in their efforts of funding the deficits with just short-term T-bills and notes. And that will come back. There's just no way out of QE. It's just a question of how are they going to go about it? And this is an indication that rates are at a level that they're starting to get uncomfortable with. And if they go higher than this, they will push them back down to at least this level or

lower. And so that's your indication. And I agree with you, Scott, that it may not be a three-day trade. It may be more like a three, six-month, one-year, two-year trade. But the TLT, the rates will come down in 20 and 30 years. Yeah. So listen, something we haven't actually talked about here, we kind of conceptually talk about QE is inevitable. We've all seen the ways that they've done it in the past. Everybody knows mass money printing, of course. But Dave and James, could it be different this time, the way that they do it? Could it be in a more stealth manner? Could it be the fiscal side, the monetary? What happens when they align? How do we actually get this QE if they then don't just print, again, 40% of the money supply as they did last time? Start with the stop in the QT. They'll pull back from QT because the Fed can't be competing with the

treasury for liquidity. That in and of itself is a non-starter. So they're going to stop that first. And then on the other side, I do expect some stealth moves. This BTFP program is going to expire in the spring and they're just going to re-up it. They're going to re-up it and they're going to say, yeah, we're just going to extend it. There's still some questions in the spring and they're just going to re-up it. They're going to re-up it and they're going to say, yeah, we need to, we're just going to extend it. You know, there's still some questions in the commercial real estate market, whatever. They're going to extend it. And then they're going to find more acronyms and quietly, you know, pump liquidity into the market somewhere, somehow. They're going to find acronyms to do that. And whether it's just to patch this hole here, touch up this here,

I expect it to be a little bit more stealth. Does that require them to print more money in theory, or are there other ways that they can create those budgets, you know, by moving some numbers here? Scott, there's one way out. Printing after me. I just, let's understand what they need to happen. They need to go back to the pre-pandemic policy, which of course is very hard because the world has changed, of asset inflation, runaway asset inflation, creating disinflationary consumer inflation forces so as to mask what they're actually doing. And they're going to need to do it. They're going to need to do it on steroids. So I feel like,

you know, if they're, well, they probably aren't because I don't think there's anybody smart enough there to actually do this at, you know, in this administration. But if I were in this administration and I were trying to get Biden reelected, I'd be yelling like Mel Gibson and Braveheart, hold, hold. And I wait until May, June, July to unleash the, you know, the Stephanie Kelton modern monetary theory redo to help provide a dose of adrenaline to the economy, which hopefully for their sake would last through October. I mean, because that's literally what that's their only hope. Now, I know that sounds crazily cynical. Frankly, I'm not so sure it will work, but it's literally got to be the game plan because there is no other way. They need assets to go higher so that the wealthy people and people will continue to invest and do the things in investing that productive capacity. So supply chains will be that so we can go back to importing

more cheap stuff, yada, yada, yada. That's what they need. Now, will it work? I don't think the world is conducive to that. I think James and I have talked about many of the factors that say that it won't necessarily work. The genie's back out of the bottle. That's my question, right? Because I think that the entire world knows now. I mean, Scott, you can't go shopping. So we all know you're not going to be surprised. And I talk with pretty much everybody I come in contact with, whether it's a cashier, whether it's a parking lot attendant, whether it's a person sitting

next to me at a concert that we went to in Miami, it doesn't matter. And the overwhelming thing you hear about people, pretty much every conversation just about is someone bitching about prices. You can't, that genie can't be put back in the bottle once that happens, because we've lived it. We lived the 70s and yeah you know we understand what was going on it is it is something that you can't put back in that doesn't mean they're not trying to cram it back into the bottle but they are they're gonna try to cram it back in the bottles claim that it's at two percent where it's really running three four five percent and yet and and hope that people don't notice or the ones who do don't have enough of a voice

to do anything about it. Yeah, but okay. But once we've seen this inflation of consumer prices, do they ever come down? Does the price of milk or chicken or, I mean, some of those obviously outside. Yeah, some like eggs spike up to come back down. That had nothing to do with inflation, actually. Yeah.

So at the end of the day, things that can't be substituted away tell you what is happening. Medical care, college tuition. Of course, college tuition isn't worth a tenth of what people are paying these days given what kids are learning. But that's a totally different topic, one which is very frustrating. We'll do woke Wednesdays.

I mean, look, you know, I would love to have that conversation, but that's a totally different topic. In any event, the reality is things that you can't substitute away are dramatically higher. And they're higher at a new high level. I mean, people look at house prices and rent prices and things that you can't substitute away, and they're up. The question is, can they come down? Well, only if you figure out a way to refactor the economy. I mean, the US doesn't like thinking about it this way, but a lot of people in the rest of the world would. Talk to a Brazilian. Why is their currency now called the REI? Why is it now the real crucero as opposed to the fake crucero, which existed

before? It's because every once in a while, inflation gets so bad, they have to do a great reset. The US did a reset once. That was in 33, when we had a gold-backed currency that Roosevelt confiscated it, revalued it up by, what was it, two-thirds? That was a reset on our currency. We are in a far, far bigger hole now than he was when he did that. Anyone who thinks that we don't need to do a great reset of some sort isn't paying attention. The only way out is to inflate away the value of the debt and grow your way out or a reset. But grow just means artificially inflate the price of stocks and real estate and such. I don't have that. We have no political leadership and a population who has the stomach for anything else.

I feel like the Simpsons, which has been one of the most, I mean, Macron is just, I mean, he's the goat when it comes to predictions, right? The Simpsons, there was an episode with Lisa Simpson where they realized they needed to raise taxes. So they called it a negative rebate adjustment or something like that. I can't remember, you know, but it kind of shows, it specifically talks about, you know, how big of a hole and what you have to do in terms of fooling the population.

And, and, you know, however you want to look at it, I think the next attempt is, is MMT like full bore. You know, I don't think it's an exam. I do not think it's crazy that we're hearing more murmurs about that in this administration. That is why I am so bullish on Bitcoin. It is that. It's a system. It's systematic. It doesn't matter both. Either party gets in. It doesn't matter. It's a system that is running. These deficits are going to continue to run the deficits and they will print the way out and create inflation. my groceries anymore. But then suddenly, instead of going through austerity, which means I can afford even less for a period of time versus just printing money and expanding the M2 supply, reinflating or keeping assets inflated, inflate them even more in order to inject liquidity into the markets, that makes that's a much, much easier path

forward. And so you will have inflation, but you'll have also inflation of wages, inflation of houses, inflation of assets. And that, that will, that's an easier path to stomach, even though long-term it's completely unsustainable. It's absurd. It's, it's, it's ridiculous, but that's the only path that a politician is being rewarded for. You don't get reelected on austerity. Yeah. You're not going to be rewarded for austerity. It's political suicide. They won't do it. They won't do it. Now, if we had term limits, austerity is a great thing. Yeah. Austerity is a great thing to do when you're like at the end of your last term and you can't be reelected. But they're entitled to the last term. If we had term limits, I wrote about term limits almost 30 years ago. That was my thesis at Yale,

term limits. And they will never consider them why congressional term limits are fiat it's like it's like they're not going to vote for an an anti-insider trading policy you know because they're they're the ones who are benefiting from it you know who gets it who how do you get a raise in congress? You vote for one, right? Yeah. I mean, how many of our senators who have done nothing but public service are multi-multi-millionaires? I mean, come on. If you're making on average an average of $150,000 to $180,000 a year over the last 25 years, how are you worth over $100 million?

How is that possible? Well, it's because it's massive money in political campaigns, and your campaign is allowed to do things like buy books you write. You're allowed to get paid ridiculous speaking engagement fees. You are allowed to have your family be employed by your political campaign, yada, yada, yada. And the answer is trading options. You need to have assets to do it. I mean, look, at the end of the day, there's there's you just have to look at human nature. I just think that, you know, and this is both sides. Let's be clear.

I mean, Trump came out over the weekend and I saw some people criticizing it. But the reality is, is he's going to campaign on deregulating and cutting taxes. That's how he what he's campaigning on, literally. So and right now he's the front runner. I do not believe that if he decides to pull out or whatever, I don't think that DeSantis, Haley, Ramaswamy, or anybody else will campaign on anything different than that. It will be spend on defense, cut taxes at home, deregulate. Now, the deregulation, you've all heard, I think is the right thing to do and

probably one of the only things that would make sense. But the truth of the matter is, if you start your campaign with cutting taxes, not cutting spending, but actually probably increasing spending for foreign wars or whatever, that's the Republicans. They're supposedly, you know, the conservative ones on economics. OK, maybe not so much. Whereas the Democrats, what are they campaigning on? They're campaigning on higher taxes ish, which we all know will will be net negative to the Treasury at this point. Higher taxes for And more spending. I mean, okay. Middle class.

They wave these arms around stuff, but it's like there's nobody who's going to campaign on austerity. It just isn't going to happen. And at the end of the day, the party that wins will be the one will be dependent. If, you know, we end up with a rosy market next year and the economy looks to have bottomed out, that's why we keep calling for a soft landing. They want a soft landing so they can declare victory next summer. That's what they want. You guys are right. Next January.

Watch. I mean, I'm a year from January. This is why I have been saying for months that I'm bullish on Bitcoin and I am pessimistic or cautious on the stock market, but don't believe shorting a stock market that's valued in nominal terms is going to make sense if inflation becomes runaway. I think there are many places in the stock market that are going to get crushed, right? Things that people, a lot of so-called value stocks are going to turn into value traps. With all due respect to Cliff Asness and AQR, I mean, the problem with value is in a world where people that are dependent upon the company's incomes as prices and they getting squeezed on the producer prices side, they have a real problem. Company margins will, on some sectors, will be problematic.

If you're a tech company, you don't care about any of that stuff. You just want people to buy the illusion of growth. And Mike McGlone is right. I mean, we are at all-time historic valuations. But the old expression, the market can remain irrational longer than we can remain solvent. Especially when they're purposely making it irrational. At that time, that wasn't the case. Now it's such a manipulated market that we know that that's true, right?

We know. Put it this way. A stock market crash, a market that starts to sell off at the same time yields break 5% and don't look like they're slowing down soon, that would be the recipe for a serious, I won't call it a Great Depression because I think they'll do something, but at the end of the day, that would be a serious problem. But if every time the stock market goes down, the bond market rallies as they flight to safety, they're shrugging their shoulders because the Fed cares about the bond market. That's what they care about. I mean, yeah, the stock market matters to the politicians, but the Fed has been focused on the bond market.

And that's why James and I are, you know, look, I said it in our weekly recap, which, by the way, talked a lot about the ridiculous letter for 20% of our Congress people based on completely false information about how Bitcoin was used for terrorist financing, which the Wall Street Journal finally retracted. But in our recap, I actually have the quote for those who want to see it, that I believe the people at the Treasury and the Fed are crapping their pants every time the long rate gets towards or through 5% because they just can't let that be confirmed. By the way, though, Dave, I have to say, though, you know, we had that conversation, obviously, last week, the Hamas funding. We all know the

story of chain analysis and elliptic and now the retraction. I think the most shocking news event of last week for me was that Lummis doubled down on it after everybody knew that it was fake news. Yeah, but Lummis. But she went after Binance and Tether, which are the two non-American foreign actors. Well, but think about why. And, you know, you and I, you have had both Caitlin Long and I on the show. I love Caitlin. She's amazing. But, you know. But Wyoming and everything that they stand for is about regulated, zero leveraged businesses. But then look at who Lummis went after. She went after Binance because Binance is the biggest place for leveraged players in crypto. And she went after Tether, which is the biggest competitor towards Custodio or anybody else launching a real stablecoin.

Or USDC, if you consider that to be the already regulated player in the United States. That's right. But the fact is, you know, you've had Paolo on your show. I think that Tether was shady as hell five years ago. But I think that at this point, there's no reason for them to do anything other than what they're doing. I think it's fully valid. Other than make 5% free in billions of dollars all the time.

As long as people are willing to want Tether to trade crypto outside the United States. They're one of the biggest holders of treasuries. They're bigger than, what, 80% of countries? Yeah, did you see this, by the way? And you mentioned Brazil before, but Brazil reports stable coin boom as USDT trading volumes passes all other digital assets combined. If there was any question, by the way, to people of whether there's more demand for Bitcoin in inflating economies or what does Mike like to call them, digitized dollars or whatever stable coins

the answer is that people want dollars everywhere and this is a way that they can get them and that's just incredibly apparent in a report like that people spend dollars people want to save in bitcoin there's a right and most people just can't save because you have to have money to be able to save right i mean james uh speaking to to all of this what do you make i don't save because you have to have money to be able to save. Right. I mean, James, speaking to all of this, what do you make? I don't know if you looked into Lummis or this proliferation. Yeah, I haven't looked at all that, but it's clear. Like you're saying, when you're in an area that you don't have banking, you don't have the ability to just move your home currency into dollars. It's incredibly important

to have that on ramp. And it's an easy way for them. And it's difficult for any region to stop that. If you have an internet connection, you can get there. But this is the point. And what, you know, Dave and you are saying is that there there is a flight to dollars and to currencies that can be transported. You know, you can't take gold across a border. You just can't. I mean, it will be confiscated. It's difficult to carry. It's difficult to transport. It's difficult to get in these regions that have uh unrest you know gold spikes regionally to levels that that physical gold spikes to levels that doesn't make sense so you know uh having the ability to get onto some sort of stable coin and bitcoin it's an absolute no-brainer you know we've talked to uh um the sultan of of of uh of venezuela before and he said his family got out because of bitcoin they were able to bring their their the vast majority of their uh assets over to the united states through bitcoin so it's not it's not some fallacy. It's not some fantasy or tale. This is real, and it is happening, and it will continue to happen. in Russia and they're storming the airport to find you.

I mean, it's awful and terrifying. And you've got to have a safe haven. And you can't just go with a shirt on your back. You've got to have something with you. And this allows you to transport your life to somewhere safe. And we have to contextualize. I know I don't want to devolve into politics because I spent the weekend ranting on Twitter to which there's no good answers to my rant. And I will challenge anyone to a public debate on what I was saying, but we're not going to go there. But what I will say is the amount, the trillions of dollars of wealth that is now afraid. And Bitcoin is half a trillion.

We all know that even, and of that half a trillion, less than 10% of it is available on the margin at anything close to the prices we're at right now. So ask yourself the question, what's the asset that has the most likely chance for explosive growth when there are literally trillions of dollars that are now reading the news stories, seeing things that are terrifying them and wondering, maybe I should put something that I can carry with me if I have to move someplace. And you don't have to get to a very large number. I mean, we talk about the Bitcoin ETF story. Think about what we said. The best estimates, Galaxy did a great job. They said $40 billion in two years. And we think $40 billion in two years could make Bitcoin go from 35 to 100

something. What happens if three or 400 billion, which would be with less than 5% of the, of the money pool that I'm talking about decides it needs Bitcoin. Now I'm obviously it doesn't happen all at once, but you want to talk about, you know, Mike Alfred talks about the God candle. You want to know what caused the God candle. That's what caused the God candle.

And if you're short at this point, you are absolutely picking up pennies in front of a steamroller. And that's how it looks like it is. People right now aren't rushing to buy it. But it's one of those things. It's like, you know, you know, it starts moving. And then people are like, well, what the hell do I need? And it's unfortunate, but the market is so small that you know you don't need a whole lot of geopolitical instability to make it go higher go ahead james well i was just going to say let's unpack that uh trading friction for people to understand what you're

talking about because if you if there are no sale sellers between here and you know fifty thousand dollar bitcoin you just need who's that is that because the train the bright line train goes that's the train you guys missed this dave you missed it but mike just was talking about the very beginning they took the bright line today from or last night from miami to orlando we were talking about the bright line it's come up twice so the bright line is right down there and whenever some moron decides to walk across the tracks this train which we are so far we have not seen anybody killed thank god that's good but we have seen multiple i don't know 10 yard you know events gotta get close across all right back to james sorry sorry go ahead james

you're unpacking unpack continue it's simple. If there's nobody selling between here and 50,000, you just need one sat to trade. Just one sat to trade at 50,000 and now you're at 50. Because there's a black hole of liquidity there. There's just no... It's a vacuum, sorry, of liquidity between here and there. And and as as more capital comes into this space and, you know, the people who hold Bitcoin, this is the crazy things that people will Bitcoin, the typical. You know, of the I don't know how many million people actually are have wallets wallets, separate people versus just separate wallets. But there are a lot of hodlers out there who will just – they'll be emboldened not to sell as it goes higher. It's kind of a reverse mentality. And so as this god candle starts, it's only going to get stronger.

And that's the crazy part. And so you don't need a lot of capital to move it. The why is just so obvious. I mean, we all talk about, I mean, Scott, you have, you know, when you have Gareth and you're talking about short-term squiggles on the charts, I know I'm not really, I really don't, Gareth does an amazing job. And I think he's, he is what I would call one of those expert swing traders. And I think that it works because he's careful. He has tight stops, et cetera. People who listen to him and don't have the same discipline,

they get carried out. So this is not again, I have nothing against swing traders, but the reality is the vast majority of Bitcoiners believe Bitcoin will be in $2,023, somewhere between $500,000 and $600,000. And everybody believes that we're going to have inflation making that worth less. And most believe it will actually go beyond that. I'm not sure. But at least to get to 10% of monetary aggregates, which is where gold was for basically post-, post 80 until the last five, six years, where it's actually fallen below that.

Gold is probably underpriced based on historical measures. And a large part of that, I think, is Bitcoin on the margin. Even Mike has said that. Even Mike has said that. He said, we see these outflows from the gold ETFs and from gold in general. And he thinks that that's potential inflows into a big one. But think about it. It makes a huge air pocket when you get to price discovery.

Now, people are going to take profit. You've got to be crazy not to. If you get a rip from 30 to, you know, a new all-time high at 70, of course, you're going to get retracement. Of course, bull markets don't go to the sky. Nobody should interpret what I'm saying that we're going to go from here and then go, boom, up in an elevator one way. Of course, that's not how markets work. But when you look back and understand the supply demand dynamics, that's how markets operate. And there's literally no version where you can do fiscal or monetary policy to stop it if you're the government. I'm not sure you even care, but I'll tell you. But that's probably one of the reasons why you get the hysterical bullshit of the Hamas story last week, because people are afraid of what it means.

And they've tried every other type of FUD. So now they want to say it's financing terrorism, except the absolute ridiculousness of Hamas six months earlier telling people not to use Bitcoin. And us and our senators and congresspeople, their staffers didn't realize that, making themselves look like fools. But the truth is, but you got to understand why. I mean, you get increasingly desperate. You're trying to maintain this monetary system that looks like a shell game. The last thing you can afford is for assets that are designed to show it its weakness to thrive. But I still think Bitcoin's market is way too small for anyone really to care about it. I agree. I agree, which is a good thing. James, we have three minutes.

Final thoughts. Yeah, no, I agree. So you were talking about the, you know, Dave, you and I are the largest cynical, you know, we lean the most cynically here on the show. But in reality, because of Bitcoin, I'm super optimistic because we have a way out individually. You are not beholden to just ride this debt wave and hope that we come out on the right side of the asset inflation because we have something that we know can't be inflated away. And that's unique. And so through all of this, I do expect there to be volatility in Bitcoin. I do. Just like Dave said, I fully expect

some severe volatility. But I also expect that volatility to tilt to the upside severely as well. And in the long run, we do get to those prices that Bitcoin begins to completely usurp gold as the store value. And that's just because it has enough market value to actually warrant that separate allocation. Agreed. I didn't know, Dave, it looked like you had something. It will look a lot like what gold did to silver. It doesn't mean silver isn't 5X where it was 25 years ago, but it's not more than that. The gold-silver ratio, the Bitcoin-gold ratio will move, but there's still it doesn't mean gold goes down for Bitcoin to usurp gold's monetary value.

It's the other way around. I think that people need to understand that what you're actually talking about. I mean, I still personally believe that there's a lot going on here and a lot to unpack. When you have these sorts of cross currents, volatility is guaranteed. And I will say it again for the end team's time, Bitcoin trades like an option. What am I going to say people not to do? Don't use leverage. There you go. Don't use leverage. I know it's literally 10, but I do want to give the honorable mention today, Dave, you mentioned it before the fact sheet, the president Biden issues executive order on safe, bridge. I know it's literally 10, but I do want to give the honorable mention today, Dave, to you

mentioned it before the fact sheet, the president Biden issues executive order on safe, secure, and trustworthy AI. If you guys listen, you'll all read it. I'm sure you'll all hear it. But the echoes of what we've been hearing for years about blockchain now hitting AI show you that the gerontocracy that runs this country is just fundamentally opposed to new technology that they clearly don't understand and are scared of. And I just want to reiterate, I, with time, come to not believe this as much of a left and right thing as it may seem, although I think one party is beating the drum. It's what Richie Torres said when he came on space. He said, the old people just don't get it. And any government that's run by old people is going to just fundamentally because they are

old people, not want anything to do with what's new. Every one of our parents has told us that our rap music is crap, has yelled at the kids to stop playing ball on their lawn. And they've told us how much better things were before. And we need to, you know, make America great again. But the fact is, they're just never going to get it. They're going to try to regulate it away. And blockchain and AI are going to be so far beyond anything they can try to do by the time they even try to do it, that it's going to be laughable. But it is very clear that our government and others like it, the ones that have old incumbents that have been here for 40 or 50 years, not the Dubais and UAEs of the world where there's younger people, whether they have a bad or favorable human rights record, who clearly want growth and understand it. In governments like ours, there is literally no way that they will embrace technology until they're gone.

It's just not going to happen. You can read through this. They don't get it at all. They're talking about how AI is going to boil the oceans, just like they did with Bitcoin because of the amount of energy. Guys, it's the same playbook. They're scared. And that means inevitably we win. It just does. But it's going to take time. I think you should all dig into that because it's not just us, right? Before, I guess, the Bitcoiners, finally, now the AI people, I hear them saying, man, I see what you blockchain bros have been talking

about these years. I literally heard that out of spaces this morning, right? All right, James, Dave, thank you guys so much. Mike, obviously, it was awesome that he was here before. Dave, you should just jump on that train and go up to Orlando and visit Mike real quick. Because you guys are both in Miami.

All right, thank you guys. We'll see you in Miami. All right. Thank you, guys. We'll see you next week. Amazing show, as always. Bye. Take care. Let's go.