Luke Gromen Sounds the Alarm of a Crashing Economy: Macro Update to Help Investors Prepare

00:49:01
https://www.youtube.com/watch?v=NckfcfiGR2k

Resumo

TLDRThis episode features Luke Groman discussing the potential consequences of austerity measures on the U.S. economy, particularly in relation to Doge and government spending. Groman highlights the critical nature of managing the U.S. debt and warns that cutting too deeply into government spending without first restructuring existing debt could lead to a severe economic crisis. The conversation explores the balance needed between fiscal responsibility and sustaining economic growth, the roles of gold and Bitcoin as safe assets, and potential strategies for devaluing and managing U.S. debt. Groman ultimately emphasizes the importance of thoughtful planning in avoiding a 'sudden stop' in the economy, indicating that the actions taken now will significantly impact the future financial landscape.

Conclusões

  • 💸 Austerity measures like Doge could worsen debt issues.
  • 📉 Cutting government spending may lead to economic crisis.
  • 🏦 U.S. receipts don't cover debt obligations.
  • 🪙 Groman suggests gold and Bitcoin as safe havens.
  • 🗓️ Effective debt management requires restructuring before cuts.
  • 📊 Interest expenses exceed revenue; a serious concern.
  • 🔄 Devaluing U.S. debt is crucial for economic health.
  • 🛠️ A comprehensive strategy is necessary for recovery.
  • 🏗️ Reshoring jobs and skills development are essential.
  • 📈 Federal actions now will shape future economic stability.

Linha do tempo

  • 00:00:00 - 00:05:00

    In the beginning, the discussion delves into the complex interrelationship between government policies, treasury market values, and looming economic crises. Luke highlights the necessity for political leaders to avoid drastic actions that could destabilize the economics of treasuries, warning that failing to prioritize the real value of these assets might lead to unprecedented economic turmoil.

  • 00:05:00 - 00:10:00

    The conversation shifts to the topic of government spending and the potential impact of austerity measures via initiatives like Doge. Luke emphasizes the importance of understanding how tightening budgets can backfire by triggering a halt in economic activity, exacerbated by the fact that current interest expenses surpass government receipts, challenging the feasibility of debt payments without further monetary assistance.

  • 00:10:00 - 00:15:00

    Luke discusses restructuring scenarios, asserting that the primary objective should be to negotiate with banks to effectively manage debt—lowering interest burdens before cutting down on potentially wasteful government spending. Failure to follow this sequence could endanger the economy and deepening the debt crisis.

  • 00:15:00 - 00:20:00

    As the discussion progresses, it becomes clear that any major cuts to government spending could lead to a significant downturn in GDP. Luke warns that such budget cuts would only worsen the situation, leading to stock market declines and potentially triggering more severe monetary interventions from the government.

  • 00:20:00 - 00:25:00

    The implications of long-term versus short-term economic planning become a focal point, with a clear distinction made between immediate market responses and the wider economic picture that spans decades. The conversation casts doubts on the viability of drastic reductions in government spending without causing wider economic instability.

  • 00:25:00 - 00:30:00

    Luke critiques current proposals for revamping the economy, suggesting that any serious plans should prioritize fiscal health before venturing into cutting waste. He notes that populist policies need to be weighed carefully; acting too hastily on Doge-style austerity could result in economic stagnation.

  • 00:30:00 - 00:35:00

    The need for a comprehensive plan to manage US debt levels is underscored, with suggestions including exploring strategies such as gold revaluation. Investors and policymakers are alerted to the need for decisive actions that consider the existing financial landscape to avert imminent economic crises.

  • 00:35:00 - 00:40:00

    The discussions center around the potential consequences of moving away from US treasury-based markets towards alternatives like gold and bitcoin, alluding to the motivations behind capital flows and the global reserve status of the dollar. Luke emphasizes that every action taken will have profound implications for the wider economy.

  • 00:40:00 - 00:49:01

    Finally, Luke offers reflections on the importance of solid financial strategies amid the precarious state of the economy, urging for proactive and systemic reforms that can arrest current trends without sacrificing the integrity of the financial system. He reassures listeners that awareness and preparedness are key in navigating the turbulent economic landscape.

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Vídeo de perguntas e respostas

  • What is Doge's role in addressing government spending?

    Doge has become a polarizing issue as it aims to cut government waste and fraud, but pushing austerity too hard could worsen the debt situation.

  • Why could cutting government spending trigger an economic crisis?

    Cutting spending might reduce revenue needed for interest payments, pushing the economy closer to default and reducing GDP.

  • What is the current state of U.S. receipts compared to obligations?

    U.S. receipts are at all-time highs, but they can't cover the interest expenses on debt and obligations.

  • What are the proposed methods for devaluing U.S. debt?

    Groman suggests using Fed yield curve control, restructuring debt, or even revaluing gold to manage and reduce debt.

  • How does government spending relate to the U.S. economy?

    Government outlays account for a significant portion of GDP; cutting too much could have adverse effects on economic growth.

  • What is Luke Groman's outlook for Bitcoin?

    Groman believes Bitcoin will eventually decouple from equities and serve as a neutral reserve asset.

  • What role do gold and Bitcoin play in the future economy?

    Both are viewed as potential safe havens against inflation and currency debasement.

  • What measures does Groman advise for economic recovery?

    He advocates for a comprehensive plan involving debt restructuring, managing inflation while supporting the middle class, and reshoring jobs.

  • What is a 'sudden stop' in the economic context?

    A sudden stop refers to a rapid halt in capital flows leading to severe economic downturns, like a crash in stock markets.

  • What should investors do in the current economic climate?

    Investors are advised to focus on hard assets like gold and Bitcoin as a hedge against potential economic instability.

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  • 00:00:00
    look Trump's a New York guy Bessence in
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    that world Let Lutnik in that world They
  • 00:00:05
    are going to have a lot of people in
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    their ear saying basically make the
  • 00:00:08
    American people scream don't hurt the
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    Treasury market's real value And the
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    reality is is like unless they want the
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    worst crisis they've ever seen That's
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    what they have to do Crush the real
  • 00:00:18
    value of treasuries or you will not be
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    able to do all these things you say you
  • 00:00:22
    want to do politically and economically
  • 00:00:24
    [Music]
  • 00:00:29
    Hey everyone welcome back to the show
  • 00:00:31
    Luke Groman here founder of FFTT Thanks
  • 00:00:33
    so much for returning to Coin Stories
  • 00:00:36
    Thanks for having me back on Natalie
  • 00:00:37
    It's great to be here again Lots to talk
  • 00:00:40
    about because there's lots of
  • 00:00:41
    uncertainty Um I really want to start
  • 00:00:42
    with Doge because regardless of where
  • 00:00:45
    you stand politically I think it's hard
  • 00:00:47
    to argue against removing government
  • 00:00:50
    waste and fraud right but this has
  • 00:00:52
    become very polarized and a lot of
  • 00:00:54
    people are concerned that it actually
  • 00:00:55
    won't make a debt in all of our debt And
  • 00:00:57
    that's where I want to start with you
  • 00:00:59
    You've been warning that pushing
  • 00:01:00
    austerity through things like Doge too
  • 00:01:02
    hard could actually create more problems
  • 00:01:05
    with our debt especially on the fiscal
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    side Um so for people hearing that for
  • 00:01:09
    maybe the first time can you explain why
  • 00:01:10
    tightening our belts could actually
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    trigger a sudden stop in the economy
  • 00:01:16
    yeah absolutely Ultimately it comes down
  • 00:01:19
    to the uh things in our economy that are
  • 00:01:24
    interest expense and interest like um
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    and right now our gross interest plus
  • 00:01:31
    the pay as you go portion of
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    entitlements plus veterans affairs they
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    are
  • 00:01:36
    aboutund8 110% of our receipts In other
  • 00:01:40
    words we are not covering with our
  • 00:01:42
    receipts and oh by the way trailing
  • 00:01:44
    12-month receipts in the United States
  • 00:01:45
    are at all-time highs They're higher
  • 00:01:46
    than they ever were
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    postco So we can't make the effective
  • 00:01:52
    interest payment on our debt and
  • 00:01:54
    debt-like obligations without printing
  • 00:01:56
    the money is where we stand
  • 00:01:59
    today When you're a when you're in a
  • 00:02:02
    situation like that this is really a
  • 00:02:04
    restructuring situation Uh when you're
  • 00:02:07
    in a restructuring situation like
  • 00:02:09
    that it's important to get the order of
  • 00:02:12
    operations right The order of operations
  • 00:02:15
    in such a situation
  • 00:02:17
    is a you go to your banks and you say
  • 00:02:21
    let's renegotiate we can term out debt
  • 00:02:23
    we can reduce coupon we I can give you a
  • 00:02:26
    stake of the equity somehow you have to
  • 00:02:28
    get the interest expense down
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    dramatically then you can go to your
  • 00:02:35
    different business lines and say okay
  • 00:02:37
    I'm losing money on this batch of
  • 00:02:39
    customers this division is a money loser
  • 00:02:42
    I have fraud in this business division
  • 00:02:43
    ision Let's cut this stuff And that from
  • 00:02:46
    that base after you've restructured your
  • 00:02:49
    debt so that you are not literally
  • 00:02:51
    unable to make the interest payments um
  • 00:02:54
    you actually can then restructure the
  • 00:02:57
    business and and move and improve
  • 00:02:59
    profitability improve efficiency all
  • 00:03:01
    these things that Doge is trying to do
  • 00:03:04
    And if we take this to the US and the
  • 00:03:09
    Doge situation and I'm sure there will
  • 00:03:11
    be people cringing saying "Well the US
  • 00:03:13
    is not a business They can print their
  • 00:03:14
    own money." And ultimately exactly
  • 00:03:16
    That's my that's my point Yes they can
  • 00:03:18
    print money Uh but if we carry this
  • 00:03:21
    forward to the US just to to to talk
  • 00:03:23
    through why it will trigger a crisis
  • 00:03:26
    with certainty if they do the wrong
  • 00:03:29
    order after which they will print lots
  • 00:03:32
    and lots and lots of
  • 00:03:35
    money It's the same kind of dynamic We
  • 00:03:39
    have true interest expense that is over
  • 00:03:41
    100% of receipts
  • 00:03:44
    In that situation in the real world in
  • 00:03:46
    the private world you need you don't cut
  • 00:03:50
    fraud waste abuse Every dollar that
  • 00:03:52
    comes in the door of revenue whether it
  • 00:03:55
    is money losing or not it doesn't matter
  • 00:03:58
    You don't cut that You have to because
  • 00:04:01
    you need every dollar there to be paying
  • 00:04:03
    your debt
  • 00:04:05
    And so if you cut those dollars of
  • 00:04:08
    revenue all you're going to do is make
  • 00:04:13
    it harder to pay your interest and
  • 00:04:15
    interest like obligations push you
  • 00:04:17
    closer to default or to printing as the
  • 00:04:20
    case is Uh and and you're going to
  • 00:04:23
    knock stock market down and business
  • 00:04:25
    down because the US government whether
  • 00:04:27
    it's fraud or not it doesn't really
  • 00:04:29
    matter It's revenue and their outlays
  • 00:04:32
    are 25% of the economy of
  • 00:04:34
    GDP And when you have a highly levered
  • 00:04:37
    economy you knock down two points of GDP
  • 00:04:41
    By the time end users do it they are
  • 00:04:42
    going to uh there's going to be a
  • 00:04:45
    leverage effect a money multiplier
  • 00:04:46
    effect if only from the leverage if not
  • 00:04:48
    from the economy you know turning the
  • 00:04:50
    money over with So there probably would
  • 00:04:51
    be a notable multiplier effect And in
  • 00:04:55
    addition you know we on on in in in on
  • 00:04:58
    on in in markets we want everything you
  • 00:05:01
    know this month three months six months
  • 00:05:03
    If we're really thinking long term in
  • 00:05:04
    markets we're thinking 9 to 12 months
  • 00:05:07
    And the reality is a lot of what is
  • 00:05:09
    being discussed as it relates to Doge
  • 00:05:12
    etc impacts the real economy the nonwall
  • 00:05:16
    street the non-investment
  • 00:05:18
    uh uh management real economy And in
  • 00:05:21
    that world long-term is 10 20 30 years
  • 00:05:27
    And when you're talking about
  • 00:05:28
    potentially cutting a quarter of the
  • 00:05:31
    economy down drastically government
  • 00:05:33
    outlays
  • 00:05:34
    uh and you're talking about changing the
  • 00:05:37
    structure of trade and the system well
  • 00:05:39
    all of which I think are the right
  • 00:05:40
    things to do in the in in the long run I
  • 00:05:42
    think it'll be great for America in the
  • 00:05:44
    long run if we survive the experience
  • 00:05:47
    Uh the problem is is that these people
  • 00:05:52
    have to make a an ROIC calculation an
  • 00:05:55
    internal rate of return calculation
  • 00:05:57
    Should I invest in a property plant
  • 00:06:00
    equipment in America on a 20ear scale
  • 00:06:03
    30-year depreciate
  • 00:06:05
    whatever Okay what are my inputs well is
  • 00:06:09
    the tariff 10 or is it 20 or is it
  • 00:06:12
    nothing or is how can I put a plant in
  • 00:06:15
    America if the federal government's
  • 00:06:16
    going to slash spending to what's 20% of
  • 00:06:19
    my customer base because they deem what
  • 00:06:21
    is fraud and abuse what I you know what
  • 00:06:23
    screw it I'm just going to sit on my
  • 00:06:25
    hands and wait And that's what we're
  • 00:06:28
    starting to see happening All this soft
  • 00:06:30
    data that we're seeing collapse this is
  • 00:06:33
    just corporate execs
  • 00:06:34
    going I can't I can't plan a real
  • 00:06:38
    business around this so I'm going to
  • 00:06:40
    wait And that's why I say to tie it back
  • 00:06:43
    to the initial doge is you've got this
  • 00:06:44
    very potentially toxic I mean been I've
  • 00:06:47
    been repeatedly harping on and using
  • 00:06:49
    this you know it's it's a crude metaphor
  • 00:06:51
    of giving yourself a a root canal with a
  • 00:06:54
    shotgun is is if you try to doge before
  • 00:06:58
    you restructure with your creditors
  • 00:07:00
    before you devalue debt to GDP yeah
  • 00:07:04
    you'll cut spending you'll cut fraud
  • 00:07:06
    waste and abuse you know in the same way
  • 00:07:08
    that you'll get rid of that root canal
  • 00:07:10
    by sticking a shotgun in your mouth and
  • 00:07:11
    pulling the trigger like that's but it's
  • 00:07:14
    it's it's effective but it's fatal and
  • 00:07:16
    that's where we are and uh so they need
  • 00:07:20
    to sort of meet with the creditors and
  • 00:07:23
    get debt to GDP down drastically and
  • 00:07:25
    there's there's a number of different
  • 00:07:28
    ways you can do it Ultimately it
  • 00:07:30
    requires a significant period of real
  • 00:07:32
    negative negative real interest rates
  • 00:07:35
    Um and if they do that first then yeah
  • 00:07:38
    absolutely you'll be able to sort of
  • 00:07:40
    whack away at you know fraud abuse waste
  • 00:07:43
    etc And yes it will hurt certain areas
  • 00:07:47
    Yes we might even have a recession but
  • 00:07:49
    it isn't going to be fatal to the
  • 00:07:51
    economy um we will if you don't devalue
  • 00:07:56
    the debt to GDP first drastically
  • 00:07:59
    quickly because we're on the clock now
  • 00:08:02
    uh you do run this risk of a sudden stop
  • 00:08:04
    and and sudden stop in the US would look
  • 00:08:05
    like S&P down 20% in a month and it
  • 00:08:09
    would look like in that you know
  • 00:08:11
    initially 10-year Treasury yields would
  • 00:08:13
    go down for the first little part of
  • 00:08:14
    that people say oh see it's going to
  • 00:08:16
    work and then 10ear yields would start
  • 00:08:18
    going up and by the end of the month
  • 00:08:19
    they'd be up 10 or 20 basis points and
  • 00:08:21
    the dollar would probably be down on
  • 00:08:22
    that and gold would be surging and I
  • 00:08:24
    think at some point Bitcoin will stop
  • 00:08:26
    trading with NASDAQ and start surging as
  • 00:08:29
    well in that scenario I don't know if it
  • 00:08:30
    would happen as fast but that's what
  • 00:08:32
    we're looking at and then what in that s
  • 00:08:36
    what do you do do you do you have the
  • 00:08:38
    Fed come in and print money do you do
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    you have what what do you do like so
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    off your pass Well I want to put a
  • 00:09:51
    spotlight on something you said because
  • 00:09:52
    I think that's what the average person
  • 00:09:54
    doesn't get there For Doge oh cutting
  • 00:09:56
    government spending that's great But to
  • 00:09:58
    your point government spending is making
  • 00:10:00
    up a huge portion of the economy And so
  • 00:10:02
    if you crash that all of a sudden our
  • 00:10:04
    GDP crashes risk on assets crash then
  • 00:10:07
    tax receipts crash and then we're
  • 00:10:08
    getting into that debt spiral that you
  • 00:10:10
    always talk about So actually what is
  • 00:10:12
    the solution the US is cornered and
  • 00:10:14
    you're saying we have to devalue our
  • 00:10:16
    debt But how do we do that because there
  • 00:10:17
    has been talk of can we revalue the gold
  • 00:10:20
    i just had an interview with Senator
  • 00:10:22
    Cynthia Lemus That's something she's
  • 00:10:23
    proposing in the Bitcoin act that re we
  • 00:10:25
    revalue the gold certificates not even
  • 00:10:28
    the physical gold just the gold
  • 00:10:29
    certificates But then I hear Scott
  • 00:10:31
    Bessant saying that's not going to
  • 00:10:32
    happen So how do we work our way out of
  • 00:10:34
    this
  • 00:10:38
    yeah I think ultimately um like I said
  • 00:10:41
    there's a number of different ways they
  • 00:10:43
    so let's start with sort of the most
  • 00:10:44
    plain vanilla is you're going to need
  • 00:10:46
    some version of Fed yield curve control
  • 00:10:49
    slashQE either by the Fed
  • 00:10:52
    um or via Fed proxy Right so when you
  • 00:10:56
    hear Scott Bessant in that same artic in
  • 00:10:58
    that same release talk about
  • 00:11:00
    exemp repealing the SLR exemptions uh or
  • 00:11:04
    the SLR regulations excuse me for you
  • 00:11:06
    for banks holding treasuries again What
  • 00:11:07
    he's saying is is I'm going to try to
  • 00:11:10
    get back to where we were in 2020 where
  • 00:11:12
    the banks were doing QE alongside the
  • 00:11:15
    Fed Um it just wasn't called additional
  • 00:11:18
    Fed QE but that's de facto what it would
  • 00:11:20
    be
  • 00:11:21
    And look he's sophisticated He's he's
  • 00:11:24
    spinning it as it's deregulation And
  • 00:11:26
    who's not in favor of deregulation well
  • 00:11:28
    nobody in in his political party right
  • 00:11:30
    if he came out and said "Well we're just
  • 00:11:33
    going to do more QE through the banks
  • 00:11:35
    like we were 2020 and
  • 00:11:37
    2021," the reaction from his party might
  • 00:11:40
    be a little different Um but that's what
  • 00:11:43
    it could be Um last week you saw this
  • 00:11:48
    um floated out this this proposal on
  • 00:11:52
    Bloomberg discussed It was a Brookings
  • 00:11:53
    white paper with a former or current Fed
  • 00:11:56
    governor adviser for former Fed governor
  • 00:11:59
    current I think Fed adviser at any rate
  • 00:12:01
    plus a couple other folks where they're
  • 00:12:03
    talking about backstopping or bailing
  • 00:12:05
    out uh the hedge fund relative value
  • 00:12:08
    trade Well the hedge fund relative value
  • 00:12:11
    trade has been one of the biggest
  • 00:12:13
    marginal buyers of treasuries over the
  • 00:12:14
    last three four years And again as you
  • 00:12:16
    as we wrote wrote for clients last week
  • 00:12:18
    in the end I don't have an opinion on
  • 00:12:20
    whether that's you know the political
  • 00:12:22
    opinion of that I'm just looking at
  • 00:12:24
    straight from the math of like okay
  • 00:12:26
    that's that would be you know we want to
  • 00:12:30
    get back to reprivatizing markets We
  • 00:12:32
    keep hearing that We hear it from
  • 00:12:33
    Secretary Bess and we hear it from you
  • 00:12:35
    know everyone on that side of the aisle
  • 00:12:37
    Well if you want to rep privatize
  • 00:12:39
    markets then you have to be willing to
  • 00:12:41
    let Treasury markets dysfunction
  • 00:12:43
    Treasury market auctions fail and rates
  • 00:12:47
    Let the free market set rates The
  • 00:12:50
    problem is is given everything we
  • 00:12:52
    started this podcast with The free
  • 00:12:54
    market setting rates for Treasury would
  • 00:12:56
    set them at a level that would bankrupt
  • 00:12:59
    the entire US economy the government
  • 00:13:01
    everybody And that is not really
  • 00:13:04
    hyperbolic We saw it with the repo rate
  • 00:13:06
    spike in 2019 Repo went to 8 to
  • 00:13:09
    10% There you go Private market rates
  • 00:13:12
    are setting a rate for the US government
  • 00:13:13
    8 to 10 percent mortgages
  • 00:13:15
    12 This country is a smoking crater
  • 00:13:18
    financially after that Yeah there you go
  • 00:13:20
    We've reprivatized So you see these
  • 00:13:22
    things um floated discussed whether it's
  • 00:13:26
    SLR exemptions whether it's bailing out
  • 00:13:28
    the hedge fund relative value trade
  • 00:13:30
    starting to be discussed whether it's
  • 00:13:32
    you know what have you Um and and then
  • 00:13:35
    you know the last one you mentioned was
  • 00:13:36
    uh Senator Lemus with the um uh
  • 00:13:39
    revaluing gold uh or revaling gold
  • 00:13:42
    certificates You know look they can they
  • 00:13:44
    could create now with gold you know this
  • 00:13:46
    morning as we sit here 3150 you know
  • 00:13:49
    you're probably close to $850 billion
  • 00:13:51
    that would get deposited directly into
  • 00:13:53
    the TGA with which Bessant could do
  • 00:13:55
    whatever he wants within some
  • 00:13:58
    constraints uh I suppose which is an
  • 00:14:01
    oxymoron but he could certainly buy back
  • 00:14:02
    debt He could It reduces duration
  • 00:14:05
    issuance by $850 billion So
  • 00:14:09
    paradoxically for a long time people
  • 00:14:11
    said "Oh if the US revalued gold
  • 00:14:13
    Treasury yields would spike." No they
  • 00:14:15
    wouldn't They'd collapse You want to get
  • 00:14:17
    the 10-year Treasury yield down talk up
  • 00:14:20
    gold right walk you know walk gold up
  • 00:14:22
    You're not going to need to issue any
  • 00:14:24
    debt Um and if you don't have to issue
  • 00:14:26
    any debt every year there's 400 to I
  • 00:14:29
    don't know this is a guesstimate every
  • 00:14:31
    year there's probably 400 to 500 maybe
  • 00:14:33
    $600 billion dollars of just mindless
  • 00:14:36
    duration buying in treasuries um they
  • 00:14:39
    have to buy and it's pensions and
  • 00:14:41
    insurers right so they're going to buy
  • 00:14:43
    400 to 600 billion and maybe it's 300
  • 00:14:46
    maybe it's 7 I don't I I I don't know
  • 00:14:48
    but it's but it's a decent chunk of
  • 00:14:50
    money and the point is is that if you
  • 00:14:52
    get duration issuance plus foreign
  • 00:14:55
    selling bel of duration below that
  • 00:14:57
    number treasury yields are going to fall
  • 00:14:59
    almost regardless of what's happening
  • 00:15:01
    with with inflation and and all this
  • 00:15:04
    other crap So uh yeah you could revalue
  • 00:15:07
    gold Um you could walk you you could or
  • 00:15:10
    or the gold certificates Um and you
  • 00:15:13
    could
  • 00:15:15
    um significantly reduce treasury
  • 00:15:17
    issuance get yields down That can work
  • 00:15:20
    in this way That just buys you time
  • 00:15:23
    though That buys you a year or two That
  • 00:15:25
    doesn't fix the problem you would have
  • 00:15:26
    to revise gold a lot higher or be out in
  • 00:15:30
    the market as the US government bidding
  • 00:15:32
    gold which might be if I was sitting in
  • 00:15:34
    his seat is what I would do is I would
  • 00:15:35
    just use the exchange stabilization fund
  • 00:15:37
    to goose gold to five or six or $7,000
  • 00:15:41
    and then write it up and that would buy
  • 00:15:43
    me even more time but that's neither
  • 00:15:44
    here nor there Well so what's the other
  • 00:15:47
    side of that why why wouldn't they be
  • 00:15:48
    doing this um and do you think it's
  • 00:15:51
    likely that he could revalue gold at
  • 00:15:52
    least to current market levels
  • 00:15:55
    i think it's very likely he'll he could
  • 00:15:56
    do it to at least current levels because
  • 00:15:58
    they're quickly you know because they
  • 00:16:00
    haven't followed the order of operations
  • 00:16:02
    Um they're running out of room I think
  • 00:16:04
    we are very I think we're I've said
  • 00:16:08
    three to five months to a very severe
  • 00:16:10
    crisis And I would take you know every
  • 00:16:12
    day that passes every day we have Trump
  • 00:16:14
    come out and say you know like yesterday
  • 00:16:16
    morning it wasn't even lunchtime and
  • 00:16:17
    I've got sanctions on Russian oil and
  • 00:16:19
    I've got um you know maybe I'll maybe
  • 00:16:22
    I'll sanction everybody a tariff every
  • 00:16:25
    that's just going to get everyone to sit
  • 00:16:26
    on their hands more So uh I would take
  • 00:16:28
    the under on that three to five months
  • 00:16:31
    Um so I do think he will do that
  • 00:16:34
    eventually You know why wouldn't he do
  • 00:16:36
    it look if the plan is to basically fly
  • 00:16:40
    the plane into the ground at 500 miles
  • 00:16:43
    an hour in order to create a crisis so
  • 00:16:47
    severe that they have wide you know wide
  • 00:16:51
    wide birth to to uh you know polit
  • 00:16:55
    political cover to sort of restructure
  • 00:16:57
    the system as they see fit If they if
  • 00:16:59
    they think that's a good thing to do and
  • 00:17:02
    they think politically they can survive
  • 00:17:04
    that experience then don't do anything
  • 00:17:07
    just keep doing what you're doing
  • 00:17:08
    because that's what we're going to do Um
  • 00:17:09
    and then once the plane you know smashes
  • 00:17:11
    into the ground and you know people are
  • 00:17:13
    begging for salvation you know then
  • 00:17:16
    you've got a lot more leeway I just have
  • 00:17:19
    a hard time believing that's the case So
  • 00:17:21
    that's sort of like you know push back
  • 00:17:23
    one is like oh they want this to crash
  • 00:17:24
    I'm like you really understand what
  • 00:17:26
    you're asking for
  • 00:17:29
    um and and because again politically
  • 00:17:31
    like if they do that and then they bail
  • 00:17:33
    out too big to fail banks they're done
  • 00:17:36
    politically They're done It's it is over
  • 00:17:39
    They will get crushed in the midterms Um
  • 00:17:42
    you know the other push back I I the
  • 00:17:44
    other reason they haven't yet some of it
  • 00:17:46
    could just be as simple as like this
  • 00:17:47
    takes time They're figuring this out I
  • 00:17:49
    think all of SQL this is the last thing
  • 00:17:51
    they'd like to do Um and so they wanted
  • 00:17:54
    to maybe try some other things first
  • 00:17:55
    which are obviously not working now Uh
  • 00:17:58
    and when I say obviously not working
  • 00:17:59
    it's you 10 year Treasury yields are
  • 00:18:01
    flat The S&P is down 8% Like that's not
  • 00:18:03
    how it was supposed to go You know flat
  • 00:18:06
    you know 10ear Treasury yields are flat
  • 00:18:07
    over the last six weeks five weeks Um
  • 00:18:10
    that's not how it was supposed to go So
  • 00:18:13
    it's not working It's not going to work
  • 00:18:15
    And then I think the last is you know
  • 00:18:16
    some of it's political Like look Trump's
  • 00:18:18
    a New York guy Bessence in that world
  • 00:18:21
    LTNS in that world
  • 00:18:25
    Um they they are going to have a lot of
  • 00:18:27
    people in their ear saying basically
  • 00:18:29
    make the American people
  • 00:18:32
    scream don't hurt the Treasury market's
  • 00:18:34
    real value And the reality is is like
  • 00:18:37
    unless they
  • 00:18:38
    want the worst crisis they've ever
  • 00:18:42
    seen after which they're going to get
  • 00:18:44
    bailed out and destroy themselves
  • 00:18:45
    politically by doing so Yeah That's what
  • 00:18:48
    they have to do It's we're really you
  • 00:18:50
    know the MAGA reshoring all this stuff
  • 00:18:53
    It's a simple choice Crush the real
  • 00:18:55
    value of
  • 00:18:56
    treasuries or or don't or you will not
  • 00:18:59
    be able to do all these things you say
  • 00:19:01
    you want to do politically and
  • 00:19:02
    economically Well you've pointed out
  • 00:19:04
    that the Fed really hasn't offloaded any
  • 00:19:06
    10-year treasuries on net since like
  • 00:19:08
    2010 Um so obviously anyone would be
  • 00:19:11
    skeptical that the Treasury could
  • 00:19:12
    actually sell them without spiking
  • 00:19:14
    yields So why is Wall Street ignoring
  • 00:19:16
    this what why is Wall Street on the
  • 00:19:18
    opposite side of this consensus
  • 00:19:24
    they're getting whispers from the
  • 00:19:26
    government No
  • 00:19:30
    because look Wall Street's a little
  • 00:19:32
    famous for this right like you give them
  • 00:19:34
    a narrative and you really push it and
  • 00:19:36
    they will you give them something to
  • 00:19:37
    sell and they can sell it right and so
  • 00:19:40
    you know hedge our guy hedge fund
  • 00:19:42
    manager is running treasury It's a
  • 00:19:44
    markets person Free markets Here we go
  • 00:19:47
    It's not this labor economist labor
  • 00:19:50
    economist who's never had a job in the
  • 00:19:52
    in the in the private economy uh and who
  • 00:19:55
    you know who is uh uh um you know
  • 00:19:59
    University of California Berkeley blah
  • 00:20:01
    blah right so we've got this you know
  • 00:20:03
    I'm speaking of course of Yellen
  • 00:20:06
    you know so I think a lot of it is just
  • 00:20:08
    like it's Besson versus Yellen and like
  • 00:20:10
    the math doesn't care The math is the
  • 00:20:12
    math Um the problem is the problem
  • 00:20:15
    And oh by the way Yellen bailed them
  • 00:20:18
    out with in in the you know right So
  • 00:20:23
    like you know was
  • 00:20:25
    was I think that's really it is this
  • 00:20:28
    case
  • 00:20:30
    of you know they believe it right you
  • 00:20:33
    give them the narrative and you push it
  • 00:20:34
    and they believe it I could point to a
  • 00:20:37
    whole number of things right over the
  • 00:20:38
    last 10 years where it's like hey you
  • 00:20:42
    know I'm not going to say the word
  • 00:20:44
    because then you'll get you know
  • 00:20:46
    restricted on YouTube but you only need
  • 00:20:48
    one of these things and one of these
  • 00:20:50
    things turned into six of these things
  • 00:20:52
    and eight of these things and every
  • 00:20:53
    three months of these things and uh you
  • 00:20:56
    know hey I mean I got lamb based in 2022
  • 00:20:59
    and I didn't say I'm rooting for Russia
  • 00:21:01
    I said Russia has a lot more leverage in
  • 00:21:04
    this whole situation than the common
  • 00:21:06
    narrative says I was right They were
  • 00:21:09
    wrong We're seeing that Russia won I
  • 00:21:12
    mean and now you're hearing it from NATO
  • 00:21:13
    NATO the head of NATO two months ago
  • 00:21:15
    said "We out we got outproduced by the
  • 00:21:17
    Russians four to one." Um Russia's
  • 00:21:19
    winning full stop And so I think it's
  • 00:21:24
    one of these kind of situations where
  • 00:21:25
    it's like they're the narrative is hey
  • 00:21:28
    it's them and it's different and so
  • 00:21:30
    they're going to be able to figure it
  • 00:21:31
    out And the reality is is the math 108%
  • 00:21:34
    true interest 108% receipts and you're
  • 00:21:37
    doing everything you can to get receipts
  • 00:21:38
    to fall by getting stocks down and
  • 00:21:40
    getting executives to sit on their hand
  • 00:21:42
    as it relates to capital spending
  • 00:21:43
    decisions and hiring
  • 00:21:45
    decisions Math doesn't care Math is math
  • 00:21:48
    Help me understand something Let's go
  • 00:21:49
    back to the idea of rep privatizing the
  • 00:21:51
    economy because you say it's the right
  • 00:21:53
    thing to do but the order of operations
  • 00:21:55
    really really matters The thing I don't
  • 00:21:57
    understand is we are the global reserve
  • 00:21:59
    currency We have to run structural trade
  • 00:22:02
    deficits You can you know yell about
  • 00:22:05
    tariffs You can incentivize these
  • 00:22:07
    companies to bring the labor back here
  • 00:22:09
    but I don't think it can last long
  • 00:22:12
    because we can't pay workers as much as
  • 00:22:14
    they would need to in order to sustain
  • 00:22:16
    our position we have to offload these
  • 00:22:18
    dollars We have to export the inflation
  • 00:22:20
    And so we've in you know we've moved
  • 00:22:23
    industrialization overseas So I I just
  • 00:22:26
    can you help me understand that because
  • 00:22:27
    it seems like they're talking about
  • 00:22:28
    something that is impossible
  • 00:22:32
    It is impossible until you consider what
  • 00:22:35
    I think is the elephant in the room and
  • 00:22:37
    what they can't say because they would
  • 00:22:38
    scare the crap out of the bond market
  • 00:22:40
    and then they would have to buy the
  • 00:22:41
    entire bond market with printed dollars
  • 00:22:43
    in a compressed period of time which is
  • 00:22:46
    all of those things are true
  • 00:22:48
    until we settle our deficits in a
  • 00:22:52
    neutral reserve asset that floats in all
  • 00:22:53
    currencies settle in goal Make it take
  • 00:22:56
    steps to encourage everybody Stop
  • 00:22:59
    stockpiling treasuries number one which
  • 00:23:02
    we have started doing as of three years
  • 00:23:03
    ago with sanctioning Russian FX reserves
  • 00:23:06
    more recently with threatening sanctions
  • 00:23:09
    on Colombia for not taking two planes
  • 00:23:11
    plane loads of people back You can read
  • 00:23:13
    in Steven Myron's piece these different
  • 00:23:15
    uh user user charges on treasuries If
  • 00:23:18
    you buy treasuries as a foreigner we may
  • 00:23:21
    charge you a user fee uh we may increase
  • 00:23:24
    the tax rate on your holdings of those
  • 00:23:27
    treasuries Lots of different things They
  • 00:23:29
    are all pointed in one direction that
  • 00:23:31
    most of Wall Street's not paying
  • 00:23:32
    attention to which is making the cost of
  • 00:23:35
    carry on treasuries relative to gold and
  • 00:23:38
    conceivably Bitcoin Uh but for the
  • 00:23:40
    moment gold because we can see that
  • 00:23:42
    that's where primarily or sovereigns
  • 00:23:44
    have switched to in terms of not
  • 00:23:46
    treasuries Uh making the cost of carry
  • 00:23:49
    on this paper higher And so if you run
  • 00:23:52
    if we run a deficit as the United States
  • 00:23:55
    as we have forever if that money is then
  • 00:23:59
    recycled back into our treasuries back
  • 00:24:01
    into our NASDAQ etc uh the dollar stays
  • 00:24:05
    strong the top 1% in this country and
  • 00:24:09
    Washington DC get richer and richer and
  • 00:24:11
    richer and the industrial base of the
  • 00:24:14
    economy gets hollowed out and hollowed
  • 00:24:15
    out and hollowed out and poorer and
  • 00:24:16
    poorer and poorer on a real basis which
  • 00:24:18
    is precisely what we've seen Mhm Once
  • 00:24:21
    you force the world to net settle in
  • 00:24:25
    gold or Bitcoin it can be Bitcoin
  • 00:24:28
    practically speaking thus far It's gold
  • 00:24:31
    Uh then the deficits we run are
  • 00:24:36
    immediately reflected in the dollar
  • 00:24:39
    because gold gets bid much higher faster
  • 00:24:42
    in dollar terms than it does in say yuan
  • 00:24:45
    terms And so through the gold pivot and
  • 00:24:47
    I'm going to say gold It could be
  • 00:24:48
    Bitcoin but like I said for practically
  • 00:24:50
    speaking it's gold for right now If gold
  • 00:24:53
    goes up 80% in dollar terms because
  • 00:24:57
    we're still running these big deficits
  • 00:24:58
    with the Chinese and the Chinese are
  • 00:25:00
    mostly getting dollars and dollars for
  • 00:25:02
    everything is non u in America uh and
  • 00:25:05
    they're turning around and they're no
  • 00:25:07
    longer buying treasuries and they're no
  • 00:25:09
    longer buying the NASDAQ which oh by the
  • 00:25:11
    way they have bought trillions in NASDAQ
  • 00:25:13
    and they're no longer buying farms in
  • 00:25:14
    Missouri and they're no longer for a
  • 00:25:16
    number of different reasons then they're
  • 00:25:19
    going to buy gold and as they buy gold
  • 00:25:22
    the price of gold is going to go up
  • 00:25:24
    because for example uh you know people
  • 00:25:28
    highlighted well China ran the biggest
  • 00:25:29
    trade surplus not only in China's
  • 00:25:32
    history last year but in world Indry is
  • 00:25:35
    a percent of
  • 00:25:36
    GDP And what I pointed out about a month
  • 00:25:38
    and a half ago when that data came out
  • 00:25:40
    is China also imported $1,384 tons of
  • 00:25:43
    gold last year according to their
  • 00:25:46
    customs non-monetary
  • 00:25:48
    gold At $22,000 per ounce of that gold
  • 00:25:52
    China ran a balanced trade position What
  • 00:25:55
    happens to the dollar is you know so you
  • 00:25:57
    can see this being set up The Trump
  • 00:25:59
    administration to me it's very clear
  • 00:26:01
    what they're doing Stop res stop
  • 00:26:04
    recycling your
  • 00:26:05
    dollars into our capital markets Listen
  • 00:26:08
    to what Bessant said Wall Street is not
  • 00:26:10
    hearing him And I think he's doing that
  • 00:26:12
    on purpose We want Main Street to do
  • 00:26:15
    really well Wall Street has done really
  • 00:26:17
    well They'll still be okay but we want
  • 00:26:19
    Main Street to do really well How do you
  • 00:26:22
    do that you let our deficits crush the
  • 00:26:25
    dollar via gold by making it hard if not
  • 00:26:29
    impossible but certainly have higher
  • 00:26:30
    cost of carry for your trade creditors
  • 00:26:34
    to recycle into the NASDAQ And so it's
  • 00:26:38
    you know for example super interesting
  • 00:26:39
    to me you've written about it I've been
  • 00:26:41
    writing about it for three four months
  • 00:26:42
    is you know the biggest belt and road
  • 00:26:44
    hub in the world is the NASDAQ 100 I
  • 00:26:47
    mean this is like the stupidest trade in
  • 00:26:49
    the history of the world from a trade
  • 00:26:50
    and economic perspective So the 1% of
  • 00:26:53
    America does great the the government
  • 00:26:56
    federal government does great and the
  • 00:26:57
    rest of America gets crushed and the
  • 00:26:59
    country gets crushed which is we run
  • 00:27:01
    these deficits we offshore these jobs
  • 00:27:02
    China they run the sur they run
  • 00:27:04
    surpluses against us We send them
  • 00:27:05
    dollars They buy treasuries Okay well at
  • 00:27:07
    least we can sort of get some of our
  • 00:27:09
    money back when when we you know inflate
  • 00:27:11
    away treasuries Well they stopped buying
  • 00:27:13
    treasuries 10-15 years ago What are they
  • 00:27:14
    buying since they own trillions and
  • 00:27:17
    trillions of NASDAQ So we are literally
  • 00:27:19
    selling control of our most valuable
  • 00:27:21
    companies IP etc Equity and equity
  • 00:27:24
    stakes that's what this is to the
  • 00:27:26
    Chinese in return for Chinese-made
  • 00:27:28
    goods so that the top 1% in Washington
  • 00:27:31
    can get richer and richer Like that's a
  • 00:27:34
    stupid stupid trade And the military is
  • 00:27:36
    what has finally put a stop to this
  • 00:27:38
    which is like uh guys we just lost in
  • 00:27:40
    Russia because we can't make anything
  • 00:27:42
    without the Chinese because of this deal
  • 00:27:45
    So that's where I think a lot of the
  • 00:27:48
    sort of discussion that I see still
  • 00:27:50
    publicly was well someone has to run the
  • 00:27:51
    deficits No they don't Gold is going to
  • 00:27:53
    run the deficits And so when you see
  • 00:27:54
    what we're seeing in gold I don't think
  • 00:27:56
    people saying oh gold's due for a pull
  • 00:27:57
    Who knows i don't know if it's due for a
  • 00:27:58
    pullback or not I don't think they
  • 00:28:00
    understand what they're watching They're
  • 00:28:02
    gold's going through a phase change Gold
  • 00:28:05
    is going to run the deficits And I think
  • 00:28:08
    before long Bitcoin's going to start to
  • 00:28:10
    run the deficits And as that happens
  • 00:28:13
    you're going to see gold up big Bitcoin
  • 00:28:15
    up big dollar down against the yuan in
  • 00:28:19
    particular big Um the Chinese are going
  • 00:28:22
    to have to consume more of their own
  • 00:28:23
    production which oh by the way their
  • 00:28:24
    dollar and yuan purchasing power of gold
  • 00:28:26
    and bitcoin will be going up Uh and they
  • 00:28:29
    can do that in that case and and we will
  • 00:28:32
    have a rebalancing mechanism And you
  • 00:28:34
    know we can't compete We can't compete
  • 00:28:36
    because of the dollar you know and on
  • 00:28:38
    global markets this will now that's the
  • 00:28:42
    thing I think Bessant doesn't want to
  • 00:28:43
    say which is like this is wildly
  • 00:28:46
    inflationary wildly and that's in the
  • 00:28:49
    cake like we have you know we can have
  • 00:28:51
    wildly inflationary outcome and be
  • 00:28:53
    dependent on the Chinese for everything
  • 00:28:55
    as we sort of print money to kind of
  • 00:28:56
    keep this deal going over and over and
  • 00:28:58
    over and end up with no industrial base
  • 00:29:01
    or we can have a wildly inflation or
  • 00:29:03
    wildly inflationary now and end up with
  • 00:29:05
    a defense industrial base and a more
  • 00:29:08
    balanced econ economy a middle class a
  • 00:29:11
    workingclass more politically stable
  • 00:29:13
    society And I think the Trump
  • 00:29:14
    administration is pushing us in that
  • 00:29:16
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    code Coin stories So if we lose the
  • 00:30:51
    status of global reserve asset via US
  • 00:30:54
    treasuries and we move to something like
  • 00:30:55
    gold or eventually Bitcoin um can we
  • 00:30:58
    still be the global reserve currency or
  • 00:31:00
    why would that even be necessary
  • 00:31:03
    it's a great question
  • 00:31:06
    Uh I think it would still be you know
  • 00:31:10
    think I I think it would still be the
  • 00:31:12
    global reserve currency and we would
  • 00:31:13
    continue to trumpet it as such in the
  • 00:31:16
    same way that it was call it 40 1946
  • 00:31:18
    to71 before we we closed the gold window
  • 00:31:21
    right wasn't really the dollar it was
  • 00:31:24
    the gold back dollar um
  • 00:31:28
    and
  • 00:31:29
    knowing our government any government
  • 00:31:32
    we're going to continue to say we're
  • 00:31:34
    still the global global reserve currency
  • 00:31:36
    Gold's going to be the global reserve
  • 00:31:38
    currency or eventually Bitcoin perhaps
  • 00:31:41
    Um or the that'll be the asset backing
  • 00:31:44
    the dollar Yeah Um and it you can see it
  • 00:31:47
    in sort of the breakdown you'll see of
  • 00:31:49
    of the two sides of sort of dalization
  • 00:31:51
    The one side says "Oh look dollar is
  • 00:31:52
    still used in 90% of global transactions
  • 00:31:55
    and probably still will be So what?" And
  • 00:31:57
    then you look at share of global FFX
  • 00:32:00
    reserves and the dollar's share just of
  • 00:32:02
    other currencies has gone from 70 to 58%
  • 00:32:06
    over the last 20 years If you include
  • 00:32:09
    gold in that now as gold prices rise
  • 00:32:11
    it's probably gone from 70%
  • 00:32:13
    to 45%
  • 00:32:16
    And and and if gold if you know it's an
  • 00:32:19
    if I have to say if but I think it's a
  • 00:32:21
    when as if gold continues to run the
  • 00:32:24
    deficits become the neutral reserve
  • 00:32:26
    asset the the dollar share of global
  • 00:32:29
    reserves is going to continue to fall
  • 00:32:31
    and the biggest share of global reserves
  • 00:32:33
    will be gold again which was oh by the
  • 00:32:35
    way the way it was like sort of forever
  • 00:32:38
    other than like the last 30 40 years
  • 00:32:42
    So that's how I think it will play out
  • 00:32:45
    you know we're going to have to see Okay
  • 00:32:47
    so going back to Wall Street um
  • 00:32:49
    basically they're sort of in a
  • 00:32:51
    bargaining stage They recognize issues
  • 00:32:53
    but they're not recommending dumping the
  • 00:32:55
    treasuries for gold or for Bitcoin What
  • 00:32:57
    do you think will change that and have
  • 00:32:59
    them actually recognize this big shift
  • 00:33:03
    i don't think they I I think by the time
  • 00:33:05
    they do it they will be it it'll be like
  • 00:33:08
    08 right like it
  • 00:33:10
    was so obvious what was happening by
  • 00:33:12
    call it 06 07 the severity of it Yeah
  • 00:33:16
    And then by the time like it was all
  • 00:33:19
    like oh this is a problem I mean that's
  • 00:33:22
    just the nature you know that's the
  • 00:33:24
    nature of political organizations That's
  • 00:33:26
    the nature of banks which are highly
  • 00:33:28
    political organizations
  • 00:33:30
    Uh I don't think the average person
  • 00:33:33
    understands you know if you're not in
  • 00:33:35
    that world the career risk to you
  • 00:33:38
    working at a big Wall Street
  • 00:33:41
    bank saying some of the things I say you
  • 00:33:45
    just don't get to do it And part of the
  • 00:33:48
    reason why I wanted to be independent
  • 00:33:49
    why I took no outside investors when I
  • 00:33:51
    started as frightening as that was Wow
  • 00:33:53
    Um so I I I you know I do think there
  • 00:33:58
    will come a
  • 00:34:01
    time where they will say what they will
  • 00:34:04
    say the opposite of what I was told um I
  • 00:34:07
    guess it was was a year ago year and a
  • 00:34:09
    half ago might have been a year and a
  • 00:34:10
    half ago anyway I was told I I gave a
  • 00:34:14
    presentation and someone came up to me
  • 00:34:16
    after and said hey that was great and
  • 00:34:17
    you know the only problem with what
  • 00:34:18
    you're saying and it was basically like
  • 00:34:20
    look like treasures would be fine but
  • 00:34:21
    basically gold has been outperforming
  • 00:34:23
    treasuries is going to continue to
  • 00:34:24
    outperform treasuries
  • 00:34:26
    dramatically And this person at this you
  • 00:34:28
    know sort of a investment conference
  • 00:34:31
    said the problem is is like if I buy
  • 00:34:33
    gold and it goes down 30% I get fired
  • 00:34:35
    And if I buy treasuries and they go down
  • 00:34:36
    30% I keep my job And you know this was
  • 00:34:40
    after long-term treasuries had already
  • 00:34:42
    fallen 40% by the way when this person
  • 00:34:44
    said this to me So I think at the end of
  • 00:34:47
    all of this you'll get some version of
  • 00:34:49
    the opposite of that which is you know
  • 00:34:51
    like you kind of got in the late 70s
  • 00:34:53
    early 80s Hey treasuries or certificates
  • 00:34:55
    of confiscation you're going to lose and
  • 00:34:58
    you know nobody paying attention to the
  • 00:34:59
    fact that gold was
  • 00:35:02
    130% of foreign held debt at that point
  • 00:35:06
    of foreign held US debt at that point So
  • 00:35:07
    like we literally had a our debt was
  • 00:35:09
    130% backed by gold like all right well
  • 00:35:11
    I'll take a flyer on the debt at that
  • 00:35:13
    point right especially 15% rates so I I
  • 00:35:16
    think you'll get to a point where they
  • 00:35:18
    won't you know they won't say oh dump
  • 00:35:20
    your treasuries but it'll be you know
  • 00:35:22
    hey they will get much more vocal about
  • 00:35:25
    you know hedging it with gold or hedging
  • 00:35:26
    it with bitcoin or or you know if if if
  • 00:35:30
    the government won't create gold bonds
  • 00:35:32
    like Judy Shelton or bit bonds like uh
  • 00:35:35
    some of our uh our friends and
  • 00:35:37
    colleagues have have been talking about
  • 00:35:40
    um create your own synthetic gold bonds
  • 00:35:43
    or bit bonds right where instead of
  • 00:35:44
    being 100% duration in treasuries you're
  • 00:35:47
    90% duration in treasuries and 10%
  • 00:35:50
    Bitcoin or something like that Um and
  • 00:35:53
    who knows maybe we'll even see products
  • 00:35:55
    like
  • 00:35:55
    that If slash when we see products like
  • 00:35:58
    that I'll be that that will be like the
  • 00:36:00
    first time where I would probably start
  • 00:36:03
    to go okay where are we in the cycle
  • 00:36:05
    where are we where's the price of gold
  • 00:36:06
    where's the price of Bitcoin my guess is
  • 00:36:08
    you're not going to see it until gold
  • 00:36:09
    and Bitcoin are still way way higher
  • 00:36:11
    than here But once you start to hear
  • 00:36:13
    those types of things those will be your
  • 00:36:16
    signs I think they'll be more subtle
  • 00:36:18
    than just hey treasuries are dead Get
  • 00:36:20
    out You know that kind of a thing It'll
  • 00:36:22
    be something like that in an allocation
  • 00:36:24
    basis or something So near-term you're
  • 00:36:26
    pretty bearish on on Bitcoin Um it's
  • 00:36:29
    been closely tracking with these tech
  • 00:36:30
    stocks So what do you think will finally
  • 00:36:32
    make Bitcoin break away from that
  • 00:36:34
    correlation with the NASDAQ and I'm
  • 00:36:36
    assuming you think negative real rates
  • 00:36:37
    is going to help drive that
  • 00:36:40
    You know I would I would well I think
  • 00:36:43
    negative real rates will help tech and
  • 00:36:44
    Bitcoin
  • 00:36:46
    um marginally but I think it really is
  • 00:36:50
    around this dynamic that I still don't
  • 00:36:52
    get the sense that people that investor
  • 00:36:55
    investors really appreciate which is
  • 00:36:57
    America is basically flatout telling not
  • 00:37:00
    just China but China is the biggest take
  • 00:37:03
    your money and go home We don't want it
  • 00:37:04
    here anymore You want to buy You want to
  • 00:37:06
    build a factory here great But if you
  • 00:37:07
    just want to come here to buy stocks and
  • 00:37:10
    dump money here we don't want to be your
  • 00:37:11
    laundromat anymore That's the America
  • 00:37:13
    First order right exactly Yeah There So
  • 00:37:16
    for for listeners that haven't seen it
  • 00:37:18
    or uh there was on on late Friday night
  • 00:37:22
    uh February 21st uh the Trump
  • 00:37:24
    administration released the America
  • 00:37:26
    First Investment Policy Memo And you
  • 00:37:29
    know it's like 10 pages You can read it
  • 00:37:32
    but it's basically China take your money
  • 00:37:33
    and go home we don't want to hear
  • 00:37:35
    anymore
  • 00:37:36
    And that I think will ultimately be a
  • 00:37:40
    catalyst to the separation of gold and
  • 00:37:42
    bit or excuse me of Bitcoin and NASDAQ
  • 00:37:46
    and and you know that is I think
  • 00:37:49
    starting to drive NASDAQ down It has a
  • 00:37:51
    long way to go because multiples are
  • 00:37:53
    high and in the short run you know
  • 00:37:56
    traders control the flows and you can
  • 00:37:58
    you know call up your screen short-term
  • 00:37:59
    NASDAQ down trade Bitcoin is levered
  • 00:38:02
    NASDAQ I get it It's you know high beta
  • 00:38:03
    NASDAQ in the short run Now if you like
  • 00:38:06
    back up fiveyear 10-year chart you can
  • 00:38:09
    see very clearly these periods
  • 00:38:12
    where you know a Bitcoin has massively
  • 00:38:15
    outperformed NASDAQ massively Uh but
  • 00:38:18
    they still are tend to go directionally
  • 00:38:20
    similarly when Bitcoin's up NASDAQ's up
  • 00:38:22
    and vice versa just Bitcoin rises more
  • 00:38:24
    and pulls back less in the in the uh in
  • 00:38:26
    the or draw down after draw down full
  • 00:38:29
    cycle it ends up from a higher starting
  • 00:38:31
    point is probably the best way to say
  • 00:38:32
    that
  • 00:38:34
    Uh the
  • 00:38:37
    uh uh America first investment policy
  • 00:38:39
    memo I think will start to break that
  • 00:38:41
    that correlation because I think right
  • 00:38:43
    now in the short run that correlation is
  • 00:38:45
    holding At some point I think Capital
  • 00:38:48
    Flow is going to see Bitcoin for what it
  • 00:38:50
    is which is a neutral reserve asset
  • 00:38:53
    linked to energy uncontrollable by any
  • 00:38:56
    government And I think it'll start
  • 00:38:58
    siphoning some flows off from NASDAQ as
  • 00:39:01
    you know America continues to say
  • 00:39:02
    "Listen you want to invest in factories
  • 00:39:03
    here great otherwise get out." And
  • 00:39:07
    that's a lot a lot of capital that's got
  • 00:39:10
    to get out And you know we're seeing the
  • 00:39:12
    gold benefit already I think what we're
  • 00:39:16
    seeing in gold is a precursor to what
  • 00:39:18
    we'll see in Bitcoin Uh you know gold is
  • 00:39:22
    going up despite real rates you know
  • 00:39:24
    over the last couple years That's the
  • 00:39:26
    kind of divergence I think we'll see as
  • 00:39:28
    a result of these flows uh in in what
  • 00:39:31
    the Trump administration is attempting
  • 00:39:32
    to uh to achieve Yeah I agree with you
  • 00:39:35
    It's a good time to stack Um all right
  • 00:39:36
    As we start to wrap up we're in this
  • 00:39:39
    airplane in a steep nose dive as you've
  • 00:39:42
    written We need to lighten the load We
  • 00:39:44
    need to devalue the debt So if you were
  • 00:39:45
    in charge if you were either in the
  • 00:39:47
    White House or you're in charge of the
  • 00:39:49
    Fed I mean what are like the first three
  • 00:39:51
    things you would do immediately what
  • 00:39:53
    needs to be done so that we can bring
  • 00:39:54
    this plane
  • 00:39:58
    up i would call a conference on a
  • 00:40:02
    Thursday night maybe a Friday night I
  • 00:40:06
    would set everybody down said on Sunday
  • 00:40:08
    night we're
  • 00:40:09
    leaving and we're going to announce this
  • 00:40:12
    And what this is is a comprehensive plan
  • 00:40:16
    of where we want to be in two years
  • 00:40:19
    three
  • 00:40:21
    years and that includes significantly
  • 00:40:23
    devaluing the debt in a very short
  • 00:40:25
    period of time and then figure out
  • 00:40:28
    exactly how to do that There's a lot of
  • 00:40:29
    ways you can do that but it has to be
  • 00:40:31
    done fast has to be aggressive
  • 00:40:35
    Uh we are simultaneously going to get on
  • 00:40:40
    message again the Fed is going to help
  • 00:40:43
    us with this for the next two years in
  • 00:40:45
    order to maintain bond market
  • 00:40:49
    stability Three we are going to message
  • 00:40:52
    to the American people this is what we
  • 00:40:55
    need to do This is what political
  • 00:40:56
    leadership should be doing we stand up
  • 00:41:00
    and say "Listen we're doing this We're
  • 00:41:02
    doing this and here's why we can't make
  • 00:41:05
    things anymore It's hurt the middle
  • 00:41:06
    class." Blah We are going to have a
  • 00:41:08
    2-year period of elevated
  • 00:41:11
    inflation but it is going to be
  • 00:41:13
    inflation
  • 00:41:16
    primarily where the
  • 00:41:18
    wages of the middle and working of the
  • 00:41:21
    middle and working class in particular
  • 00:41:25
    outperform other they they they are um
  • 00:41:30
    keeping you close on your uh on your on
  • 00:41:33
    your cost of living as it relates to
  • 00:41:35
    commodities and because the Fed is
  • 00:41:38
    stepping in to help us they're capping
  • 00:41:41
    yields for mortgages at whatever So
  • 00:41:43
    you're going to get basically a
  • 00:41:46
    you
  • 00:41:47
    know um you're you're going to get a
  • 00:41:49
    debt jubilee on your house if you own a
  • 00:41:51
    house Now of course say okay well what
  • 00:41:52
    does that mean home prices surge for new
  • 00:41:55
    people you know that you you can quickly
  • 00:41:58
    get into you know the last thing I I
  • 00:42:00
    would say is that let's before I finish
  • 00:42:02
    the third thing I would say is we're
  • 00:42:04
    going to launch a comprehensive
  • 00:42:06
    um trade skills
  • 00:42:10
    um program You know basically we are
  • 00:42:13
    reshoring we need 5 million welders by
  • 00:42:16
    2028 we have this many and the first X
  • 00:42:20
    that go in are going to get guaranteed
  • 00:42:23
    free tuition and a paycheck of this you
  • 00:42:26
    know go And so now you know and and
  • 00:42:30
    subsidized housing who knows whatever Um
  • 00:42:33
    that's the kind of thing I think has to
  • 00:42:35
    happen right you're going to have bond
  • 00:42:37
    holders lose big time on a real
  • 00:42:40
    basis
  • 00:42:41
    Um and people say "Well that's not fair
  • 00:42:44
    It's communist and social." What look I
  • 00:42:47
    can't I can't remember how many times
  • 00:42:50
    I've heard we're in a war This is a new
  • 00:42:52
    war Whether it was COVID whether it's
  • 00:42:53
    new cold war whe there's all these
  • 00:42:55
    Everybody wants a cold war wants to win
  • 00:42:57
    the cold war Everyone wants to compare
  • 00:42:59
    it to this great this great
  • 00:43:01
    competition And nobody wants to remember
  • 00:43:04
    that during the great competition we had
  • 00:43:06
    capital controls last time Mhm We we had
  • 00:43:09
    we had low debt to GDP because at the
  • 00:43:11
    end of World War II we whacked we we had
  • 00:43:13
    negative real rates of negative 13% at
  • 00:43:15
    the lows That to GDP went from 110 to
  • 00:43:17
    55% on their way to 30 because we
  • 00:43:20
    repressed bond holders for 30 years Like
  • 00:43:24
    you can't have your cake and eat it too
  • 00:43:25
    So it would have to
  • 00:43:27
    be this type of not just financial but
  • 00:43:32
    comprehensive announcement with a very
  • 00:43:35
    distinct defined time flies and because
  • 00:43:37
    you can't I think it's too dangerous to
  • 00:43:40
    have the Fed out there on an open-ended
  • 00:43:42
    hey they're just going to buy the debt
  • 00:43:43
    until the the currency
  • 00:43:45
    collapses There's got to be some sort of
  • 00:43:48
    um you know some sort of dynamic There's
  • 00:43:51
    sort of different ways you could do that
  • 00:43:52
    I mean look like you said we could we
  • 00:43:54
    could revalue the uh the gold We could
  • 00:43:56
    we could buy down the debt We could you
  • 00:43:58
    know do the bit bonds thing where you're
  • 00:44:01
    issuing a little bit of that and get the
  • 00:44:02
    the borrowing rate really low Look
  • 00:44:04
    that's just a different way of saying
  • 00:44:06
    Bitcoin goes to the moon and you know
  • 00:44:08
    the dollar collapses against Bitcoin and
  • 00:44:10
    you know so it's really a lot of
  • 00:44:13
    different flavors of a lot of different
  • 00:44:15
    things
  • 00:44:17
    uh or or or methods to get to the same
  • 00:44:19
    outcome which is the real value of the
  • 00:44:22
    debt must be collapsed in a compressed
  • 00:44:24
    period of
  • 00:44:26
    time and bond holders and banks must be
  • 00:44:30
    financially repressed severely on their
  • 00:44:32
    bond holdings
  • 00:44:34
    And we must reinvest and provide some
  • 00:44:38
    sort of
  • 00:44:40
    visibility to both how we're going to
  • 00:44:43
    invest the jobs the the comfort to
  • 00:44:46
    companies Hey this is going to last two
  • 00:44:47
    three four years This is a permanent
  • 00:44:50
    change Okay now I'll make a
  • 00:44:52
    change You know now I will definitely
  • 00:44:55
    invest in the plant um you know cuz we
  • 00:44:58
    get another eight 12 months from now
  • 00:45:00
    they're going to start going Trump's
  • 00:45:02
    going to be out of here in two years and
  • 00:45:04
    if they have a bad
  • 00:45:06
    midterms they don't have to do anything
  • 00:45:08
    they just have to sit and wait So it
  • 00:45:10
    would have to be sort of a quick
  • 00:45:13
    forceful holistic with a finite term
  • 00:45:16
    type of
  • 00:45:19
    program I hope they're doing that I'm
  • 00:45:21
    not encouraged that they are Well Luke
  • 00:45:24
    you're pointing to the harsh reality
  • 00:45:26
    that there's really no easy way out And
  • 00:45:28
    if you're not holding on to hard scarce
  • 00:45:31
    assets you're going to be debased You're
  • 00:45:35
    going to be crying out for handouts Um I
  • 00:45:37
    really worry about that portion of the
  • 00:45:39
    population Majority of people they're
  • 00:45:41
    not in these stocks that Wall Street has
  • 00:45:43
    benefited from for a very long time
  • 00:45:45
    Their whole savings is essentially in
  • 00:45:47
    their house Um I just I worry about
  • 00:45:50
    where we're going And I think that the
  • 00:45:52
    people that have been so happy that they
  • 00:45:54
    got their elected official in and they
  • 00:45:57
    have Trump in I think they're going to
  • 00:45:58
    be a little disappointed I don't know
  • 00:46:00
    But um there's just no easy way out of
  • 00:46:02
    this debt crisis that we're in And the
  • 00:46:06
    gold holders the Bitcoin holders will be
  • 00:46:08
    the beneficiaries So um that's why I
  • 00:46:10
    think what we do is so important Luke I
  • 00:46:12
    really really appreciate it Any final
  • 00:46:14
    thoughts
  • 00:46:15
    no I think uh it's I think the next
  • 00:46:17
    three months going to be pretty
  • 00:46:18
    interesting So um it's you know it's
  • 00:46:22
    starting to feel like every Sunday night
  • 00:46:23
    like you know it's like Sunday
  • 00:46:25
    afternoons it's Sunday mornings I'm like
  • 00:46:26
    okay what's going on which uh on one
  • 00:46:29
    hand is great On another hand it's
  • 00:46:30
    reminiscent of periods when things are
  • 00:46:32
    pretty volatile So look I think it's I
  • 00:46:34
    came to the year thinking we're going to
  • 00:46:36
    need to be low over our skis for the
  • 00:46:37
    first two to three months of the year
  • 00:46:39
    We're three months in and I think we
  • 00:46:41
    probably need to stay low over our skis
  • 00:46:42
    for the next two to three months and you
  • 00:46:44
    know wait and see how things develop uh
  • 00:46:48
    over that period of time Do you think
  • 00:46:49
    the bottom's in
  • 00:46:51
    in terms of what in stocks economy
  • 00:46:53
    Bitcoin bitcoin
  • 00:46:56
    Um probably not you know but I'd be a
  • 00:46:59
    better buyer here Like a gun to my head
  • 00:47:01
    I'd be a better buyer but I wouldn't be
  • 00:47:02
    real aggressive But like
  • 00:47:06
    look I love it long term It's still one
  • 00:47:08
    of a very important position for me And
  • 00:47:12
    like I just I don't worry about it I
  • 00:47:15
    worry about it getting I worry about the
  • 00:47:17
    NASDAQ to be honest and how and just
  • 00:47:20
    being a realist of like look it's going
  • 00:47:22
    to trade with the NASDAQ till it doesn't
  • 00:47:24
    Yeah And the NASDAQ I'm really worried
  • 00:47:27
    about Do I think the bottom's in for the
  • 00:47:28
    NASDAQ no Emphatically no uh American
  • 00:47:32
    investors and I'm and I'm trying to one
  • 00:47:34
    of the I think great many great things
  • 00:47:36
    about X and and is is you quickly get a
  • 00:47:39
    sense of sort of where consensus is
  • 00:47:40
    where are
  • 00:47:41
    where American
  • 00:47:44
    investors are
  • 00:47:46
    absolutely 150% not factoring in the
  • 00:47:49
    capital outflow dynamic This is the
  • 00:47:52
    first time in any of our careers we are
  • 00:47:54
    actively telling the world's factory the
  • 00:47:56
    world's biggest creditor get out take
  • 00:47:58
    your money and go home And that is not
  • 00:48:00
    in the price of NASDAQ because if it was
  • 00:48:01
    the NASDAQ would be a lot lower than it
  • 00:48:04
    is today in my opinion It's so true
  • 00:48:07
    Thank you so much for all of your
  • 00:48:08
    insights Um you have helped me
  • 00:48:10
    understand the macro picture more than
  • 00:48:12
    probably anyone and I know a lot of my
  • 00:48:14
    viewers and listeners feel the same Our
  • 00:48:16
    last interview about Bitcoin as the new
  • 00:48:18
    oil went totally viral I think people
  • 00:48:20
    will get so much value out of this one
  • 00:48:21
    too I'll link your work below FFTT Um
  • 00:48:24
    Luke Groman thank you so much as always
  • 00:48:27
    Thanks for having me back on It was
  • 00:48:28
    great speaking with you again Thank you
  • 00:48:29
    so much for checking out this episode of
  • 00:48:31
    Coin Stories Make sure you're subscribed
  • 00:48:33
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    episodes If you can turn on those
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    review They really help the show grow
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  • 00:48:47
    educational and entertainment purposes
  • 00:48:49
    only Nothing should constitute as
  • 00:48:50
    official investment advice and you
  • 00:48:52
    should always do your own research I'm
  • 00:48:54
    always open to feedback and guest
  • 00:48:55
    suggestions So please feel free to reach
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    out at info@talking bitcoin.com
Etiquetas
  • Doge
  • U.S. Economy
  • Government Spending
  • Debt Crisis
  • Luke Groman
  • Bitcoin
  • Gold
  • Fiscal Policy
  • Investment Strategies
  • Interest Rates