What Bitcoin Did - BITCOIN & THE END OF THE DOLLAR SYSTEM w/ Luke Gromen

Episode Date: March 24, 2025

Luke Gromen is the founder of FFTT, an economic research firm focused on global macro trends. In this episode, we discuss why Luke believes the U.S. is approaching a sovereign debt crisis, how rising interest costs and capital outflows are driving the system toward a breaking point, and why the current path could lead to inflation, capital controls, and a repricing of gold. We also get into the potential role of Bitcoin as a neutral reserve asset, whether the U.S. could strategically adopt Bitcoin or issue Bitcoin-backed bonds. THANKS TO OUR SPONSORS: IREN: https://www.iren.com/ RIVER: https://river.com/wbd CASA: https://casa.io/ LEDGER: https://www.ledger.com/ ANCHORWATCH: https://www.anchorwatch.com/

A moment is coming of like, like sheer terror. Like people are going to be like, oh, like, holy cow. Like, so capital's leaving, rates have stopped going down. Inflation's picking up because, oh, by the way, the tariffs are, they're not being absorbed by China. Where's that money going to go? You know, some of it will go to, you know, what we see. But I think it starts going into Bitcoin. I think that'll be a really interesting moment when you start seeing, you know, not just some outperformance,

but a literal divergence, and that makes perfect sense. Because once you cross the Rubicon, and we did, you don't come back. What Bitcoin did is brought to you by our lead sponsor and Massive Legend, Iron, the largest Nasdaq listed Bitcoin miner using 100% renewable energy. Iron are not just power in the Bitcoin network. They also provide cutting-edge computing resources for AI, all backed by renewable energy. So whether you're interested in mining Bitcoin or harnessing AI compute power, Iron is setting the standard.

Visit iron.com to learn more, which is iranet.com. Luke Grosin, great to see you again. Great to be here. Thanks for having me on. How's everything been going? I've been watching a lot of your interviews. I tend to watch pretty much everything you do, and it seems like you're about as better as I've ever heard you.

Yeah, it's been a while. Probably most so since, in the near term, at least, since right around, call it April of 2022, when I came into 22 thinking, there's no way they're going to hike because they haven't inflated away enough of the debt yet. And it was like, oh, they're going to hike. This is going to be a disaster.

And so I pivoted. And it was a disaster. And it didn't, you know, a lot of how I thought it would play out sort of did. It basically got inflation down for a bit with the tradeoff of getting us to where we are now, which is sort of an even worse fiscal shape. in a more acute manner. And in the same kind of way, I've been pretty vocal over the last three, four months. Look, if you want a doge, great, big supporter of efficiency.

And if you're going to doge, you better get that the GDP down significantly first or else you're going to create the arguably possible, the worst financial crisis, the worst economic crisis problem since 2022 and arguably since 2008. and came into the year thing, you know, just saying, look, I want to be low over my skis for the first two or three months of the year, kind of see how it plays out. And as we sit here today at the end of that three-month period, I want to continue to be low over my skis for the next two to three months because they didn't follow the order of operations. It is creating problems in the real economy.

It has started to create a problem in the stock market. The fiscal situation is at least as bad as it's been, and we can touch on that, if not getting possibly worse, we'll see. Given what we're seeing in stocks and the real economy, you would expect that it will. So yeah, it's, I don't think it's a time to be brave. So, and what is like your big, does it all kind of come back to the sovereign debt issue? And we're just way too far, way too extended on that? Ultimately, yes. And in particular, as it relates to the, what I call true interest expense relative to receipts, right? So the debt is what it is, but the real issue is, is U.S. interest plus entitlements is more than 100% of receipts.

And receipts are at all-time highs, literally, and it's still over 100% of receipts and growing at a multiple of GDP. And so the elephant in the room is you got to get, you got to get debt down or you got to get entitlements down. and the entitlements are politically toxic. And so you got to get that the GDP down fast. And so they haven't. And that's really the issue. That creates the problems. So I want to get into all of that.

But one thing that really confuses me that I'd like your take on is, obviously Scott Bucent's come in, Howard Lutnik's come in. They're both very smart. They've had really good careers. And they must see this. And the way they're acting is a little bit unusual. And it kind of has brought up these theories that are a bit further out there. But I don't know if you can put any credence in it.

Like, are they potentially doing things that will drive the equity market down to save the bond market? Are they just letting things get so out of control that they can step in and do something really drastic? Like, what's your take on all those kind of more out there theories? I've seen both of those. I mean, I said to someone reason. I said, look, you know, if the plan here is to trigger a worse financial crisis than what we saw in 2008 is a means of creating the political cover to do to do what, you know, some of the more extreme types of things from an economic standpoint that you need to do in

terms of devaluing debt and kind of resetting the system, then keep doing what you're doing because that's, you know, you know, that they need to keep doing what they're doing because that will get them there. Now, yesterday on the All In podcast, Besson said, you know, we can't go too fast because we want to land the plane. And the inference I took from that is if we go too fast, we're going to crash the plane. And that is a bad thing. And so that would suggest, A, that he knows that going too fast will crash the plane and, B, crashing the plane's a bad thing. And I think he is far too.

not only is he far too smart, but he said his mentor is Stan Drucken Miller. He said that on the All In podcast, and I think that's common knowledge. Yeah. Druck and Miller gave an interview with Kirill Sokolov in 2019, in which he pointed out the countercyclical dynamic where if you try to cut, you're going to start a recession. And if you have a recession, your deficit will actually rise because your countercyclical payments will rise. So he has to know that as well. So I don't, I don't know if the plan is, is, is, you know, drive it into the ditch to sort of, you know, kitchen sink the numbers and, and, and, and blame it all on Biden. Because I think they understand that that is, you know, with the, with the amounts of leverage involved, that isn't sort of a bumpy landing. That is into the ground at 400 miles an hour nose down. And then you're scaring the equities in the bond market. I think there is probably some element of that at work.

I understand why that's a popular theory. I think it can work in the very short run. Um, you know, something that has really grabbed my attention in the last three weeks is, we've had this down ticking equities we've seen since whatever late February, not even mid February. And for the first 10 days or so of it, hey, we're great. Equity's down big, yields down big on the 10 year after, after Besson and said, hey, we're focusing on the 10 year yield. That's the number we got to focus on. And then something interesting happened started around February 25th, which is 10 year yield stopped

going down. Like, we had the equity market go down another 5, 6, 7%, as measured by the S&P 500 on high volatility. And the 10 years gone from 424 to 432, today back to 424, even though the Fed yesterday promised we're going to stop selling an extra 20 billion of treasuries beginning on April 1. And that's a problem. That's a huge problem. So why do you think that's happened? I think it's a couple things. I think mechanically, it's... It goes back to something we've talked about before, something we've written a lot about in our research, which is one of the biggest marginal buyers of treasuries over the last two, three years, maybe even a little longer, but certainly the last two, three years have been these

relative value hedge funds who, you know, borrow a bunch of money. They basically are buying, you know, levered treasuries, which is fine, as long as volatility is low. And as long as volatility is low everywhere. So if equity vol picks up, it's not like these relative value hedge funds because they're multi-strategy. They don't say, well, that's just equity vol. We don't have to worry about over here in our treasury book that's levered five times, ten times in some cases, according to some reports in the FT and elsewhere. They get a tap on the shoulder from compliance and like that's it.

de-gross. Equity vol is spiking. We're not going to wait around for it to spike in treasuries. And so we've seen repeatedly over the last five years. very tight correlations between equity vol and treasury vol. And so I think that's part of it mechanically. I also think part of it is when you look, U.S. equities essentially back the treasury market in a roundabout way in that the key marginal driver to tax receipts are U.S. equity prices, as intellectually offensive as that is. They've created this system, and now they're getting what they

wanted good and hard. And so to the extent equities fall and stay down, you can say with an extremely high degree of confidence within three to six months, your tax receipts are going to start are going to start weakening. We saw this in 2022 and 2023, and that means your issuance is going to start to rise on the treasury side. And so I think there's some element of that. And then I think there's also probably, you know, we haven't had the strong dollar or the high oil prices, you know, that we've seen in 2020 through, call it, 24, early 2024. Historically, over the last five years, when dollar gets too high or oil gets too high, treasuries get sold, and we've not seen either of those. So those have sort of been well contained,

but we have seen a new wrinkle, which is significant capital outflows out of the United States in a way we haven't seen in a long time. Ever since, you know, basically mid, I date it to around the, the third week of or fourth week of February, middle of, you know, I think it was 1 a.m. Friday night to Saturday, February 21st to 22nd, the America First Investment Policy memo was put out by the Trump administration. And it essentially says China, you've got trillions of capital here.

We don't want it anymore. Take it and go home. And what are they doing with that capital? Well, the flows would tell you it's going to Europe. It's going to Asia. It's going to gold. It's going into Chinese stocks, Hong Kong. You know, somebody pinged me recently.

They're like, I was in Hong Kong. And they said, hey, tell Trump, thanks for making Hong Kong great again. Because all this, you know, when they told China, take their money and get out of here, like some of it's going to Hong Kong. So you can see it in the charge. You just run, you know, sort of, you know, the Hangsang over NASDAQ and Hangsang over S&P, you know, the German Dax over NASDAQ and over SNP, gold over NASDAQ and S&P, French Kako. So all of these different indices are significantly outperforming, and gold is significantly

outperforming. So I think you're seeing this capital outflow out of the United States that has weakened the dollar, and that has helped kind of keep things in the treasury market, on one hand, more well-contained because too strong a dollar drives yields up. But on the other hand, you're also having capital outflows, which if it goes too far, we'll also drive yields up, you know, sort of prevents yields from, you know, you say, I want to scare money out of equities into the 10 years so I can refinance the debt. Great.

Well, you're scaring money out of equities, but you're also promising to tariff it and tax it and maybe sanction it and what have you. And so some of it's just leaving and going somewhere else. And so do you think that was a strategic error making that announcement? It depends on the timeline. In the context of what they are hoping to achieve as of 2028, no. look, the U.S. has basically been the world's bank slash world's laundromat, right? We run deficits, and then the world's wealthy, recycle their capital into American markets. And it's great for

their countries and it's great for our, you know, Washington and Wall Street. And it's not as good for the rest of America. If we want to change that, then that flow has to reverse. And so that secularly reverses that flow, ideally it will come back or stay here in the form of a investment in a hard asset, productive asset, factory, something that drives American jobs. Now, in the shorter run, strategically, if you look out 2028, that has to happen at some point. So I don't think it's a mistake where I think there is a, it's a mistake. I don't know why. I think a lot of it is just political realities.

it's executional mistake. The reality is, is doing this with debt to GDP at 120% is the wrong order of operations, number one. Number two, you don't have the facilities set up to say, listen, hey, get your money out of stocks, but we will continue your tax break or we will give you this huge tax break if you bring the money into, you know, XYZ. And oh, by the way, we're going to offer an incentive to retrain. in the American workforce. So look, if you want to study welding or other skilled trades in America, it's free. And when you come out, we're going to guarantee that you're going to make $100,000 a year

starting minimum with no debt. There needs to be sort of this whole of government approach to this kind of restructuring that has not happened. And I think that's leading sort of executional risk slash mistakes. Because we, look, we have had some headlines and flashy headlines of Apple and others saying we're bringing money back. And those are great things. And if you compare it to the money that is left, I don't know that any money on net has come in. If anything, we've probably lost, you know, given what the dollar's done, we've probably lost it. So that's, I don't think it's a mistake, but it's the executional, it's not being executed

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You have peace of mind knowing the River has monthly proof of reserves and holds all Bitcoin in multi-sig cold storage. And with US-based phone support, you'll always have someone ready to help. So open an account, go to river.com forward slash WBD and earn up to $100 in Bitcoin when you buy. That's r-I-V-E-R.com slash WBD. Okay, so if we get back to Bessent's analogy, he wants to land the plane not crash the plane, first of all, is that possible? And let's say, like, you woke up tomorrow, Luke, and you have unilateral control,

you can do whatever you want to do. What is the best path here? Like, what should they be doing? And then can they do that? What they need to do and what they can do, I think, are too far apart, unfortunately, is kind of what I'm coming to. What they need to do is significantly devalue the debt, you know, write gold up to $20,000, put $5 trillion into the TGA, buy back a quarter of,

or more of the treasury market. That's going to be highly inflationary, debt the GDP will be down, reinvest that money into some of the things we just talked about, and away we go. That's effectively sort of a one time right down on a real basis of the treasury market, of the debt against gold, which is I bring up not as Bitcoin, because gold's on the books, they can do that right now, right? In theory, Bitcoin could serve that role, but there's simply, it's not

on the books anywhere or in the rule books as they apply those rule books. So I would do something like that. And then again, whole of government approach, Fed, you're going to do yield curve control for the next two years. We're going to cut rates to, you know, 50 basis points at the front end and two and a half percent 10 year. And we're also going to run big deficits to retrain the workforce. and, you know, these types of, you know, you're basically talking about, you know, kind of laying out a two-year Manhattan Project slash wartime initiative. And that's what needs to happen. And it's not happening.

And by the way, part of that's because you need to have capital controls within this. You know, you basically, hey, if you own treasuries, you're going to have cash on 30% of this as we buy back, whatever we buy back. And then you can invest here, but you can. can't do this. And the reality is, is any source of capital controls of that magnitude amount to a de facto end of the dollar's reserve status as it has been structured since 1971. Doesn't mean it's no longer the dollar reserve status. It means the structure is changing back to something pre-71 with some with some wrinkles where gold is actually the de facto reserve asset, not treasuries. So that's what

needs to happen. And the reason why it has to be that drastic is, you know, like I, you know, I, you know, we've seen Scott Besson say, well, we're just, we need a detox. And Wall Street has grabbed this detox and they love this detox idea. And, you know, it's so funny to me because, like, everybody forgets why we taxed in the first place, right? Like, you know, why, why do we need to detox now? Well, in 87, we could have detox, but it would have collapsed the system. And 94, but it would have collapsed a system. 98, long-term capital, would have collapsed the system. 02 could have done it would have collapsed the system. 08, could a detox would have collapsed the system.

You know, 2018, 2019, repo rate spike. We could have left repo at 8 to 10 percent, let treasuries reprice at 11, 12. Mortgages reprise at 13, 14. Collapse a system. COVID, we could have detox. Would have crashed the system. Signature Valley could have repri-would have collapsed a system. So like, it is fascinating to me this whole, well, we can just detox and it'll be fine.

Like, come on. Like, if all of those other, you know, some of more smaller, some were bigger than what we're trying to do here would have collapsed the system. And debt is higher. And deficits are higher. And the demographics are worse. And the geopolitical situation is far worse. We're no longer a unipolar power. In fact, we just lost a war, a proxy war.

How do you think detoxing is not going to be catastrophic? Like, it's, you know, it just doesn't make intuitive. sense, let alone when you actually sit down and run through the math and go, oh, my God. So that's what I would do. I don't think it's politically possible. And so I think Besson's comments yesterday talking about how there was that was the first acknowledgement of like, yeah, we just can't, you know, if we doge too fast, we'll crash the plane.

I think it's an important acknowledgement in both directions. It's like, okay, well, we're not going to crash the plane, but like, okay, then sort of the whole political impetus of the first three months of this administration are kind of like what like where are we yeah the do things interesting to me because like it's a nice wrapper on essentially just austerity um and are we in a position now where austerity just can't work like even if we take that simple part of everything you've just said are we in a situation where austerity on its own won't even work no it won't work no it absolutely won't work because is that that's too high. You know, to do austerity, the sovereign balance sheet has to be in a position

where a recession will not credibly threaten the solvency of the sovereign itself. Volker could be Volker and Reagan could front load pain because there was no world in which rates would go to a high enough number where the treasury market would dysfunction, where treasury auctions would fail where the U.S. government's interest expense would be more than its receipts and it goes into a debt spiral. We're already in a spot where the interest and interest like obligations are greater than receipts with receipts at all time high and austerity will absolutely take receipts down. So you'll be even further below 100% of or further above 100% in terms of your interest and interest like obligations. So the political cost is too high. And then the

math simply won't work. I mean, you just, you've got to get that debt down first. You know, there's, you know, we used in our recent, in a recent report, and we've highlighted this before, you know, the last hegeman that had the reserve currency that tried to doge after it lost a war, had run up its debt and had been deindustrialized and suffered a series of financial crises over multiple decades was the UK after World War I. And they said, you know what, we're going to go back to pre-war parity on the pound relative to the dollar. And we're going to take the austerity pain. That's what we're going to do.

And horribly, horrifyingly, the UK lost 6% of its adult age men working force in World War I, 6%. And so taking that 6% away out of the workforce, the UK doing doge austerity after World War I to try to sort of deflate. U.K. unemployment was never below 7% from 1921 to 1940. And that was without, you know, that was on a gold standard for the first half of that and what, and was 6% of the working force killed in this horrible war in the decade prior. So really the number was unemployment never went below 13% for 20 years.

There's, and, you know, politically you started to have some of the fallout from that as you got into the late 20s around, I forget the guy's name, but he was in peeky blinders as sort of a plot for one season. But it was, it was, you know, the fascist party and the Communist Party were starting to make real inroads in the UK as a result of the unemployment situation and the economic situation. So politically, it's not possible, but more importantly, like, they didn't have a debt-based system. They didn't have a debt-based banking system. Like, mathematically, it wouldn't take 20 years. It wouldn't take 10 years. It wouldn't take 10 years. It probably wouldn't take a year in terms of just the fallout.

And so it keeps taking it back to the same point, which is, I don't understand the game at foot. Either they're trying to drive it into the ground to clear the decks, which, again, I don't think that's the plan, or just politically, they can't do what they need to do because it's so complex. That's probably the better base assumption. So are we kind of at a crossroads here where the US dollar system, as we know it, like can't really carry on, and they're going to have to move to kind of a neutral reserve asset, whether that's gold or obviously in like these circles, people talk about Bitcoin. Or do you think they'll be able to just keep kicking this can, things will progressively get worse, and the dollar system will remain relatively similar to what it is today?

I don't think it's going to remain similar. And I think that's sort of the whole point of the Trump administration, right? when you're, that's the other, you know, another fascinating thing about sort of what what Bess and Ted to say, which is like, well, you know, we're not, everyone kind of came right to me, hey, Luke, they said, they're not going to revalue the gold. I said, well, they're not going to say today, we're not going to revalue the gold, you know, six weeks ago. He said Trump wasn't going to harass the Fed anymore about rates either, and that lasted a whole six weeks. So let's, you know, let's take that with a grain of salt. But setting that aside, he echoed what Trump and Vance

and Buren, uh, and Miron, uh, have all discussed, which is a 180 degree reversal of the flows of capital and trade that have defined the dollar system. You know, we're, you know, what are we telling people? Defense wise, we're not defending you anymore. Defend yourselves. Okay, that's gone. We want to put tariffs up.

We want to drive most of our revenue out of tariffs. That's not the dollar system. You know, take your capital and go home. We don't want China recycling its surpluses and trade with us into our capital markets anymore. go home. That's a reversal. So I think we are moving towards a neutral reserve asset system. Gold is certainly acting like it. Bitcoin for the moment is being dragged down by, you know, the historical, the short-term correlations with the NASDAQ. I get it. I fully expect NASDAQ and Bitcoin to separate or to diverge from the NASDAQ later this year in a more pronounced manner. I mean, if you look at sort of long

Bitcoin short NASDAQ on a two-year chart. You can see it's like, it's, you know, kind of divert, but I think you'll see a pronounced divergence later this year. But I think it's in everybody's interest to do that. I think that's what we're moving toward. And so, like, can we get into repricing the gold? Because you said before, they could write it up to $20,000 an ounce. How does that actually work? Like, what has to happen for something like that to occur? They would probably have to make a market in, you know, people have, I think, correctly said that, look, like, you know, they would have to sit there and buy it. You know, basically you're printing, you're creating M2 money supply.

You know, could the U.S. do it? Sure. They have a printing press. You know, they can print dollars. Everyone's like, oh, we can always pay all of our debt in dollars because we have a printing press. Well, the same is true of gold. You know, in theory, they can buy all the freaking gold by printing dollars. So it's literally as simple as them saying, like, come to us, we'll buy it for $20,000 an ounce.

Yeah. same thing they've been saying with the bonds, right? It's yield. It's yield curve control. I don't think that's a base case. I think that's a very extreme example. I still do think they will ultimately write up the gold to market. You know, if I was going to be Machiavellian about it, I would take steps to get the price of gold as high as I could get it by the market. You know, let the market do the work for me and then reprice it to that. So what you'll talk about here is the gold that's priced at $42 an ounce or whatever it is on their bank.

Okay, so they write that up to $3,000 or whatever it's at right now. And so then what would they do with that gold once it's written up to that price? Nothing. It's a gimmicky exchange of paper that deposits $800,000 or $800,000, $800 billion of money roughly at current prices into the Treasury General account with which Besson can do any number of things. but for the sovereign facing issuance issues and somebody wishing to term out debt and keep issuance at the long end as low as possible, $800 billion is a lot of money, right? That's 40% of the deficit on a trailing 12-month basis, 35%. There's so much in there that I want to ask you about, because obviously this has kind of ties

to the Bitcoin Strategic Reserve that's now been signed. But before we do that, you said then that you talked about percent wanting to offer like the longer duration bonds. He came out and said that, and then he actually started issuing T-bills again. I'm like a layman in this, but my read on that was I guess he's assuming that rates go down, so issue bills now and then roll them over into long duration when the interest rates drop. Is that what you're thinking, or is it something different to that? I think if he would have tried, the 10-year yield would be a lot higher than it is today,

if he tried to issue in any size. Like I think, so I think a really important piece of context in all of this, two important pieces of context. First is that Yellen obviously moved to the front end, didn't term out the debt, took a lot of criticism, including from Besson over the last year, year and a half for not doing so. That's context one.

Context two is that the Fed has not sold on net a single 10-plus year treasury bond on net. So they probably sold some. But on a net basis, their holdings, of 10 plus year treasuries has not fallen since 2010. So if that market is so star-spangled, awesome, and liquid and deep, why can't the Fed sell any? And so if the Fed can't sell any and Yellen moved it all to the front end, you have to come to one or two conclusions.

Either Yellen is stupid and didn't term it out when it was low because she's a complete and total moron. And we know she's not. And we may not agree with, you know, people may not agree with her. politics, the woman is clearly very bright. I think she did a very good job of dealing with the reality she was dealt with as a result of sort of stupid decisions our government has made over the prior 20 years. So either she's stupid or 10-year treasury market is nowhere near as deep in liquid as advertised in any attempt to try to issue at the size that they would have wanted

to to term it out would have quickly blown out 10-year yields, two levels. that create a problem. And now we can look on the chart. Every time 10-year yield over the last five years, four years has gotten near 4.8% to 5%, the wheels start coming off the cart. Equity markets start selling off. So now go back to what we talked about before. Equity markets sell off, treasury market starts selling off more because, again, our biggest buyer has been these levered hedge funds. So they're going to sell treasuries into a market sell off. And you would quickly get into this sort of death spiral that we started to see occur in 3Q23 and 1Q23 and 3Q22. So what my view of why Besson got into office and didn't her start terming out the

debt immediately is I think he got red in. I was like, oh, you know, so, you know, he's kind of played it cool of like, well, I just stayed with her plan because, you know, the cost cuts haven't come through yet. And I think that's fair. And if I was in his seat, I'd say the same thing. But like behind the scenes, he's probably, I think that's what happened is he just goes, oh my God. Like, what am I supposed to do with this? And that's why I think he's ultimately going to revalue the goal to create balance sheet room for himself.

Because like, if he had so much room that he didn't need to do it, start turning it out. Go ahead. Like, knock yourself out. And that hasn't happened yet. And so if we just assume that like, I agree with you wholeheartedly that he's saying that he's not going to reprise the goal today. I think that doesn't mean he's not going to do it in six weeks time. But let's just assume that reality for now. Like how can he drive a market for longer duration bonds without repricing gold?

Or is that impossible? In the short run, it's not impossible. But it's a very self-limiting strategy for multiple reasons, right? So if you look at his public pronouncements over the last 12 to 18 months around this topic, it's more recently sort of, hey, we're going to detox and slow the economy and private and right. We're going to knock stocks down to drive a bid for bonds. Great. You did that and you got 10 trading days out of it and then the 10 years stopped going down. Now what? Okay, well, the Fed just said we're going to stop selling as many. Okay, great. That was good for another, what, two basis points?

We went to four basis points. We went from 428 to 424. Great. Now what? Well, we're going to go to Europe and say, hey, we're going to pull our defense umbrella if you don't term out your debt 50 years. Hey, Japan, same thing. And like, I think a very underappreciated plot twist of the last week or two has been Europe going like, you know, bugger off. Like, fine. Give us our money back. We'll buy it ourselves.

And the jab, like, it was an article last week in FT or earlier this week in the FT, like Asian defense makers, stocks are soaring. Because the Europeans are showing up and being like, hey, you know all the stuff you make for the Americans anyway? Make it for us. Because it reminds, I don't know if you've seen the Bruce Willis movie, Armageddon. You know, there's the Russian cosmonaut stranded in space, right? And he's like, you know, Russian components, American components, all made in Taiwan. And it's like, it's kind of the same thing.

It's so like, plot, you know, the next strategy was, well, we're going to term out the debt for 50 years based under this defense umbrella. Well, like, number one, I. The Europeans are saying, give us our money back. We'll do our own defense thing. That's not helping drive yields down. If anything, you know, German boot yields are up and actually looking like they're going to pull 10-year treasury yields up. Same thing with 10-year JGB yields in Japan.

And I think it's another one of the sort of these underreported stories. Like, Mark Rudy, that's Secretary General in NATO two months ago, not even, said, look, Russia's out producing all of NATO four to one. Eric Prince, who runs Blackwater, came out in the last week or two and said, listen, two years ago, three years ago, if you took a shot at the Russians in Ukraine, it would be with an artillery shell, it would take them an hour and a half to shoot back at you. Now when you shoot, you better have your ASS and a car running because they're going to have something on you in two minutes. Like, there is the defense umbrella. I don't

think looks as attractive after the last three years. The American defense umbrella and the performance of conventional weapons, certain conventional weapons systems on a relative basis, I don't think look as attractive or they carry as much leverage in terms of terming out our debt as they did two, three years ago. And I don't think that has been digested by Wall Street at all. But it will be. It will be. And so the point for our purpose is here. is, okay, well, knocking stocks down had a very short shelf life. And the longer you go with that, the more it's not going to work because you're going to hit receipts, you're going to have to increase issuance. Economy's going to slow. God forbid if you drive yourself into recession,

because now your issuance is going to blow up by one and a half to two trillion, maybe more, just based on a run of the mill plain vanilla recession and sort of what deficits do in those. The sort of defense umbrella thing is starting to kind of look a little, eh. The whole Europeans paying for it. They're taking their money and going home on the margin. And so if I'm sitting there in their shoes, you know, again, it goes back to sort of this executional thing. I think their target, their strategic goal makes perfect sense.

I think it's great for America. I think it's great for all Americans at both sides of the party. But the risk was always going to be the execution and the political ability to do some of the things they needed to do to execute, and that is quickly, you know, getting bogged down in the mud. So to kind of like left side of the bell curve, is this really like the U.S. trying to find its place in a changing world order? And was kind of the start of that, the sanctions on Russian treasuries?

I do think it's us trying to find our place in a new world order. I think some of it is the recognition by Washington, corporate America, and Wall Street. circa, I don't know, it was 2017, 2018, something around there, a sort of, oh my God moment where they started to realize that they were falling behind China in a lot of key ways. That was where I think it started to hit home. And then I think COVID reinforced that with the inability to get supplies. And then I think the Russia, you know, number one, that we were outproduced by the Russians as badly as we've been outproduced. And then the of some of these weapons systems. Like I've been told, like, look, the, we've got the best

weapons in the world and they've underperformed the good enough weapons, you know, and, you know, in wartime, you know, quantity has a quality all its own. So, uh, I think it's that recognition that the sort of benefits of globalization of lower costs and lower labor costs and this. have gone too far on a number of different fronts. And they're trying to kind of reverse that. But the problem is, is it's like, you know, it's like fixing one of the fins on Elon's rockets, you know, while it's like leaving orbit, right?

Like it's, you know, and you're hanging out there holding on trying to tighten us. Like, hold on, let me bolt this thing on and move it over a couple inches. I guess it's very difficult to do. It's, it, the executional risk is very, very high. So if they've now like realized, or at least some people in,

in the administration of realized that maybe a move to kind of like a neutral reserve asset is the right move. Do they have a bigger kind of geopolitical advantage of making that gold or Bitcoin? Because if you tried to follow the incentives, presumably they're going to go for which everyone gives them the biggest advantage. Short answer is yes. The short answer is yes. The longer answer is I think some of our adversaries have front run us on this. On those gold on Bitcoin. Mm-hmm.

Mm-hmm. I would be shocked. And I've had people that I respect say, Luke, you should be shocked if China hasn't been stacking Bitcoin on an official capacity on the QT for multiple years. I totally. Ditto Russia. Mm-hmm. So I'm, the theory of it is yes, we would have an advantage. And I think ultimately, you know, in theory, yes, practically right now, no.

going maybe not, maybe not, right? If they've already stacked it, then maybe there isn't, maybe there isn't one. I don't know. Ultimately, you could make the case that, you know, we can produce that you're better, that something like a Bitcoin where there is a hard cap on the supply and a shrinking stock to, or a rising stock to flow over time,

gives you a better incentive and ultimately drives a, it drives it in a competition of pure sense of where is your best rule of law, where is your best productivity? Because the guy who's got best productivity and forget about rule of law, I mean, within reason, best productivity is going to win, right? He's going to be the guy earning Bitcoin net. Some of that's a, you know, well, the currency against Bitcoin will fix all that, right? Like, you'll, it should balance over time.

So you could make that case, then that gets us back to another area of executional risk, right? Of internationally, you know, the real politic is, is, you know, who's got the best weapons in the nukes and who's the creditor and who's willing to go all the way to the mattresses and can incredibly threaten others. And, you know, you get into sort of the Game of Thrones from sort of a, you know, blackmail slash intrigues slash, you know, black ops, thermonuclear war all the way up the scale, like,

trying to figure that out. So I can see the theory of it. I can see, but I, you know, who knows? Okay, because like, if everything is kind of leading back to repricing the gold, maybe actually, first of all, why is the gold of $42? That was the price it was when we closed the gold window. But why have they never repriced it before? Is it down to like it's politically unfavorable

to do that. Like, what's the reason it's still there? So I have heard two reasons. The first is that if they repriced it and they basically would put it back on the table and that would be eligible to be claimed by primarily European creditors as having been defaulted on

under Bretton Woods. I don't know the verity of that. If those treaties are still in place, what have you, I've heard that. I think it's the more plausible or the cleaner explanation. And maybe they're both true, I don't know, is just the dogma of it. That basically, once we took it out of the

system, you know, we just didn't want to talk about it, right? It's sort of like the dirty secret in the closet, you know, you just shove them away and never talk about them again. And, you know, I think, I think it's, you know, that's part of it, if not most of it. Yeah, that makes sense. But that also seems like something Trump and Elon and the rest of them maybe wouldn't actually care about, which probably makes it more likely that they're going to reprice it. So in Bitcoin circles, like with this executive order, obviously the caveat is they can acquire Bitcoin as long as it's in a budget neutral way. And one of the ways that they can potentially unlock a lot of money and do that is by repricing their gold. Maybe like start with, I'd like your take on the strategic reserve and what you think of it.

And then do you think that that's even like a potential outcome or do you think they're not likely to reprice it and buy Bitcoin? I don't think they would use the whole proceeds. Simply because, like, you know, when your house is on fire and someone gives you a fire truck, you know, full of water, like, you don't take it out back and fill the swimming pool in case you, you know, in case the weather's warm, right? Or in case you need it for the future, right? You spray it and throw it out the fire. And, you know, $800 billion would.

by operating room for the better part of a year, maybe a year and a half, well into the, you know, very close to the next midterms. So, you know, maybe they would do some on the margin. Maybe they, you know, if they did it, you know, 20 billion, 50 billion, you know, sort of a nod, and then they can sort of tweet, you know, promises kept kind of a thing. I don't think it's going to be a big number simply because, again, to go back to that initial point, like, true interest expense is over 100% of receipts with receipts at all time high. and with all these other things have, the Europeans taking their money back,

your Chinese taking their money back, like the, it's a very tricky situation. And so taking the 800 billion and taking half of it and thrown into Bitcoin, you know, I don't see how that, but I think that that in the long run,

it might be, it probably is very, very much the smart thing to do. But again, it's like, you know, it's like filling up your pool with, with your house on fire. It just,

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it really couldn't be easier. My inheritance plan has gone from a vague treasure map for my wife to a rock solid security plan they have total confidence in. To find out more about CASA, go to cassa.io, which is ca-sa.io. Okay. One other bit on Bitcoin that I wanted to ask you about is I heard you on another show recently saying you were not bearish on Bitcoin, but a little more bearish on Bitcoin, mainly because of how it's trading kind of just like the NASDAQ. Do you want to expand on that point? I'd be interested to hear that. Yeah, that's just straight capital flows. That's, you know, February 21st, Trump came out and said, take your money home, China.

We don't want to hear anymore. And, you know, it's fascinating to me that people don't realize the biggest China Belt and Road Hub in the world is the NASDAQ. There's trillions in Chinese capital sitting in there. And if it's leaving, I think you're going to see a lot, sort of a drag down period, especially given the valuations we're talking about, right? It's not like the NASDAX trading at, you know, low valuations,

multi-year lows. Like, it's in sort of la-la land. And like, you literally just told trillions in capital go somewhere else. And so I think, I think the NASDAQ will be sort of in this drawdown period that we've seen over the last, I mean, we're only a month into this. It's crazy. And so I think it's going to continue for a while. You know, and it doesn't necessarily need to be a crash, but I just think it's going to kind of like, like it's done over the last month and look, every trader on the planet is like, look, it trades like a tech stock. It trades like a tech stock. It trades like a tech stock, too, by the way. They leave that part out. The BKX, the NDX, the NASD and Bitcoin are all right together, right? But my expectation, my view,

my hope, maybe, because, you know, it is a big position for me. It's a neutral reserve asset. It isn't a tech stock. It isn't a bank stock. It isn't a bank stock. and as the factors that I see that we talked about earlier developing where I think a moment is coming if they don't really sort of do something big in terms of devaluation, which, oh, by the way, will be really good for Bitcoin, in my opinion. If they don't do that pretty quickly to get that the GDP down, like, a moment is coming of like, like, sheer terror. Like, people are going to be like, oh, like, holy cow.

Like, so capital's leaving. rates have stopped going down. Inflation's picking up because, oh, by the way, the tariffs are, they're not being absorbed by China. China's telling American retailers to, you know, bugger off. And so those are, oh my God, where's that money going to go? You know, some of it will go to, you know, what we see. But I think it starts going into Bitcoin.

I think that'll be a really interesting moment when you start seeing, you know, not just some outperformance, but a literal divergence. Because look, like, we saw that with, gold forever. Hey, gold's just to play on real rates, real rates, real rates, real rates. And then 2022, they went like that and they've never come back together. And that makes perfect sense. Because once you go, once you cross the Rubicon and we did, you don't come back. And I, so I think we're going to cross a Rubicon with the NASDAQ and Bitcoin. That's all it is for me. It's just, you know, I've got clients that are sort of all across the board in terms of

like time horizons. And so I try to be, I got tell them what I'm doing. I've got a longer term time horizon, but I want to, you know, I was reflect, like, hey, if you get a short-term time horizon, like, I think NASDAX's going down and maybe relatively rapidly. And in the short run, that's probably not going to be good for Bitcoin. And that's what that's a reflection of. That has nothing to do with anything other than that. So it's just, it's long-term bullish still, short-term, a little bit more bearish. But when it comes to, like, the world understanding what Bitcoin is, like I don't see Bitcoin as a risk-on asset or even like a risk-off asset. It's just like a forever asset for me. Do you think it's going to take a moment of

this like crisis to convince the world that that's what Bitcoin is? I think it's going to take that to convince Western paper traders, Western traders, right? Western short-term traders. Because I think if you go to the average, I don't know, emerging market participant who's, you know, live through a high inflating, you say, hey, would you be interested in money that can't be confiscated? You can move anywhere globally and it hedges your, you know, inflation. And they're like, yes, please.

And twice on Sundays, right? Like, and, like, what I'm discussing here, really, you know, and this is blasphemy to say, blasphemists to say, we're talking about the United States of America heading towards an emerging market sudden stop crisis, right? Like, that is capital leaving, rates up, inflation picking up. It's terrifying. It's terrifying. I've never lived through one, but my understanding and reading about them in emerging market is like, yeah, you get your money. of dollars if you can. You get your money into gold if you can. You get your money into Bitcoin

if you can. And I think that's kind of like the, you know, sort of, you know, I jokingly said this the other day to someone on X. So like, like over the last 20 or 25 or 30 years, like sort of, you know, it's, you know, a good way, a good theme or narrative to fade, you know, to bet against and make money is the narrative of, well, it's different this time because we're America. so all the history won't matter. And then they're like, oh, wait. You know, I know, I know, I know home prices have never fallen nationally.

Oh, oh, you know, printing a bunch of money won't be inflationary. Oh, you know, Afghanistan is the graveyard of empires, I know. But, oh, you know, hey, fighting Russia in their backyard is a bad idea, but we're a, oh, like. And so you sort of have, you, yes, these are all the makings of a sudden stop capital's leaving, inflation's bottoming, you know, tariffs, you know, tariffs are being absorbed by us, rates are bottoming, like, but we're America, it won't matter. And like, I'm current course and track unless something really changed. I think a moment's common in the next three, six months. It's like, oh, that's why all of the people in Argentina and Turkey and,

you know, these Latin America in Brazil like like Bitcoin so much. Oh, okay. Now I get it. I mean, that is terrifying because, like, I obviously want Bitcoin to do really well. Like, I couldn't be more all in Bitcoin. So this is, like, something like that would be great for me. But at the same time, I don't want to see Bitcoin do really well while everyone else is getting absolutely crushed. But that's kind of like the picture of painting, which is pretty bleak. Everything we've kind of spoken about there has been very, like, big picture. If we brought that back to, like, a more individual basis, what do you think the next, like, year, five years is going to be.

going to look like. Are we going to see inflation rip again? Yeah, I think so. My only question is, is it, is it do we get like a brief whoosh down first and then ripping inflation or, you know, they're trying to land the plane, you know, but, you know, they're sort of reaching stall speed. And once they reach stall speed, it's not like you just go down like this. You hit stall speed and you go, and so I can't tell if it's wump and then they hit the jets and go or if it's just and then, you know, pick back up. In the end, you know, that's a matter of positioning. That's a matter of leverage.

If you're unlevered, you don't care. If you're not reporting monthly or quarterly numbers, you don't care. I think it's going to be higher. And it has to be. Like, this, there's only two ways, three ways, really. There's three ways. I don't want to sell short the other. There's only three ways you get out of these debt situations historically.

I mean, we aren't in a once-in-a-hundred-year debt cycle. and you either default. And again, default is a nominal write-down of some description. And unlike any other time in history, this is one way it definitely is different this time, is the entire system, you know, the sovereign debt is the collateral backing, the banking system. So if you write down the debt, the entire banking system is undercapitalized. And so if they do that, then all of a sudden, you're going to have two choices. print the money to bail out all the banking system, inflationary, or, hey, everybody with a deposit over 250,000 in any bank in America,

congratulations, everything over 250 goes poof in every individual account. What do you think is going to happen that? And they showed during the Silicon Valley Bank thing that they're not, or they at least weren't willing to let that happen. Whether this is different, I don't know. They can't. And to be clear, like I'm being hyperbolic for the example, for the illustrative purposes, it would be much more like, you know, Silicon Valley. Okay, they were, they could have

kept selling treasuries to pay out their depositors and that would have put more upward pressure and treasury yields, which would have caused losses elsewhere in treasury and duration across the banking system and started raising questions elsewhere. And then it feeds on itself. And once it, again, these things are nonlinear. And yeah, they showed you, they just preempted that. So I, the phenomenal default isn't going to happen. Let's just take that one and move that. over here. So then you're left with inflation or productivity miracle, right? You've got to have a significant period of negative real interest rates. And, you know, it's fascinating to me. It's, it's, you know, it's kind of like the detox, intox thing, right? Well, we're detoxing.

Well, why are we detoxing when, you know, look at all the other intoxing things we did, right? Same kind of thing where we compared COVID to World War II. We compared, you know, we compared Putin to Hitler and, you know, all of, you know, oh, it's, it's like, you know, 1938 again. blah, blah, blah, blah. Great. Then why in 2020, didn't you do what we did from 1945 to 51, which is yield curve control, capital controls, bondholders get killed, real rates in the U.S. were negative 13% at their lowest. In Japan, they were at negative 60, 60% at their lowest. Australia, they were negative 30. Italy, you know, basically the losers, they were really bad, and, you know, they were only in the teens or 20s or 30s in the winners.

and, for example, U.S. debt to GDP went from 110% in 1946 to 55 in 195. And that's the thing they don't like to talk about. And there's a reason why they don't like to, right? Is this like it's uncomfortable and politically probably very difficult, if not impossible to do without a huge crisis? But like, don't give me like half of the World War II, oh, we need to do World War II. Well, finish the analog. So that's inflationary.

Like, we're going to get to that point at some point, one way or another. Like, that's coming. That's on the comp because that's the only way out of this. The last one is productivity miracle. You can, in theory, do that. The UK did that after the Napoleonic Wars and the 1800s in a wildly different time. The challenges, you know, with productivity miracles, especially now, is fat, you know, it would have to be a productivity miracle where,

people don't lose their jobs and people don't have their wages not grow because, you know, after the Napoleonic Wars, it was not a debt-based system. There was not this proliferation of consumer loans everywhere, right? So like, we get a productivity miracle where robots and AI, you know, replace 20% of the workforce and they promptly start paying, stop paying their mortgages and their car loans and the banks have trouble and they start, right, we're right back there, which then gets back to, like, all roads lead to inflation. All roads lead to the, basically, basically some sort of crisis driving the full reserving of the debt market, right? You know, ultimately, that's where AI and robotics go, is they're going to have to fully reserve

the debt market to prevent the banks from collapsing because of the productivity from AI and robotics. And to me, that's a big part of the reason I own Bitcoin and gold. But like, if they're going to have to fully reserve the banking system because of productivity and technology, and all credit to this line of thinking goes to Jeff Booth. Like, Bitcoin's actually, to me, the cleanest AI play. Yeah. By far. And there's an interesting element there where, like, if we do get this world where we have

a million, a billion AI agents and they need money, like Bitcoin also fits into that perfectly. Absolutely. But so you probably, it was probably a little over a year ago you were on the show. And you were talking about there being like a non-zero chance that we get like high double digit, even triple digit inflation. for a short period of time to try and wipe out this jet debt's GDP. Do you still think that's like on the cards?

Yeah. I think it's the like when I say like if you, when you ask me, like, what would you do? That's, that's what I would do. That's the only, you know, the longer you delay this, the more compressed and high, right? So you've got to basically go through a period. You know, we'll say it's a shape of, you know, five years of, you know, five years of, negative 12% rates, we'll say, right? Or you can do one year of negative 150% rates and just ripped the bandaid off. Right. Something like that. I don't think you can do, you know, I don't even

know if you can do five at negative 12 anymore. I think you could have gotten away with it. You think you started to do it after 20 and then they chickened out when when it got to, you know, 8% CPI officially and probably higher than that unofficially and midterms came. They, they, they Whist out, bottom line. Like paradoxically, if Powell wanted to be brave, like Volker, he would have done nothing. He would have sat there and taken the heat and let inflation get to 15, like, get the, they got that the GDP from 130 down to 117, 116. He should have let it run hot, let it get down to 80, and then crank, then done the,

the old time Volker, you know, that was the brave thing. What he did was the politically expedient thing. And I don't blame him. It just is what it is. So I don't think sort of five years at negative 12s even on the table anymore for the reasons we talked about without capital controls. And I definitely don't think, you know, 10 years at negative five or negative 3% real rates because it's just the number, you know, you're too far gone in terms of the demographics on the entitlements and stuff. But what if no one is brave enough to do this? What happens then?

Like what does the market actually do if no one's brave enough to make a decision like that? That's a good question. Like, is the money printer just the easy option, like the easy way out of for this always? I think you're just going to see more and more of what we've gotten, which at faster and faster intervals, which is you have, you know, in theory, right now we're seeing a change in behavior of the dollar because the capital outflows are overshadowing the, the what had been dominating dollar performance, which was crowding out effect of dollar markets, right? And every other time, This is like the dollar is falling with true interest expense about 100% because so much capital is flowing out over the last month, month and a half.

I think you're going to, you know, you're going to continue to get these periods of treasury market dysfunction. You're going to need more and more, you know, you'll see what we saw yesterday, which is Powell coming out and being like, well, we're going to take, you know, we're going to QT, 25 billion a month down to five for treasuries beginning on April 1. And, you know, someone pointed out to me yesterday right at the end of that press conference, he laid out that, you know, they have talked about at least. He said, we're not there yet, but it's conceivable we could continue to run off the MBS because we want those gone, but stop growing our balance sheet overall or stop shrinking our balance sheet, keeping it stable, which implies buying treasuries. While they're selling with the proceeds of selling MBS,

or rolling off MBS, which is, you know, not QEQE. I mean, the purest will be like, oh, it's not QE. But it's QE. I don't care. Yeah. It's QE. It's QE. And how many mortgage-backed securities do they have on the balance sheet now?

Like, how big is that? Oh, boy. I don't know. The balance sheet is, what, a little under seven? I don't know. I should know it off the top of my head. I don't. But is it like quite a lot of money?

Oh, yeah. Yeah. I mean, it's, it's, if I had to guess, it's probably a third of it. Okay. I would I would guess, but again, it's, I should know that number I don't. Okay. But really, what you're saying is all roads lead back to QE, I guess, and are you thinking this year? Like, is this in the short term? Yeah, I do, ultimately, because again, we keep going back to this, you know, the true interest expense number. The fiscal situation is just so problematic. You know, receipts are at all time highs. markets are just barely rolled over. The economy's softening.

Foreigners are are repatriating their capital. You know, somebody say to me today made me laugh out loud. Trump has done the impossible. He's got in Europe to act together. These guys can't agree on what to have the lunch, but they all want to build an army now. It's incredible. Yeah. think ultimately if we don't do that sort of period, we just go from rolling crisis of,

rolling crisis of, and now ultimately they will, you know, crisis better, crisis better. And it keeps getting kind of what we've seen, right, which is 19, 20, 22, 23. And pretty soon, at some point, they just kind of lose the market and it doesn't form, right? At some point, and some of it could be like what we're seeing in gold right now. We're just like, you come in, you know, gold goes up on trading days at end in Y. Like, that could be sort of the early, you know, that would be one of the symptoms of what you'd expect to see. Bitcoin separating from the NASDAQ would be another such symptom where Capels just goes, they're going to look at this, go, listen, I don't know when they're going to sort of yield curve control or, you know, but the writing's on the wall.

And so, you know, we'll see. And so I've spoken to Lynn Alden relatively recently, and she's been on this kind of fiscal dominance thing for a long time. And again, like my layman perspective of that is it basically just means the Fed's, well, the Fed's policy makes little difference. If the Fed started doing like a major QE event again, does that take us out of that fiscal dominance era? I think it's more a nod to it than anything else.

I think it's just sort of giving into it, right? Because think about the environment in which that would be happening, right? You know, a dollar that is down from 109 to 103, inflation bottoming, tariffs coming into place. Wow. That could be, you know, that'd be pretty powerful. You know, now, if they, ultimately, the way you get out of fiscal dominance is you shrink. There's two ways. you raise rates and you do the Volker, right?

You just fire and brimstone. And again, my long-term view on this, and I think the math is bearing this out, you can't do it with debt to GDP at 120% when your receipts are dependent on stocks that you need to kill to find, like, it doesn't, doesn't work. It's a snake eating its own tail. So fire and brimstone can't be done. So the only other way to do it is you got to get debt to GDP down significantly. to get out of that, because that's really the key marginal, you know, the key marginal driver. You could do it with entitlement reform as well.

We're not really seeing anything there. But if you can get the all-in debt to GDP number down with a period of high inflation, which I think the Fed sort of doing QE into, you know, tariffs, et cetera, et cetera, and capital outflows, that would do it, right? I mean, that would do the trick. I mean, it's, they're equally unpleasant in opposite directions. Okay. The last thing I'd want to talk to you about is Bitcoin backed bonds.

So we spoke about this in Nashville with Preston on the show. And that was the first time I'd really kind of heard of this idea. And since then, I don't know if you've been kind of keeping tracks on the Bitcoin side of things, but it's become a much bigger narrative. So like Brian Astaire's wrote a sort of two-page white paper. on this. I was in D.C. last week at the Bitcoin Policy Institute Summit, and Andrew Holmes did a presentation on that in front of some key policymakers, which is really cool to see. Do you think that, A, has like a realistic chance of actually happening, and B, has like a big impact in the bond market

if they do do that? I don't know on the chances. I hope so. You know, Judy Shelton has talked about this on the gold side. And, you know, if I interacted a bit with Brian and Prest, in a bit on the bit bonds thing. If you look at the chart showing that thing, there's an FFTT thing down at the bottom of the chart, I think. But I absolutely think it could make a big difference, right? And this is one of these things where it doesn't have, the inflation necessarily doesn't have to be sort of this system-wide

sort of collapse of bonds against everything. This is, you know, you basically, you write up Bitcoin, you write a Bitcoin, you put a little Bitcoin kicker. You know, would I buy, you know, would I buy a 10-year treasury with a 2%, 2-5% yield? Let's say 2 for easy amount. Would I buy a 10-year U.S. Treasury, 2% yield with whatever, 5% of the face in Bitcoin? Yeah, I'd buy that. And that means you've got to go out and buy the Bitcoin right to back at basically, right?

which means like the dollar is going to collapse against Bitcoin. Same thing with gold a little bit. I don't know what the right number is on gold to do it. It's it ain't 3,000. You know, it might be five or six or 10. But again, you know, someone asked me the same question. It's sort of a different version of the same question. It's like, when would you be, at what yield would you be bullish on 10-year treasury yields?

It's not about the yield of the bond, the price of the bond. It's about the price of the dollar. In other words, relative to gold, you know, historically, you know, If you look at the value of the dollar relative to gold, the value of our debt relative to our gold, it's dirt cheap. You know, gold is dirt cheap. You know, at $10,000 gold, reprace my gold to $10,000, I'll buy some, I'll buy some 10-year paper at 2, 2.5%. I'll do that, right?

And there's different ways you can structure that. And the same thing's true. I think with the Bitcoin of, like, the risk is the inflation. Like, I would, everything that I have said here today, everything we've talked about is there is no way out. Even a productivity miracle creates a crisis that makes the debt unpayable. So there's really no conceivable range of likely outcomes

in which me holding long-term U.S. Treasury paper, and by the way, it's true for British paper, it's probably true for German paper, et cetera, et cetera, I'm going to lose money on a real basis. And I don't like that. But if you ameliorate that risk for me by giving me 5% of the face in Bitcoin. And there's obviously Bitcoin makes it very easy,

much easier than gold to sort of say, like, right, like you can put that in, under sort of lock and key. Yeah, you can have confidence that that is there versus, you know, hey, trust us, you know. Yeah, that absolutely could be huge. in terms of bond market implications, I really haven't thought through the competitive implications,

but I would have to think it would drive capital flows here. I think it would drive spreads higher of a, it would basically force all the sovereigns to do it because I think if you weren't doing it and competing with the Americans who were, your spreads are going to blow on, you're going to have a crisis.

So it would be a very, I think it would be a potentially a very big deal. So I hope they're successful and I want, I think it makes a lot of sense. And it like, look, I've said all along, like, this ends with a change in the dollar, in the, in the structure of U.S. dollar reserve status. And that would absolutely 150% be a change in the dollar reserve status, right? The dollar would collapse against Bitcoin. Great.

Like, perfect. And oh, by the way, what's, as Bitcoin rises? what's going to get backfilled stable coins? T-bills. Like this it literally it's sitting right there at the two-yard line going in. They just have to hike the ball and

but it's there's a lot of dogma what have you and some of it might be they need a crisis to do I don't know but I think it it makes a ton of sense. I'm a big fan of the idea I think it would work. Let's hope our policymakers can see the wisdom and prudence in it. Yeah, I'm a big funny idea as well. The thing that I'm not sure of is what it means for the dollar. Like, if they did that, does that basically signify the end of the dollar as like the World Reserve currency? I don't think it's the end of it. I think it's the end of the post-71, which is, that's already dead anyway. Like, it's ironic. The last people to get that that was dead were the people in Washington and Wall Street. Yeah. Right? Like the, like the and they're finally like, oh, we can't get masks. Oh, we can't. Oh, we can't. make weapons. Maybe this is not a good system for us. Like, nice job, guys. Congratulations.

Come out in. The water's warm. Welcome to the party. Um, so like that system's already dead. Like this would just be marking it to market. And so it really would be, I find Besson's comments that he made last year that I want to strengthen the dollar system, but weaken the dollar. fascinating because 90 plus percent of people on Wall Street think those two concepts are mutually exclusive. And the way you sort of split that baby is bit bonds, gold bonds, these types, like that's one of the ways you can sort of split that baby. The dollar collapses against Bitcoin, but the dollar system strengthens meaningfully. And now you're, you will be talking about a system where Bitcoin is a de facto neutral reserve asset of sorts. If not, you know, explicitly so, being added to other sovereign FX reserve piles, et cetera, perhaps.

And if not, if they're buying American bonds that has a Bitcoin attached to it, guess what? Bitcoin's a friggin de facto reserve asset just like gold was pre-71. And so it would really be much more like that pre-71 reserve status where, yes, the dollars is a currency, but guess what really is? Bitcoin, right? Bit bonds, right? You're buying those bonds. You ain't buying those bonds for the freaking dollars. You're buying those bonds because the dollars plus the Bitcoin.

Same thing with gold. You weren't buying the bonds from 45 to 71 because of the friggin dollars. You're buying them because those dollars were good for gold, where they were supposed to be as good as gold. So that would be the change. And I think that's part of the reason the political dynamic of that change. Like that's a big, that's probably a big hurdle in a lot of minds. But again, like, A, that's already, like, it's over. Like, that whole old system is no longer, it's already collapsing.

It's not in our interest. It's killing us. And if it's ever going to happen, it's now, right? Like, J.D. Vance was just talking about this this week. Like, how bad the old system was for us. Trump's talked about it. Bessonson's talking about Mirren. It's all there.

So it makes a lot of sense. It would just be a different dollar reserve system. Just to clarify, when you say it strengthens the system, you mean that's because it actually brings demand back for US-based debt? Yeah. Yeah. Interesting. Well, I hope it happens. I mean, it'd be great for us Bitcoiners.

But, Luke, you've kind of black-pilled me on the economy there, but I really appreciate the time. It's been a really good chat. Thank you so much for coming on the show again. Where do you want to send anyone before we close out? Yeah, if they're interested in hearing more about what we have to say, it's FFTT-LC.com for more information about. our institutional and mass market products and obviously on X as well at Luke Gromman, all one word. Perfect.

Well, thank you very much, Luke. Likewise. Thanks for me on, Danny. It was great talking to my friend.