What Bitcoin Did - Is The Fed Lying About Inflation? | James Lavish

Episode Date: July 8, 2026

"They will allow inflation to run hotter than they'll admit to." James Lavish is co-founder of the Bitcoin Opportunity Fund and author of The Informationist newsletter. In this episode, we discuss Kevin Warsh's first months as Fed chair and whether the Fed is about to change how it measures inflation. We get into the inflation task force, the trimmed mean PCE, why the 2% target was always arbitrary, and how the balance sheet is quietly expanding through treasury buybacks and QE light. We also cover credit card delinquencies hitting 2008 levels, the K-shaped economy, whether the Fed is hoping AI bails them out of the debt problem, the circular AI trade, and why James is confident Bitcoin will be back at all-time highs within 12 months. THANKS TO OUR SPONSORS: ANCHORWATCH BLOCKWARE LEDN BITKEY SWAN CAPE FOLLOW: Danny Knowles: https://x.com/\_DannyKnowles or https://primal.net/danny James Lavish: https://x.com/jameslavish

I wouldn't want to be in Bessent's seat trying to manage all these deficits and just watch Congress continue to pile on more and more spending have absolutely no solution for Social Security, which I've paid into all my life and suddenly they're talking about, oh, we're just going to start cutting it. What do you mean cutting it? It's not even keeping up with inflation. Are you kidding me? They have a pretty big problem in front of them here. And it's obvious what the solution is. It's just how are they going to do it? What acronym are they going to put on it?

And can they get away with it in a way that doesn't cause a massive spike in the separation of wealth in the short term? Another thing that's happening, Danny, is people are, they have fully 100% embraced the debt-based economy. And they live on debt. The first quarter, New York Fed numbers came out. And credit card delinquencies, 90-day delinquencies are, they're matching the 2008 levels now. Let's talk about the Fed, James. I have this. It's been super interesting to see what's happened since Walsh has come in

because it's not been what I expected. I don't think it's been what most people expected. But one of the most interesting parts of it that I've been watching and I have an inkling as to what's going to happen next is, are they going to start lying to us about inflation? And when I say lying to us, we already know that CPI is like a bit of a cook number, but they've got this inflation task force now

and are they about to start sort of overtly lying about what's happening? I mean, I talked about this a long time ago where I think we're so used to the 2% inflation number. We've just become conditioned to it. It's a frog boiling, you know, kind of just turn up the heat a little bit. Yeah, inflation's kind of normal. You need inflation because you need people to spend money for goods in order to keep the economy going, all that. You get people to buy into it. I had an argument with somebody about this, you know, years ago about how inflation is just,

it's insidious. You don't need it. It's just part of a debt-based system. It's what it's a reality. And, you know, people become conditioned to it. So once you get them to that level and we've, we've talked about this before, how the, the Fed was asked, Powell was in a congressional hearing and I can't remember who asked him, but they were like, you know, why 2%, like, where does that come from? And he gave this long, drawn-out answer that had to do with the neutral rate and everything. And it was like, he just completely obfuscated the answer, which was because that's what we can get away with. You know, it's that people don't notice it. Three, four, five, six percent.

You start noticing that come out of your paycheck because you go down on the street to get groceries. And you're like, oh, man, that's a lot more than last month. And my wages haven't gone up yet. And so I'm like, I'm now suddenly behind. And so 2% is, there's a saying it came from your area of the earth where Australia decided in the, I believe it was in the early 80s that, you know, they kind of, they stated that number. I think it was New Zealand. So I'd never heard this before.

That's right. Alan Farringson wrote an article recently and mentioned that's the first time I'd ever seen it. But apparently it was like a central banker in New Zealand who got asked in an interview on TV and just said 2%. And that's where the whole mythology around 2% started. Yeah. And I don't know if it became, it was because that was, that was kind of matching the, the, the expansion of the gold supply for mining. But in any case, I wrote about this a long time ago.

I said, look, people are conditioned to 2%. They're going to kind of say, yeah, somewhere around 2 or 3%, and then eventually it'd be somewhere around 3, 3, 4%. And they'll just kind of let it slide. And people are like, oh, well, inflation's, bit hotter now, whatever, but then they just get on with their lives. And part of the issue here, Danny, is that when you have an oppressive fiscal system like this, people are struggling just to survive. Like, they don't have time to dig into why this stuff is happening and I understand it.

They're just trying to be like, what do I need to do to make more money to feed my kids, put clothes on their back, pay for the car, pay for the rent, and just keep going. They're just, they're inundated with with or they're just overwhelmed with that need and then you know the two working the the two working spouses and um you know double salaries and now you're paying for child care you like it's just it's overwhelming so the answer is that's a long way of saying yes I think they're going to change the definition now I thought that they would kind of gravitate towards a 2 to 4%, 2 to 3% range. We're going to be on there.

Because it's really hard to hit a target and it's subjective. We're going to call it a range from now on. That seemed like the shortest putt to me, but changing which measure you want to use. So Warsh has been quoted as liking the trimmed mean PCE, which is the, it's the other type of CPI, the PCE. that's the pricing index that measures goods and services. And the trimmed mean is you're just throwing out the outliers.

So if energy is way up on one month, one month, you throw it out. If rent is way up, you throw it out, you know, and that way you get to a point where like, ah, well, those are kind of outliers. The problem with that, though, is historically, it's been kind of a canary in the coal mine that, oh, energy's way up, that's going to push everything else up or housing's way up because of something else structurally going on. And everything's kind of moving that direction. And so it ends up being that it's a lagging indicator. And then when they're way down and you throw them out, well, it's a lagging indicator the other way. So over a long period of time, sure,

it smooths it out, but it misses moves. And since we're already in, we're using data it's already lagging. So now we're lagging the lag. And then not only are we lagging the lag, but then you've got these meetings that are lagging that and their decisions. And once you start putting something into place, then the effects of that is lagging. So it just produces a mess like we saw in 2020 to 2022 when we printed all that money. Goods and services started going up from price. They blamed it on transitory inflation from bottlenecks of, you know, manufacturing and supply chains. And they were wrong. I mean, flat wrong. And, and way, like, way behind the curve. So that is kind of the concern here. And one of the things that he said he's

going to do is, like, with this way, a new way of figuring out inflation is go back to what he He says first principles. He starts a task force. But what do you think the first principles he's trying to get to are? Because I don't think, I don't believe that he's going to get back to the sort of the first principle definition if me and you sort of started talking about inflation. Well, I think he's saying first principles, he's talking about, okay, let's look at the market as a whole and dynamics around it. And you cannot deny that AI can be disinflationary or deflationary. Like you just can't deny that. It's, uh, it now, whether or not that flows through to pricing remains a pretty big argument because of what Lynn talks about all the time, which is fiscal dominance. And when you have the government paying for goods and services up the wazoo, and we're running multi-trillion dollar deficits on a, on the back of $39, almost $40 trillion of debt servicing that debt, you know, then, having to reissue all that debt, that's just borrowing upon borrowing, and it's driving the economy. And so first principles would say, yeah, but this is all going to be disinflationary, or it's going to be deflationary at some point because you've got these LLMs that are going to be doing the work of multiple people, and especially when you get into agentics, you know,

where you've got agents, everybody's got an agent. And instead of me hiring, you know, accountant to do my to do my books for my business and accountant to do my taxes, I can just have somebody come in and check the work of the AI to make sure it's right, check it off, and, you know, pay him a smaller sum of money. And so it'll take up whose jobs. It'll take up the jobs of the people who are working for him, compiling all that data and putting into the models into the, you know, the programs to kick out the numbers. That's all done automatically now. And so, obviously you're seeing layoffs at places like where they have data, you know, entering or, you know, just simple analysis.

You're seeing a slowing hiring there. Does that mean that we're going to lose all the jobs? No, but you could see how that becomes, like you're doing more work for less effort, clearly. However, the money is still, it's going to be spent one way or another. I'm going to spend it on an AI agent or I'm going to. to spend over here on a purse and maybe spend less on the agent, obviously, but this is going to go into Anthropic or Open AI or, you know, Grok. And then the next thing you know, you've got

an increasing separation of wealth. So it's just the, I hear him on the first principles. I get it. I agree. We should be looking at first principles, but you can't parse out the principles. You've got to, you've got to take them as a whole, right? You wouldn't reuse a Bitcoin address, so why does your phone broadcast the same identifier for life? Every sim has a static ID, and carriers, ad networks and bad actors all use it to track you. The big carriers have been caught selling that data over and over again. Cape is America's Privacy First mobile carrier. Their identifier rotation feature changes your ID every 24 hours, so you look like a different subscriber every single day.

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Like, Block have already got rid of a load of workers. I saw BitGo have got rid of a load of workers. Like, this is already happening. So is it that he can ignore inflation numbers for now, knowing that disinflation or deflation is coming in the future? I don't think it's ignoring. I think he's just putting everything aside and waiting. That's why I think one of the big reasons that he doesn't want to give guidance is because he knows that things are changing rapidly here. And it's going to be difficult to anticipate that. I can't anticipate. It's way too complex to figure out. that's just, I mean, when these things came out, Danny, when I, you're too young,

but when I had a Blackberry, which was just, it was basically a, a messaging tool, they didn't have, they didn't have screens on, they just had a little text screen on it. But when that stuff, when that came out, then suddenly I was in, and this is the, this is the late 90s. So when this came out, though, I, I, I, we, We all thought, wow, this is going to make us, this is going to make it so much easier to get work done and you're going to be able to be productive

and get stuff done in a shorter period of time. And that wasn't really the case. All it meant is that you're going to have more work piled on top of you and you're not going to have any working hours. You're literally going to be on the clock all day every day. I mean, I was trading in Australia at 10, 11, 12 o'clock at night. I mean, I was at dinner trading Australia in Dallas. And I'm sitting there with my kids.

I'm on my Blackberry. you know, trading Australia. I'm like, this is insane because at 2 o'clock in the morning, I'm getting phone calls on my cell phone now from Europe. And they're like, hey, it's going to open here. What are you thinking about that? I'm like, I don't, it never turns off now. And that's what this is turned into.

Instead of it being, oh, it's going to be a great productivity tool. It's going to make everybody work less. No, it just means everybody's on the clock now. So what does that mean for AI? I don't know. And that's why it's difficult to get a gauge of what the, what's really going to happen. So that is a long way of saying that I think that's what he's trying to do is just give himself time and say, we're going to look at the data. We're going to

make decisions that are data dependent, just like the last Chairman Powell did. And we're going to not really talk about it. We're going to see what comes in. Now, if he changes the inputs, though, and says, well, this data is a little bit different than it was six months ago because I think it's a little bit better way to look at it, he's a chairman of the Fed. That's his, you know, job is to decide what they're doing and how, what they want to see and how, how they want to digest what. So, but he's all, he's also got a job of getting everybody on the, on that board of governors and the officials, the Fed officials who are voting in each of these meetings to get on board to whatever he's thinking. And they can have a collective vote on it, right?

rather than just have a fight and then have a bunch of dissension, and it's just not going to be healthy. So I think his challenge is multifold. And so where he comes out, I believe, is not raising or lowering rates in the next meeting or two. I just don't see it happening. Could he raise rates later in the year? Well, sure, if we see a continued uptick in inflation, but I just don't think that's going to happen.

I think with a resolution in the Middle East, oil coming back down in price, producer price index numbers coming down, which means that that's going to feed through to the CPI. Remember, that's what pushes all first, because the producers start raising their prices, then the consumer, you know, then the manufacturers are raising their prices,

then the stores are raising their prices, and they're trying to get those margins and keep some sort of margin, and it passes on to the consumer. And then it unwinds backwards the other way, right? So we'll have to see what happens, but I think that's what he's going to do. And I just don't think that there's an impetus for him to act right now.

I think he's going to be sitting on his hands for a little bit. When he came in, everyone expected him to be super-dove-ish, want to cut rates. And he's actually coming very hawkish so far. Is this all strategy? Is he basically trying to be like, look, I'm not just a Trump-pun, This is still an independent thing and trying to get the other board members on side. Or is there something, is the data telling him that he can't do what he wants to do?

No, I think that that is definitely a part of it. I think he wants to be seen as independent, that he's not a sock puppet for Trump, as Elizabeth Warren called him in those hearings, the confirmation hearings. I think he wants to be seen as independent, strong. he came across as kind of hokey, you know, the way his language was just down to earth, just a hokey little, you know, we're going to have a little family fight about this and, you know.

And so I think he wants to come across as just an independent, thoughtful guy, but not going to do the bidding of anybody. Now that said, he has breakfast weekly with the Treasury Secretary. he and Bessent know each other know each other well and so

you know Bessent has his own issue here he's like I'm rolling this debt I'm rolling 12 trillion dollars of debt in the next year and then I'm going to have to do it again the next year and next and it'll be 14 trillion

so he understands that every single month that they keep fed funds high is it just it continues this ongoing deficit and increase in

deficit because you're rolling these bonds off you've got you've got longer term bonds that are maturing along with all of these T bills that they piled up because Yellen was playing chicken with the Fed

and she screwed up not she didn't term out the debt she didn't push out to longer date and maturities when she had the chance to fare that we're looking back to, you know, hindsight 2020, but she also saw us print $5 trillion. And she had been the chairman of the Fed. She must have known that was inflationary, but she got behind the curve there.

She didn't just hurry up and get out on the curve a little bit and on all those months and quarters that she could have issued longer term debt at lower yields, but she didn't do that. And Bessat was highly critical of it during the campaign about that. But now he's in the same spot. So do you think he's going to have pressure on the Fed and on Warsh to, hey, we got to get these rates down? Well, most people think that that would be the case. However, if you recall, when Powell did cut rates by 100 basis points right before the election, what happened to the 10-year treasury?

The yield went up 100 basis points. Why? Because the bond traders, they didn't swallow it. They called the bluff. They're like, no, no, no, no, no, no. You're going to cause inflation here, and that means that I'm going to have to be paid more yield on the longer end of the curve to get a real yield on my money.

So you can cut rates all you want, and you know and you could talk about how the treasury how the how the mortgage rates are going to come down if you cut rates but it's not the case and the the fact is if you just look at the the 10 year hovering around 10 or four and a half percent here it's it's gotten up to just about 5 percent and it's backed off but you know the the reality is the bond traders understand that we have a, we are in fiscal dominance and we have an issue here of having to to issue more and more and more debt to pay for all the, you know, the deficits that we're running. And so they're not buying it. They're just not biting on that hook. And so what happens from here? Well, that's why we

have to be watching, Danny. I think that this rate, it's almost noise, almost, that all this rate talk is noise because the real issue is when do they come in and start buying bonds again. Now, they're buying T bills to replenish bank reserves and in order to make sure that the general account is topped up. But they've backed off that a little bit. And the Treasury is buying what's called off the run paper in a regular Treasury buyback, which is not, it's not regular in any way, shape, or form. Yeah, there's the balance sheet.

Exactly. So we have to watch that. And you saw it's ticking up here since the end of last year. And it's taking up slowly, but it's not rolling off. So what are they doing? Well, every single mortgage-back security that matures are taking, instead of taking that money and just taking out of the system, they're going back and using that money from that they're getting from, you know,

basically the Fed is getting money from the Treasury for the maturity of these, you know, basically they're getting money for the maturity of the bonds, the T-bills, and they're getting money for the maturity of these mortgage backs, and they're turning around and taking those mortgage-back money and plowing it back into bonds and into T-bills. So that's why this is still expanding. Because, you know, at a lower rate, it's not expanding at a higher, but if you split out the treasuries versus mortgage backs, you'll see that the mortgage backs are coming off and the,

and the treasuries continue to rise. So as a, you know, as an asset split. But that's what's going on. So this is what we're watching. We're watching that closely to see, okay, when do they really start, when do they really start buying here? And are they doing some sort of yield curve control, or, you know, Operation Twist. Because go back, if you leave that right there, Danny, just leave that, leave that right there. Go, go right before 2020. You see it a little hump there? Yep.

Yeah, that's where we got into that. That's where we got into the repo crisis, where there's the shortage of dollars. Well, guess what's going on around the world right now? Look at the, look at the U.S. dollar, you know? It's not at all-time highs, but it is up. over 100 bucks again. And so, you know, that's a signal that there's a shortage of dollars around the world that other central banks need dollars.

And so, you know, what is the case now is that you're watching Japan. The whole Japan experiment is, man, that has gotten to a point where this is a real issue. You've got rates going up. you've got the yen collapsing in the face of it, which is telling you that basically it's telling you that investors in Japan, they don't believe that the rates are high enough for them to be compensated for the risk of continued expansion of spending out there. And so, you know, I'm not saying the yen is collapsing,

but I'm saying the confidence is falling. falling in it and people don't want to be holding in. And so that is, that's another issue. So, and you're just seeing all these things play out in real time. I would not want to be in either of those seats. Let's put it that way. I wouldn't want to be in a percent seat trying to manage all these deficits and, and just watch Congress continue to pile on more and more spending, have absolutely no solution for Social Security, which I've paid into all my life. And suddenly they're talking about, oh, we're just going to start cutting it. What do you mean cutting it?

It's not even keeping up with inflation. Are you kidding me? You know, like you've got to be joking. So you'll have an uprising here if you do that, especially with people who really, really, really need it. But so these guys have a, they have a, they have a pretty big problem in front of them here. And it's obvious what the solution is. It's just how are they going to do it? What acronym are they going to put on it?

and can they get away with it in a way that doesn't cause a massive spike in the separation of wealth in the short term? See, the thing I don't understand about that, because obviously you're saying they can print money and that'll get them out of this whole. And I can understand from say percent's point of view why that would be attractive. But if the Fed is independent, why would Walsh want to do that? Because his dual mandate is inflation and jobs, right? So like- Pricing jobs, yeah, exactly. So and at the moment, like,

percent's in this problem where he's rolling over debt, it's costing him an absolute fortune. But why does Walsh care about that or why should the Fed care about that? Why do they, why do you feel like they have to be sort of accommodative there? Well, this is a great question. This goes back to first principles. Why does he care about inflation? Why?

Why does he care about inflation? And, you know, so some people have to deal with it for a little while. Why do they care about it? First principles. They care about it because his, job is to instill confidence in the U.S. dollar, period. The job of the Treasury is to do the bidding of Congress, figure out a way to issue debt and borrow enough to cover all that spending, or to manage the Treasury in a way that if we were in, somehow we got into, we got away from

deficits and we had a surplus to manage that surplus with investments or whatever. But that's That's not the case. The case is the entire balance sheet of the treasury is, you know, the only growth that's happening there right now is on the debt side because we're not repricing gold primarily. You know, but so when you look at the, you look at the Fed and you look at the Treasury, those are the first principles. That's what their jobs are to manage the spending on the Treasury side and to instill and keep confidence in the, the dollar on the Fed side. And so, you know, when the Fed has to find a way to do that, so they use inflation, the inflation, he's got, they know they must manage the, they have to

manage inflation and have inflation. There's just no way around it with the debt laden economy that we have, or the system we have here. I mean, the math is just working heavily against these guys. And I think what they're hoping for, Danny, truly, I think these guys are both hoping that, man, this AI will be so disinflationary that we could just keep printing money and, you know, buying debt and we're kind of back to our way out of this because what we'll do is we'll have a productivity miracle where you have an increase in productivity without having to increase all the spending. I don't get to that math myself. Why not? What stops you from getting there? Well, I mean, think about it. If you have a productivity miracle, meaning there's, so what, you have

robots and AI basically doing all this work for very, very, very little cost. And then prices go down, you know or like if you had like if you had a deflationary shock to the system which again I think that would take us getting to AGI you know or you would go or close to it where these computers are just so much smarter than us that you know that we're not that we can't be employed but what are you going to have you're going to have universal basic income I mean, you've got, on one side, you've got, uh, Elon Musk saying that people are going to be paid a lot of money. Like everybody's going to be wealthy.

You're going to have an abundance of high income. Universal high income, right. So, um, but, you know, how do you, so how do you get there without pain in the middle? How do you get there without unemployment, without a spike in unemployment benefits and, and costs the government there? and then a massive spike in deficits and spending there. I don't know. And then what are you going to have like a handful of companies

paying all the taxes that the government needs to take in to pay down its debt? I just, I can't get to the math. And maybe it's because I'm not smart enough. But it just, I just don't see how the productivity miracle would get us there. It's interesting. have you ever seen, have you ever seen this chart? I'm going to pull up, I'm going to pull up two things, actually,

and see if you've seen these, because this is really interesting. I'm going to pull them up together. And this is kind of what, I think this is what everybody's afraid of. And this is a great article. It was years and years and years ago that I read this, I was saying, 2010 or 12, something. And I was like, wow, that'd be really interesting if that was if that was real. And I couldn't, you know, I just kind of dismissed it. So, but you see this? So the intelligence

staircase, have you ever seen this? No, I don't think I have. Okay, well, down here on the second step of this huge staircase, you've got an ant, right? Then a little, like a few steps up, you've got a chicken, then a couple steps up, you've got a monkey. And then a couple of couple steps up in there, you got us, the human, right? And it seems like, I mean, we're, you know, so much smart in this ant. And we're, you know, about eight or ten steps above it, give or take, right? And then when you, but this is the scary part. The scary part is, that's artificial general intelligence up there. And we're down here. So this is what's scaring people. And this is what I think is, you know, when we get to there, I don't,

how are we going to handicap what happens there? I don't, we're not smart enough. You know, we're smart enough to know that we're smart. And there's almost no point at that point. Like we're not, we're not at the wheel at that point. What's that? We're not at the wheel at point. It doesn't even matter what we think. We're not at the wheel. So I don't, how can you say that we, we don't know what's going to happen. We're smart enough to know that we're nowhere near what artificial general intelligence going to be. But I mean, so anyways, that was a little bit of an aside. But the point is that I think these guys have a very difficult path ahead of them,

which means that they're going to move slow. That's what I think they're just going to move slow. And that's what I'm expecting. I do not expect shocks. I don't expect them to come out and do something without, you know, just as a surprise. I don't expect wars to just come out and, oh, Fed, you know, I'm sorry, Trump said to cut rates, so I'm going to cut them. Like, I just don't expect that.

I would expect it to happen on the balance sheet side before it happens on the rate side because the rates are just so front and center. Nobody's like, who's talking? Do you see anybody on CNBC or Bloomberg talking about the balance sheet of the Fed, how it's been expanding, how they've been buying T-bills, how they've got that

treasury buyback system going, that they're buying old paper to get, you know, more money in the system back, you know, more velocity in the system by having paper moving. No, they don't talk about that.

It's too confusing. It's too many acronyms. It's just, you know. So that's where I think it comes in. That's my expectation. Do you want to pay less in taxes and stack more Bitcoin? Of course you do. Well, by mining Bitcoin with Blockware, you can. Under Section 168K of the US

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That's anchorwatch.com. Let's discount the artificial superintelligence for a minute. And let's just say they did get a productivity boost from AI that did kind of give them some breathing room and meant that they could kind of tread this path a little bit more carefully and get to where they want to be over the next five years. What does that mean for the real economy, like for real people? Is it just more of an exacerbation of the K-shaped economy? Is it more permanent underclass and more people that do well who are the asset holders? I think that is.

I think it is the people who are in – that chart I showed you is what people are scared of, right? And they don't want it. They don't want it. They don't want it. They don't want it. I don't want it. I don't want it. And you need to embrace it.

For example, my son was working in cybersecurity. Got out of college, got hired pretty quickly. and was working in cybersecurity. He was on what's called the Red Team, where they get paid by companies to find ways to break into the companies and show them where their weak points are, their vulnerabilities.

And his company tragically shut down because of a death of the founder. But when he went back to go get hired again, I was like, so what are you going to do? He's like, there are no jobs, none. He said Anthropic came up with something that they don't even need us anymore. And he said, so when I'm, so I said, well, what do, what's your plan?

And he said, I'm going to embrace AI and figure it out. And I'm going, I'm going to be in that world somehow. And I'll use my past skills to get there. And, you know, went head first into it, Danny. Like for eight months, been doing nothing but learning and studying and learning and studying, you know, living on a ridiculous shoestring budget to get there. And he got hired to, so what he's doing is he's advising an industrial company in Dallas Fort Worth on their AI hardware because they need help to understand it.

So there's a perfect example of he's not, he's not. coding. He's not, you know, he's not a prompt engineer. He's not using AI to come up with marketing tactics. He's just, he understands the technology well enough and the, and the hardware around it to help this company get to where it needs to be. Well, that job wasn't there two years ago. One year ago, there was no job there. They literally created that job and hired him. And so that's what I mean. So the people who embrace it, they're going to stay with the economy. They're going to going to keep going. I mean, the internet changed things. Yeah, it meant you didn't need the same kind of transfer. It changed the way big box stores operated, retail stores operated. So it changed it.

People lost jobs. But then they regain them in other areas. And other people realize, oh, now, okay, drop shipping and Amazon and Walmart and like everything's being sent out because I've got just, okay, I'm going to be working in a different area now. And so you just, you just, you just, you just, just have to adjust. You have to embrace it and adjust. And so the people who do that, they're going to continue working, I believe. I think it's going to create jobs that we can't even imagine right now. And so, but again, I do think you're right that these big companies, the people who are involved with them, the people who are doing well with AI are doing the jobs of four, five, six, eight people. And so now they're getting paid the same as two or three

people would get paid. And so they're doing well. And people who have assets and all the big companies, the wealthy people, the K-shape, the top leg of the K is going to continue to grow. And that's not just productivity. It's also because of just the sheer amount of money they're going to have to print. And what does it do? It raises asset prices. And then it feeds into the economy and it feeds into the consumer goods later. But that's kind of what, again, what I expect. And that does concern me for the economy as a whole. It's a good time to be a high agency person.

That's awesome. Your son's done that, though. That's cool. If you take AI out of the economy right now, how is the US economy doing? Because you hear lots of numbers about how it's performing quite well. But is that all being propped up by these AI companies? No, it's being propped up by the,

the asset holders, you know, the boomers, the older people and the people who have assets, Gen X, and some of the, you know, millennials who, who, um, are doing well enough that they're generally, they're, they're driving the economy. Um, the, you know, it, I don't know what the exact stat is, but it's, it's, it's pretty good rule of thumb to say that 80% of the spending is coming from 20% of the economy, something, you know, along those lines, the, um, the 80, rule, but it's, it's, that's what's happening. And you could see it. When I, when I go out to dinner, I mean, I'm surrounded, it's not a bunch of kids. You know, you used to be, I have a pretty good mix of people in a restaurant, young people on dates, maybe in the 20s and some 30s and maybe a

party of, uh, of 10 people like together that are having a girls night out or a guy's night or just whatever. It's just like, I don't know what it's like around you, but around here, it's like, it's just a bunch of people my age and older. And you know, you look around, it's like there's a lot of silver hair in the restaurants. Like there's, it's just an older demographic and it's the demographic who has assets. And I think that they're driving the economy. It's just you can see it every day.

And so, you know, I think that, but that's really what's been happening. And wages have lagged, but another thing that's happening, Danny, is people are, they have fully 100% embraced the debt-based economy and they live on debt, you know. And even if they're renting, they're using credit cards. And so again, here's another number that's severely lagging. The first quarter Fed, New York Fed numbers came out, and credit card delinquents. 90-day delinquencies are they're matching the 2008 levels now. Wow. And that's with people refusing to pay their student loans.

So you've got student loans defaults, which is expected. People are just like, I'm not paying it. I can't get a job. I'm not paying it. And then the second one is the credit card. So what do you do when you start getting into trouble? Well, you're not going to stop paying your car. You're not going to start paying your car.

You need to have a car to get your job or groceries or drop your kids off at school or whatever. your first thing you're going to stop paying is credit cards. But the interesting is the credit card spending is continuing, you know? Like there's a lot of credit card debt out there. And then another thing is margin debt. You're seeing a ton of margin debt in securities. So whether or not people are pulling money out of their accounts and using margin to keep, to avoid having to sell the securities and just leaning on them.

But again, so it's either using credit, using debt, or you've got assets that you're drawing from, that you're able to keep spending. And that's kind of what the Fed has been seeing. And they've pretty much acknowledged that. So that's why they're watching unemployment closely. Because once unemployment starts ticking up, along with those credit card delinquencies, that's a toxic mix. and so that's an easy way to slip right into a recession. How can that snowball the credit card delinquencies,

student load delinquencies, like what happens, what is the sort of next thing to fall after those? You have a market crash. We have a stock market crash and then spending just seizes up because, you know, you feel great. Yeah, my Google stocks at all time high, you know.

I bought the Max 7 and I'm doing okay or, man, I got into this AI trade. I'm crushing it, you know? and then all of a sudden the market crashes and you're like oh wait hold on i'm not going to i'm not going to buy that car i'm not going to you know buy that house i'm going to pull that pull back my spending i'm going to cancel you know this this offer for this or whatever and then you just that that in and of itself i mean we've seen it happen a number of times in our career um careers and market crash just that grinds the economy to a halt especially in america in the united states we're so

we are so financialized as an economy that we cannot get away from the stock market. It's part of it. It's a central part of the health of our economy. And how, what likelihood would you put on that happening? Like what percentage likelihood in the next, say, couple of years? Well, I mean, so it's interesting because you saw SpaceX come out and the absurd valuation they've got on that thing. a hundred years of revenue, you know. Crazy. Crazy.

Then you've got Open AI and Anthropic coming. It sounds like they've punted to next year. Yeah. So why would they do that? Well, you know, remember, once they go public, all their borrowing and their debt and their contracts and the lending and all the offshore stuff, sorry, off-balancing. sheet stuff and they're lending to the chip makers or lending, like, it, it's, it just becomes

this kind of a circle. And so I'm not sure they want to show their hands on all that quite yet. But the issue here is that, yeah, the chip makers are, they're crushing it. You saw micron's earnings last week. I don't, I mean, I don't know how much that spending comes from lending from within that same ecosystem. Yeah. It's hard to tell. And that's number one.

And number two, you know, once they, once they come out and they just, they show all their books and everybody sees what's going on, the issue here is you saw everybody running into SpaceX at an insane valuation. because they just want to get into this trade somehow. I mean, I had people calling me, Danny. Like, friends and family calling me, like, how can I get SpaceX? I need to be in this before the IPO. I'm like, call your broker, man.

It's going to be, it's insane. I'm not sure I would buy it on the opening. If you, you know, if you get some of the IPO and just want to put it away for 10 years, sure. But I don't understand that. Like, apart from the vibes being really high and Elon clearly being an insane person of agency who's done really cool things. Like, what is it that people want SpaceX for? Why do they want it so bad?

And the space energy, you know, they's going to have the hyperscalers out in space where they can run more efficiently and they're going to zap, teleport that energy back to Earth, you know? So. Come on. Like, do we even know that's going to work? Like, we don't know that's going to work.

I don't, I don't know. If it does, it's world changing. Literally world changing. That's like, Tesla, you know, the original Tesla power plants. It's like completely world-changing. So will it work? That's what you're betting on, basically,

that that and AI is going to be a big driver of their earnings. But why were people doing that? Because they can't get into the actual AI. They want to be an AI somehow. The first obvious thing to do was, well, AI needs power. So go buy all the power companies, you know, the irons and the, you know, the ciphers and whoever's got contracts with AI, Google and whoever can get them energy, you know, Google's got contracts, Anthropics got contracts. You know, we've got, we've got Cormant who's got contracts with these guys. Yeah, that's real.

So that's the first step. And then what do you have? You have the chips. You got the chip makers. So people going after. anything AI associated because they can't get the actual thing. They're buying the picks and shovels and they're like, where can I get in? Where can I get in?

Where can I get in? So if these things get way out of hand because people just want to be there and it becomes bubblish, because you start seeing that circular reference within that AI economy, yeah, sure, then that could pop and you can have valuations come back to Earth. or a different earth than they thought. And so that's the one thing that worries me about this market, Danny, is it's hard to tell just how much further it can go and what exactly is going on with their earnings and all this.

So when we get, I hope that that doesn't happen and we can just continue on and things kind of settle to the right spot. And you have the AI companies come public and it all works properly. That would be ideal. We'll see. It's going to be interesting. So Bitcoin is at 64K. There's obviously a lot of uncertainty still out there in the market.

But Bitcoin over the last week or so seems to have found another bottom. Who knows whether it's the bottom or just another bottom for now. What do you think Bitcoin's going to look like over the next 12 months? Well, I actually am confident that it's going to recover the next 12 months. I think we're going to be bumping up against the all-time highs or above them. again. Look, we didn't have a blow off top like we did in the prior cycles. Part of the reason for that is it's kind of a multifold. One reason is I think that $100,000 level was a massive mental level for a lot of people. And not just new people, but oh geez, who have been sitting on this

thing from a few dollars, you're like, if it ever gets $100,000, I am selling half my stack, or I'm selling three quarters of my stack. And you saw millions and millions and millions of coins come out over the course of 2025 because of that. They're just like, it's over 100, I'm done, I'm out, pushed as far as I can. I don't know what that game was in the beginning of Bitcoin life, but there was a game that Hoddle was telling me about where it was like you put in a Bitcoin

and then you see it grow and grow and grow and grow and grow and grow and grow and and then you have to say when you want to get out and you might get seven Bitcoin out of it. you get out. But if you don't, it might go seven, seven point or zero. And it's like you missed it, darn it. You know, so you had, it was kind of like that, the old mentality. If it's up, 110, 115, 120, 125, 126. And then it started falling. And then they're like, okay, I'm out, I'm out, I'm out, I'm out. And so, and you just saw it happen. And then you had the de-leveraging event in October. Who even knows what that was, Jane Street or whatever it was that was involved there.

But that was one part of it. Second part is that hot ball of money was already moving out of Bitcoin and it entered into gold and silver and the metals at the, you know, in the third quarter of last year and fourth quarter. And then it also was going into AI stuff,

anything AI related. Yeah. And then it poured out of everything, out of Bitcoin, out of gold, out of silver, platinum, copper, everything. Just get out. Get out. Get into the AI trade. And so, and then you had, of course, the energy trade on the, on the backside of the war. So the hot ball of money has been moving around. And it has, it left Bitcoin. The good news is, because it didn't have such a blow off top, that the downside, that drawdown was kind of muted for Bitcoin. It sounds brutal to people who just got into it and they're down over 50%. But like this was actually not so bad. Yeah.

You know, it wasn't 85%. So, you know. It's funny, though, because like, the actual, the price hasn't been so bad. Like, 50% for a bear market is nothing. But the sentiment's been terrible. It's been brutal. Like, maybe the worst. People attacking each other in the Bitcoin community.

It's been brutal. Like, you know, and calling each people, like, people you know, people you know, calling other people unethical. It's like, oh, man. Like, seriously. What are you doing? So, but I do think that, you know, when you look at things like the power law, you've got people coming out, say, oh, the power law is broken. It's way off.

It's not on the power law. And it's like, it's broken the power law's support. And it's like, hold on, the power law does not have support. It's never been support. You know, it. So it's just, it's that regression. And it is log, log. and it's from past price is determining what it looks like as it grows and will it get back there

yeah i do think it'll get back to the to that mean um can it be one or two standard deviations off well one one and a change and change but it's it's been nowhere near a collapse of the of that the power law pricing. And that's a pretty good North Star at this point to see where you think it should be. And so if you look at that, the various models say it should be somewhere around, you know, $180,000, next year, right? So at the end of 27, if you look at the mean. And so, yeah, I like Porcopoulos. Yeah. So, you know, um, do I think, do I, has it been, as it, has it been disconcerning? Or has it been disappointing?

Yeah, it has been. Disconcerning? No, it's just what it is. And if I, I, so to answer your question fully, I think if we don't have a drawdown in the market, if we don't have a correlation to one event, I think we, we have seen bottom that said, this is Bitcoin. And if it drew back to 52,000 or 47,000 without a correlation to one event, it wouldn't shock me. But I would say it's a better than 50% chance that it won't at this point.

But, you know, it's Bitcoin. You just got to stomach it. You just never know. The interesting thing to me is like I obviously totally agree with you when you say the hotball of money has left Bitcoin. And I don't think it was really that interest in Bitcoin for the entire 2025 cycle. Like it was never, it wasn't like previous cycles we've had. The interesting thing to me will be, if the AI trade does roll over, I mean, at some point it's going to, who knows if that's a decade away or a year away, but at some point that trade will roll over. Yeah.

Like where the money goes then, because like you look at other equities and I don't really see the narrative for them. But then if you look outside of that, things like gold, Bitcoin, like the sound money trade seems like the debasement trade seems like the obvious place for money to start moving. Do you think that's the likely outcome of something like that happening? It's the obvious place for money to start moving when you see that Fed asset, when you see the Fed assets and the balance sheet expand again. That is the obvious place. Or if you see a, you know, structural problems in debt or fixed income, I would expect for there to be a reaction and a it would be a visceral reaction from

the Treasury and the Fed. I think that they will do what they need to do to stabilize those markets. And so that's really the thing. So if you see the stock market crashed, they may let it, they may let it simmer out a little bit. But if you see it take down the bond market with it, no, that's going to be, there's going to be printing immediately behind it. So, but you're looking for signals in the background. So one thing they could do is they, the Fed could take out the supplementary leverage ratio rules and remove treasuries from there.

And then suddenly banks are buying more treasuries and holding more treasures on their books. And what is that? That's inflationary. You know, you could see some sort of acronym come out in a regular treasury enhancement system, you know. And so next thing you know, they're buying treasuries. And they say, well, we're going to be buying seven years and, you know, seven to 15 year treasures. You're going to be buying those for a little bit.

And it's because of this, this and this. And it's a regular operation. There's nothing to see here. If the balance sheet is expanding, it's not regular. That's inflationary, meaning it's debasing the currency. And so those are obvious. kind of flags for you to get back into those trades. Not that I've gotten out of them. Yeah, me neither. It's, I'm too bad at trading. I just buy and hold Bitcoin. But when

QE comes back in whatever form it is, might not be called QE. Do you think we could see yield curve control and go the full sort of Japan playbook route? I do, but I don't think it would be, I think it would be much less obvious than what Japan has been doing. just think that we'll obfuscate it in some way, shape, or form with acronyms and programs. And I just don't, I don't think it would be so obvious. But functionally and structurally, it basically be the same thing. The question is, how much would we be buying and for how long? And, you know, and whether it's like Larry says, it's whether it's a collapse of the markets or economy or confidence in

the treasury and next thing you know, you've got the big print. That would take a black swan event that we can't imagine. But, you know, I couldn't imagine six years ago that they would insist that be locked in our own houses for months of the time. So who knows, who knows what they come up with. But, you know, I just think it's more along the lines of a slow, continuous, quiet print. And they move these programs around to keep it going,

and they're active. They dance around it. I don't think it's going to be in your face, big, obvious debasement. I think it's going to be a quiet, steady debasement like we're seeing now. Right now it's just, we've got QE light going on. And I think it would be QE light to medium for a long time. And they will allow the,

inflation to run hotter than they'll admit to, which is the whole point of the conversation we started with, which is what really is the inflation rate? Go look at your own bills. Go look at what you were paying for last year and compare it what you're paying this year. Look at the same things. And look at your grocery bill, your gas bills, your, you know, air conditioning, energy, and don't forget insurance. That's likely the biggest slug of it. health, home, car, like that stuff is just skyrocketed. Child care, I mean, you can't tell me it's that's 3.5%. Please.

Zero chance. It's absurd. Zero chance. So the best thing they could do for them is quietly allow inflation run hot. You know, quietly let it run 5, 7, 9% without people really understanding it somehow. to inflate away their debt. Yeah. What's that? To inflate away their debt.

To inflate away the debt. Yeah. Inflate away the obligations. Not a nice outcome. It's a mess, man. I can't wait to do a show where we talk about the economy. You're like, damn, things are looking pretty good. Great.

Is that ever going to happen? Things are looking like England football. I mean, I'm hopeful. I get hopeful every World Cup. But this year, I actually think it's our year. I think we've got it. James, this. been awesome, man.

We'll have to, I wonder I don't know when I'll next be in Vegas, but I've not seen you in a while. We'll have to do one in person at some point soon. Definitely, let me know when you're here again. Please. I'm going to be here for a long time. Let's go. Well, you've got the USA

World Cup match to watch, Belgium. I think you're going to win it. Belgium, not the team they were a few years ago. I think you got this one in the bag. Yeah, they're still tough. But yeah, got family coming over. We're going to go watch it in the pavilion's going to be good. Awesome.

And Trump's done you a favor. He's got your striker back. That's insane. So insane. I don't know. It's also objective. We'll see what kind of red cards come out tonight. Yeah.

As long as he scores the winner, then I mean, I don't know. People in Europe will be having a meltdown. It's hilarious. Thank you so much, man. We'll definitely do this again at some point. I appreciate the time. Yeah. Thank you, Danny.

appreciate it and look forward to the next time. Awesome.