 This is how it all went down. There's a pseudonymous Twitter poster named, calls himself James Medlock, describes himself as a tax enthusiast and hyperinflation doubter and says, I bet I'll bet anyone $1 million that the US does not enter hyperinflation that of course being a sort of joke in itself in that if it went to, if we had hyperinflation, the million dollars wouldn't be worth so much. But Balaji, you jumped in and said, I will take that bet. You buy one Bitcoin, I will send a million US dollars. In a sense, this is a bet that I've already won and a bet that I've already lost, right? Why? Okay. So the point was to bring attention to the stealth financial crisis that at the time that I tweeted this that had not been acknowledged as such. People were treating it as an isolated bank failure. They were trying to say that the Fed had nothing to do with it. They were trying to say that, oh, of course everybody knows how to hedge duration risk. And it was just one dumb bank manager. People were not talking about the fact that the crypto exits were being closed with crypto banks getting shut down and crypto companies getting assaulted. And so how do you punch through that, right? How do you, how do you go, like you have CNN, you have Wall Street Journal and like Marshall is reporting on this somewhat, but they're reporting it on a, as a like a blow-by-blow basis, like this bank is going down and this thing has a problem as opposed to an overall narrative that puts the facts together in a different way, which says the Fed actually killed the banks. And that's actually the upside in hand of all the business and firefighter, right? And that is a model of what to expect. So point basically being how do you punch through that cycle? And I actually, a few days earlier, had a different thing where I was just basically paying people like 1,000 bucks to post about, you know, like graphs and charts on this stealth financial crisis. And then mocking that, Fedlock came and he was like, oh, and the New Yorkers will never enter hyperinflation. And so then I was like, okay, fine, you know, why don't we take this a little bet because I had already set out to essentially burn money as a public service to alert people to this stealth financial crisis. This was the post that I wanted people to see, okay? It's a reply to the bet post and essentially lays out a completely different narrative than what you'd read in the press where, you know, insofar as if you're to believe Twitter before this, some immigrant engineer in Sunnyvale is responsible for finding a hidden insolvency in a footnote of a bank 10Q, but Jerome Powell is responsible for nothing. Right, that's literally what the narrative was. And I knew hundreds of like Indian founders, other founders who are like, I don't trust US banks and moving their money back home, just getting their money to heck out, not knowing what the hell was happening, just knowing they were getting blame for the bank losing their money. And pulling it all together, essentially, just as in 2008, the bankers lied. This time, the central bankers, the banks and the bank regulators have lied to all dollar holders and depositors, not your typical fractional reserve situation, there isn't enough in the banks on a market-to-market basis to cover withdrawals. They knew this all through last year and communicated internally in their code language. I give a bunch of citations, the key word is unrealized losses, citations to the Fed, citations to FDIC, citations to the banks themselves, citations to the bank's accountants, showing them how to hide the insolvency. I'm not selling any Bitcoin, holding Bitcoin until the US dollar is no longer in reserve currency. Because the allegation would be that you own a lot of Bitcoin, so you're trying to pump up the price to make more than the one or $2 million that you've bet. Yeah, exactly. That's his allegation, which is false, and I rebutted it publicly. First, obviously, I've closed, I've had Bitcoin forever. But second is, I didn't actually even propose this bet. I accepted it, right? It was somebody else who proposed it and so on, like they're poking at me. Third is that this is like a Simon Ehrlich sell bet, it's like an IELOT still bet. This can't actually be money on it. It was meant to prove a point about this financial crisis, and you can see my state of mind if you go and look at the tweet since like March 11th, like essentially what I'm doing is piecing together this name that I just kind of described. I was trying to figure out what the heck I'm looking at and it builds in banks. Okay, so it's a, sorry, so it's a, you're saying it's a Julian Simon, Paul Ehrlich style bet who famously made a bet trying to see, you know, Ehrlich was predicting that we're gonna be overpopulated and commodity prices are gonna go crazy. Julian Simon said, no, let's bet on this basket of commodities and Simon famously won that bet. So he actually believed that this was not going to happen and he won the bet. I guess that's the one question I wanna get to you before we have Larry Wayan here is like, do you actually believe Bitcoin's going to a million dollars or is it really just to draw, is it like a, you know, drawing attention to this problem that you've laid out? I think Bitcoin will eventually go to a million dollars. I do think there's some, Arthur Hayes also thinks it's going to a million, like basically I think we're now in the final stages of fee-out in a sense. Like they've realized that they cannot, they tried this rate hiking thing, they buckled, they're now printing again. So we're in like, and we're already in a base of high inflation and unlike 2008, the US dollar is no longer too big to fail. Like it has two scale competitors in the form of BTC and RMB and God help us if RMB, if they open the capital account and it's a nuclear currency, then we're all under some horrible surveillance. Even the dollar itself is being turned into something pretty terrible, I think with this FedNow thing, which is not technically a CBDC, but it's got many of the negative aspects of CBDC for civil liberties. So the thing is timing is hard, prepping is easy. So I don't know exactly when this is going to happen, but I wanted to draw attention to the combination of A, lots of small banks being destroyed with money being centralized in big banks or money market funds. B, the crypto exits being closed. C, an enormous amount of printing beginning. And then D, emits all of this in July, pushing the timetable evidently for the FedNow launch, which would make it easy to impose capital controls and lock you in to a system of potentially devalued dollars. Let me play a clip from a Fed share Jerome Powell expressing a contrary opinion about the state of the banking system. And then Larry, I'd like you to weigh in and tell me, do you side more with Balaji? Do you side more with Powell or do you have a totally different take on all this? Our banking system is sound and resilient with strong capital and liquidity. We will continue to closely monitor conditions in the banking system and are prepared to use all of our tools as needed to keep it safe and sound. What do you think, Larry? No, I think I'm on Balaji's side when it comes to the soundness of the banking system or lack of soundness of the US banking system. And I think he's doing a real service by drawing attention to what's been going on. Now, I don't follow that hyperinflation is going to be the result of it. But yeah, the banking system's in very deep trouble and it's because of central bank policy. And even if the Fed hadn't tightened monetary policy, there would have been a problem because the loose monetary policy that the Fed ran during the pandemic and then didn't withdraw when the need for that much liquidity had vanished gave us the 8.9% inflation that we had last year. The Fed itself is already solvent. It's worth mentioning. The Fed itself has a very long bond portfolio and it's lost enough money to wipe out its capital. But that doesn't stop them. In a fiat money system, nobody can redeem their liabilities. So they can keep on printing. They can keep on lending to banks. But they don't need to engage in a hyper expansion in order to lend more to banks. And even if they lend more to banks and don't neutralize the effect on the monetary base, they can neutralize the effect on money held by the public. So it depends on whether the Fed will take those steps. And if they're at all serious about keeping inflation contained, they will have to take those steps. Now, we've seen in other countries the kind of problem where central banks issue a blanket guarantee that they're gonna print enough money to save all the banks. The Philippines did that in 1997. And the result was inflation and a sharp devaluation of the Philippine currency. But in the U.S., we bailed out the savings and loan industry without that causing an inflation. In fact, that happened in a period of fall in inflation. So I'm skeptical of the prediction of hyperinflation in the U.S. and, correspondingly, I'm skeptical of hyper-Bitcoinization as a result. Let's talk first about hyperinflation. What do you say to that skepticism policy? So the thing is that actually, I'm trying to find this paper. I mean, there's a difference between hyperinflation and hyper-Bitcoinization. Those are actually distinct. And it's actually possible, for example, to have something like what happened to Argentina where you had both a massive economic contraction, massive end, the dollar trialed in value, so people were trying to, the economy was contracting and people were trying to exit it at the same time for a stronger coin. That is what hyper-Bitcoinization looks like where you could potentially even have some prices fall or you could have weird things happening where like, I don't know, housing prices fall and food prices rise or things are all just haywire because they've broken some of the normal relationships where they're still hiking rates, but they're then bailing out the banks while they're hiking rates. It's a normal relationship between high rates and tide monitors is being broken. So just like sag inflation is in a region of the graph where you think that inflation unemployment are traded off and maybe they could happen at the same time. I don't know whether typical economic relationships will hold. So I don't have a strong thesis on all the internal dynamics of the US or more generally Western economies. I do think that more and more people will want to exit them. And that's what hyper-Bitcoinization means. Hey, thanks for watching an excerpt from that conversation with Balaji Srinivasan and Lawrence H. White about Balaji's million dollar Bitcoin bet, the state of the banking system and the US dollar. You could watch the full conversation here or another clip here.