What Bitcoin Did - The End of Fed Control? Bitcoin & Macro Outlook | Checkmate, Joe Carlasare, Matthew Pines

Episode Date: September 30, 2025

Checkmate is an on-chain analyst and founder of Checkonchain, Joe Carlasare is a Commercial Litigator and macro commentator & Matthew Pines is the Executive Director at the Bitcoin Policy Institute. They explain why the four-year cycle may finally be dead, how ETFs and institutional flows are reshaping Bitcoin’s volatility, and why 95K has become a critical “Hodler’s Wall.” We get into gold’s resurgence and how central bank accumulation signals a structural shift in global finance, and how fiscal dominance is eroding the Fed’s independence. The roundtable also dives into the politics of debt, the prospect of yield curve control, and the AI-driven capex boom that could both fuel growth and deepen inequality. In this episode: - The end of the four-year cycle - ETFs, flows, and the new volatility profile of Bitcoin - The Federal Reserve & fiscal dominance - AI & the future of productivity THANKS TO OUR SPONSORS: IREN RIVER ANCHORWATCH BLOCKWARE LEDN BITKEY Follow: Danny Knowles: https://x.com/_DannyKnowles or https://primal.net/danny Checkmate: https://x.com/_Checkmatey_ Joe Carlasare: https://x.com/JoeCarlasare Matthew Pines: https://x.com/matthew_pines

For as long as I've been in Bitcoin, this idea of the four-year cycle has been this sort of ball and chain, I think, on the Bitcoin price. If you can get rid of that narrative, I think that has very profound implications for how Bitcoin will trade into the future. The one lesson I have from Bitcoin is when a bunch of hyper-autistic nerds become obsessed with like an early part of an exponential curve, right? Like, don't fade them. The impact of transformative AI is going to be hard to underappreciated. and it's going to have downstream effects and everything else, right? Everything in terms of how we measure inflation statistics,

how we measure GDP. And that will become, I think, the defining conversation of our political lives in the next few years. Plan A is just the system as it is continues indefinitely. The question is, what's plan B? Governments have to have plan B. Monetary regimes tend to change on generational timescales.

And if you're looking out for the national interest over 50, 100 years, you've got to think about, okay, what's our backup plan? We belong at 150. And, you know, the journey is we've kind of proven a trillion dollars back in 2024 market cap. I think we've now proven two trillion. In my view, three trillion is kind of the next move. And then it's just a question of how many more trillions? Let's get going. We've actually, we've got Joe to thank for this interview happening.

After we spoke in Vegas, Joe was saying we should put together like a roundtable conversation. And we've got Joe here on the macro side, checkmate on the Bitcoin side, and Matt Pines on the everything geopolitics side. So I think this is going to be a good one. But I think we've got start with Bitcoin, over 114K again. Checkmate. Are we back? Yeah, it's an interesting dynamic. So the thing that I've been looking at the most right now, here's some stats for you, above the 95K level. So 95K is a real important line in the sand. I've been describing me as like the Hodler's wall. Because if you look at the distribution of supply, 30% of all Bitcoin have a cost basis above 35K. But that 30% of supply, if you price it based on when it was like,

last moved as like a dollar's invested, it's more than 60% of the total wealth that's been invested in Bitcoin, above 95K. So if you think about that from like a sentiment standpoint, first thing, we've had to stack a sell side, right? The amount of sell side pressure that this thing has absorbed above 95K, big money has come in to absorb it. If you drop down below 95K, 60% of your wealth invested is now looking at their portfolio and saying, did I just buy the top? So it's actually a pretty important level, I think, to keep those guys in profit. And if we we go back and look at most of the start of like nasty bears, very, very similar structure. 30 to 60% of the wealth and the coins.

This is kind of the dynamic we are. So at the moment we're holding, like, and from many levels, there's like first line of defense, second line of defense. Short-term cost base about 111K. And until you go below that, my rule is just be a bull. And we got down like 109 and here we are at 114. So when the bears have enough juice to get us down below short-term cost base, and then 105 it starts to tip over.

95 is that line in the sand. It's like, guys, you haven't even taken out the first line of support yet. So I'm certainly cautious because it's not a big move, price move from 140 to 95. That's not a significant move, but the damage it could cause is pretty significant. But the damage hasn't happened yet. That's my kind of broad picture of view of things. It's funny, like, how quickly the sentiment is shifting both directions this ball market.

Because, like, I think on one side, I'm guilty of this. it doesn't feel like a normal Bitcoin bull market where I've not had the dopamine hits and the euphoria. And then all that has to happen is Bitcoin dropped like 4% and everyone's calling for the end of the cycle. Joe, like, how are you feeling about it now? And do you think the idea of like Bitcoin cycles might be over? Yeah. I mean, to be honest, I, and I've said this publicly for well over a year and a half now. I think it is a mistake to attribute the peak and subsequent drawdown in late 2021.

and 2022 as a Bitcoin idiosyncratic feature, okay? To me, it's not simply coincidence that Bitcoin peaked in November of 2021 alongside numerous other risk assets, that it was coincident with the telegraphing from the Federal Reserve that they would begin, well, that they were behind the curve and that would be in one of the fastest rate hiking cycles in history, dealing to the rapid onslaught of inflation, rolling off their balance sheet, QT, et cetera. So I just think it's simply implausible to suggest that that was a Bitcoin idiosyncratic feature. It just happened to line up with the majority of macro chaos that we had to go through

most of 2022. So my view has been that even predating the 2021 cycle, I think the cycles were dead if they were ever were a thing driven by some halving supply demand dynamics. I think that it wasn't a coincidence also that alongside Bitcoin ripping you had many other risk assets ripping through most of 2021 that were drunk on the high of the Stimmy checks and the ZERP and, you know, massive central planning easing. So, you know, my view is that these are sort of ex post facto the narratives we sort of develop to justify why price action develops. And, you know, to me, right here, I think it's very

simple. If the economy remains robust, potentially re-accelerates, I expect Bitcoin to do well. I expect most major risk assets to do well. And the opposite is also true, right? If the economy continues to decelerate if some of these weaker segments of the overall economies start to get worse and potentially bleed over into other sectors, I expect the greater risk asset complex to struggle alongside Bitcoin. I don't know. I'm curious. What, if anything, I said there that Matt or chat could disagree with. No, I fully agree. And I think I've had this line I've been floating around recently. People are going to hang on to pass cycles, well past they're used by date, and they're also going to throw out certain patterns thinking that, oh, it's already broken.

So, like, I'm living in a very, very flexible world in terms of how I bring data into my system. Because, you know, if you look at the past cycles, really there's been two major regime shifts. I wouldn't really call them cycles, but a period in time where market structure absolutely changed. The first one was the 2017 top. After that 2017 top, it stopped looking like this retail, very just like organic type dynamic. Stable coins come in, derivatives come in, leverage comes in. that 2018 through the 2022 period, for those of you who lived through it, Bitcoin was like, I call it Schroding as Bitcoin. It was both alive and dead. The regulators were going to kill it,

tradfired, written it off. There's a bunch of Hodlis who still believed in it. There's degenerate gambling on this thing with leverage. Then we got the stimmy checks and everything in 2021. And when FTX collapse on 2022, you can look at any metric you want, whether it's price relative to the 200 day, any on-chain metric. They all change pattern at the 2017 high from a very organic retail driven thing, that middle period boom busts just straight up, straight down. And then from 2023 onwards, super stable, super structured, looks a lot more like 2016-17, but things take a lot longer to play out.

And they don't have as big drawdown. So they're the kind of zones where market structure changed. And there's a lot of different components to that. But I generally agree with Joe. People like to fit a narrative to explain it. But, you know, yeah. I'll just tell you, from when I say this, people, tend to hear, oh, it's a super cycle. Bitcoin will never go down. They'll never be a correction. I'm not

suggesting that at all. Like, Bitcoin can obviously pull back and it can have drawdowns, right? But this sort of predictable, like, four-year boom-bust cycle that we have to go on that's coincident with the having, I think that's kind of always been sort of more of a meme than anything else. The thing that I've just been paying a lot of attention to is the thing that doesn't get paid attention to, which is like Bitcoin's volatility, right? And I'm not a, I'm not a trader. I don't kind of look on chain, but I sort of pick up like the zeitgeist. And the zeitgeist to first order is just like, Bitcoin's moves, right? That's usually when the mainstream media reports on it, like it drops 5% or it goes up 10%. And Bitcoin has just been in this like unprecedented period

relatively of low volatility. And so it just kind of becomes like less interesting to kind of most Bitcoiners when it's just like a thing you DCA. And that's maybe a sign of its overall maturity as an asset class, where most folks are just treating it now as a thing to kind of nibble in as part of their portfolio. Now it's been kind of blessed by the U.S. government and blessed by the ETFs. I just think we're just in a different regime where, like, those heyday cycles where it's like memes-driven, sentiment-driven. It's sort of maturing as an asset class, and, you know, it's coming into like 20, 30 percent

annualized vol. And that just means it's just fundamentally, like, behaving differently than most Bitcoiners I've gone through these different cycles. That's kind of my more like layman's observation here. But I think it has a lot more kind of far-reaching effects on kind of how you think about its adoption cycle, right? Because most people's unit bias that have come in in the last few months has been the ETF, you know, share price.

And so, you know, you probably pay attention to what the Bitcoin price was when you bought it, but when you check your brokerage account, you sort of see, you know, a much smaller number, right? And so people just have a different psychological orientation to the Bitcoin price than, you know, most of us, right? and where we're sort of checking it like, you know, every, every hour, right? People just see it as a thing that they were convinced to finally buy a slug of,

and now it just sits in their portfolio as an ETF. And that means they're not going to trade as much. It means that they're probably a bit more resilient to sort of swings, but its overall sort of placidity has been the most sort of novel feature of Bitcoin the last few months to me. Yeah, I think the two things where people log into their brokerage account, they see Ibit in an uptrend, and they see over, you know, the default view is one year.

Like, oh, cool, I'm up 100%. That's great. How awesome is that? And the other thing I think is really important to note is options. Like Ibit options. I think this is the one story I haven't heard anybody talking about, talking about the volatility profile. They went live in November 24.

They've now overtaken Deribit in terms of size. And only took, you know, whatever that is, the shortest part of a year. They're like, you know, $40 billion. There's 40 cents of options contract written per unit of IBIT, which is an incredible number. but if you look at GLD, that gets up to like 120%, 100%. So you'll get a dollar for every dollar that's in there.

So that is a volatility extraction tool. But it cuts both ways because all these folks, and they can write covered calls and they can write covered puts, but there's points in time where the market does just move, and suddenly all those options, writers are on the wrong side of the trade. So you get a broader slowdown in volatility, and then you get these tail events that just blow everything up. So, you know, you've got to keep all those things in mind as well. So is that why we've not seen Bitcoin be as volatile?

Because obviously we've had ETS buying a shits on a Bitcoin, all the Treasury companies like sailors buying everything that's out there, but price hasn't moved that much. And you hear people come up with these narratives around like price suppression and stuff like that. But is that really down to these derivative markets? They have a role, but the beast that no one likes to talk about is there's a stack of Hodler's selling. Like you can look at just in the on-chain space, you just look at coins moving and people can debate and say,

it's just UTXO consolidation or, oh, I'm just moving it into an ETF. You know, when we look at the amount of money flowing into the ETFs, it is five times smaller than the amount of profit being taken by coins that move at the peak. So, you know, you rally to 73K, suddenly you've got $50 billion worth of Bitcoin moving a month. That used to be like one, two, three years old. They all move around the top, and then the top seems to just stop and be the top. And then it happens again in 100K, and it happens again at 124K. So yes, everybody might do their UTXA management at the all-time high, but it's just sellers.

Based on that, though, I'm curious if any of you have thoughts on the causality. Why are they selling? What is the driving force? Is this just people that were sitting on piles of Bitcoin and say, you know, now it's time, you know, you only live once. We're going to celebrate and buy our yachts. I mean, what is driving this, if any? They've got fun of the Treasury companies, Joe. Yeah, Treasury companies.

Well, the thing with the Treasury companies, a lot of those Treasury companies are left pocket to right pocket as well, right? Some old holder or old entity has got a stack of coins. They move to their right pocket, change the legal entity, you know, suddenly you've got a treasury company. So, you know, there's a lot of that going on behind the scenes. But, you know, it depends who you talk to, right, in terms of these whales. I mean, we saw Galaxy cleared a 80,000 Bitcoin trade for one guy. How many 80,000 clips has that guy got? I met a dude who's been around for a very, very long time since the Satoshi era, like mining the CPU type level. And I did a president. where I was talking about sellers, and I said, look, the next most likely zone, this would

have been, I was six months ago. The next most likely zone we get a lot of sell side come in was 120K. And at the end of the presentation, this guy put his hand up and goes, I got sell orders in at 120. So it's just like this number that people have in mind. And I also think there's a lot of estate planning going on. If you're thinking about some of these guys have got thousands of 10 to thousands of coins, you need a legal team to try and sort out your inheritance. And suddenly you've got ETFs you can move into, you're not going to get your bank frozen for moving that kind of money around, like being associated with Bitcoin. I think it's just a lot of those dynamics, which, you know, it makes sense after such a long time and massive price moves. Well, it's anecdotal,

but I've had a few of these conversations as well, right, with some OGs. And Bitcoin's an interesting market, right, which is, it's such a large market, right, $2 trillion plus market cap. But, like, the largest single, you know, cohort of holders are, like, very much idiosyncratic, relative to other asset classes, right? They have a unique, I would say, psychology. They are all kind of similar age bands, right? Like, obviously there's going to be exceptions, but like they tended to be, I'd say,

highly correlated in terms of their cognitive phenotype, their age, their gender. And so, like, people go through life events. People go through, you know, maturation as, like, when you go into your 20s and your 30s and you start thinking about things a little bit differently. And so you have an entire cohort of kind of OG bitcoins that are kind of all hitting these life events while Bitcoin is reaching

all-time highs. And so it just seems like a natural psychological kind of effect that you would see kind of also like cascade where you, they all know each other too, right? And so they also kind of hear from the rumor mill that, oh yeah, I've got ladder. I've got ladder cell orders at 120. And it's because a relatively small group of these folks, that gets around. And then it kind of, it sort of, it becomes self-reflexive, right? And then everyone realizes that's the level I should sell at, right? And And so it doesn't actually take like kind of gigabrain kind of alga traders to kind of drive this. It's like a handful of people in their signal chats. And, you know, they're reaching different life milestones.

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That is anchorwatch.com. I'm curious to know what you all think about. So let's say Joe's right and the green, green, green, red theory isn't true. Sorry, Hoddle. And we're just entering a different world now. Why do you think this happened? Like, goal has been ripping this year. Bitcoin's done really well for the last couple of years.

Maybe we'll continue to do well. It's just the world searching for safety. And mixed in with all the deficits. spending, the debt? Like, is this just the world waking up to these problems? I mean, in my view, in gold's case, yes. When you look at, I like to price everything in gold, because gold is like, I know that as Bitcoin, as we say, Bitcoin is the meter of value. Gold is the meter of value, right? Bitcoin might become the meter of value, but it is gold. So over the long arc of time, you correct the stock market by gold, and you can actually see

these 10-year, 20-year cycles where, you know, why is an inert yellow metal doing better than the best performing stocks in the world, something's wrong with the world, right? That's generally what the signal being sent there, inflation, debasement, whatever it is. So the fact that gold is moving the way it is, it's quite clearly central bank demand. You can look at the ETF flows. They're only just starting to pick up. And I actually pulled the World Gold Council data the other day. And I was looking at which, just at a regional level in terms of official holdings. And through like the 2000s, the Europe in particular was just selling gold, selling something. selling, selling. 2008 happens, and suddenly the eastern countries, you know, China, Russia,

they just start buying gold like crazy. And then as of 2024, we started seeing European stepping into buying gold, right? And you can go back and look at when the Australian government sold their gold. It's the exact bottom on the Aussie dollar gold chart. So, you know, it's one of those things. I just think a lot of, you know, they wrote gold off. It's a barbarous relic. And now it's coming back into the fold. And for me, that's actually quite exciting, because when you think about how much market cap gold is adding, it's trillions of dollars. And my long-term price target for Bitcoin has always been the same. It's 10.8 kilos of gold, which is parity.

The higher the gold price goes, the higher the Bitcoin price goes at a relative basis. So it's just lifting the floor of where this thing's going. I mean, I just had a lunch with an individual as a pretty well-connected hedge fund guy, travels to China often. And he described how he had met with the senior officials at the People's Bank of China. And they were very clear to him, at least. that they've been massively ramping up their gold purchases in the last six months, accelerated in the last three months.

And the sort of narrative that they gave him, again, you know, take it for what it's worth, was that, you know, Trump's political actions with respect to the Fed were perceived by senior leadership at the PVOC as like a regime shift. And so the firing of Lisa Cook, you know, appointment of Steve Moran, who's a G, has sort of fundamentally shifted the, the vibe among the people's bank of China. And so that's just a step change.

And when you have, you know, the people's bank of China, just to say, like, we're just going to keep buying gold, hand over fist, it's up 45% in a year, right? That's not a surprise. And they decide, okay, if this administration wants to weaponize the global trade system, wants to essentially, you know, go toe to toe in a total economic and financial war, which has been ongoing, a bit more sub-roser for the last civil years,

Gold is sort of the natural international unit of account that will reflect that rising sense of instability and that risk premium. I definitely agree with the central bank, and I'll defer to Matthew and check on the sort of geopolitical element of it. But one thing I will note is that if you look at copper since the beginning of the year and pre the tariffs that I think were announced at the end of July, memory serves, copper is up 45%. Okay, copper's not like the store of value of choice for central bankers. So I think you're clearly seeing the market sniff out what many in Bitcoin circles have been talking about for a long time, which is higher structural inflation that speaks to the issues in the larger, broader economy. You're entering, again, you're continuing on a rate-cutting cycle from the Federal Reserve

where inflation is, by some metrics, nowhere close to target. And this is not to say, as I suggest in any way, hyperinflation. I generally fade almost every hyperinflation call in the United States I've ever heard. But I will tell you that you can have a middle ground between, you know, the let's get back to 2%, the hyperinflationistas, and somewhere with higher structural inflation, which is going to bleed through to commodities. And in this higher structural inflation regime, I expect commodities to do generally well, right? They kind of go one in one. They're correlated very much so. So to me, I think that's a huge element of it too.

I think you see this across the broader commodity complex, excluding oil, which there's some, again, idiosyncratic features of the oil market that are going on here. But to me, that's a broad takeaway. I think you need to add into everything Matthew and Czech said. What do you think about what the Fed just came out and did, Joe, in terms of cutting rates, looks like they're going to cut again going into the end of the year. I almost feel a little bit of sorry for Jerome Powell because I just feel like he's stuck between a rock and a hard place. But like if all he can do is either cut rates, which is going to be potentially good for jobs but bad for inflation, or keep them where they are, which is going to be bad for jobs and maybe better for inflation.

Like, what is he meant to do? Do you think he's doing the right thing? Well, that's a wholly separate question. But let's go to the first part of that. Okay. So, you know, a lot of people, and I always think this is fascinating, they will, I actually was DMing with Lynn Alden about this. A lot of people will sort of like, they'll pair the fiscal dominance regime

without really understanding the implications of what that means. If you are truly in a fiscally dominant regime, by definition, right, the monetary policy is indominent, less dominant, whatever we want to characterize it, meaning that does it really matter? Like, does it matter if the Federal Reserve cuts 25 bips, 50 bips, 75 bips? They have a communications channel, right? They have an expectation setting channel. There are clearly segments of the economy that are desperate for lower rates.

You've seen that for years now, the weakness in those parts of the economy that are well documented. But to your, you know, sort of broader question, they're cutting rates here in a dynamic where also continuing to roll off their balance sheet. That seems at cross-purposes, but I think they're dealing with a lot. They're dealing with the political pressure. Obviously, there's massive implications for the erosions of Fed independence, and without casting a judgment on it, you have to accept that it is on the table, right? You know, less Fed independence. But the question for me that is important to focus on is that, you know, what is the implicit message that is being sent when you are cutting rates in an environment where you still have the inflation metrics,

the Fed's own metrics running far too hot. And I think it is an implicit sort of suggestion that, you know, our rate hiking, rate cutting policy isn't perhaps as meaningful as it once was. And I truly believe that. I think that, you know, is it going to really amount to a whole lot? No. I don't think it structurally changes very much cutting 50 or 75 bibs. You'd have to cut substantially more than that, I think, to trigger some,

more of a credit impulse in the economy. So that's the broad takeaway. I mean, it's almost like an admission to some extent, a tacit admission that their rate hiking policy isn't going to bring us closer to target. We have to rely on the rates naturally, well, the way to rely on the inflationary pressure is naturally abating. You know, there's an interpretation out there that we probably would have gotten through, you know, the pig of python of stimulus and seen that natural roll-off of inflation in 2022, even if the Fed hadn't have hiked. You know, if the Fed had kept the neutral, kept it, you know, let's say, you know, somewhere in the low threes or something like that, there's arguments out there that those inflationary pressures driven by the lockdowns and driven

by the excess stimulus would have naturally abated regardless of what the Fed did. You can't really test it. It's not quantifiable, right? But to me, I think the reason they're doing this, which is the whole long and variable lags and we want to do these sort of insurance cut. I mean, Powell used the term risk mitigation front, right, risk mitigation cut at the last presser. I thought that was fascinating because he's basically saying, like, we're, you know, we're just as worried about the labor market now. They've come into better balance or parity, whatever, you use the phrase, as the inflationary pressures. Well, you know, your inflationary numbers are still far above target. So how is it that, you know, maybe it's just an acknowledgement that the broadsword of the cuts or the hikes, rather,

are not going to be sufficient to actually bring down the pressures. So all of that's a long-winded way is saying, like, I think they're recognizing that, you know, the policy where it's had right now, which they claim is, you know, slightly restricted or moderately restrictive is not really meaningful. Yeah, the way about sort of, it's a, it's a, we're in 2025, right? And a lot of things are different. It's not just fiscal policy. We also have trade policy and state craft policy. And so you have an environment where, like, the effective tariff rate on China is like 54%, right? And then you've got, like, almost every other country is facing a structurally higher tariff rate. You have still the backdrop of, you know, 6% of GDP and deficits.

And then you have an entire new, like, capex boom being driven by the private sector, now in, like, hundreds of billions of dollars of, you know, per deal sizes for building, you know, massive data centers, right? Which are very, you know, commodity resource intensive. And so you have these massive distortions that all came at the same time while you have, like, what the Fed likes to have is, like, these smooth, long and variable lag-based kind of forecasts. And fundamentally, they just are kind of in the back seat, right? It's not just they're in the sort of the passenger seat. Like all of these other perturbations in the global macroeconomic environment are much more

significant than a 2550 basis point cut. And I think the most significant feature of the curve that matters politically is basically the long end for mortgages, right? Ultimately, there's just like millions of Americans that are trapped in their houses and feel that like they can't climb the ladder and, you know, home prices are still sort of stuck very high, and yet to sort of refinance would be prohibitive. And so there's just like a political pressure to bring down the long end, while the government knows that they need to keep refinancing at the shortage and they can stuff tea bills into stable

coin. So there's just like very much a political necessity to sort of distort the yield curve and to ensure that capital flows for the most strategic and like politically conducive purposes. And the Fed as like a, you know, as an institution is very resistant to being used as a tool for any of those other purposes. And that's why that we see this political conflict play out, right? When the federal government and the commander-in-chief and the executive agent in charge of running the country decides that, you know, there's a certain set of state craft and trade and economic policies they want to pursue, like history tells us usually the Fed gets subsumed.

But we're sort of in the middle of that process playing out, and the Fed's heavily resistant to that. But that's like, ultimately the Fed becomes less and less of the story and more, okay, like how much of a resistance are they going to put up to what seems to be like a structural shift and how the U.S. government is attempting to wield a much more command-driven economy. Yeah. So, Danny, if I can jump in, because I have a question for a man of this. So what I don't understand is this. There are very bright people in the administration.

And surely they must understand that the overnight rate, except by the Fed, doesn't amount to a hill of beans compared to the all-long-end rate, right? I mean, you pointed out there that's the most politically sensitive part of the curve that really matters for people, matters for household, matters for mortgages, et cetera. So what is what is driving in your mind the emphasis on the overnight rate, which to me, I think, at least from the rhetoric, they seem to suggest that like, you're conflating those two things, that if the Fed were to somehow cut tomorrow by 150 vips, that that necessarily would bring down that long end rate. And I'm not so sure that's true. What we have seen is that the long end goes up when they cut. Yeah, yeah, it might even be counterproductive. I think that's a bit of, I mean, whether it's just like they brief Trump and Trump's

gets told the rates are too high because, you know, Powell's not cutting rates. And so he just tweets rates are too high. Whereas the real, like, quote, technocrats just want to capture the Fed. And they want to be able to use these other tools, swap lines. They want to basically do much more street to cooperation with buybacks, right? So like, ultimately, control over the long end has been shifting over the last several years to the Treasury versus the Fed, right? This got started under Yellen with activist treasury issuance, strategic use of buybacks.

That's only going to increase, but the sort of effect of that is blunted by, you know, moves the Fed can do in terms of how it manages its balance sheet. And then obviously now, like, Besson comes out and says, we're going to give $20 billion swap lines to Argentina. Like, a swap line is actually a Fed facility, right? Like, he can give loans through the Exchange Civilization Fund to the country, but like a swap line is an instrument that the Fed has control over. So, like, there's just a de facto subsumption and sort of, a sort of irrigation of a lot of the capabilities of the Fed.

And I think they're just sort of using the short end, like, pressure as, like, a rhetorical tactic. Because I agree, like, if you just jam short rates down, that doesn't mean anything for 1030 year. In fact, it might, you know, be counterproductive. But it's a rhetorical cudgel to try to, like, jam the Fed into submission. And that seems to be their strategy, right,

to get to sort of stack the board and squeeze. So the complaint about the front end is pretext in your mind. I mean, it could be a mix of both, like, underlings that have like, you know, a 5D chess and then political apparatchiks that just want to like save the line and believe what's, you know, what's convenient for them to believe.

Because I agree, like, there's no like immediate stimulative effect, really, from bringing down short rates except for the, you know, the refinancing of the government, right? If we have to issue whatever, 25, 30% more on the short end, maybe more now. Well, again, that starts to add up more for the government's borrowing capacity. Is this not where this sort of quiet third mandate comes in?

I know it was mentioned in the, or I think it was mentioned in the last FOMC meeting, that they want to try and influence the long end. Do you think they will try and do something akin to yield curve control? I mean, I think they have to, right? If you really run the numbers, at some point they have to. And I think this is what makes this time in economics. I mean, for me, I consider myself a macro tourist, right? I kind of try to study it to the, because I find it fascinating.

We're at this point in time where they have to do it, but the path from here to there, the path to pendency, if you just say to the long end, oh, by the way, we're going to do yield curve control, who's going to want to own bonds? And I think Luke Roman does a good job. He basically says, like, they have to anithetitize the bond market, lull them to sleep, boil all the frog, whatever your analogy, that's the path they're going to. But if they say it outright, and if they say it explicitly, this is why they say it's not QE, but it's QE. It's some bank funding program. It's some, you know, adjustment to a regulation over here. There's ways that they do this to keep the wheels on for as long as possible. And I often like, I wonder, because, you know, my engineering background, I look at this and I go, of course, this is what they have to do.

Like, this is the machine, there's sand in the gears. You've got to get sand out of the gears. This is how you've got to do it. But the average bond trader, they still have to plug in CPI. We all know that the CPI number is bullshit. But that's the number they have to plug into their bond models because they know. know that's what everyone else is using. So it's like a shelling point. It's like I know I've got my own inflation number, but I know that this guy's going to trade off CPI and this guy's going

to trade off CPI. So everyone gathers around the room and watches as the CPI numbers come out, knowing that it's complete shit and they change with the basket of it all the time. And it's super core and it's magic core and it's special core. And it's all these different versions of inflation. And we all know it's much higher. So it's just part of this kind of Fugazi game. K-Fabe, I think people call it. I think it's a mix of things. It's going to be a mix of things. It's going to be a of, you know, creative use of national accounting. But it's also going to be, I think, more clever use of geopolitical instruments of kind of soft

coercion for other allied pools of capital because you ultimately, to first order, you want to extraterritorialize your financial oppression, right? You don't first go after your domestic political, you know, constituencies and your donors. You go after the folks at the periphery of the dollar imperium, and you make them take as much pain as you can. And so you see these headlines like South Korea was, you know, committing to invest $350 billion in, you know, AI, semiconductor, energy, et cetera, but they said, we don't actually have the money for it.

Like, and we'll basically give them a backdoor swap line. So we'll sort of, you know, that's effectively, like, in a certain sense, like geopolitical yield curve management. You're taking these foreign surpluses, you know, that are oftentimes, like, managed by, you know, sovereigns, whether it's explicitly or implicitly. And you're sort of directing their, like, their choices of where to allocate those portfolios

into U.S.-based securities on conditions that we impose, right, where we can either get that capital deployed for strategic, national reshoring, technology purposes, or to help fund our deficits. And that's easier said than done, because it requires a droid integrated state craft. It requires, like, actually being able to, like, cajole slash, twist the arms of the Taiwanese and the Japanese

and the South Koreans and the folks in the Middle East. And, you know, it's sort of what was the plan that Zoltan drew up last summer, that Steve Moran put in his white paper, but they're like the whiteboard technocrats. In practice, you have to get Lutnik to cooperate with Bessent to cooperate with the State Department in Rubio. And it actually requires a high degree of state capacity

and competence to sort of wield these different instruments to steer capital and suppress the long end. And I think they've like, they're not like, I think they're learning how to do that more effectively. And then there's like these moments after Besson comes out after Liberation Day in the 30 years spiking to 5%. And it's like, five. on fire and then it generates a coordinated reaction.

And then everyone just goes back to the normal beefing where Besson's gonna punch Pulte in the face, right? And so- What's the coordinated reaction? Is this rhetorical? Well, I think when push comes to shove, right, the sort of allied network, you know, kind of the Five Eyes Alliance plus kind of NATO plus, at the end of the day,

everyone has a mutual interest in the dollar-based system not just blowing up overnight, right? And so, you know, at the same time that they also want us not to renege on our security commitments. They also want us to give them access to cutting-edge GPUs and our frontier A-M models. They want us to like continue servicing the, you know, crappy F-35s, etc. So it's like lots of, you know, other, other sort of carrots and sticks that the government could use in like a, you know, optimal bargaining strategy with say Japan or Taiwan. And that's really hard, right? And actually, how do you price each leg of those different,

you know, carrots and sticks requires like a lot of state capacity? And when push comes to shove, Maybe they can do it well on like a handful of deals, but then other deals get lost in the cracks. Yeah, but, but man, that that buying doesn't even account for 40% of the treasury market, right? I mean, like the external ex-the United States. I mean, the bulk of treasuries are owned by U.S. institutions and entities and individuals. I think there's buying time. I think it's just like Besson doesn't want the 30 year to blow up on his watch. And so he's looking at like a quarter to quarter basis to see how much do I have to issue, how much will how much will be taken down by?

domestics versus foreigners, how much can I sort of, you know, play this game of activist treasury issuance that Yellen started? And, you know, he only needs like an extra 20, 30 billion to prevent an auction from going bad, right? And so he's just playing, I think, the game to last to the end of the term. I don't think this is like the one weird trick, strategic game changer for the government's fiscal position. But it's sort of like they're looking around and they don't want to have the five-year, to have a 30-year go above 5%. And so they're just going to try to pull the different levers to bring it back down. And it doesn't require hundreds of billions of dollars.

It requires, you know, Japan coming in with 20 billion on a Sunday night or something. Got it. I mean, to me, the original question about the yield curve control, I continue to believe we're far away away from that, a long way away. I mean, I don't really see that. I think there's far more softer measures that you can do before you even get to something remotely close to that.

That would strike me as sort of an extremist measure. And everything Matthews is talking about, and I think would come first. And to me, ultimately, you know, a huge factor in the long end discussion is the implications for inflation and for economic growth generally. So if your view is economic growth is going to remain robust, then, yeah, I could see an argument for how the 10-year and the 30-year continue to sell off. I mean, they're driven primarily, historically, by nominal growth rates and inflation.

So, you know, what's your forecast for the economy? What I don't understand, Danny, and this is what frustrates me. We talked about this in the last interview we had like how you can't have it both ways. You can't say growth's going to collapse. We're going into some, you know, hard down recession and yields are also going to skyrocket. I've never understood that logic. I can think of some sort of tail events that could possibly trigger that, but those are, you know, their tail events.

They're not sort of your, they shouldn't be your base case. Because that's emerging market behavior, right, where people sell the, sell the long end, or they don't own your bonds when you go into a recession. So I think that would be the case against the, that is if we do have some kind of a recession and the market goes, okay, so you're running 8% deficits in the good times, those deficits go to 14, 15%, right? They shoot through the roof in a recession. So the reason someone would sell the long end and your long end would go up is actually emerging market type behavior. Now, whether the US is going to get there, I think there's

always going to be that just like built-in response where they bid the dollar, bid the bonds. But the fact that we're seeing this like cut rates long end up, gold up, all of these things, are just starting to US equals EM. We're not like full emerging market, but we've got the initial flavors of it. Well, I mean, we cut rates last fall, and we cut rates just recently, right? And the long end 4.70 as of today.

I mean, we were at, in October of 23, we were at 4.14. So, I mean, you're 40 bips lower, 45 bips lower, roughly in change. from October of 23, we've run structural deficits, 6 to 7% deficit GDP for the last two years. So if it was purely a supply issue, if it was purely a, now to Matt's point,

it's like, well, we've been relying increasing the long end, so you don't have a supply catalyst to cause that. So that's another compounding variable there. But I don't know. I'm not as convinced that cutting at the front end is necessarily going to trigger it to sell off aggressively. I think the more likely scenario, Jack, is in my mind,

structurally higher. I mean, regardless of all these efforts that Matthews is talking about, you're stuck in the fours, say, you know, the higher fours. That seems like the base case. Higher for longer. Yeah, yeah, yeah, no, 100%. And I think the other thing to bear in mind is if you look at it's the U.S. is the cleanest dirty shirt, look at the U.K. I mean, look at Japanese bonds. Look at any other market. Now, granted, a lot of those, you know, Japan is much lower than the U.S. So you could argue there's a bit of a normalization going on there. But if you look at U.K., for example, they are trading like an emerging market. They're above the list trust moment.

So it could just be that the US being the privilege of the global reserve asset and currency, it's going to take longer to lull that bond market to sleep. But over time, it's going to happen. But I agree. I don't think these things are going to happen straight away. There's going to be a whole process. And, you know, coming back to the original Bitcoin conversation, I just think a lot of people miss how glasily macro moves.

Like, we can see a lot of these things coming down the pipe. You know, I looked at, when I started really rocking Bitcoin, 2019's where it properly clicked for me. I didn't really understand anything about macro, but I understood that the debt situation was a problem. And a lot of the things we're seeing playing out now, I couldn't have described that to you back then. I wasn't experienced enough with it. But I had this feeling that it was going to look something like this. There was a reason why you wanted to hold hard assets. So I made that decision back then.

So it's one of those dynamics where it's going to take a long time for this stuff to play out. You can see it years and ahead. But pricing then into the next daily candle is where a lot of people get stuck because they think, but hang on a second, why doesn't everyone else see this? Because there's 1,1 incentives that cause them to not see it or there's regulations, there's mandates, there's all this other stuff going on in the background. So things just move slower than you expect. Do you wish you could access cash without selling your Bitcoin?

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Speak with blockware to learn more at mining.blogwresolutions.com forward slash wbd. Joe, I know one of the things that frustrates you about like the Bitcoiner macro conversations is the fact that no one really talks about growth and productivity. If we are going to see a lot of that, where will it come from? Is this going to be like AI robotics type stuff? Well, I would argue you're seeing it for the last, like one of the reasons why the recession eases have been consistently wrong is what Matthew alluded to earlier with this capex boom. I mean, this is a massive deal.

There's some forecast. I can't remember what the note it was, but, you know, it's still in the pipeline. We've got, you know, maybe you saw this note. It's on the tip of my time. Three trillion. Is it two trillion? Yeah. I think it's three.

Three by three trillion dollars are coming in over the next couple of years here. Into the, in terms of CAPEX, you know, those are jobs. Those are, you know, those are private sector stimulus. The money's been secured. It's not. From where? Where is that money coming from? Well, some of it's just cash reserves of these mega caps.

I mean, they're flush with cash and they're spending in a very smart, intelligent way. They're trying to build out this, you know, industrial revolution. type moment here, and that money is going to flow through, and it will have a multiplier effect. Private sector spending has a greater multiplier effect than government sector spending. I mean, there's some studies that say the money multiplier is declining to really sad levels when it comes to government spending, right? So, but the private sector, you're not seeing that.

You're seeing massive, I think, investment here, and that will continue. And that this was specifically alluded to during the last FOMC. Like, you know, we don't know exactly when the CAPEX boom is going to end or come to a halt here. but we do know that there's at least stated intentions for the next couple years now, at least, to put trillions of dollars into the economy to do this build out, which is essential. It's like it's non-negotiable. I mean, it's for winning the next couple decades potentially in the AI race. So I don't think that's going to be deferred.

I don't think no matter what the economic conditions are, I think that money gets spent into the real economy. So in terms of growth, right, that's a ton of private sector capital that's going to propel. And I mean, this is a Matthew question, really, if you're going to get the return on the investment. I don't know. I can't forecast that. I'm not smart enough to figure that out. But I do know that I think it is a big mistake to just say, no, you're never going to get any growth from this. This is another tech bubble like 2000. None of these companies are going to make money off that. I think if you make that calculation without doing perhaps the homework that Matthew or others have done on this call, you're potentially committing a catastrophic error. So can I throw a question here? Because this is something that like the one thing I have been looking at is just like the concentration of stocks on this AI boom. You know, you look at all the indices, you've got the hyper-financialized economy. If Nvidia falls, because if you look at really the, it's all the same customers.

Invidia's trading product chips with Microsoft and they're paying open AI. It's kind of this big circle of like, you know, 12, 15 firms. And you can kind of look at that and go, look, there's a couple of like left-hand paying the right-hand type dynamics. Is the ROI there? Matthew, I'd love your views on like how sustainable is this thing because, like, I get the state craft element. I understand that the administration wants to win this AI boom, but there's only so far I can imagine companies running non-profitable strategies. And I almost think about it in the world of Bitcoin mining, where you've got the subsidy,

which is all these models getting trained, guaranteed massive load, and then you've got to move to inference costs where people are actually using it, getting built into businesses. That's kind of the fee model. And I would imagine that we've got to kind of hit that critical mass where people are really integrating in everything that they do. But I'd love to know your thoughts on how this sustainable, this inverted commerce bubble is. We're moving from like a regime of analyzing AI where it's kind of a firm-specific ROI analysis to a point where you're understanding, is it going to have macroeconomic effects and could have

a financial bubble? And it's like, well, just that fact alone means that if you're trying to analyze the next few years of your macroeconomic forecast, like, and you don't take very seriously what's already in the pipeline and what like the folks making these trillion-dollar investment decisions believe about the future, then you're just kind of in denial you're going to smack in the face, right? Now, those people might be wrong. Their assumptions might be, might be ill-founded, but like, they're the ones going to be in charge of borrowing trillions of dollars and deploying that into the economy. And so, like, whether you like it or not, like, that's just going to be a baseline feature. And now from, like, the perspective,

like an individual firm's best use of a particular, you know, capital structure, whether it's going to pay back their investors. I don't know, right? There's, like, idiosyncratic business decisions that could lead to failure. The overarching feature of this new era that we're entering to is going to be accelerated creative destruction, where you could have like an absolute unicorn darling pop out of nowhere, get $10 billion at ARR, and then go bankrupt the next year, because somebody else figured out how to basically automate their business model. So you could have enormous amounts of capital destruction, you know, equity and debt losses, people pick the wrong horse, right? And so yes, very clearly I think there are going to be business models

that everyone falls in love with, that are the next big thing, that absolutely. absolutely blow up. And people will point to those as the direct analogy to like Pets.com or whatever is like there's hype, there's froth, there's massive capital misallocation, people are just trying to ride the wave, meme, hype, etc., right? Typical story. I think there's something fundamentally different. Like the folks deploying this capital now, as Joe mentioned, like most of them are deploying it out of their existing balance sheets, right? They just have huge amounts of capital and cash flow, right? So Google, Microsoft, these hypers are cash flow generating machines.

Right? And they can take pretty healthy leverage on that without really getting their balance sheet, you know, upside down. And there's other folks like Open AI that have to do these really creative, you know, sort of deals with Oracle and Navidia to try to bootstrap this scale of this investment. But it's not fundamentally different than just taking somebody else's massive cash flow generating balance sheet to deploy into the next generation of models. Then the ultimate question is like, okay, well, where's the beef? Like in the internet in the late 90s, it was kind of like e-commerce wasn't a thing. Like it was just all a belief system, right? Right now, like people are paying. for tokens, right? Like, they're economically valued, and they're generating massive amounts of revenue at a pace that, like, no other technology has ever generated. And so it's like, there actually is a huge amount of demand for these things, right? Now, the real macroeconomic question is then the productivity, you know, downstream effects of that, right? You know, right now people have lots of different ways of trying to measure that. I think they're terrible. Like, we don't

really understand how to measure, you know, productivity, you know, with these tools. It's because the rate of change is going so fast that, like, most, by the time you do, like, a good economic study, it's like 12 months out of date. And if you just look at the scaling curve, it's for most of these different benchmarks, their doubling time is like six to eight months. So like the median task that a model can perform is doubling about every seven months. And so by the time you feel like you've got a really good econometrics analysis of the effect of these things, it's kind of out of date. And so you're principally just relying on trust in the scaling curves. Will these scaling curves continue to go up? And that's what's convinced, you know, most of the capital, you know, most of the

in the world to deploy the marginal unit of their holdings into something related to AI. So I think there will be massive amounts of like, there'll be unprecedented amounts of capital destroyed in this AI boom, right? Just because the amount of money that's going to be deployed will be unprecedented in scale. I think Joe put it right, this is an industrial scale transformation,

right? Compressing maybe 100 years of industrial revolution into maybe 10 at most. And we're not even at the point of seeing the downstream implications of what sort of this order of magnitude step change in intelligence gives you, right? When, you know, you get to an era of, okay, people can book tickets more easily through, you know, whatever, um, Stripes, uh, open AI, you know, integration. Great, right.

But like, secretly, they're all working on trying to solve fusion, trying to solve room temperature, room temperature superconductors, trying to, um, create like breakthroughs in quantum computing, trying to like, like unlock what would be separate trillion dollar, you know, sort of breakthroughs in, and, uh, in our sort of economic substrate. Who knows? Those could be just figments of the imagination. But if you draw out these curves, like these frontier math

benchmarks, these very, very difficult areas of human knowledge and skill are quickly being reached by these models. So I think you're going to enter a much more volatile regime where just the amount of investment will distort the GDP statistics, right? Could actually kind of turn what would otherwise be a soft recession into. positive GDP just because of the of just the capital investment. But then if you think about, you know, effects on total factor productivity, if that goes up by just a few percentage points

over the next few years, well, that's going to have a pretty significant, you know, fiscal effect as well. But I think in the CPI statistics, you're probably going to see like very kind of conflicting inputs. You're probably going to see, you know, cost deflation and a lot of services as you get more things like automated that will have labor and political effects. But then you're going to have bottlenecks the economy, like, you know, anything connected to energy, essentially, energy and commute is going to go up. So, like, you know, power prices are going up, you know, whatever, 15, 20 percent per annum, which is, like, unheard of. So you're going to see different parts of the economy be sort of strained differentially and sort of aggregate statistics will

not really capture that, right? You're going to have unemployment at, you know, at the bottom. You're going to have a lot of people that can just be massively more, you know, productive and capture lots of different value. So it's just like a, it's a massive shock to the, to the, to the a system that normally likes to be in like a few percentage point kind of change every year. And when you have something that changes things like, you know, like we saw the pandemic, when you're like all of a sudden, third of the workforce is like not working anymore, you get, you know, massive ricochet effects. I think we're going to see something like that instead of over the course of like three weeks

during COVID, it's probably going to be over the next three years. So it'll be a bit more smoothed out. But the scale will be just as significant. So I would say, you know, anyone who picks a particular forecast for like by X state, you know, we'll all be driving, you know, sort of, flying cars and a robot will be doing my laundry is just kind of picking a dot on the wall to throw. But I just say, like, do not, you know, the one lesson I have from Bitcoin is when a bunch of, hyperautistic nerds become obsessed with like an early, like an early part of an exponential curve,

right? Like, don't fade them, right? And there's like a whole cohort of our most sort of gigabrain autists are like looking at, they're spending all day just like plotting new lines on this exponential curve. And they're like, yeah, like, this is where it's going to go. And so in general, right, like the same thing we started in COVID, a bunch of hyper-autistic people were drawing dots on a map and being like, oh, okay, this is a curve. Now, there's no such thing as a true exponential, right? Ultimately, it becomes a logarithm, right?

The question is, you know, how far are we from that curve? So anyway, that was a bit of a soliloquy. I would say, yeah, the impact of transformative AI is going to be hard to underappreciate. And it's going to have downstream effects on everything else, right? Everything in terms of how we measure inflation statistics, how we measure GDP, how we think about the labor market, how we think about the political effects and starting as soon as the next election.

And that will become, I think, the defining conversation of our political lives in the next few years. Yeah, so just, Danny, just hearing all that, just real quick, you know, I cannot help but think you've got these paradigm shifting, transformative, I mean, even can go as far as to say, revolutionary effects that are coming in from the private sector with these tools.

And then you've got how much digital ink spilled over whether the Fed is going to cut 25 or 50-year hold steady. I mean, it just seems, you know, the old chair Ackles comment about pushing on a string in the 1930s, like, wondering if monetary policy has any effect to revive a depressed economy. I mean, I think it holds true here in sort of a similar way, right? Like, you've got this massive, these massive forces coming into play, and then you've got people fixated on whether Jerome Powell is going to cut or hold. I mean, it just seems so misguided.

It's like you're not even focusing on remotely what was close to being important here. Yeah, I totally agree with that. But one thing that did make me think is if we're going to see massive capex, potential positive growth in GDP, but at the same time, we'll see potentially a lot of job displacement. How would you calculate what that actually means for the economy? And do you think this is just like another turbocharger on wealth inequality, essentially? Yes. I mean, yeah, like the short answer is it will lead to more wealth inequality. It will lead to higher structural unemployment. but it will also potentially do higher tax receipts because asset prices are absolutely going to moon. Like high-end wage earners will see their incomes disproportionately go up. And so you'll see the hourglass economy becoming even more of an hourglass. And I think that's the real risk, is that it stretches too far

and the rubber band breaks, and then you get a massive political reaction, blow up the data centers, you know, sort of expropriate Elon's wealth. And kind of, you know, the political system we're sort of evolving into is one where you have these techno-feudal sort of oligarchs controlling their own, like full stack estates. Like they're getting to the point where they're sort of seceding

from the normal public goods world where they want to build their own, you know, fully integrated ecosystems from their own power, right, to their own, to their own chips, to their own,

you know, distribution centers to like, you know, again, like their own e-commerce platforms where they can take the VIG. It looks like, okay, the government's going to have to actually sort of a lot of power on that really hyper-concentrated

techno capital stack in order to try to get some amount of the surpluses to then redistribute to the folks that are massively displaced. That's going to be, like, basically, you know, UBI, quote, like, or an AI dividend. Like, how we approach that is going to be, like, a very contentious, I think, issue, right? Because I think these disruptions are going to come, right?

Like, I talk to these folks at Frontier Labs, and they're literally, like, they have entire teams, like, with mass amounts of resources trying to automate as many jobs as they can. They have a whole list of them, and they're paying billions of dollars, try to, like, get people to train their models on how to do all of those tasks, everything from, like, you know, health insurance, claim automation, DMV, you know, processing, you know, like, you name it, kind of like white collar labor back office functions.

They're, like, pouring billions of dollars to try to automate as much of that as possible. And that will happen kind of in a nonlinear phase transition. Like, you want to have someone do your QuickBooks. You don't just get take someone off the street or give a college student that job because it's important that the numbers be right. And so you're going to try to get these A.A. models to do QuickBooks for you. and it's not going to be good enough right now, so you're going to like, nope, not going to do it.

But as soon as it hits the point where it can do your quickbooks reliably, everyone in the economy is going to, you know, fire the person doing their quickbooks for them. And so you don't just get this like incremental kind of attrition. You get like an entire new job class just gets eliminated, right, in a matter of months. And that, we haven't really seen that yet. But I'll say, like, people are worried about bit corners

being the subject of like $5 rent attacks and like the hyper-biquinization scenario, right? which could be still a thing. But, like, you know, when you have just, like, entire occupations just kind of being, like, iced out, like, overnight, and people are not ready for that. Is this why the AI tells people who are clearly wrong

that they're absolutely right, just to maintain social fabric? Is that what this is all about? Well, it's an interesting lesson from Bitcoin of, like, you know, a really niche, kind of out in the wilderness, subculture that had very idiosynocratic beliefs about the future,

this sort of transformative technology was going to come in, it was going to be really significant. And then there was, you know, the laughing, you know, chattering classes, sort of sneering and saying, no, no, no, you're just a bunch of anarcho-capitalist nerds. And then we're like, okay, well, now the president thinks, you know, we're like legit now. And the government is holding their Bitcoin. And it's like a thing.

But like that transition was very, very awkward and it still isn't quite complete. I think with AI, it's like the PR for AI is like very much, you know, where you sit. And I think that, like, you know, you talk to an early career graduate. You talk to, you know, somebody who's, you know, too old to be retrained. You know, folks like us, they're like professional, you know, talkers or like we've got like a niche client base. And like, I think we're feeling pretty, pretty relatively confident in our economic mode of being. I think there's a lot of people that are feeling really, really anxious and uncertain. And they don't like change.

Bitcoiners think we are used to change. We reach the volatility. it's kind of the whole, you know, what we sort of signed up for. The average person does not like that. The average person wants, you know, predictable returns. They want to send their kids to the same college they went to. They want to retire. They want to go on vacation.

And then when the outside forces just like, you know, can't be contained by the government, they look for someone to sort of provide that stability. And I think that's a, that's just something we have to deal with. Well, that's how you get to deal with. That's the core of the issue here, Nanny, because to me, and my view is, is consistently that despite all of the hand-wringing about economic collapse and catastrophe of the monetary and fiscal authorities, I still think that the biggest threat that we have to overcome is this wealth and income inequality issue because it transfers into a political dispute.

Okay. And if the type of disruption that Matthew is talking about does come to effect, that's going to be massive, have massive political implications. It could lead to the rise of, you know, very pronounced socialism in the United States, even more radical views. And I think that should be on everyone's radar. Even if you're just following markets, right, you have to understand the disruption this is going to cause is going to be felt by certain cohorts of the population more so than others. And they probably outnumber the ones that are going to benefit from it and profit from it. But I will note, which I completely agree with Matthew on this, is that I think it's so funny that we go into these rooms a lot and talk to people on Twitter and other spaces about, you know, the overvalued of the tech stocks, how the tech stocks are so significantly overvalued and how if you're buying the S&P, you're concentrated in those. those few different names, right?

The reality is, though, if those names and they have the type of integration, Matthews talking about, if they continue to reap most of the benefit and they exacerbate that income inequality that you're talking about, I can't see that the argument that those stocks are all going to collapse coexisting with an argument that, well, these are going to dominate and transform the planet through AI, right? Like, one of those things has to not be true. Either this is all just fluff, which I tend to fade pretty hard, that it's not going to be as transformative, as Matthew is saying, I think that it will be. Or if it is that transformative,

you should expect those things that just rocket, that those things are, those assets, those securities are probably undervalued significantly. I see this as like, yeah, kind of hyperbolic equilitarums, right? Like, either they, maybe there's like three scenarios. One, it's like it's complete, you know, over the skis, hype, you know, the debt that's being built up will never be paid back and there'll be billions of dollars of losses and it'll be like a black eye will never recover. I think that's like less than 5% scenario, but it's like you can't eliminate it. But I think there's also a failure scenario where like they hit takeoff, but then there's a political reaction that like caps your, that caps your return, right?

There's nationalization. There's, you know, forced breakups. There's, you know, I think that's also why you see so, like, $100 million super PAC being raised by the AI companies, you know, taking a page out of the crypto playbook to realize, oh crap like we are about to hit this inflection point everyone's going to see like our asset prices absolutely run and everyone you know Elon's going to be a trillionaire and Oracle like everyone's going to be so much wealthier that hell that holds in a video stock they're like bracing for the political counterreaction because they know that like that's just one that's one you know

majority vote away from being taxed out of your hands right um and so I think you know that's that we're in like a very weird dynamic where if you if you do see these exponential returns like if they happen too fast, that was also like the concern Bitcoiners have. Like, if we do get to this like, oh, shit moment and everyone's like a veto on the US government for whatever reason and, you know, Bitcoin's gaping up $100,000 in a night, well, like, that's almost too fast because the political reaction to that could potentially like stop it in its tracks and, you know, you maybe never recover. So I think there's, I think folks at the top of these capital stacks and tech stacks are now

positioning themselves politically to try to like, you know, mitigate that kind of reaction. So they can kind of protect those rents, right? Ultimately, you're talking about these techno-futable, where they've got essentially a monopoly to a certain extent between, you know, a monopole, got like a hyper-concentrated set of very competitive, but ultimately like a handful of companies owning all this compute. And they can charge, you know, a ton of money for that.

And the question is, how does that massive surplus get distributed to the rest of the society? I'm really interested what Joe and Tech may think of what Matthew said just before. in terms of UBI, because ever since the last few years when AI has become apparent is going to be insanely disruptive, like UBI is the only thing I can see happening here. I don't know how we get to this AI world without it. Like, ideologically, I don't really agree with UBI, but I don't see how they'll have another option.

Do you think that is probably coming? I think so. I mean, when you really just look at how this plays out, you almost end up with like a permanent underclass. Like, we already have the bones of this now. and if the wealth inequality keeps going, which it sounds like it certainly is, you kind of just end up with these folks who are almost unemployable in many ways. If you start wiping out, yes, there will be jobs that get created, but, you know,

it's kind of higher level, you know, your electrical engineers and things like this. It's not a, you know, something you can go from working in QuickBooks to suddenly being an electrical engineer, right? These things are hard to retool in. So very, very challenging. And I do think that's probably where it ends up. It's also where a lot of these things end. up if you just look through history, right? Periods of inflation, you know, regime change.

It tends to end up in these more social policies because people feel left behind and they feel left behind today. So if that's going to accelerate, you can expect it to accelerate. Yeah, I agree. I think politically, we'll start with the stipulation that I think we have in many countries, UBI light already through various different social programs, through tax credits, etc. I think that only has more mission creep and trickles towards more proposals. I was, you know, whatever you want to call it, right? And politically, you might not call it UBI at first, but I can see various efforts to sort of curb the overnight influence of the forces that Matthews talking about.

And they will be increasingly creeped out in any form, you know, whether you call them a tax credit or other transfer credits or displaced workers' credits. I mean, this is not new. And in many ways, it's an older playbook that has to be recycled. and probably to a larger degree. So I think it is inevitable. It's just a question of the sequence and how it gets rolled out.

Joe, I have a question for you. So like, you know, connecting to the Fed, right? So if you're briefing the Fed and you're like, hey, there's several trillion dollars of CAP-X coming in, assume baseline, several percentage points increase in total factor productivity, say that means like the R-star, which is like they're kind of like Shibboleth, their like, you know, their internal target.

Say that means that that structurally is going to rise It should be higher. Yeah, several percentage points. Meanwhile, you have potentially like increasing structural unemployment because of, you know, the labor displacement of AI. So like AI both causes long run growth to increase. You are, you know, going to be running the economy really hot. You get nominal GDP is really high.

Tax receipts are great. Maybe the government can even cover some of its deficit now because, you know, it can just tax capital gains. But the unemployment figures are also skyrocketing, right? So, like, you have... Well, define skyrocketing. Well, I mean, say that, you know, if, you know, a massive... And also, maybe, like, it's contrary in certain cohorts.

So maybe, like, the under 30 cohort is reaching, you know, 30% unemployment, 40% unemployment. It's, like, a great depression. For some parts of the economy, it could even be in, like, a lot of blue cities, right? Where it's kind of most PMC class jobs just get, like, just decimated. And, like, Accenture and July just announced 20, 30% across the board cuts. And all of a sudden, you've got people in relatively wealthy, you know, congressional districts being like, what the hell, right? Like, I could see this happening.

The Fed is like, what, like, okay, they're potentially coming into the bottom of a cutting cycle next year when this starts to kick in. Like, what do you see the Fed like doing in that environment where our star is higher? Unemployment's also going up. You're heading into an election. It seems like everyone says that they're in the worst of all possible worlds right now. Like, I can see it's only going to get 10 times worse for them next year. And then Trump's just going to have his guy in there.

Yeah, I just like, where like the conversation about the Fed is today, I just, I just, see that conversation is getting more insane in the next 12 months. Yeah, it's going to get more insane. I think to start off, I think they should revisit all of their models, right? All of their models are broken, as we like to say, because they are. Let's be honest. Like, first of all, the R-star discussion is, I think the R-Star is, you know, they'll say they're still sufficiently restrictive.

I'm not so sure about that. I think R-star is going to be structurally higher moving forward. But to answer your question more directly, you know, comparing the labor market dynamics to the inflation dynamics and the neutral interest rate dynamics, what they have said and what Powell has said repeatedly, they've actually analyzed this and looked at this a couple different times with their mission statements or equivalence. And they said, look, if you take the two targets, you got to figure out which is more out of whack. Are we farther from the inflation target? We're farther for the labor market target. To me, I think it's an easy call currently. I think they're much further

from the inflation target. Now, the problem why I started off with, like, let's check your models, is because is the 2% target given the forces and dynamic? you're going to talk about with growth and inflation expectations, is that a realistic target, given the rate of our economy, given the rate of growth, given the grade of government spending? I don't think it is. I think that the most likely scenario is sort of a, they'll never admit it, actually, but a realistic abandonment of the 2% target in favor of three. And I think that's mostly how they're going to square it. They're going to say, look, this is beyond our control. We're dealing things that are outside of our ability to effectively cajole or influence.

So we can prevent us from collapsing the labor market further. So when push comes to shove, I think they're going to take the structurally higher inflation for a variety of reasons, one which is government debt and burning away the debt, the run-in-hot narrative, et cetera, in favor of keeping unemployment to the modest degree they could influence unemployment, a lid on it. Now, all bets are off. That's why I sort of interrupted you rudely with the, like, what is runaway inflation, right? Or runaway unemployment, excuse me. Because if you're at 10% unemployment, that's drastically,

different than five or 5.5. You know, to me, run away, you're going to, let's get about 5% on unemployment. But then you got folks that say, like, look, the unemployment market, the unemployment rate is is being confounded by like this mass exodus of retirees and the boomers live in the job market, work for participation, immigration. So again, structural issues beyond which the Fed has control. And going back to Danny's earlier point, like, I still, for the life of me, I know there's political justifications for it, but I don't understand all the ire that Powell is drawing here. Like, I mean, look, like, we all know behind the curve, miscast, forecast inflation, the transitory rhetoric was awful. Let's stipulate all that.

But what do you want the guy to do with some of these forces that he's having to deal with here? One of which is the constant, you know, berating from the president on this rate issue. So I guess in summary, my view is I think they're going to have to sacrifice our star in favor of the labor market. I think that's ultimately how push comes to shove when they have those two goals and they're in conflict over one another, and I think that's the choice they'll make every time. Which is effectively grow your way out of it, which is another euphemism for inflated away. Yeah. And at the end of the day, they can pound the table as much as they want about Fed independence, Fed independence. We know they're not truly independent. I mean, they have to, it's similar, you know,

and I kind of learned this with the court system, right? And I have a profound amount of respect for justices and judges, so I don't mean to persmurch any of them. But I'll just tell you, like, I think it's very naive for people to completely say their objective in every regard when they're put into places by, you know, a political party or partisan. And that is in the back of their mind. It has, at a minimum, it has an appearance of potentially tainting their views or tainting their decisions. And there are very noble people that try to disabuse themselves of any influence. I get all that. But it, it, it's, you know, it. it still has an effect, I think, in my view,

when they're human beings. They're not computers. They think about these things. They think about their career. They think about their legacy. They think about their friends. So I think that's an influencing factor that people discount and no matter how much they say they want to be objective.

I mean, I think you're absolutely right to say, we don't really know how independent the Fed is. We know it's certainly not completely independent. But if Trump gets his way here, I'm sure you all saw the meme yesterday of him saying he's going to fire Powell. he's obviously been ramping up the pressure as much as he possibly can. But if he brings in Moran or someone else who is essentially just a stooge for the government, are the severe negative impacts from that?

You know, I'll start with that. So first off, I will note it's kind of an interesting thing. This challenge to Lisa Cook as being briefed in the Supreme Court, you had every living Fed chair sign off in support of Cook's position as well as I mean, I don't know, was it over two dozen Nobel laureates in economics? I mean, it was a huge number. But, and I'm double counting somewhat there. But the point is that I think that the mainstream view would be that the erosion of Fed

independence is a systemic risk to the economy and to the monetary system. I do believe there is strong arguments that historically we have gone through periods where Fed independence has been undermined. It has been much less independent or central bank independence in the United States, more broadly, has been less independent than it is currently. So I'm not so sure that I can draw an easy conclusion on that.

My general view is that I think it's a more stable feature consistently across history to have an independent central bank. However, I question whether they have been independent for the last 20, 30 years. I think they have had significant political forces thrust upon them and political influence that has been asserted on the Fed, really since the GFC, perhaps before that. So I guess I question whether this is really just an acknowledgement of sort of the current

status quo, what people finally are being forced to admit it. I mean, the PBOC is not an independent central bank. And if you model the decision environment for national leadership as one of acute, in only increasing strategic competition between U.S. and China. And the U.S. is, you know, way of prosecuting the conflict is try to, like, emulate China as much as possible, which seems to be our strategy of industrial policy,

subsidies to critical industries, and picking national winners and losers, you know, forging national champions that hew to our strategic interests. Then, like, the monetary independence of the central bank is, from that perspective, seen as a, as a luxury of peacetime that is sacrificed in order to prosecute geopolitical competition,

just like we did in the 40s and 50s. And that, you know, the hope would be, okay, well, that doesn't do permanent damage to the institutional DNA, and that when those exogenous geopolitical conditions relax, then the kind of inherent kind of structural division of responsibility between the Fed and the Terts, but like, we haven't declared a war. So we kind of live in this ambiguous Schrodinger's state of, you know, political polarization where all the presidents, all President Trump's moves are viewed as essentially political actions against his domestic adversaries. But at the same time, the president is the executive agent commander chief. And so his actions are also strategic moves in at least nominal defense of the national interest. And in many cases,

it's hard to tell which is which. And so, like, the political subsumption of the Fed could be viewed as, like, just to like his henchmen going over to take over like the one entity that hasn't like bent the knee. But from another perspective, it's, hey, we need to have all the tools at the present's disposal to fight essentially a total economic war with China. I think you could have a fair view of that and it's probably a mix of both. Yeah, I don't know. I agree with everything you said there. I'll just note that I think that the way to defeat, if you're in a geopolitical sense in an economic war, the way to defeat the people's role of China is not to emulate them. I think there are other avenues. I agree with you. That's been my main criticism for the past year is like you're not

going to out totalitarianize China. You're not going to like out state capitalism China. Like it's just like our ace in the whole has always been our ability to weld relatively free capital markets, innovation, the most high density talent clusters in the world and like turn great ideas into like world dominating businesses that like preserve our competitive

advantage drive GDP growth and better quality of life. Like, that's kind of been our whole thing. If we're like, oh, shit, we did like bail Intel out and, like, pay above market price for a rare earth's mine and, like, distribute friends to our cronies that come to the White House. Like, you quickly get to more like an Argentina-style model. So it's like, we're kind of on a nice edge here, right? You could do, like, really good industrial policy that's like, you're picking your spots and it's, like, well-calibrated and it's, like, you know, ultimately fair. Or you could just do, like, ham-fisted, you know, handouts to your capitalist cronies, and you don't get the strategic advantage, you know, or the

competitive advantage. You just kind of get money going into different pockets. I want to get on to, like, the US and Bitcoin. Matt, when you were consulting for the government a few years ago, you've talked about working on these low probability, high consequence things, one of which was Bitcoin, one of which was AI. Are they no longer low probability? How has that changed? Yeah, I mean, I guess they went from objectively, like, less than 1% to like the probability, for example, of Bitcoin reaching parity with gold by, say, 2030. If that was a scenario, I think, you know, when I was doing that, you know, four or five years ago, I would say it was like less than 1%.

Right. I would say that's more like 10 to 20 percent. So like a 10 to, you know, 20x increase of the relative likelihood of a pretty strategic shift in the, you know, the distribution of monetary assets in the global system. And I think that's probably like a reasonable estimate of what some people think inside the DoD as well. I think, you know, just to give the TLDR, like, Right now and across the federal government, there's, like, different views of Bitcoin as a policy instrument.

Some folks view it as like a handout political kind of favor, right, that's owed to them because of campaign contributions. Some view it as a, as a, you know, oh, this is now an established financial instrument. It's normalized, regularized. We need to have all the right regs. We need to sort of write the wrongs of the previous administration's kind of heavy-handed, you know, somewhat punitive approach to the industry. And then you have other folks that see it as like a true strategic ace in the whole for the United States. How would you break those down? Yeah.

I would say White House, some political appointees, more like the former. The Treasury Department, SEC, CFDC is more like in the middle camp, right? It's just a new instrument. You know, it's now legitimized meaning to like, you know, make it safe for, you know, mom and pop in the 401Ks. And then there's the folks in the Pentagon, the CIA that are like looking in the next five, ten years and realizing the strategic vulnerabilities of the current system. And they're like, okay, well, Bitcoin, we have about 33% of it. Relative to gold, we have maybe 8% of the total above ground gold stock. So if you just assume, like, gold and Bitcoin are going to, like, move up relatively in tandem over the next five or 10 years,

then we have, like, a 4-to-1 advantage by having Bitcoin monetized relative to gold. And it happens to advantage us relative to our Eurasian adversary. So, like, Pentagon's very much pro-Bitcoin. CIA likes to use it. But they don't make government policy, right? So Treasury makes the policy on the SBR and CFDC, SEC, SEC are involved in all the clarity market structure stuff. So you're in kind of this ambiguous zone where, you know, it's not like the government has one view of things. And there's political priorities, it was closed, stable coins, clarity, and then maybe SBR, depending on, you know, what happens.

I'll just point to the fact that the current new bo-Hines in the executive position, executive director position at the president's working group on digital assets at the White House, the top crypto policy. advisor to the president is a gentleman named Patrick Witt, who is still dual-hatted in his acting director of the Office of Strategic Capital at the Pentagon. So he comes out of the Pentagon. He's got, you know, a lot of sort of NatSec, Bonifides, and he's now leading the crypto policy role at the White House while also having strong connections into the Pentagon. So he's getting his sea legs under him. Obviously, the political system inside D.C. has put all their chips on market structure. Obviously, BPI, we're trying to get the Blockchain Regulatory Certainty Act. you know, linked into that bill.

So we have a save, save your wallets campaign, check out a website. You know, we want to get that protection for open source software, you know, riding along with that bill. And then, yeah, we'll see 2026 what happens with the SBR. I'll just do one last little political update. Yeah, so like the executive order required the Treasury Department coming up with, like, budget neutral means of acquiring additional Bitcoin. We haven't heard anything about that, right?

Now, I know I've had a number of conversations, I've written a few memos, laying out all these different ideas. Again, it's their job to come up with the final legal analysis. And nothing I've heard has been like a legal objection. It's more of a matter of like political will, whether and how they, how far do they want to go? And from this menu of options, like, which ones do they feel comfortable going forward with? And what's the, what, you know, someone at the top has to kind of do this. I mean, the Deputy Secretary of Treasury was involved in those meetings, Falkinder, and then he got fired.

And so it's like, okay, you know, you're kind of back to square one sometimes, whereas like you think you're moving and then the guy gets bounced, right? So there's a lot of like contingency here. I'd say like the SBR is kind of like Chekhov's gun. It was like put on the table and act one. And it's just kind of forgotten about. And we'll see. Like maybe they don't complete the story.

But usually, you know, it's a nonlinear thing. When the government decides to like buy Bitcoin, if they ever decided to do that, it's not going to be because like, oh, they just had to like do that. It's going to be like a strategic decision. I've always been of the thought, sorry, just riffing off what we were saying before about the US emulating China. China's been, which is ironic for a capitalist government, they've been saying to their citizens to buy gold for a long, long time. And I've often thought, like, for me, the SBR, it's a fun narrative, but like I'm not that convinced of how actually useful government buying Bitcoin actually is. Sure, there's a signaling there, but like, okay.

I've always thought it to be far more powerful to the SBR is just Americans balance. right, whether it's in the ETFs, whether it's just private holdings, you're actually better off having Americans owning Bitcoin and then it monetizing than the government only. Because what's the government going to do with it, leave it in the vault? Aren't you better off having the capital gains taxes, the wealth effect, all of that of Americans owning it? So I've often wondered if a much more strategic option is just to kind of green light and say, hey, we actually want you guys to own this, allow Americans to get access to it, which is obviously happening. In my view, that's actually a far more effective and probably productive means of, you know, generating the same effect.

I guess it's a policy judgment of like, what's the role of a reserve asset on the national balance sheet? If the government's going to pursue a policy of making Bitcoin a global reserve asset, just like gold is already, well, we have about 5% of the total, you know, above ground gold stock international reserves. If you add it up like all the ETFs, it's maybe 8 to 10%. So you'd be like, all right, well, if we are by policy going to create a world where Bitcoin is going to be the new gold, then as a matter of like national strategic positioning, you should have like a proportional share of it as you have of gold, right? Now you could obviously get all the collateral effects by encouraging Americans to hold it as well if you also want to pursue that as like a strategic shift and you can get a lot of the benefits out of it. I think the real benefit, though, of holding Bitcoin in the national balance sheet is actually to ensure it's actually kind of a socialist policy in a certain sense of like the right, you know, people that are tracking Bitcoin can buy ETF, but like not everyone can. So if the government's going to, as a matter of national policy, encourage the adoption of Bitcoin, it's like, okay, we'll hold some on the national balance sheet to ensure that every American has some sort of upside exposure to it and not just people that have the wherewithal to buy it in an ETF. And there's others outside the box ideas like BitBonds, et cetera.

Andrew Hones is a great idea of like how maybe you could engineer. actually a paydown of the national balance sheet, a bit more speculative kind of if then, right? But yeah, that's like a policy choice. It's a question of the government. If they decide to make Bitcoin into a national strategic asset, that they actually want to be monetized, disproportionately relative to gold in the holdings of other countries, well, then, like, you should, like, you know, make good on that, right? If you don't think that's your policy objective, you just want it to be adopted as a financial instrument, you know, another commodity-like synthetic digital. asset that you don't want to displace gold or you don't want to reach parity with gold, well, then you should not adopt it in your national reserves. But those are like different

objectives. If you're like, we only really want Bitcoin to kind of slowly go up to five or 10 trillion and we never want to live in a world where Bitcoin is like surpassing gold, well, okay, then that's fine, right? But if you're assuming that that's a world that you have to prepare for or even engineer, you want to make sure that your balance sheet is well positioned for that scenario. And you don't think that's accomplished with the currently held finally resolved coins

that are in the U.S. government's possession? You think it has to be combined with a signal of additional acquisition? I actually think it should be one of two things. I think there should be no like, I think you should ultimately have a proportional share of Bitcoin as you hold of gold if you're preparing the country

for a future scenario where there's, you know, where Bitcoin is basically parity with gold. So like that's like the end state. I think you should get to if that's the world that you're preparing for. So given that, the kind of like- Why is that? Why does it have to be proportional to gold? Well, it's kind of your gold's function on the national balance sheet has always been

this kind of backup plan, right? Not really, because we hold as a percentage of our GDP, I think we're at an all-time low with our gold holdings, right? We have an $800 billion, if you add it all up. You know, maybe depending on the valuation, you know, now it's closer to like a trillion. And so, you know, that's been kind of steady. Relative to GDP, it was substantially higher, I think, in the 80s, our gold holdings, right?

Yeah. And we've been, you know, aggressively trying to neg hard assets as like a national policy for the past 50 years, right? So if we expect the next 50 years to be like the last 50 years and the Treasury dollar standard to just be basically unscathed, then you don't need to have any change to your national reserve policy, right? Like plan A is just the system as it is continues. indefinitely. And you can just like keep, just like let it ride, right? And so like plan

A is plan A. The question is what's plan B? You know, always governments have to have plan B. Monetary regimes tend to change on generational timescales. And if you're looking out for the national interest over 50, 100 years, you've got to think about, okay, what's our backup plan? As a reason why we haven't sold off our gold, why isn't really like countries don't sell off their gold. It's not because it's some barbarous relic. They just haven't gotten around to it. It's because countries think about, you know, generational shifts and wars. And it's like the thing they, you know, it's their old standby. They don't really want to give it up. And so if gold still plays that kind of, again, we don't like to talk about it, kind of,

you know, back of house plan we've really underinvested in. China, meanwhile, has been dramatically investing in their backup plan for the current dollar system. Okay, well, it's our backup plan for a shift in the global dollar system. We don't really want to talk that shift into existence, right? So you don't really want to talk too much about your Bitcoin acquisitions, right? So I wouldn't recommend they do like a bunch of symbolic buys, which are just kind of like, you know, pump the price, but actually don't change the strategic position of the country. I would actually prefer they just quietly acquire as a matter of national policy over never, over the next several years, just like we did with gold.

And it just becomes like a new architecture that we have, you know, bought a relatively, you know, cheap option. Or you don't do it at all, right? It's kind of, because, yeah, kind of like signaling just to pump the price would kind of just, you know, would be seen as like a payoff to serve your donor base without actually moving the strategic needle. for this downside scenario. So I see this is just kind of like a binary.

I just like, hold what you've got and just like let it ride. It's good, right? We've got maybe $10, $20 billion with the Bitcoin on the balance sheet. That's fine. I wouldn't expect that to like provide much of a, of a strategic insurance policy for a world if, if we really mismanaged the dollar system.

We got that number from Besson, too. Didn't he say 20 billion on like a news show or something? I thought he was interviewed, right? Yeah, and it was something when you did the math, it was less than the 200,000 that people talk about, right? So they've either lost some coins or there's a few missing keys or TVC. Well, that's the other thing is like, as a matter of public transparency, we should know how much Bitcoin we have, right?

Like, it seems, and I know that the, I know, like, there are lots of other, like, couch cushion pockets of Bitcoin that had been sitting there when it was like 5,000 Bitcoin when Bitcoin was $1,000 and it wasn't like that much money sitting somewhere in the CIA or the FBI or whoever. and now it's worth a lot of money. And now the Treasury comes knocking and goes, hey, guys, like, we need you to give us all that, all that juicy coin.

And they're like, I don't know about that. So I actually think that the real number is kind of a mystery. And it's probably classified reasons why they don't want to talk about it. It's also logistical reasons, right? Like, because there's individual. All those different offices and, yeah. Yeah, there's individual U.S. attorney's offices that probably have Bitcoin. And, like, you know, is it finally resolved, right?

Have victims been paid their restitution? I think the government doesn't have as much as you expect a sort of a uniform database that's sitting out there with all the Bitcoin. Like that's not how they're constructed. There's branches and regions and localities. And I think that it's a tall order probably to gather all that information. And one of the most like just good housekeeping reasons to do in SBR is just to clean that up, right? There are people with like manual spreadsheets with private keys on like sticky notes. And like you'd want you want the nation's Bitcoin to be like custodied and secured in like just a well managed fashion.

So like at a minimum, I think everyone should be in favor of the SBR just so we don't like have some, you know, random US Marshal Service guy like, you know, delete a key with a billion dollars of Bitcoin on it. To checkmate's point earlier though, like I do I do agree with him that it would be good to see Americans hold as much Bitcoin as possible rather than or people from anywhere in the world rather than the American government. And this is one of the reasons that I really like the bit bond idea. Because I think if you did bit bonds at every level from sort of like mortgages to city and municipality level and then the treasury, like and then a shared upside in Bitcoin gains, that seems like the biggest win-win. Do you think that we'll actually see bitbonds within sort of Trump's administration? I mean, actually, I prefer the bit bond idea to the straight SBR idea, right?

It just requires, it's a bit more involved, right? It requires, you know, a lot of arrangements and the Treasury developing all sorts of stuff. and because it'd be them issuing a new debt instrument that Congress would have to authorize. So they would have to pass the law. I don't see that like likely obtaining unless there's like crazy majorities. Now maybe there's like some clever way of interpreting statute that would allow them to issue some like experimental bond. I don't know.

It seems a bit of a bit of a tall order. But the prospect of like other other other, other, you know, government, you know, entities issuing something like that might actually be more more realistic. right so states and local governments could get in the action the basic principle right is you know there's kind of a way to kind of arbitrage the risk and distribute that risk to different people that want to have a different exposure to to bitcoin and you know leverage existing debt markets that are otherwise quite liquid and want and can hold government instruments but they want exposure to bitcoin and so here's like a way the government could kind of you know create a kind of win-win kind of the sailor style strategy but in sort of public

finance. So I think it's definitely a great idea, right? It is, you know, it's like for the, for the stack of things you have to buy into, right? It's like at the top of a pretty tall stack. And so I think Andrew Hones has done the great job of like laying out like the math and like even within various assumptions, why this is like at least worth exploring as a pilot, but could have a lot of benefit because it puts Bitcoin in the hands of lots of people that, you know, wouldn't otherwise maybe be able to get it and help defray public expenses. So I actually like it. It's a great idea. But realistically, though, like, administratively, legally,

there's like higher hoops for that to go through. Like the SBR can be established to a certain extent with executive authority up to maybe $20 billion using the funds in the Exchange Civilization Fund. That requires just like political will, doesn't require a new legislation. Doing like the Bitcoin Act, the Lummis Bill, that would require like, you know, majority in the Senate,

which could happen, but is a much higher left. Last question on this stuff. When Trump came in, obviously, there was a ton momentum, he signed the SBR executive order, and he's been very sort of open to Bitcoin businesses in the US with the huge caveat that he's still putting privacy developers in prison. Maybe not directly him, but that's still happening. Do you think the momentum's waning, or do you think there's still positive stuff going to come out of this administration for Bitcoin?

I don't think momentum. I think, well, the BRCA, right, getting the president or was getting the White House to really vocally support that. It's not just good for Bitcoin, it's good for everyone that digitalizes ecosystem. It's good for folks that want civil liberties. It's already got co-sponsors in the house, but it requires strong support, right, to make sure it gets through. So we'd love to see more of that come. I think people are definitely in support of it.

But, you know, there's always more they could do to make sure that it passes. People have said that if they get clarity passed, you know, then the SBR will come up for discussion as the, you know, the third of the sort of sequence of three major crypto legislative priorities from the White House. We'll see if they make good on that next year. But then we'll, then we're quickly going to run into the political calendar summer, 2026 elections that fall. And then everything's basically a crapshoot depending on what happens in those elections. I think the politicization of crypto policy is definitely, um, a risk, right?

Uh, kind of, you know, his personal family involvement in it will, it's going to be like a major, a major feature of the campaign. And if the Democrats take back the House, they'll have hearings, they'll subpoena, you know, all the different folks involved in Trump's crypto businesses. It'll be a thing that they'll like keep whacking on over the course of the rest of his terms.

So that environment would be kind of not that conducive from any more like pro-Bitcoin thing. So it's like a window of time, I think, between now and the summer of next year, where if there's going to be big moves, they're probably going to happen then. After that, you know, unless he can keep the Senate in the House majorities, then it's probably going to be, you know, stasis.

Yeah. I think it's even, my view is even earlier than that. You really have to like the late spring, right? Or April-ish, May, maybe perhaps, but that's it. And, you know, if we punt until next year on the Clarity Act, right, you get that across the line, it's going to be really tight to get a turnaround something like, you know, getting authority for bit bonds or anything like that through Congress. I just think it's going to be too tight.

Now, obviously, that can all change, right, with how the midterms roll out. If the midterms are a Republican sweep, they retain both houses, then that gives you more runway to make good on some of these other promises. If not, obviously the opposite. All right, before we close out, is there anything else that you guys want to talk about before I do my last bit? Checkmate, what's the price in 12 months? That's literally my last question.

The CIA is always watching you, Danny. Come on. Look, I mean, no one knows. But honestly, like, my view has been, so I can't remember when it was, it was about six, maybe eight months ago. I wrote a piece. It would have been around January, February. And it's when we just hit 100K. We're kind of starting that chop around 95, 100.

And I've got this model that I use and how much capital needs to flow in in order to justify each market cap move. Now, my case back then was, I think we justified 100K, but I wasn't sure we had the juice to go that extra 50%, get to $3 trillion, which is $150K. And my base case was we probably have to see the ETFs approximately double in size because I won't go through all the numbers, but that would approximately be the amount of money because the ETFs are about 20, 25% of the demand profile. That means if you multiply that by four, that's kind of the amount of money that we need to see come in. to justify 150. If you take the amount that Just Strategy has bought and the ETSs, you now have that doubling. So in my view, if we had it gone in January from 100 to 150, we'd be exactly where we are right now. We would have come back down because we just didn't have the real capital coming in

to absorb that sell side. We didn't actually belong at 150. We kind of belonged at 100. I think we now have the juice to not only go to 150, but stay there, honestly. So that's my base case. Now, as I said at the start. I think they're just being very aware, like at the moment, the bears haven't even cracked the first line of defense. If we get down to 105, things start to get a little bit hairy, just in the amount of people who are going to be underwater. You go below 95, it's a hard shot to get past. In every single previous bear market, that is more or less being that tipping point. Now, we're not there yet. So that's really the way I'm looking at it. Path dependency, if there's some kind of crack, and that's really why I wanted to pick minds on the

AI. Was there any risk that this thing bubbles out and implodes? Because that's the kind of dynamic, where suddenly you're below 95 and now you've got a bare market in play. If that doesn't happen, we belong at 150. And, you know, the journey is we've kind of proven a trillion dollars back in 2024 market cap. I think we've now proven two trillion. Does Bitcoin belong above silver? Yes. Where's silver going up? So, you know, in my view, three trillion is kind of the next move. So And then it's just a question of how many more trillions? So 12 months from now, at least 150. There we go.

I'm going to call it by the end of the year. But listen, I really appreciate this. Joe, thanks for pushing us to do it. I think we should do this. I mean, Matt's going to take a step back from podcasting potentially. So maybe we should do this every quarter or so and we can have a rolling guest instead of Matt. Yeah. Happy too.

Let's do it. Before we go, I just wanted to one comment on this. Okay. for as long as I've been in Bitcoin, this idea of the four-year cycle has been this sort of ball and chain, I think, on the Bitcoin price. And Bitcoin is extremely sentimental, as we all know, right? Up 5%. We're all going to make it, down 5%. You know, we're headed to Goblin Town. If you can break the back of this four-year cycle, I'm just telling you, I think that changes fundamentally the market structure in Bitcoin. It changes investor allocation. I mean, even right now,

anecdotally, I'll tell you how many people, I was playing poker. the other night and a guy who's own Bitcoin say, yeah, I'm probably going to sell a little bit going into the Q4 of this year because it's a halving cycle and Bitcoin's going to tank next year. If you were able to rid this sentiment of the market and push it more

towards like an equity mark where I don't hear that at all in traditional finance, somebody talks about like a four-year cycle for the S&P. Obviously there are liquidity cycles and recessions, etc. But if you can get rid of that narrative, I think that has very profound implications for how Bitcoin will trade

into the future. So we talked about that earlier a little bit in this podcast, but that's going to be fascinating. And the most fascinating thing is it comes against the backdrop of that Fed independence, potentially weaning or the curtain being pulled away from in the early part of next year. That's not that far away. It'll be into the early part of next year. You'll be, you'll probably be getting an announcement of a new Fed chair. I mean, Besson said it was potentially November or December that they were going to give that name out there. And then the confirmation hearings will start, obviously, and you're going to have somebody taking over for Powell in May, right? So, I mean, that is almost like a poetic backdrop for Bitcoin, right,

and where it's had in its cycle. So hopefully we can crack that. Yeah, the four years cycle is already broken, people just aren't aware of it yet. I hope you're right. Bion Hall. Cycles are dead. Bitcoin's going to a million.

Let's fucking go. All right. Thank you, guys. Appreciate the time. Thanks, Danny. Later.