We Study Billionaires - The Investor’s Podcast Network - BTC200: Base Fiat Money and Bitcoin w/ Matthew Mežinskis (Bitcoin Podcast)

Starting point is 00:00:00 You're listening to TIP. Hey everyone, welcome to this Wednesday's release of the Bitcoin Fundamentals podcast. On today's show, I have an insanely smart macro and financial thinker with Matthew Mishinskis. This is a topic that I've always wanted to cover very deeply on the show, which is what is the monetary-based money with Fiat, and why should a person understand it? How does it impact the movements of Bitcoin in markets abroad? But this is a tricky conversation and topic, and without the right guest, an educator, it can get a little bit difficult and confusing.

Starting point is 00:00:31 But let me tell you, folks, Matthew is such an incredible educator, and he covers this topic better than anyone I've ever seen. If you're only listening to this conversation in audio format, you might want to go back and check out the YouTube version because there's some charts that are totally incredible and worth your time to really view in their dynamic and the way that he put them together. You really can't find these anywhere else. So, with all of that, here's my chat with Matthew. years. You are listening to Bitcoin Fundamentals by the Investors Podcast Network. Now for your host, Preston Pish.

Starting point is 00:01:18 Hey, everyone. Welcome to the show. I'm here with Matthew. And boy, this is going to be an exciting conversation because there's going to be a lot of first principles discussions around what is money, how this is all working. And there's no better guest than Matthew to present this. So, sir, welcome to the show. Thank you, Preston. Nice to meet you. Finally, it was nice to meet you in It was. It was. Briefly, and yeah, how did you like being over here for the... Wow.

Starting point is 00:01:44 I'll tell you what, this is my first time in Latvia and in that part of the world in general. And I had a blast. I really liked the August 70 degree temperature, which was really nice. But it was a pleasure meeting you in person over there. It was just an awesome event. Yeah, it was great. The high signal event for sure. The first one we did was in November of 2017, which was an exciting time, as you can imagine.

Starting point is 00:02:09 And it was like right after Segwit was activated and we had been screaming towards all-time highs. So it was very exciting time. But people were a little bit thinking for Riga, we could do a little bit better for the weather. So we moved it earlier. And it's actually gotten earlier and earlier. And I was in late August, which was a kind of an interesting time for a conference. But I'm glad the people that wanted to be there were there. So it was really good.

Starting point is 00:02:30 Yeah. Max said, just be thankful you weren't here in November. That's true. It can be bone chilling at times for sure. So, hey, Matthew, this is where I want to start because one of the things I'm really passionate about from an education standpoint is teaching people, like everybody in Bitcoin knows there's 21 million coins. But what I think is lost on a lot of people is how the base money of the Fiat system works, what it looks like, the sheer quantities. And then like all the multipliers on top of that, which I don't want to talk about up front. I just want to talk about base money because so few people, ever even discuss this. This is your forte. This is where you love to start. And I love that about you because in my opinion, this is where the conversation really needs to begin. So teach us about base money. What is Fiat base money? What is it? Sure, sure. Yeah, it's kind of, I have hung

Starting point is 00:03:26 my head on that for many years now. You can find me on most platforms at one base money, the number one base money. It's a concept that I think has been overlooked, frankly. And you know, you can get conspiratorially. Why is it not understood more? I don't think you need to get conspiratorial. I just think it's because we're talking about central banks, we're talking about a monopoly, we're talking about a privileged class. It's usually something that they don't really want to sort of shed light on.

Starting point is 00:03:50 But if you actually drill into the numbers, which are there, they are available. You just have to find them on the websites and on the balance sheets of central banks. It can illuminate a lot of the confusion around the whole financial system, in my opinion. So anyway, that's what I've been trying to get to over the years. This is the starting the seventh year of me tracking this stuff. I do it every quarter. And basically what it is is you're looking at the liability side of the central bank. That's what base money is.

Starting point is 00:04:17 If that sounds confusing, there's basically assets on a central bank, which we talk, I know you talk about on the show a lot. What is the central bank buying? What's a central bank selling? Typically, they used to an old days hold gold, which is the backer of the money. But now it's mostly for big central banks. It's the sovereign bond. It's the sovereign debt of the country, and they can influence the price of the bonds, of course,

Starting point is 00:04:38 many ways by doing many different activities. But so it's the Treasury market is what the central bank holds on their assets side. Of course, they're not the full treasury market, but it is a huge proportion, by the way. The United States, when the Federal Reserve started 100 years ago, they held zero bonds. They were buying corporate bonds. They were lending to banks. It was a totally different thing. Now they hold about 20% of all United States debt, Federal Reserve.

Starting point is 00:05:03 So that's $7, $8, $9 trillion. It fluctuates, right? On their asset side, that's about 20% of all of the Treasury's outstanding. So that's just a little side note. But anyway, we get lost in the Treasury market often because it's liquid and it's easy to talk about. But what I focus on is the liability side of the balance sheet, and that is what they use to buy those treasuries.

Starting point is 00:05:24 And of course, that's this money printing, the printing press, that's the monetary base. So that's what it is. It's the liability side of the Central Bank balance sheet. And it's two things, traditionally primarily. The first is the notes and the coins that you have in your wallet in a grocery store till under your mattress. Everybody knows what that is. Obviously, that is counted.

Starting point is 00:05:42 That is recorded somewhere. It's a liability of the central bank. It used to be the majority of the liabilities. Now it's a minority. The new majority is what they call the bank reserves. What's the percentage of the cash versus the bank reserves? Do you know the ballpark? Yep.

Starting point is 00:05:57 Absolutely. It used to be 80, 20 cash to bank reserves before the global financial crisis. Now, it's about 70, 30 bank reserves to cash. So a complete inversion, almost. And we can talk about the effects of that. But just to lay down the definitions a little bit more, the bank reserves is I always define them. You can think about it, kind of like fiat gold or something.

Starting point is 00:06:19 It's a fiat way that banks move money around. But really what it is, it's the bank account for each bank. So each bank in a banking system, so in the United States, the Federal Reserve System, all the banks that have a charter, they have what's called a master account. and that master account is literally the bank reserve. So they'll have a ledger entry. They have assets with the Fed. The Fed has liabilities of the bank.

Starting point is 00:06:38 That's the bank reserve. It doesn't have to be digital, by the way. I mean, bank reserves existed before, you know, computers were around. You totally had bank reserves in the old days. But now it's hyper, it's very fast. It's very liquid. So those two things, by the way, are most analogous to Bitcoin because they're what we call RTGS or real-time gross settlement.

Starting point is 00:06:58 And those are the only things actually in the banking system that are. such. So in the United States, when you want to clear these, obviously we can clear the cash, that's pretty simple, right? It's real time. One person has the cash. The other person doesn't. Once the trade is done, it's done. The money has moved. It's real-time growth settlement. And the same thing is with the bank reserves. It's done in the United States through Fedwire system. And that is just a massive amount of cash. It's a quadrillion dollars a year or something like that. I have a chart. I didn't have it ready, but I do have a chart tracking that. And so in volume. In volume. When you're saying a quadrillion. Yeah. In volume. Yes. Not value.

Starting point is 00:07:31 but volume. So incredibly voluminous, high-velocity transactions, and that's the base money. So at the end of the day, if you think the old ways of payment in the U.S. a check, for example, you can have a check from P&C Bank, a check from J.P. Morgan, Chase, and you think about how long it might take one person deposit the check, one person that might take a couple months or whatever, and you have all these checks outstanding between banks, but eventually, and it really does work this way, right, in the financial system, eventually you go up, up, up, and you might get to a where JPMorgan Chase has a billion dollars owed from, let's say, PNC Bank or something, it's a Midwestern Bank where I'm from, and PNC Bank says owed a billion one from JPMorgan Chase.

Starting point is 00:08:15 So they don't like, how do they solve that? Well, they solve it with the bank reserves. End of day, final settlement, there's no more core thing in the financial system, is 100 million of bank reserves would flow between JPMorgan Chase and PNC. It's a final net settlement, but we call it real-time gross settlement because you're actually wiring like real, real cash, real bank reserves. And of course, it's just all done the books of the Fed, primary other New York Fed. And that's how it goes. So that's a little bit more verbose probably than we needed. But that's the monetary base, some of its paper, some of

Starting point is 00:08:44 it's digital. And like I said, the split about today worldwide is 70, 30, 70 percent of these reserves, 30 percent cash. Just to kind of wrap some more numbers around everything you're talking about. And for simplicity, if you're a bank, let's say you're JP Morgan, let's say I'm Wells Fargo. So if we're going to have a balance of payments, let's say you owe me $10 billion, that's happening with base money. That exchange between you and me happening over Fedwire is happening with base monetary units of dollars. And so when we're talking about how much M0, because base money is often referred to as M0,

Starting point is 00:09:21 how much of this is there total if you add up all the M0, call it the U.S., the Euro, Japan, how much of that is in existence around the world, roughly? Yeah. Before I answer that, I was just thinking, you know, always doing math on the fly. It's hard. If I was said a billion and a billion one in my prior examples, 100 million would be that net of base. I say that. It was 100 million.

Starting point is 00:09:41 Okay. Yeah. Regardless, the quick little math correction. So the M0, yeah. It's actually, again, some slight technicalities with M0. People confuse this a little bit. So if you have M0, that is the cash and coin that is outside in the economy, like I said, in people's wallets and stuff.

Starting point is 00:09:57 That's not all of the cash. There is that small portion, which is not M0, and that is cash that is still in bank vaults. Oh, interesting. Not in the central bank, but in bank vaults. I just call it Volt Cash. It is called Volt Cash. So you have vault cash plus M0.

Starting point is 00:10:11 Yeah. Vault cash plus M0 equals physical currency issued by the central bank. So there's actually three different physical supply. I've never heard that before. Okay. Yeah, right. So it's just a small technicality. But to split those up, what I just said,

Starting point is 00:10:25 said, it's roughly 95, it depends on the central bank, but 90 to 95% is M0. That means out in the economy out in the world. And 5 to 10% is in banks. Okay. In vault cash. And I read this in your report. It's if you take like the top five, it's like 35 trillion. Oh yeah. And the actual number, if you market to market US dollar equivalent, sorry, the percentage is there. The actual number is $9 trillion. It's about $9 trillion. Okay. And that's a real like up. Up, to date as of last quarter, as the top 50 currencies in the world, you know, you weight them all by the exchange rates, $9 trillion, a little over $99.1 trillion. What's fascinating, so the gold market cap that's often quoted is 10 to 15 trillion for gold.

Starting point is 00:11:13 And so you're basically saying that if you take all of these M-0s of the top five countries in the world, it's the equivalent of what gold is. Is that correct? Yeah. It's a little bit, you know, gold actually, as I'm counting it, gets up to about 15 trillion now because we had a big run-up member in this last year. Yeah, I know. It's going up to $2,500 now. So the current valuation of gold minus about 7 to 8 percent industrial gold, which I don't count.

Starting point is 00:11:40 Like, there's 50 percent industrial silver, as you probably know, about 15 trillion. And the numbers that are constantly changing, right? It's also something to think about. It's like, that's the gold pot. Then there's the fiat pot. Then we have the Bitcoin pot. We have a silver pot too, which is a bit smaller. It's about 600, 700 billion.

Starting point is 00:11:57 Yeah. But Bitcoin is $1.2 trillion, 1.1 trillion, depending on the day at the moment. So that's a huge, that's just a huge penetration of this whole market in the last 15 years and just get the right down to brass tax. Bitcoin has already passed the fifth largest currency, and it did that in February, and that was the British pound sterling. So of all the pound sterling notes, all with the queen on them, all the notes and pictures and coins plus the bank reserves in the British Isles, that's about $1.1 trillion.

Starting point is 00:12:27 Wow. Right now, Bitcoin is floating below $60,000. It's actually flirting with that market cap. This goes by market cap, of course, the comparison. So Bitcoin is right at about the, but for since February, it's been above this, which was pretty remarkable. It's been above. And that's the fifth largest currency.

Starting point is 00:12:42 And then after you get past the sterling, you only have four left. And that's the dollar, the euro, the yen, and you want. I have a chart. I just want to bring up real fast for folks. This is on Trading View. And I have the M0 for a couple different countries here. I'm just going to throw this up. So this is the U.S. This is the M0 for the U.S., the monetary base. And this chart I find really interesting. I'm curious to hear your point of view, Matthew, because it's moving at what it seems like a pretty standard growth rate there right up until the 2008 financial crisis. And this is when Bernanke and everybody started announcing quantitative easing

Starting point is 00:13:24 and the expansion of the MZO just took off. You can see them trying to tighten it there leading up into COVID and then all of a sudden COVID happens and they expand it again. And the chart's kind of crazy when you look at it compared to some of the MZOs for other countries. So I'm going to bring up the one for Japan. And this is Japan, since, the 19, we'll call it 1970. And it's moving much more, and it's interesting seeing how they're trying to tighten it here for the last, call it year, right? But this one is much more exponential and not as lumpy as the U.S.'s. And then I got the U.K. here as well, this is for the pound. And it's kind of characteristic to what we see in Japan, where it's just been kind of moving out

Starting point is 00:14:15 aggressively without the lumpiness that we see in the U.S. And for people that are, you know, just listen to- Go back to Japan really quick. Yeah, here's Japan. Yep. Yeah, go ahead. No, so when I'm going back to the U.S. and I'm comparing it to them, I'm just saying it's almost the U.S. has been trying to like hold back the floodgates where everybody,

Starting point is 00:14:35 all these other central banks have just been moving out aggressively debasing and expanding their monetary base. The U.S., it appears like they were really trying to hold it back. And then after the financial crisis in 2008, just haven't been able to sustain the growth rate of the monetary base. And it's aggressively moving out. And my expectation in the coming four years is that we're going to see yet another massive jump in M0. I'm real curious to kind of just hear your overall take as we're looking at these charts and whether you would agree with that last statement or not. Yeah, I absolutely do agree with it.

Starting point is 00:15:11 But one thing's very interesting. And maybe if you can leave the charts back on. I don't use Trading View precisely for this reason. And if the Trading View people are listening, this is like, you know, maybe some breaking news for them. But this is one of the big problems with money supplies, which I'm at M1, M2, M3, or especially the monetary base versus M0 as we just talked about. Because even M0, as I said, can be broken down into, you know, this vault cash, cash outside. Even right here on Trading View, these are incorrect numbers.

Starting point is 00:15:37 So the reason is very simple, a very simple broad concept. Perhaps someone at Trading View here is from the UK. But the UK, South Africa, and one other country I'm blanking on right now. They typically use this term M0 for the monetary base. That's how they call the monetary base, which includes both the currency and the reserves. But as I defined it to you and how the U.S. use it, the U.S. says MB on monetary base for specifically the balance sheet of the Fed. And M0 is just the cash. So just for an example, this MZero that you're showing on the screen, that is U.S. monetary base.

Starting point is 00:16:08 But if you go to Japan, that's why I want to do to double-check it. Okay. Japan, that is just cash. That's just physical currency. No way. Yeah. And the actual monetary base of Japan is $675 trillion. This is $113.

Starting point is 00:16:24 And you can see another very interesting thing just about the cash markets is you see how they're very, not the last recent, like, year, but see how the spikes basically every year? Yeah. Like, you go back to the 80s. That's a very interesting, like you always see that in the cash markets. That's the holidays. The holidays spike up.

Starting point is 00:16:42 Oh, no way. man for cash, yeah. So that's what you can really see that in a physical cash chart. But it's even on Trading View, it's so confusing for people that you want to get a nice API or whatever. And even with the biggest central banks, this is incorrect data. In Japan, it's correct to call it M0, but it's not correct to call the U.S. chart M0. That is USMB or monetary base. So if anyone from Trading View is listening, that is just not the right number. I love that. If you're listening to this and you don't think Matthew knows what he's talking about. I'm sorry, like he's a killer. Yeah, it's why I do it myself.

Starting point is 00:17:16 That's why, you know, none of these APIs exists on like half of these, more than half of these banks and stuff. So, but anyway, back to your, actually, you want me to show you my screen? Yeah, I'm going to, I'm going to pass this ever to you. I'm going to stop sharing. You show your, because I have your charts here, but I want you to, you're going to be able to pull them up faster than I can. Yep.

Starting point is 00:17:32 Show some of your charts for people to kind of wrap their head around what's happening. Yep. So we'll, I'll answer the question, but this is the bottom line, total MB now. So this is the top. highlighting the top five currencies, world basic money. So the total, I don't know if I've told you yet, is you see in the tooltip there, world total, 26.1. Let's take a quick break and hear from today's sponsors.

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Starting point is 00:21:41 sign up for your $1 per month trial today at Shopify.com slash WSB. Go to Shopify.com slash WSB. That's Shopify. W.S.B. All right. Back to the show. Trillion. Matthew, before you go any further, people are going to want to pull this up for

Starting point is 00:22:04 themselves. This is at your Porkopoulos economics website and then help navigate them so that they can find this. Sure. Unfortunately, no. There's so many charts that I have and I just, I don't have the, you know, if the donations go up, maybe I can get it there. But I have a few charts hosted on Bitcoin on my website.

Starting point is 00:22:23 It's Porkopoulos. That I.O, most of these are going to have to go to my YouTube channel or check out the monetary base websites. One base money, you can find me anywhere as a platform. But yeah, it's just local hosting most of these. It's high charts program. Anyway, so this is the figure, right? We're at 26.26.12 trillion.

Starting point is 00:22:42 And you remember, Preston, you asked me about how much physical cash in the world. About $9 trillion. So as I said, it's about a $30-70 split. This is the total you're looking at, but between cash and bank reserves. Okay. So that's bottom line, big picture. This is how it looks. And just right off the bat, you can see obviously a huge, really the biggest spike we had

Starting point is 00:23:00 was not the global financial crisis. Yeah, COVID. The U.S. spiked a lot, but worldwide, we're all just chugging along printing. And then you see they tried from 2018 to just before COVID, in fact, to normalize. And you may remember we had that repo spike in September of 2019. So it really wasn't normalizing, but they were trying to. And anyway, COVID hit.

Starting point is 00:23:22 And you see it just explodes. It was 20 trillion before COVID February 2020 and then 30 and a half trillion a year later, a year, two years ago. So that should just everybody should understand that's how money printing actually works. This is the actual printing press. Went up 10 trillion. And now we're back down. They've again, trying to do this normalize normalization of all balance sheets.

Starting point is 00:23:43 And we're back down to 26 trillion. More to say on this, but let's just keep it with the descriptions maybe just to show you Japan. So here's Japan. This is in dollar terms, you can't see it. So this is Japan in dollars, right? This is Whitkenstein's ruler, right? Everything changed. There's no North Star in finance, so we have to, I'm putting it in terms of dollars,

Starting point is 00:24:02 but of course, this is a yen. I think this is actually yen when you're looking at this. So $4.2 trillion is yen. And if I gave you the actual yen figure at $675 trillion, and then remember we were looking at that $100 trillion, so chart that was actually just the paper. So this is the yen. We stack on the yuan, stack on the euro,

Starting point is 00:24:20 and then stack on the pound. of course, and this is where Bitcoin is larger than you see the pound right now is about trillion one, pretty much right at Bitcoin valuations. And then, of course, you have the dollar. And the dollar, this does match that M0 chart that you said, that you showed me, 5.73 trillion. That's the monetary base of the U.S. Federal Reserve. And then the rest of the world is 18% of that, or little less than 5 trillion. So it's, again, radio distribution, as is, you know, pretty common, works everywhere. And you see the top five has always been 80% or so of the pie. What's the dotted line up on the top there?

Starting point is 00:24:55 I'm sorry, I'm missing that. Yeah, that's the percentage of the top five. Oh, okay, okay, got it. Just showing you. So it's steady. 80% yeah, 8020 principle. Yep. Yep.

Starting point is 00:25:05 This is the question I got for you as I'm looking at this. It almost seems, you know, when you just look at the math, that it's growing at a certain percent. When we look at this, it's an exponential, right? Like every year it's compounding at, call it, eight to 12 percent or whatever. the number is, I'm sure 12.7% is the growth rate. There you go. When we look at where we're at right now, and let's say that we took the volatility and we put a bar on the top and we put a bar on the bottom, we're grinding on

Starting point is 00:25:36 the bottom rail, which tells me there needs to be something soon in order to keep this 12.7% growth rate on pace. I suspect that growth rate is very characteristic of the overall global economy and what the capacity of pain and exuberance that can be expressed or felt by the participants in the system. So are we grinding on this bottom rail? And if we are, what does that mean for what they've got to do next? Yeah, completely agree. And you're completely correct to have that assessment. I'll show you here. So this is the same chart. I'm zooming into from the pretty much a global financial crisis. So we're at $5 trillion monetary base then, roughly went up to 30, down back down to 26.1.2. So if I showed you the dollar changes, this is just changed in dollar

Starting point is 00:26:26 value. You can see that, you know, just huge, these are trailing 12 month numbers. So we were, like you said, the peak was COVID and now we're clearly grinding on the bottom side. And really, it's never been this negative as far as changes. So the worst was in, or the best, really, if you want to talk about cutting the money supply was in December of, October, December of 2022, went down 13.7% per year, continued that twin-al-in-12-month continued a little bit, and now it's still low at 4% per year. So I absolutely agree with you. We're on the lower end.

Starting point is 00:27:00 And if you look at the way that they're talking, Powell is obviously already hinting that he's ready to drop finally. So, you know, it's just gasoline on the fire, right? With equity markets at all-time highs, by the way, right? Isn't that great, at least here in the U.S. And I know there's like five companies driving these indices, but it still needs to be said, right? No, I mean, you want to be like it. I mean, yes, it's true. And yes, we are top heavy there, but it's still the best benchmarks for stock markets.

Starting point is 00:27:27 And yeah, so I absolutely think this is going to change at some point. Of course, the question is always when, but based on, let me back this up and show you something interesting here. This is actually an interesting point. People always say the dollar is, you know, is going to crash and whatever. I'm sure you've had a variety of guests over the years that think the dollar is doomed. And Peter Schiff, obviously, our Bitcoin friend is always saying this. But in fact, if you look at it this way from the construct of the central bank's monetary base, the dollar actually comes off looking quite strong.

Starting point is 00:27:57 And I'll try to illustrate that here. So without it going too much into my metrics and my methodology, I only go back to the global financial crisis here because this is the only point. You got to imagine I got 50 currencies here, but before 2007, I didn't have 50. It wouldn't be right to start doing it. Oh, I got it. Yeah. Right. So the basket changes. But I can still, with the basket that I have, measure a monthly growth. And this where I get my top line number. So this is this black. Let me take off the red. So this is with the baskets that I have, I can still figure it out, do weighted averages of the monetary base. And the U.S., like I said, is only 22 percent of the monetary base now. Back in the 70s, it was like 40 percent, something like with the data that I had, obviously. Regardless, we get to this number that we talked about. This is exponential growth. The exponential growth in log scale is going to go a straight line. Let's just. just put everything on. So we see it. There's the chart on log. So the chart is on log.

Starting point is 00:28:48 And you see it kind of looks like a straight line. I'm not drawn trend lines here, but you kind of see that the green itself goes a trend line. And then here is the is basically brass tax. This is the number. So there's the annualized compound growth rate. The money's fly 12.7%. But here's interesting. It's amazing. This is amazing. Yeah. So the craziness all started after 2000. You see the first big spike was Y2K. This is literally Y2K, where it goes up to almost 30%. Yeah. People were taking out cash like mad, worried about Y2K. I remember there's one libertarian, this crazy guy, Gary North, who was, I don't know, he has a checker pass in my opinion, but he, like, buried a tractor and like just, just crazy stuff that people were doing during Y2K. So anyway, I'm all

Starting point is 00:29:28 from protecting yourself and your family. I'm not saying that, but it can be reasonable to. People take out cash like crazy here, and that happened. And then, you know, 9-11.com, there was a big crisis. They printed more here. You can see in the early 2000s. This was Greenspan being called the Maestro by the New York Times and then tried to cool that off. And then, of course, that was the crisis and then the major QE, one, two, three. But here is interesting now, you can notice that in my chart, it really is the only time if you just take the broad span of 50 years where they've tried to, they've gone so crazy positive at times that they've had to go negative at other times, right? To, as I say, normalize the balance sheet. Okay. But now let's put

Starting point is 00:30:04 back. So this, just remember, this is like kind of the scientific number, if we can call it that, of looking at the units first, you know, euros upon euros, yen upon yen. doing all these measurements of weighting them. But if I just went back to that chart, I showed you before, or not the chart, but the metrics of the USD changes. All right, so it's a different metric. It's a change in the USDA value. You see that it falls even faster.

Starting point is 00:30:26 So you see like 2021, on the upside, it's relatively the same, but on the downside, the money print is kind of flat, a little bit down, but the black, the black bars. Yeah, but the red bars go down, as we looked at before. We were at 30 trillion. We went down to 26 trillion. So what is that telling us? What is that showing?

Starting point is 00:30:47 Remember, the black bars are kind of like the best way that we can measure the global weighted average of a print. Central banks are kind of still printing, kind of flat, kind of doing nothing. But the value of their currencies measured in dollars has fallen massively. It's fallen four trillion. And so it tells you that the dollar is still the best looking horse in the glue factory. You know, that as much as all people... Against other fiatts, yeah.

Starting point is 00:31:09 Against other fiat. Yeah, absolutely. So that tells me that they're going to have the courage to, and it's actually the wrong way to say, they're going to think that they have the courage to lighten up because the dollar is still strong. It's very strong historically against other currencies. And you could see even here the way that before 2022,

Starting point is 00:31:27 we were valued at 30 trillion, but this fall is really not due to cutting. Yes, the U.S. is cut. Europe has cut a little bit, but it's really due to the collapse of the dollar value of the other currencies. When you see this green area fall. So the point is, you know, I think that they're going to continue it.

Starting point is 00:31:42 I think specifically the U.S. is going to continue. And once the U.S. changes, all the other central banks are going to look at it as carte blanche to continue to print as well from their side. So, yeah, like you said, it's on the lower end of the bound. Generally, you're at 12.7%. Sometimes you're way over it in recent decades, but now it's very low. And if you just look at this sort of pendulum swinging analysis, and you look at, you look around and you look at the news and you look at everything else, I don't see

Starting point is 00:32:07 not printing in the near future. Just to put this number, this 12.7% in context for people, when you use the rule of 72, your buying power or the value of this is cut in half every six years. So whatever you think 100 bucks is today, it's 50 bucks six years later in terms of what you can go out and buy based off of a debasement of 12.7%. And this is globally. So the U.S., I think the U.S. isn't as, I mean, you just got, into how the dollars the best in the glue factory. The dollar is like what, seven or eight percent

Starting point is 00:32:42 maybe nine. Nine. Nine percent annualized. Okay. Eight point one year. Eight point one year doubling. Eight point one. So every eight years in the U.S., it's half as much. But if you're living anywhere else in the world, the 12.7 is probably the number that's more characteristic and you're losing half of your buying power every six years. So like you're swimming hard today. Well, in six years, you got to swim twice as hard to be in the same spot and to be able to go do the same things. And I think, Matthew, people can feel this. They can feel this. They can't quantify it because it's just, you know, it's just slow enough that the debasement is happening at a pace that like they just can feel something's different, but they can't put their finger

Starting point is 00:33:21 on it. And they don't have a degree in macroeconomics. And even if they did, they probably still wouldn't understand this. In fact, you can almost guarantee they wouldn't understand it if they had a degree in macroeconomics. Okay, this is the question I wanted to go to. So it seems like we're coming to a head. When we look at this, there's this global cooperation that's clearly happening between all these major central banks. You ease for the next two or three years and then we'll ease. And it's like this, you can see it in the chart because it's very normalized for the most part, the cooperation between all these central banks. But it seems like things are coming to a head, particularly in Japan right now, when we look at the currency exchange between

Starting point is 00:33:59 the yen and the dollar. What are your thoughts around this? Because it's getting spicy. Like, within weeks. I mean, we just had this massive capitulation event that happened. What was it two or three weeks ago? Yeah. The carry trade is supposedly over. It's not over. At least in my opinion, it's not over. Is this kind of the canary in the coal mine? What's happening in Japan to the US dollar and they really need the yen that be able to continue to weaken, but the dollar like can't get too strong. Talk us through what you're seeing over there right now. Yeah. I'm more interested in this stuff usually in the long term, to be honest. I don't consider myself. sort of like a train spotter of the short-term stuff. But I, you know, I haven't been paying attention

Starting point is 00:34:37 and the yen carry trade unwind is an interesting story, of course. I don't actually see them doing, you know, we saw on that M-0 is a little bit of tapering off. They're just on the physical cash. But really, if you look at the, let me just quote your number here again. So if you look at the yen over the last 50 years, 50 plus years, it's 11, told you the dollar was 9% growth rate. The yen is a 11.6% growth rate. And over the last trailing 12 months, they're still just positive a little bit.7%. It's flat, but it's still a little bit positive. So, you know, again, to me, it doesn't seem like there's just business as usual for these people, right? And that's kind of what I wanted to, it's maybe a little dodge or pivot to your question. But back to the way that you started the question talking about the 12.7%.

Starting point is 00:35:21 And most people can't sort of get their heads around that. At the end of the day, and this is why I think Bitcoin is such an amazing relief from all this is 12.7% compounded. That's compounding figure. That's about 1% a month. So 1% a month, if you compound it, it's not 12% a year. It's about 13% a year. That's what we're at. So you can think about it that way. It's just a constant debasement. And I continue to be amazed that there's not like Bloomberg and a lot of these news organizations following something like this.

Starting point is 00:35:48 Really dig into it, buying the growth rates. Because I don't know if you saw the last report. I did one this time where I just put trend lines of all the other things, like kind of main things like stocks, stocks with dividends, population, GDP. And you can see growth rates of, you know, 4, 5, 6, population 1%. But other things around general finance and the economy growing at 4, 5, 6, 7, 7, the highest thing that is not Bitcoin is stocks with dividends. It's 9%.

Starting point is 00:36:13 Stocks without dividends, reinvested to 7%. That's the slope of the curve, the slope of the exponential trend line. So all of those things, you just stack them up, you look at them in a column, this money printing number is like pretty high. I mean, 12.7% on a blended weighted, like a blended weighted average. over 50 plus years, even if they're flat right now at the very moment, it would be a Herculean effort to sort of, and I don't see how you would change the system. No.

Starting point is 00:36:39 There's just no way. I mean, there's just no way, everything that you talk about with guests on your show. I mean, there's just, there's too many headwinds coming at them to try to change it other than, I don't know, going back to either some new Breton Woods or adding Bitcoin, which we can talk about. But so to me, that's the big thing. It's one percent a month. That's the number to think about.

Starting point is 00:36:55 Yeah, it's kind of flat at the moment. Yeah, we've got this yen. and carry trade maybe underwinding and some money being deployed back there and not enough demand in the U.S. and things like that. But again, if all those things happen, that's even more reason for them to print more and the Fed to buy more bonds. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up and customers now expect proof of security just to do business. That's why VANTA is a game changer. Vanta automates your compliance process and brings compliance, risk, and customer trust together

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Starting point is 00:40:19 charges, and expenses. This and other information can be found in the income funds prospectus at fundrise.com slash income. This is a paid advertisement. All right. Back to the show. The number you threw out for the M0 was a 10 trillion increase through COVID. And so when I'm looking...

Starting point is 00:40:38 Monetary base. Monetary base. Sorry. Yeah. The monetary base. expanded by 10 trillion. In this next, whatever it is, the expansion, I don't think that they're going to be able to just kind of like trickle it up at this 12%. I think it's going to be another leap or another jump that just because of how lumpy everything's kind of been over the last decade, it seems like that's the new modus operandi of the central banks. Do you agree with that? If so,

Starting point is 00:41:05 what does that next jump have to be? Does it have to be 15, 20 trillion in order to kind of catch back up and kind of keep the oil in the engine kind of circulating? Like, what do we got here? Yeah. Yes, I agree. All of the prior bumps that we're talking about were preceded by, you know, this sort of decreasing, either getting close to zero or in the last two cycles, negative, which is, again, unique. I mean, they've never had to do that because they've just haven't prepared themselves for this kind of day of reckoning, which seems like it's coming. So I would say, let me show you. Can I show you one more?

Starting point is 00:41:40 Yeah, yeah, yeah. All right. So here is a trend line. It's of the monetary base itself. Oh, I love this. This is exactly what I was describing with the rails, right? Okay. For people that just saw what happened on the screen there, can you make it go back so that it's not in log terms so that they can see the normal.

Starting point is 00:41:58 This is linear. So this is linear. This is great. Yep. So it's the same chart. I showed you. We got the 26. 0.12 trillion of June 2024.

Starting point is 00:42:07 Yes. The trend line is, by the way, this is well under trend, as you mentioned. Yeah. The trend line is 32 trillion. On linear scale, you see how quickly it grows. If let's just spoil it and let's go all the way out to, I think I go out to 233 here. Okay. Which was after two having, two more having to Bitcoin.

Starting point is 00:42:22 So 83 trillion is the number. Which today sounds totally ludicrous to anybody that's listening to this in seeing the numbers. They're saying there's no way. But it seems the math is really quite simple and straightforward, and they keep it inside of these bounds. Boy, I can't wait to pull this video up in 2030. What did you say that? It was 2032. That's 23.

Starting point is 00:42:47 33. We'll see where we're at. But go ahead. So now it's in long term. Right. So end of the decade only somewhere about 60 trillion. 60 trillion by. And this is monetary base.

Starting point is 00:42:58 End of 2030. This is monetary base. Same money supply I was showing you. How much of a multiplier is the M2? over that just so we could kind of because I know a lot of people like to track the M2. Yeah. I got a lot to say about this.

Starting point is 00:43:14 I actually don't know current off the, like I don't have a global M2 like I have a global monetary base. It's a whole different can of wax. But if you looked at the U.S. itself, M3, which is another topic, you're upwards of like, you know, $35 trillion, something like that.

Starting point is 00:43:30 That's just U.S. M3. I think you can probably roughly say, it's something like $100 trillion is this global bank liquidity. Yes. It's like $100 trillion and the monetary base is $26 trillion. So it's, you're roughly looking at something like a 5x multiple, four to five X multiple. Okay. Is how it looks. But yeah, that's, we could table that if you want. I got a lot to say about that too. But this, just if we did a trend line, now this is a simple trend line. And actually, another quick aside, everything gets kind of lost in the numbers. But the slope of this trend line is less than that 12.7%. Wow. Because I'm doing a very dumb,

Starting point is 00:44:04 simple exponential aggression of all the USD values. And remember how I told you, I only have the top 50 currencies going back to like 2007, but then some of them a drop off, right? But this is very interesting because the slope is like 10 and a half or something like that, 10 and a half percent, which is lower than the 12.7. So again, what does that tell you? The way that I, like the scientific way to calculate the real growth is higher. But if you look at it, you would think, especially since I'm adding more currencies later, like I'm adding the Chinese yuan from 2000. That's a big one. The British pound, they haven't even published a bank reserves until 2006.

Starting point is 00:44:39 The Bank of England is an incredibly opaque bank. That's the one of the thing. So all of this more data comes, it's like loaded at the end. You would actually think in dollar terms, if you got a big increase, this would be higher. But again, it continues to show the thesis that if it's lower, try to visualize what I'm saying here, dear listener, Derbior, the best number I can give you is 12.7%. But if you kind of look at different ways, you look at this like Durrana trend line on these USD values. And you would think that since there's a lot more data coming, a lot more data increasing

Starting point is 00:45:09 in the later years, you would get an even higher growth, a faster growth, because it's like artificially higher. But it's even lower than the 12.7. Why is that? It's a, if you measure it this way, just a sort of a brute force, not so with a fine tooth comb exponential curve on the USD values, these USD values, again, Whitkenstein's ruler, keep decreasing. Like the euro decreases as far as in terms of the dollar. The yen is decreasing as far as the, the dollar goes. So it's a very interesting phenomenon. The dollar keeps getting stronger. That's the point, what I want to say with this slope of this curve. But anyway, a lot of nuance there. It's the point is it could be even more. The actual growth rate is still 0.7%. But if you look at the

Starting point is 00:45:46 sort of U.S.D equivalent values and then you run a trend line on that, it's only about 10% growth. Regardless, you can see that you're looking at something like 60 to 80 trillion after 7 to 10, 9 years. And if you look, let's just zoom in if we see from 2013 after, let's go, actually from the global financial crisis. Global financial crisis, we're kind of on trend based on the all-time trend, went up to the 97.5 percentile, pretty rare air, came down, pretty much back to almost trend before COVID exploded again. And now we're under trend.

Starting point is 00:46:18 We still could go lower. So now we can, the words that I've been saying, let me put some numbers to them, two and a half percentile, which again is a very rare event. That's $23 trillion. Our current value is $26 trillion. If we project out a little bit, let's say perhaps when a Bitcoin bulls happening next year, 24.2 trillion. And I find it very hard to believe that Bitcoin would be pumping and the monetary base would be going down again. This is another thing. Bitcoin's kind of colliding with these new waves,

Starting point is 00:46:43 right? So talk to it. Let's dig into that because I think that that's something that, you know, people will will say, oh, yep, there's a four-year cycle in Bitcoin. And then like, that's the end of their thesis and that's the end of their argument. But there's this entire other factor, which I completely agree with you, which is the Fiat expansion and contraction. And if it's contracting aggressively and maybe the supply suffocation and Bitcoin is happening simultaneously. Talk to us how you kind of see that price action performing despite what many people just generically make, well, it's the fourth year, so Bitcoin's going to pump. Right.

Starting point is 00:47:19 So there is actually, I have some sympathy to the cycle so far. Also, one of the things I've been studying a long time is this power trend line that's had a lot of press, I guess, this year, is Giovanni fellow from Italy. It was the first to observe it. I actually did a chart as well in 2018, didn't know about him at the time. He was a little bit before me. But the, I am. The big shift, just so people understand, the big shift that I think he brings is just

Starting point is 00:47:41 he's logging the time as well, where a lot of other people were just logging the Y axis. He started logging the X axis as well. Right. And when you do that, when you log the Y and you log the X, a power trend line will look like an exponential channel looks straight. It looks straight up. But on log linear, it will kind of look like it's decaying a little bit, but it's still a high rate. So here I have another chart. We can display this a little bit. But bottom line about

Starting point is 00:48:05 this new thing. I have sympathy for the four year cycle. I think a lot of people, there's validity to that so far as reasons. Obviously, we have the Avening and all things that sort of coincide with that. We have a new crop of new Bitcoiners. Seems to just get excited every four years. People want to spend Mommy and Daddy's money on Bitcoin. And I don't know. There's a lot of reasons. But as you see here, so here is the same chart I showed you. Remember this is the monetary base growth in red now. And Bitcoin market cap change is incredibly. Now, it's so extreme. I have to cap Bitcoin's on the right. I understand that Bitcoin is on the right axis, monetary base growth is on the left. These are multiples. The Bitcoin is four times

Starting point is 00:48:40 higher the axis. I'm doing a multiple of four. Okay. So for 40% growth on the left, you'd get 160% growth of Bitcoin's. Just Bitcoin's growth, as we know, is so huge. But Bitcoin, over the last 10 years, specifically the 2013 cycle, the 2017 cycle, we've seen it's been pretty uncorrelated. Like, it pumps. The Fiat may pump, it may go down. Bitcoin is all, is. is pumping. You can kind of see that, right? And this is understandable, right? It's a Bitcoin is a non-correlated asset. It has been. It's been different than gold, different than fiat currencies, different than stocks. It's just been non-correlated. But what has been interesting, and I'm not exactly sure what it pertends other than it might line up with these trend lines that I just drew to you

Starting point is 00:49:18 about the monetary base. You see, actually, with this last cycle, this COVID cycle, we sort of lined up, right? You see that the fiat money is, all right, enough of this. Let's slow it down. That was the exact same time that Bitcoin was gearing up for the next cycle, 2018, 2019, right? And then we explode together for different reasons, but we explode together. And, you know, meme stocks exploded all the rest. So we explode together and then we go down together. And now Bitcoin is obviously way more, but you can even see that Fiat is still kind of going with it. It's a little bit that we're trying to pump it a little bit last year, put a little bit more.

Starting point is 00:49:51 And Bitcoin, of course, was pumping a lot more. So very interesting. So when we're looking at what we think comes next, from on the Fiat side in the expansion. What are we? Two years from them really kind of expanding? What are your thoughts? Yeah, that I don't have a handle on.

Starting point is 00:50:05 Like you said, we're at the lower end of the range. We see that we're not of the 97 or the two and a half percentile. Yeah. So, so low. But, you know, again, Bitcoin is starting to move up. They tried to start to move up the printing press a little bit at the end of last year. Now they're down again a little bit. So, you know, I can't say it's so scientific or predictable about what Fiat is doing, but compared

Starting point is 00:50:25 to the... It almost seems like, Matthew, it seems like there needs to be some type of geopolitical event to, you know, give them the narrative to turn it back on. That's the scary thing, obviously. And, you know, I live in Eastern Europe. And it's a scary thing for us. And I get into that and plenty of other shows. But, you know, we have real worries about our security over here. And I also have worries about false alarms and false flags or people that, you know, are going to want to use global chaos to do more evil things.

Starting point is 00:50:53 So, yeah, I've understand what you're saying. I appreciate your reservation because it's so often that you get guests and they're like, yeah, this is what's going to happen. And you know what? I think there's enormous amounts of brilliance and knowledge in a person who says, I don't know. And it's not something that I even want to try to predict because I don't know. There's no way for me to know. No, I appreciate that.

Starting point is 00:51:17 Let me just change gears just a touch. Central Bank Digital Currency. So we're talking about monetary base. And you talk a little bit about this in your report. In fact, you say CBDCs are larping. Help us understand kind of your point of view on the role that central bank digital currencies are going to play. Are they going to play a role?

Starting point is 00:51:35 Is this going to just be privatized money as a pseudo-cdc? What are some of your thoughts? Yeah. So CBDCs are not new, at least from concept. We know the Bank of England, I believe, was the first to publish a white paper on that about 10 years ago, 2013, 2014. It was the first CBDC paper from the Bank of England. Bank of England is very interesting entity, by the way.

Starting point is 00:51:56 And it's obviously the first modern central bank. The Swedish bank is older than them, but they really started doing the modern monetary operations, the Bank of England first. And they are really not transparent either. They don't publish the total balance sheet. So the Federal Reserve, you can find total assets, this and that. You can find the monetary base of the Bank of England, but there is other liabilities outstanding and other assets outstanding that don't publish the total.

Starting point is 00:52:18 They say in their website that they publish 80 to 90% of the ad. assets. But I think it's very interesting that it's an interesting central bank that has old ties, and for whatever reason, they are not fully transparent. That's one point. The part about the CBDCs, yes, they're a sort of a mid-tier central bank. They want to be nimble on their feet. They want to try to – it makes sense to me that they were the first one to write about it. But as we know, nearly every country has written said something about CBDCs since then. And we have a lot of Caribbean banks that are active now started some Southeast Asian banks, starting China, obviously, is pilot CBDC.

Starting point is 00:52:53 It's still a very small, nascent thing at the moment. But what it is, just to quickly explain, it would be a third rail of this base money. So it is the digital equivalent of that physical currency component or the MZero component, as you mentioned. So you'd have something like wholesale banking cash, which is bank reserves. You'd have retail physical cash and you have retail digital cash, which would be CBDC. So I imagine you've had people in your show talk about how or well,

Starting point is 00:53:21 and it is and can be and you could just track transactions. And you really, if people start accepting CBDCs for all cash payments and all sort of smaller Venmo type payments as they have in the U.S. today, I know, or SEPA instant payments as they have in Europe, then you wouldn't even need a need for banks, frankly. So this is actually one of the reasons why I think it's a lot of hype. I think it's banks. I think there's hope here, frankly. Because the banks are going to lobby against it.

Starting point is 00:53:49 Exactly. And who, I mean, who are the. biggest client of the central bank. It is their banks in their constituencies, in their systems. It's very difficult for me to see a true CBDC system emerging where you basically just have 50 or 60 or whatever central banks that have their digital cash. And it's like, why would you put all of that effort into one central bank when the whole point of having sort of the banking system as we have right now is that the central bank doesn't need to be involved in these things. You have, you know, client privileges, all the rest. I just don't see it.

Starting point is 00:54:21 I think it's just a larp. I think they're just kind of acting like it's something that's exciting and innovative and interesting for them. But I don't see really it's anything. No, when we look at Tether and we look at how much, I mean, they're killing it from a profit standpoint. It's totally insane the amount that they're able to retain. It seems like the banks would want to get into that game of let me buy short duration

Starting point is 00:54:46 treasuries, the U.S. government and hell, any government at this point has a huge incentive to allow this because they need a buyer of all of this trash that they're issuing. And so it's almost like there's this relationship that is naturally occurring between stable coin issuers, governments that want to issue a bunch of short duration papers so that there's actually a buyer. And then the tokenization of dollars in particular because there's high demand for dollars all over the world, particularly in developing nation states, because their local currencies are absolute disasters of 20 to 50 to 100% inflation on an annualized basis. And so you have this really odd, unique setup that it seems like the proliferation and

Starting point is 00:55:32 the desire for stable coins is only going to get way stronger, especially where we look at where these numbers that we just talked about are going next in the coming 10 years. They need a mechanism in place in order to expand the number of monetary units out there. And it seems like this is the most obvious way to go about it. What are your thoughts? 100% agree. I think it's going to happen. We're on the road for that.

Starting point is 00:55:55 I'm sure you saw that Paul Ryan interview on Bloomberg well back. Unprovoked, he's talking about debt crisis and he's talking about a possible way to solve the debt crisis would be a stable coin demand for treasuries. Yeah. It's just hilarious to be to think that a politician is actually, you know, just talking about some cryptocurrency that way. And he's not in office, which I find interesting that he's saying. Former politician, I should say. Former politicians saying this. And it's almost like he's saying what the ones that are in office aren't allowed to say.

Starting point is 00:56:25 Right. Am I reading into this too much? Or is he just is just Paul smarter than the ones that are in office and they just don't understand what the heck's happening? Like, this gets very speculative. Like, there's no way to be able to tell. But like, do you think that the people in charge are totally figuring this out? Or is there just a couple people kind of in finance and in politics that are actually

Starting point is 00:56:47 understanding where this is all going? No, I think they're figuring it out. They know that there's real demand there. They know that it is a way to boost treasury demand. So they're going to go after it for sure 100%. I think it's hilarious, though, the tether of all companies, like the one that was in the cross hairs for so long, this sort of nebulous Caribbean entity with nefarious investors or whatever.

Starting point is 00:57:08 We don't know. Yeah. Perhaps it's something. Yeah. Those are the narratives. Yeah. Those are the narratives, right? I just think it's so funny that the government's going to go after anything that it can to

Starting point is 00:57:16 keep its golden goose clucking away. So it's, they're absolutely going to go for it. And I think it's a much more realistic use of cryptocurrency to have it. You know, the title of my podcast is Cryptovoys the last Bitcoin or to have that title is well before it became a legal term like 2015, 2016. I came up with it. But Crypto is going to come back to Bitcoin. You'll see. I think it's all going to be on Bitcoin. Because of stable coins. Not just the only, I just think Bitcoin is just, it's so incredible what you can do with it. and the freedom that you have. And like I tell everybody, and I said this in my presentation about Nazi gold and moving

Starting point is 00:57:51 crazy amounts of money around the world in Europe in the 1940s. If you're a bitcoiner and you've been around a long time and you haven't experimented with or tried multi-sig, I just urge you pleased to do so because it's a superpower. It's battle tested. It's been around 10 years. And now with Taproot, these amazing upgrades, I mean, you can have like backup paths and all sorts of things that help you from a $5 rent attack to help you against a state attack or just really preserving your funds for your family forever. It really is an incredible

Starting point is 00:58:18 technology. And I'm a traveler. I'm international. So, you know, I'm happy to recommend it. I mean, multi-jurisdiction, even multi-forms of hardware wallets, multi-backups. We'll get back to the tether, by the way. But I'm getting on this tangent on multisig now. I think, you know, I'm a free banker. I like the market. I like what banks do. Even you might want to have a private key backed up in a KY seed vault, perhaps a bank. That's going to help you from a $5 attack. And And you don't have to have it only in one bank. You can have it backed up in as many places as you like. You know, the WinkleVi, the WinkleLoss twins, as far as I remember, their strategy of locking up.

Starting point is 00:58:52 Pretty significant portion of the Bitcoin network was Shamir sharing the old one addresses, the pre-segward addresses. And they just have it in safe deposit boxes all around America and backed up in multiple wallets, multiple places. But that's just one seed. With multi-sig, you can just do so many different things. It really is a superpower. And so there's so many things that Bitcoin is doing.

Starting point is 00:59:14 Like the average politician today has no idea that this is coming. And even with the stable coin thing, I think again, it's a bit of a larp, whatever, but they're going to do it. They're going to go after it. Can I show you one more? Yeah, please, please. Just to show you, hopefully we'll drive it home. I like to try to.

Starting point is 00:59:28 To your point on the multi-sick, it's almost like your creativity is the limitation, because there's just so much capability to protect yourself or your entity or whatever it is you're using it for. Yeah, you know, I'm sure you've interviewed a lot of these. folks and I know you have listened to your podcast over the years. And I kind of came into my own of the financial awakening, let's say in the light of the global financial crisis. I was listening to Peter Schiff. I was listening to Jim Turk. Jim Turk is obviously most better on Bitcoin than Peter Schiff. But I remember 10 years ago and it's a lot of excitement. Silver had that

Starting point is 00:59:58 run up in 2011 where it went up like to $50 and of course crash back down. People that really want to protect yourself, protect your family, all those things. You dig into it a little bit more. You get an account of gold money. You do these things. It's just, It's nice, but it's just not, it's not that exciting. You know, you're still going through some KYC process. You're going through hurdles. Yeah, a lot of trust, a lot of trust. And you see what has happened in China.

Starting point is 01:00:21 It was a big, there's a big stink in the gold market. Like, are you going to keep your gold, our gold in Hong Kong? What are we going to do about Hong Kong? And these things are not going to end. I've read some of these books. There's this, I'm blanking on his name, one of the guys from Gatta. Some of the people from Gatter are obviously a little wild, some of them are. But self-interested.

Starting point is 01:00:38 Yeah, sure. But one of the gentleman, very nice, good scholar, I really enjoy listening to him, Blackin on his name, he said, I've been thinking about this for 50 years. And I think the gold community can agree, like perhaps the safest place for gold is someplace off the planet, someplace like Mars. It's something that they've been thinking about. You can imagine being a gold bug in the 70s while the price is going to $850 an ounce. And it's just, it's lucky for us that right now we have this thing called Bitcoin where you can, you really can have a superpower by taking custody of it. taking it outside of the traditional banking system because it is outside money, just like gold. It's outside. It's different than a financial system. And I think that that's in the end of the day, that's going to be the massive value. Grace. Yeah. Yeah. Totally agree. Having said all that, I really did want to get back to the tether question. Okay. Yeah, let's do it. Yeah, let's do it. Great. Right. So now back to the tether, the story, obviously, and the demand for treasuries. I mentioned earlier how we're about at 20 percent. This is a chart you don't see every day.

Starting point is 01:01:38 lifetime chart of the United States federal government debt and how much central bank owns of that debt over time. I'm going to put it on log left so you can start to see things a little bit more. So basically, when I can go through, I've done this many times back to the founding and stuff. Andrew Jackson paid it all off here at 1835, so on and so forth. But let's go up here now to the Federal Reserve. You see, so the dark green is what they own, the light green is the total debt. It looks a little bit goofy, but you can see it in the tooltip. You know, World War I, World War II, you have big bumps. So basically from Vietnam was the worst time. If you had broad Federal Reserve history,

Starting point is 01:02:14 but one of the things that broke the gold standard was growing United States debt, but also what is interesting not talked about is in 1975, which was incidentally the year that Vietnam ended and already the gold standard had ended, we get up to 18% of the United States treasuries owned by the Federal Reserve. Federal Reserve prints money, base money, bank reserves primarily bides the treasuries. So the debt was $500 billion. The Fed owned $88 billion of that, 17%. And then from there, they decided, all right, let's fix this.

Starting point is 01:02:45 And, you know, Reagan years came in. And actually, the debt kept growing. So the percentage got better. But the Federal Reserve didn't buy as much, relatively speaking. Then you have these crazy times about the global financial crisis. This goes down here because there's more corporate bailouts precisely during this time, the tarp and the TALF and those things. Anyway, you used the QE1, 2, 3, and then COVID.

Starting point is 01:03:04 But the all-time high was about 28%. So the Federal Reserve in November 2021 owned $8 trillion of treasuries, while the total last year of new treasuries are $28 trillion, okay, 28%. That has come down. We're at, again, this period of normalization. We usually, you and I can guess what's going to happen at some point close here. Well, this is not sustainable. But now it's down to just under 20%.

Starting point is 01:03:28 19.5% as of June, 2024. So $6.7 trillion worth of check. Treasuries are owned by the Fed, $34 trillion in total. And as you know, that number is going just continues to go up the total debt. This is where against, I think that the headlines are bit bigger than the reality here. I think at the end of the day, the problem the United States federal government is going to have is the biggest buyer is still going to be the Fed, still going to be the money printer. How big is the market cap of tether?

Starting point is 01:03:53 Preston, it's what, like a couple hundred billion right now? It's $118 billion. $118 billion, yeah. So that's actually, even though they are a huge buyer of treasuries, they don't even compete with the Fed. The Fed has $6.7 trillion. They don't compete with foreign central banks.

Starting point is 01:04:08 So that's where the big money is still. That's, it's politics. It's a real politic. And yeah, I think it's good. Yeah, I think they're going to do it. I absolutely think stable coins are going to be here to stay to stop up some of that demand or that supply, I should say, of treasuries.

Starting point is 01:04:22 Look at this chart. Like they're the main buyer. That's going to be the key in how financial markets, particularly the treasury markets, going to evolve here into the future. Matthew, At what percentage does this become an issue? Like, okay, so they're, I mean, because they're the issue where they're the owner,

Starting point is 01:04:39 it's this reciprocal loop, assess pool loop. At what point does it become a major issue because everybody knows it's just a made-up market. Yeah. It was only 17, 18 percent to end the Vietnam War. Yeah. Of course, that wasn't the only reason, but that was an issue. Now up to 30. Of course, it can go up to 100.

Starting point is 01:04:58 You know, I mean, like Zimbabwe, these types of countries, you're talking 100% there at that point. They're just burning money, buying debt. That's it. Yeah. I don't know the answer to that, Preston, but I do know the trends are, the pattern is now become clear. We don't want to take the pain. We don't want to have a forest fire to clear out the underbrush.

Starting point is 01:05:14 We want to just bail everybody out. Yeah. And even though they try to normalize, even though they're trying to do the good things as they talk about in all the press conferences, we see at the end of the day, this is crazy. You know, the trend is up. And we want to put it back to the broad numbers that we talked about 20, or 26 trillion now globally, in money print, I think 60 trillion by the end of the decade, totally possible, 80 trillion by the end of two Bitcoin halvings from now, totally possible. Unreal, Matthew, this was

Starting point is 01:05:44 amazing. I learned a ton and the fact that you have these charts so cleanly presented and in a way that make it accessible. Folks, if you listen to this in audio format, go back, watch the YouTube with these charts. Holy man, this is crazy how this was presented. Matthew, Do you have a website, you have a podcast, give people a handoff to these things and anything else that you want to highlight, they want to learn more because you're just a wealth of knowledge, sir. Oh my goodness. Well, I appreciate it.

Starting point is 01:06:13 I mean a lot coming from you. I've listened to show a lot over the years. I really do appreciate it. It's good to be on it. And yeah, I try to put out high signal like this. I'm just going to talk about what I know I can back up with pictures and charts and numbers. So one base money is my handle. You can find me on all the platforms on Nostra as well, one base money.

Starting point is 01:06:30 My website is porcopolis.io. Porcopolis.com. It was the old name of Cincinnati in the golden years of Procter & Gamble. Love that. Love that. I didn't know that. Yeah. So it's my hometown.

Starting point is 01:06:41 Anyway, that's, yeah, Porcopolis. Atio, you can find all the information or one base money at any of the platforms. Yes, sir. Okay. We'll have links to all that in the show notes. Matthew, thank you for your time. This was really enjoyable. Thank you, Preston.

Starting point is 01:06:53 Good to be here. Thank you for listening to TIP. Make sure to follow Bitcoin Fundamentals on your favorite podcast app and never miss out on episodes to access our show notes transcripts or courses go to the investors podcast.com this show is for entertainment purposes only before making any decision consult a professional this show is copyrighted by the investors podcast network written permission must be granted before syndication or rebroadcasting

We Study Billionaires - The Investor’s Podcast Network - BTC200: Base Fiat Money and Bitcoin w/ Matthew Mežinskis (Bitcoin Podcast)

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