 Hello and welcome to the reason live stream. I'm Zach Weissmuller today We're going to be talking with Balaji Srinivasan a venture capitalist and former CTO at coin base and author of the network state About his one million dollar public bets on March 17th That one Bitcoin will be worth a million US dollars in 90 days Today's Bitcoin price was about $28,400 when I checked to this morning Balaji is still on his way to join us. He'll be joining us from Singapore. So he's running a few minutes behind It's it's very late there. So understandable But he's when he joins he's gonna explain to us why he made that bet What his fundamental concerns are about the state of America's banking system in the US dollar and why he thinks Bitcoin is on the brink of massive worldwide adoption Also joining us to offer his insights is Lawrence H. White An economist at George Mason University specializing in banking and monetary policy and Author of the recently released book better money gold fiat or Bitcoin Larry, thank you very much for joining me for today's conversation Thanks, Zach. Thanks for inviting me So let's start. Oh, I see a Balaji has jumped in. Let me add him to the stream. Oh, there he is. Okay, Balaji Thanks for joining us Hey, thanks guys. Just the link just kept crashing my browser. I had to get to a different computer I can hear you. Yes Yep. Well, yeah, thanks for joining us and you know since since you're here, let's start with you Let's I want to start with just Understanding the bet Balaji and let me pull up a couple slides here. So 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 One million dollars 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. That's about 40 to one odds as Bitcoin is worth about 26,000 let me let me cut you off here if you go down one tweet. Yeah See if you see if you can pull that up Yeah, I'm gonna I'm gonna have to pull up your Twitter here in a second But because this is But if you want to describe what happened and I'll look for it Sure. Sure. So so basically on the fuller context here is 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 you know 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 People were not talking about the fact that that is launching Fed now in July People are not talking about the sheer quantity of money that being printed or that could be printed under this book This btfp program and the new swap lines program They weren't talking about the fact that you know hundreds of billions of dollars has been sent out of local regional banks And they were basically blaming it on You the depositor not diligence in your bank and finding out that the bank was often Insolvent and that the central bank and positive insolvent in the bank regulars had not disclosed it and so the the point of this was essentially to alert people to that kind of combination of facts and You know one way to think about it is Timing is hard, but prepping is easy and You know from like you know back during code of the early discovery I saw this thing coming out of China for my first tweet to actually California being From Silicon Valley Bank going from Totally functional bank to having 42 billion wired out of it and then another hundred something billion if reports are to be clear It was about like two days or three days We have we have something where if you looked at bunch of these big stocks They're like analog and it's digital death at the end right meaning that insofar as markets were reflecting information about the future They actually weren't because the death at the end was just digital just kind of went to zero with its SVV or like first Republic these things just look digital at the end the death is digital If you go and look at the discount window and you look at you know the money that banks are Taking from the Fed that's also like vertical in its past 2008 and on and on not boys You know this there's various quite few measures right now that showed the economy is in cardiac arrest of Some former that are entering it and a lot of these things are just kind of going vertical at the same time And all of that was being obscured because like Biden was meeting with like Ted lasso, you know staff of Ted lasso Right right yes, and so how do you punch through that right? How do you how do you go like you know you have CNN you have waltz your journal in like Washington is reporting on this some 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 base on and And that's actually the opportunity and all the interest in firefighter, right and And that is a model of what to expect It's a point basically being how do you punch through that cycle and actually a few days earlier Had a different thing where it's just basically paying people like a thousand bucks to post about You know like like graphs and charts on this stealth financial crisis And then mocking that and I came and he was like oh and the US will never enter hyperinflation And so then I was like okay fine, you know, why don't we why don't we take this a little little bet? Because I had already set set out to essentially burn money as a public service to alert people to the stealth financial crisis Does that make sense, right? And yeah, if you go and look at my subsequent tweet Can you bring that up like that reply to that first one? Yeah, it says just as in 2008 the bankers live Hold on Okay, just in 2008 the bankers live. Okay. Yeah, let me a screen share that one second Oh Okay Here we go, so There we go just in 2008 the bankers lied, right? Yeah, so 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 Then what you'd read in the press where you you know in so far as if you're if you're to believe Twitter before this on some Immigrant engineer in Sunnyvale is responsible for finding a hidden insolvency in a footnote of a bank 10 Q But Jerome Powell is responsible for nothing Right that 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 blamed for the bank losing their money and Pulling it all together essentially Just as in 2008 the bankers lie 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-market basis cover withdrawals They knew this all through last year and communicated internally in their code language I give a bunch of citations the keyword is unrealized losses citations to the Fed citations to FDIC Citations of banks themselves Tations to the banks accountants showing them how to hide the insolvency and Comparing it if you scroll up a little bit like you know, yeah uncle Sam bankman freed Okay, so just like Sam bankman freed used your deposits at FTX to go and buy You know these crappy asset shit coins and use counting tricks. He had this pretty balance sheet remember that yeah He's a counting tricks to fool himself and others into thinking that he still had the money But when people came for the money he wasn't there very similarly happened with the banks themselves They use people's deposits to buy Long dated US Treasury is the ultimate shit coin in a sense They all have destroyed at the same time the same way because it's about the same asset same vendor who devalued it at the same time which is the Fed and It's really just like the failure of central planning, you know It's just in a totally different way than communism or whatever It's just another just central planning complete faceplant where they all make the same mistake at the same time because all the You know innovation or contrarianist or whatever is being leached out of the system So, you know, I give some of the tick tock there if you go to that that citation number eight um in 2021 Yeah, so click that open a new window This shows and this is getting by the you have to like know like technical bond or bank stuff or whatever to understand What that is going on here, but if you zoom out a little bit here This headline says In August 2021 banks are binging on bonds, but not because they want to right so Essentially what happened was all that printed money it crowded out their normal supply of commercial loans Interest rates are depressed only way for banks to make money was tie Long-term government bonds the only thing that gave any interest say all loaded up on them at the same time Powell and everybody is saying inflation is a conspiracy theory You're such a loser for saying where we're gonna have inflation interest rates are gonna be low for a long time We're gonna be patient about rate hikes. In fact, if you go back to my tweet Okay, um, and you go to you know the actually if you go to the next tweet Because they only put 10 links in a tweet go into that. Yeah Just click that in the show more there click that scroll down a little bit The references Keep going. Yeah. Okay. Click link number nine Yeah, look number nine even as late as November 3rd 2021 Powell is saying that he's gonna be patient on rate hikes Okay, so he's baiting everybody in to buy gigantic amounts of bonds at Saying that rate hikes are gonna be slow and gradual and so on and then what happens is if you go back You know a couple more tabs November 22nd 2021 he gets renominated Okay, and then he just hikes rates to the absolute moon Thinking now probably that I mean like my my surmise is that he thought okay now I can be Paul Volcker I'm safe. I'm renominated. I can be aggressive, etc Because presidents don't want Fed chairs to hike rates going to an election year. Okay, so Probably for political reasons the rate hike was deferred sort of like the Xi Jinping is only letting people out of lockdown after You know after he got whatever you call it reelected or now he's supreme leader for life Whatever whatever term you would use for that right the Chinese Congress that happened recently He went easier unlocked and he felt he could make a policy change once he was secure in the same I think that's probably what happened is now Powell's like running this 80s rerun of okay I'll hike rates to the moon be starting from something near zero as opposed to near 4% and And an economy that is being you know stimulated to within its life for the last 10 years And everybody was not positioned correctly for this they all had these gigantic low-end-term bonds They were all faked out. They didn't have time to adapt rates get like to the moon and then what happens if you go back a little bit earlier Further so previous tweet Here yeah, so just click click them and just drill into the links. Sorry. I do myself Yeah, so basically Click, you know for example link 5 bank CPAs Yeah, so essentially all the banks Realized that they're dead in like April 2022. So you see that you have rising rates and considerations if you scroll down Do you see what it's highlighted? Little bit more down down down. Yeah, the anxious bankers wondering what they should do in reaction to large losses So as early as early 2022 all the bankers realized that they had just gotten wrecked by the Fed Okay gigantic losses the Fed was surprised and all of them just got destroyed because they had all trusted the Fed and Bought huge amounts of bonds at low rates before the Fed The next year just hiked it to the moon and destroyed all of these portfolios in the same way at the same time Okay, so what do the bankers do in reaction to the large losses? They hid them Hold to maturity. I should I call height of maturity. They hid them to shield their portfolio and related book capital from So basically they wanted to like the regulators embedded this okay, and you can read this it's written in accounting ease Okay, but essentially it's like how do you what do you do with these gigantic losses? Well, you can sweep them under the rug. Okay, so this shows you get he followed this trail of references It shows that the central bank Banks and the bank regulators have essentially covered up the Fed caused insolvency of hundreds of banks And when I say hundreds by the way, just go back one one more time. Yep Back to your tweets. Yeah back to tweets. Yeah, and click on number four All right, so first of all, that's unrealized losses actually sorry go back one. Sorry Click number one September 2022 This shows that you know, can't see Fed has this report Okay, which says first that rising interest rates read to the lip so they they accept the responsibility In a sense that the interest rate environment has led to you know unrealized loss positions because you know rising rates make make the Gold bonds less valuable and if you scroll down at the very bottom Yeah, wait, sorry. See that okay a year in 2021 only four community banks had tangible capital ratios for 5% that number increased to 333 by June 30th less ability to sustain economic shocks in other words the Fed Increase the number of dead banks by 75 acts in six months and the Fed with that and Didn't notify depositors They're all dead all the banks are dead like what so some very large fraction of them right Stanford's done a study You can Google Stanford study of like 4800 banks Google Google like Stanford 4800 banks, okay Stanford 4800 banks SB at separate and Stanford 4800 banks You mean the paper by Jang Matt Vos-Pikorsky and seru. Yeah, I think that's the one. Yeah, that's right. Yeah, that's that first one that first That's right. Oh, yeah, that's your bunch of ten cues. You know, maybe you read it already Lawrence so 2.2 trip loss right and point is SVB was being presented at the time that I put out that tweet Okay, that's he was presented as something that risky tech gamblers brought upon themselves So it was like VC bets There's your fault that you know like your account was zero that it was some bailout or something like that, right? What actually happened was the Fed killed not just SVB but lots of other banks the bank regulators who you paid Didn't do their job didn't tell you the depositor that the banks were bust it's a you know, you pay for all the regulation you got into the protection and The banks themselves certainly, you know, you go to these websites and what do they have? I know it's the EU but the EU tells you hey, there's cookies on the website click, right? That's in your face that the bank has cookies on their website, you know, it's on your face where the bank is in solvent Okay, so it's it's like San Francisco San Francisco you pay for the police you get all the You pay for the police and you get none of the protection Okay, anyway, let me pause. It's a point. Yeah, all thing is this narrative Now, of course, they've now moved the ball forward a little bit since last time I spoke which is Yes, now they realize that everybody knows that many banks are bust which banks are bust We don't know until you actually have a big friend because you know, these are 10 queues. It's like quarterly I don't know what their real-time, you know Numbers are and some of them have some of them have bond losses Some of them have lost in their loan book other things. Who knows which banks are actually dead or not It's a height. It's like shorteners bank, right? There's a cat dead or alive, right? so So what they've done now is they've done this gigantic essentially money printing thing this BTFP program Where it was supposed to be 25 billion dollars and not be used now It's already past whatever hundred billion dollars, you know, JPMC estimates two trillion already Arthur Hayes thinks it's four trillion And so all that money is there and in theory it's loans as opposed to purchases But probably they'll roll over the loans all the money is there now to put bail out the banks behind when people are Wearing money out from dead banks. Well, the fed is backstopping them, right? So they're they're making it less likely that the banks die in a fire Though some of them still will because they won't take the BTFP loans. Let's try and risk a bank law but But they have caused a giant cloud of money to now arise And some of it is going to money market funds and some of it is going to big banks But essentially we've turned traditional finance into like a giant floating cloud of digital money That is seeking the highest return and highest safety and that is just to completely disable as a bank So we don't understand what that is. It's actually very similar to the DeFi world We defy all this money seeking yield constantly and eventually I think some of that money is going to seek the exit to Bitcoin And that's a hyperbolicization But let me let me pause here that gives you that gives you the method of the mantis. So yes Thank you for that that overview and I want to get Larry in here in just a second to react to all of that That you just laid out, but first I just do want to ask a follow-up about the bet itself first of all Following both you and James Medlock on Twitter It looks like you've moved the money into escrow and are working out legal details Is that kind of the status of things right now in terms of the actual bet? I have the money I posted it in an Ethereum address We are working out legal details There's very I mean one of the things that happened is this guy Matt Levine made various allegations Which are untrue in an article like oh, it's you know market manipulation blah blah blah. It's completely untrue I'm not selling any Bitcoin holding Bitcoin until U.S. Sergeant Lawrence your 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 two million dollars that you bet Yeah, exactly. That's his allegation, which is false and I've rebutted it publicly First obviously I've closed. I've had Bitcoin forever, but that can is I didn't actually even propose this bet I accepted it right there was somebody else who posted and so on like they're poking at me on third is that This is like a Simon Ehrlich sell bet. It's like 90 lots that can actually be you know money on it It was meant to prove about this financial crest And you can see my state of mind if you go and look at the tweets since like March 11 Like a sense of 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. 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, you know Ehrlich was 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 that's the one question. I want to get to you before we have Larry way in here is Like do you actually believe bitcoins 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. Um, I do think there's some product Arthur Hayes also thinks it's going a million like basically I think we're now in the the final stages of fiat in a sense like they have realized that they cannot They tried this rate-hiking thing they buckled now printing again So we're in like and we're in it 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 China's nuclear currency, then we're all under some horrible surveillance You even the dollar itself is being turned into something pretty terrible I think with this Fed now thing which is not technically a CBDC, but it's got many of the negative aspects to DC for civil liberties So, um, so, you know the thing is timing is timing is hard prepping is easy Okay, so I don't know exactly when this is gonna happen but I wanted to draw attention to the combination of a Lots of small banks being destroyed with money being centralized in 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 this in July pushing the timetable evidently for the Fed now launch Which would make it easy to impose capital controls and lock you in to a system of potentially devalued dollars, right? Now right clear by the way, do I think all that is like intentional and so on? No, I mean like you think about for example camouflage You can have a soldier who camouflages themselves and they put like, you know The the stuff on their face and they've got the sniper rifle or you can have a snake Which has evolved camouflage and it was never intentional just kind of happened, right? And I think this system is more of the latter where it's like emergent and evolved or anything That's obvious is kind of caught out So the whole thing evolved for people to lie to themselves and lie to you About what they're actually doing not not fully understanding what it is What it is is like basically trying to essentially do a stealth evaluation of the dollar Like what doll you're predicted is actually now happening that they're monetizing the death They're now in the early stage of that how fast it happens I don't know but it's much better to be aware of that and then execute on whatever Digital prep measures the digital preffer before And then you know see if that happens again, but that's 90 days where it's 900 days TVD But I do think we're in the last stages of it. Okay Larry I think Balaji's laid it out pretty thoroughly there and Balaji I don't know if you're wearing a mic on your lapel or something But we are getting a lot of interference. I don't know if there's any adjustments you can do there Let me play a clip from 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, you know, do you side more with Balaji Do you side more with pal or do you have a totally different take on all this? System is sound and resilient with strong 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 the banking systems in in very deep trouble and It's because of a 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 was had vanished Gave us the 8.9 percent inflation that we had last year and that's driven up long-term interest rates And the long-term rise in long-term interest rates is what makes the value of a long-term bonds crater so The Fed is in a hard place where they're trying to fight inflationary expectations And in that way I bring down long-term interest rates but that requires them to tighten money and Decide effect of raising short-term interest rates and so that Also can contribute to raising the whole term structure of interest rates But we have a banking system where as Balaji said banks many many banks bought long-term bonds because that seemed to be The only way to earn any yield and the regulators encouraged them to do it on the under the premise that Treasuries are a safe security Well, they're not going to default. They're safe in that sense But they do have a lot of interest rate risk when you buy a 20-year treasury bond So when interest rates go up the value of those bonds goes down and that's a problem They should have been aware of and that the regulate the banks should have been aware of and that the regulators should have been aware of One of the scandals is that when they did stress tests last year of the largest banks They simulated what would happen to their net worth if interest rates rose from zero to two percent And that's as high as they went and at two percent SBB would have been okay If they had you know tested for three percent four percent Where are we now four and three-quarter percent interest rates? They would have seen a lot more trouble than the regulators wanted to see so there has been a failure to Look deeply enough and as biology said they haven't been very public about the Problems that are at the banks and the study he cited by the working paper by four economists The title of which is monetary tightening and us bank fragility in 2023 Shows that it's not just bonds that are falling in value It's also mortgages and other long-term loans at fixed rates that banks have made and they these authors estimate that assets have declined by 10% across all banks and Most banks have less than 10% capital. So that's pretty serious and at the worst banks. It's a bigger decline. So their estimate is that something like 190 banks are at a risk of insolvency to the point where Just wiping out the uninsured depositors isn't going to be enough they're going to be losses to the FDIC if they Need to pay back insured depositors So so that's a problem and in the last week. We've seen the injection of funds by the Fed in the form of loans to the banks and I looked at the Fed's balance sheet and Total Fed credit was up 211 billion last week. So it is hundreds of billions. It's not yet trillions It's not yet rivaling the size of the QE programs in recent years but if they add a 200 billion every week for a while it adds up now Hopefully they won't need to add that much And but even if they do need to lend that much to banks it doesn't follow that we get expansion in the monetary base or the the total Fed liabilities or In money held by the public because the Fed can sterilize the loans They make to banks that is they can offset their effect on monetary aggregates By selling other assets selling securities out of the Fed's portfolio and the Fed has trillions of dollars worth of securities And in that way they can keep total Fed credit unchanged. That's what they did in 2008 They sorry they didn't keep total Fed credit from rising the monetary base rose quite dramatically they kept money held by the public from rising and They sterilized those expansions by paying interest on reserves in a sense paying banks not to create more deposits So they can do that again. They can pay a little more on reserves now that in a sense kicks the can down the road The Fed is itself is already insolvent. 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 and they can keep Louise and 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 it if they're at all serious about Keeping inflation contained. They will have to take those steps now that we've seen in other countries The kind of problem where central banks issue a blanket guarantee that they're going to 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 US we bailed out the savings and loan industry Without that causing an inflation. In fact that happened in a period of falling inflation so I'm skeptical of the prediction of hyperinflation in the US and Correspondently I'm skeptical of hyper Bitcoinization as a result Let's talk 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 You know what happened to Argentina where you had both the massive economic massive and the dollar trialed in value Like relative to so people were trying to that the economy was contracting and people were trying to exit it at the same time for a stronger That is what like quote hyper Bitcoinization looks like where You know You could potentially even have some prices fall where you could have weird things happening where like I don't know housing prices fall and food Prices right 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 Normal relationship between high rates and type managers has been broken So it just like sag inflation is in like a region of the graph where you think that you know inflation unemployment are traded off And maybe they could happen at the same time. Um, I don't know whether typical economic relationships will 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 want to exit them And that's that's what hyper Bitcoinization means really or more generally it means USD BTC is the one Number that is really hard for the Fed to fake Because you can't really it can't freeze or seize or inflate Bitcoin That simple constraint of the fixed 21 million with the infinity of the Fed Bitcoin exists outside the Fed's video game Okay, like you think about the Fed as like the system administrator of all the banks and actually indirectly You know through the other central banks all the banks under, you know, like like the bank of Japan And so all of these other, you know central banks that sort of fold into the Fed where I did these like, you know announcements to join central banks We're doing that so they're central banks The Fed can you know, it doesn't have a full CVC out of course But it can order any account frozen It can print money and do all these things because all these banks are effectively licensed by it directly or indirectly So it can make all the numbers go up within this video game It can't however create like loaves of bread outside. It can't Affect China's our R&B. That's its own video game and it cannot BTC right those are separate systems, right? Those are genuinely sovereign in a sense the three currency true currency pairs in the world arguably are like USD R&B R&B BTC and BTC USD, right? Those are like the three truly independent billion person-ish economic systems And so the Bitcoinization thesis or the hyperbicronization is that as the US economy just gets worse and worse and more unpredictable People will seek a safe haven Not in money market funds and big banks which are in my view a trap in this cycle in a way that they were not in 2008 Are they a trap because I think you will probably have some form of either capital control or a Fed now like set of controls And so on and post on them. You may not be able to wire money out You may have various kinds of things that make it difficult for you to buy cryptocurrency from there It may be like It was a hotel California or something like you go in and you don't come out or something, right? Never leave. Yes, you can never leave. That's right And by the cap control thing, you know, someone's like, oh, yeah balls You will tell me when the capital controls come I'm like, do you take a look at this restrict act? Like that's even intense than that's just any transaction like forget forget a country if they're willing to throw you in jail 20 years in prison and sure $50,000 fine for using a VPN to access tick tock. Yeah, absolutely That will include capital controls like if they really want to do that, right? Like clearly that's like that's far in excess of just normal capital So so that is the thesis is you could have a contraction and you could have people who want to escape the economy Into something that is like a goal or in this case a digital goal Now by the way, it doesn't have to be Bitcoin You could go to oil or you go to commodity or you could go to hard goods of some kind You could go to another foreign banking system Some, you know Indians have moved their their money to India I never thought I'd see the day when Indian banks were considered more trustworthy than American banks But here we are and they are I mean I mean Indian founders, right? And so just you can go to gold which many Indians do Yes, that's right. Go to gold and I know you've written books on gold Lawrence and I'm I'm always pro-gold I think gold is you know eternal and it's got a lot of good properties. It's hard to transport It metal textures will set it off. It's pretty heavy. It's illiquid You know, there's our downsides as you know, but gold is also reasonable. It will hold its value. Okay, um But uh, but basically that that's the thesis is I don't have a strong thesis on the internal mechanics of you know Like the wings on a plane are in a certain way when the plane is flying But when a plane is crashing the wings give me all a Kimbo, right? So I don't have a strong thesis on what's going to happen in this unprecedented time of Continuing to hike rakes while they're printing trillions and and breaking normal relationships I don't have a strong, you know, just the things are going to break in bizarre ways By the way, we still have this whole opaque derivative thing out there where who the heck knows what's going to happen to that We have massive commercial real estate crashes this year where all these leases aren't getting renewed I've heard some stuff about like insurance. Um, there's the debt ceiling coming up in june A lot of different things are going to probably blow up. So I don't know exactly how it's going to blow up I just think that people are going to want to stay clear and I think that's the thesis on getting into big fun Yeah, I think it's I think it's reasonable to expect uh People to move some of their savings into bitcoin in order to diversify away from the dollar When inflation in the dollar Uh goes up and become less predictable But hey, we had a nine percent inflation last year at the peak We had 10 inflation in europe and great britain And we don't see people adopting bitcoin as a medium of exchange in those countries So when people talk about hyper bitcoinization, I Understand them to be talking about the adoption of bitcoin as an everyday money as a medium of exchange I've studied What makes countries switch from their domestic currency to a new currency For example when latin american countries dollar rise And it takes fairly high inflation more than 10 percent. I would say more like 20 percent And rising with no correction in sight And until we see that I don't expect to see major movement out of dollars into alternatives And one of the alternatives is gold Gold actually has a larger installed base than bitcoin right now the monetary type gold that is just coins and bullion and ETFs in the hands of the public is like four and a half trillion dollars so that's Nine times the value of the bitcoin at the moment now It's not easily spendable as bitcoin is but people are digitizing gold and making it Transferable online And so that may become an alternative if the dollar really becomes unstable But I I place pretty low odds on Our getting 20 inflation in the u.s. Anytime soon Um, well, so let me show you just this here's just an interesting graph. Can I can I put this graph on the screen the share screen? Yeah, this is this actually from seven days ago, but I think it's continued is That's an interesting chart where banks are crashing and bitcoin is soaring because It is for the first time showing something that we have theorized that If people now understand that it's got I'm not saying there aren't any failure modes with bitcoin for example You can lose your private keys. It can be stolen and so on and so forth, right But it or dog and also failure modes from losing it at the bank, right? So it's a diversification. That's so these are bank share prices, right It makes your prices. That's right. Um, so these are three worst-case scenarios. Yeah No, I know I know so, you know like Banks lots of banks, especially mid-sized banks have seen their share prices fall pretty far in the last couple that's right So, um, the reason it's just an interesting way of looking at that you're starting to see bitcoin banks like pull away Right in the sense of bitcoin exploded originally as being an alternative to the banks and now in the literal sense it is, right? um To your points, uh, you know, one thing I've said on twitter, you know many times is I'm not a bitcoin maximalist um, you know, but you know, I do think we are all bitcoin maximalist now in the sense of having focus on one asset as a lifeboat to get out is important after which there can be many Of the theological disputes travel disputes that are common in crypto And what I think is actually you can imagine just to take a sci-fi scenario for a second that um, you've seen some stuff where For example, florida's come out against the cbdc Yes, but let me play. I actually have a clip of desantis talking about that so let me play that and then you can talk a little bit about uh, desantis in florida and cbdc's society To any way they can get into society To exercise their agenda. They will do it. So what the central bank digital currency is all about is surveilling americans and controlling behavior of americans today I'm here to call on the legislature to pass legislation to expressly forbid the use of cbdc as money within florida's uniform commercial code This will ensure that florida continues to be a state that supports innovation in the financial sector through the market While protecting against government surveillance over your personal finances Could you just explain just let's not assume everyone knows what a cbdc is So just briefly explain why that what that is why you think it's a problem and why you're approving of what desantis is doing here well, so so what's the cbdc is cbdc stands for central bank digital currency and You know to first order it is Something that's a lot like bitcoin or ethereum, but it is run by central bank And so every dollar can be tracked in the ecosystem. It's more programmable um, and that's different than how the current banking system is set up where Uh, you know, we're not getting too technical. It's more opaque It's all spread out across different databases as opposed to like one consolidate database where you can track Literally every single dollar moving everywhere, right? so from a technology standpoint a cbdc Is an efficiency and transparency and programmability improvement over You know the status quo if that was if you were living in a high trust society You might be able to do that, right? problem is we're not in a high trust society, unfortunately Over in a society where these genuine productivity gains, unfortunately Will come with a with a hook. It's like, uh, it was like a suite, you know, where it's got a hook in the bait and the the hook is Total surveillance total control On billy to freeze account drain accounts. It's like the euphemism of consumer to government payments You know, I actually have a thing on this here. Maybe you can uh put this up The cbdc light of fed now is actually like they push the timetable up to lunch in july And um, I've got a slide here. Yeah Okay, great. So, um, if you look at my tweet on this, uh, here, I just paste it into chat. Um so You put that up on screen central make Yeah, good There you go Yeah, so this essentially makes the point that People say oh fed now it's not a cbdc But that doesn't mean you don't have concerns or technically it's different than a cbdc So it's important the difference from a technical standpoint from a civil liberty standpoint The difference isn't that important. The reason is if you scroll down and look at the screenshots at the end of this post on So click that first one So first point is that everything gets centralized through the fed Okay, number one if you go if you hit right arrow. Yeah, just a second. Yeah That's highlighted there. It says complies with applicable controls It just slid that one in there, right? Step three is complies with applicable controls Guess what that's anything That can literally mean you can't spend too much money. You can't you have to spend the money right now You, uh, can't send it to this person with this immigration status Blah blah blah every kind of possible crazy control that the current system is not It's it's somewhat set up through that So there's a difference if it's all centralized and it's all in database You can have crazy fine-grain controls then go to the third slide So, you know, they're like all the great payment tasks and again in a hideous aside This sounds great But you know what I see when I see a consumer to government and government consumer I see consumer to garment drain your account and garment consumer stimulus, right? Like basically helicopter dollars and you know freeze and drain your account, you know, it's the government, right? Other things and so so that is like what a cbdc or fed now actually is and But it's worth It's worth differentiating between those right because the cbdc is an actual You know coin or currency that the the fed is holding that it's like you're holding your money With the fed instead of a bank account Whereas the fed now is kind of like a instant payment system Is it are you saying there's no meaningful difference in terms of the kind of control that can be exerted through the two systems? There are some differences like, you know, it might be a little bit harder to track every single dollar With fed now than it is with the cbdc. Okay But there's there's some things like like in terms of transparent and stuff like that are different But let's say, you know, the fed now is like the federal PayPal and a cbdc will be like a federal Ethereum Okay, roughly speaking. Okay. Um, go ahead Lawrence. Did you just read that? Yeah, I think there is an important difference Between cbdc, which I am also very alarmed about the prospect of And fed now which I'm not so alarmed about because fed now you keep your account at a private commercial bank And like you say the the data then is more distributed Whereas with the cbdc, there is one database that where the fed can in real time watch every transaction So that's scary But fed now is not that it's just a way of making checks clear faster Basically, so I mean I share your concern about cbdc, but I don't think fed now is the thing to be alarmed about You're muted. The difference is that uh A cbdc you have an account on the books of the fed It's not a coin. I mean people have sometimes described it that way, but it's not a coin It's it's a fed account everybody can have an account on the books of the fed And then they can track what happens with your account Whereas fed fed now is speeding up transfers between private bank accounts Yes, except uh, so I agreed that cbdc would have even greater and more granular levels of control But if you look at some of the documentation that I was just pasting in Um, it does appear and I was looking at some of the you know, some of the api stuff I may be wrong about this, but you can go and look at the docs that uh, that they can Impose applicable controls that they can or they're adding the ability to do It does look like something where Unfortunately, I have to think adversarily with respect to this government right and uh For example, you saw what they did to the truckers. You saw they did to You know in canada. Yeah Yeah, even even with respect to russia you might actually argue it was more justified like the canadian truckers I think much less justifiable. It's like a case for domestic protest Russia that's they actually did, you know active war and so fine. I can understand that right nevertheless The revelation of that level of financial weapons out there, right? Clearly even before You know a cvc let alone, you know fed now Um Before fed a little cvc. They're freezing accounts. They're doing this type of stuff And so of course it's going to be used for political purposes is my view um The alternative to that is actually uh that many of these states I think so just taking a few of the points They're coming all the way back up. Um If you take the observation that for example You know de santis has come out against cvc. He's also got a florida state guard like he's making you know make america states again, right? federalism is on the rise and You know for the last 10 years or so states have been breaking away from the feds both left and right On not just sanctuary cities, of course, but on gun laws drug laws abortion laws Crypto everything right and crypto in particular Uh, you know, you have for example, texas says the right to buy sell send receive bitcoin shall not be infringed Wyoming and tennessee have the dowel laws Uh, mississippi and montana have bitcoin mining protection acts the florida mayor Uh, accepts the salary of bitcoin colorado accepts taxes bitcoin new hampshire is friendly to cryptocurrency. Okay so, um What I anticipate is that this is going to become A major political issue but not in the typical left right way more of a federal versus states issue with um More and more states potentially doing something like the opening gold window Okay, so you want you want to see if I scenario? Yeah, all right. Okay. Here's if I scenario. Okay. Um, Maybe actually over the next few months Okay, we get something and i'm writing up actually here's a preview of an article i'm writing. Okay Reopening the gold window accepts the digital gold window. So we have bitcoin dot farta dot gov Bitcoin dot texas dot gov bitcoin dot wyoming dot gov Okay, and so on and what you can do is it's a simple bitcoin exchange Where you can buy and sell bitcoin either as a brokerage or just by placing limit orders And then these order books, um, they can use, you know, commercial exchanges or they can peer with each other Okay, and the state takes a cut of this And they are able to start building up their digital gold reserves like they'll sell And they have restored the inter convertibility into Digital gold that essentially reverses what nixon did in 1971. Okay, and why do they do this? Well, uh, The states has actually put out some stuff on how he might actually have state chartered banks um banking crypto Uh as a response to the fed trying to shut off Banking access crypto at which point if you game it out Essentially, if you want to get out with fed to shut off fed wire or a ch or other access to state charter banked Which would mean like cutting off florida simply to cut off crypto Which is probably too big a thing and if the fed did it it would actually show the financial talentarianism That he's saying is potentially there with cbc If they didn't do it Well, then they have to actually allow the currency of the people buy the people for the people It's not perish from the surf And we actually have a bitcoin exchange that is now at a government level, right? And so the thing is, you know, you're seeing the movie pacific rim Sure. Yes Yeah, so pacific rim It's like these giant monsters come out of the ocean and humans cannot fight those giant monsters So you have to build giant rods. Okay So when when you've got a company when you've got a government that is attacking companies You can't beat a government with a company. You can only beat it with another government Okay, so florida or texas has enough hit points To be a giant robot that can stand up to harassment from the federal government And I think that's what's gonna come Right And so that's a piece of it how you actually have the rails to buy bitcoin open over the medium to long run That's how I think we get state resistance Is it's the opposite of kind of how we normally thought about it It's similar to the l salver model where the state has flipped to being pro bitcoin, right? Showing by the way where you have a political movement and it goes from People thinking it's going to be banned to becoming a national currency. That's a really really important thing Okay, that's like early christianity going from being banned to something that consentee and adopted, right? That's like, you know, many many really important political movements I can name some of them you can think of others, right? Yeah, it goes all the way from banned to Especially the head of state adopting it, right? That's a lot of momentum there so So one aspect what you mentioned Lawrence earlier Um is the rails. How do you keep the rails up? And I think that's what's going to happen You're going to have states defect and effectively realize how profitable it is for them at the state and local level Especially when regional banks are getting killed. This is the way of being a renaissance regional banks having crypto banks one Number two is you said, okay How do you you know, you know the transactions per second and so on and so forth? And what I think actually happens is Again a sci-fi scenario A sci-fi scenario on the other side of the kind of conflicts that I think might come You have essentially have bitcoin atheist states bitcoin monotheist states and bitcoin politics Okay, so bitcoin atheist states would be like the dollar states or the rim envy Okay, rim envy zones where they hate the coin and you cannot have it in private hands like gun control, right? You can't have guns in your hands bitcoin you couldn't have in private hands only FDR's gold seizure but on steroids you can't have digital That means that bitcoin atheist states bitcoin monotheist states like bitcoin maximalist states You can have bitcoin in private hands. In fact, that defines the state We could have only bitcoin and so all the inefficient You don't have to use lightning network and other things you can kind of make that stuff work. It's it's it's like there's very good workarounds, okay? um But basically what is haram what is prohibited is to have any token any digital token out of the bitcoin You cannot have anything out of the bitcoin. That's like a bitcoin monotheist like a maximalist And then finally, I think you'll also have bitcoin polytheist states which have bitcoin as like zeus at the center of A bunch of gods to speak right and bitcoin polytheist states who have bitcoin that have a theory and they have other kinds of things And they would support more complicated financial transactions They support high-capacity blockchains and so on and so forth and that you'll probably see in like financial centers like ua year Okay, so that's kind of how I see the future evolving and uh, you know, so You know, I know that sounds sci-fi but lauren's love your thoughts Yeah, I uh, I favor separation of church and state and I separation Favor separation of bitcoin and state and all other crypto currencies and state So i'm not keen on state governments running Exchanges those should be in private hands They should play hands off toward private exchanges and let them do their thing and so of course should the federal government so I mean, that's what I think we have to rely on to To preserve our monetary freedom of choice. We have to be eternally vigilant against encroachment of our rights and our liberties by the federal government and by the state governments Yeah, I I do actually understand that view Um, but that's also why I I wouldn't call myself an orthodox libertarian at all. You know, like, you know, liquan you was Pretty much all over the political map and did what what he thought was best for the country at any one time Like, you know, whether you're subsidizing houses or doing things that seem to be for the left or the libertarian right or what have you He he did some combination of policies idiosyncratic heterodox combination policies and um And I don't think that you can beat government harassment with Just lawsuits Um, I think like basically you need another state to kind of be on the other side of that Uh, and I think that's what's going to happen. So, um Look at it as unilateral disarmament if you are If if one is not actually taking what bitcoin really means seriously Um, it means essentially the currency of a free people that you're not monitored You can't be you can't have your savings, you know stolen and frozen, right? But that that has an interaction. Go ahead And that's why I'm not a fan of what's happened in El Salvador where the government has tried to mandate that businesses accept bitcoin whether they want to or not fortunately it hasn't taken Well, it's refused it and it's been unenforceable I I I completely understand where you're coming from. In fact, there is a difference of opinion in the community on this Sure. Um, but ultimately there's actually a higher sort of standard which is Is El Salvador going to attract migrants on net? Right, then say if there is a Seeming violation of one or the other libertarian principle, but they preserve the freedom to exit And other people are able to exit there and if they're choosing that jurisdiction of others Whatever local trade-offs they make that may be, um You know, like incorrect by by one theory or another are, um Nevertheless something that unbalanced attracts people Right and I think there's actually multiple solutions to that that's to say for example, uh, the Netherlands has a very liberal drug policy Singapore has a very strict drug policy But arguably they're both better than the u.s. Has this bizarre, you know bipolar Catch and release type policy where it's simultaneously very harsh punishments and non punishments, you know So we're Singapore none are very clear about their their goals Uh, so I I think, you know, um Whether El Salvador works is a is defined by whether it attracts citizens and now he's actually out there recruiting I think he is attracting citizens So we will see if that actually ends up working despite it not working from a from a theoretical standpoint works in practice not in theory I would be pretty surprised to see an autocratic state attracting citizens I wouldn't and the reason is uh UAE is doing it, uh, you know like the thing when you say autocracy also Now this gets really fundamental as a principles, right? Um I mean a guy who brought the soul brought the army into the Congress to stand by while they voted Sure. No, I understand the thing is that basically like Lincoln suspended habeas corpus, right? Um fdr ordered the gold seizures fdr ordered the japanese internment On bad things I know right but but but here's the thing is that, uh, you know If you want to get into all the details of this and this will this will be a very long conversation. Um, I think, uh, a Perhaps a cynical view is that no matter how many How many sanctions how many invasions how many coups how much inflation? Uh, how many violations of rights the U.S. National does how many guantanamo's how many drone strikes all that stuff Whatever it does is defined as democracy But if somebody wins an election they don't like That is not democracy. That's a threat to democracy Right, whether it's to the left or to the right Okay, and um, I think that's uh, you know, I think we're getting to the point where um, you know For example, did the iraqis get a vote 20 million people were just in franchise for like, you know 20 years, right? Is that a small thing or is that a big thing? That's a big thing my view Um, and can you call yourself a democracy if you're just disenfranchising people like that willy-nilly? You know, who's the authoritarian is what I'm saying, right? And of course people say, oh, no You're just doing what about us and both And it's a surveillance the opt out of that The fed do we ever vote for the fed chair all these people around the world were basically paying for the dollar to subsidize it The inflation we have a vote for that we never did any vote They didn't vote for that the arab spring was in part caused by the exporting of inflation abroad and food prices re-jacked up So You know when I say this, you know, like the um I think Insofar as one wants to assert a moral high ground. I'm not so sure it's actually there Uh, and you know, if you're bristling the military base around the world And there's a lot of coercion of both soft and hard of context whether in sanctions or actually outright invasions Um, whether it is surveillance, uh, which is hidden Or whether it is, um, you know, like, uh, you know, various treaty blockade or not Is it is it is it something where everybody really has to stay around the world? It's whatever they want freely or is who's the authoritarian right? Who's actually imposing their will on the rest of world, right? So that's why like, you know, a small country that is choosing to diverge from where the us is Is uh, you know, unless one is an anarchist you um You know a minarchist does believe that there is some necessary night watchman state You do believe that there's some minimal role or force some minimal role, uh, you know for uh, you know Jails and things like this, you know, certainly not a lot but but enough to to maintain order And if that state diverges from the us, is it necessarily quote authoritarian? Or is it just diverging from the us and therefore it is being labeled? I think it's a very fundamental question I mean, I think the answer Would be, you know, beyond the democracy question, you know, is there a fundamental respect for You know individual rights? Which we we don't see in some of the countries that you mentioned in terms of Just allowing people to practice different religions dress different ways Um, just, you know free free speech dissident speech against the government So I think there is still a meaningful difference between the us and most of the countries that Yeah, last one right so meaningful speech against government. We just saw this restrict act proposed, right? Which basically, uh, you know, all you've seen this entire new tablet series on disinformation Uh, no, I haven't seen this so it just came out but essentially Uh, we are seeing there's so many stuff that the lawn, you know, put out there and whatnot Uh, you're seeing that intelligence agencies were suppressing domestic speech in the name of You know stopping court disinformation. Um, what I'm trying to say is basically like There there was a time when the us was essentially The establishment won a game of free speech and free markets And therefore is in favor of them And more recently you've seen that people on the left have Come out against free speech though. There are previously champions of it people on the right increasingly have come out against free markets There were previously champions of it because the establishment is not always winning a game of free speech and free markets So you're seeing many more bands on speech. You're seeing many more bands on trade I think we can all agree those have been escalating And yet at the same time that the authoritarianism has been escalating the surveillance was increasing so too have been the claims of being so democratic That's a that's a point i'm trying to make is You know as the authoritarianism is escalating within the us with people being de-platformed with bills like this proposed completely unironically to strip people of freedoms Um, then at the same time the cries of we're so democratic are are rising, right? That's that to me is something that should be examined critically But let me you know pause there and what why Why is it that bitcoin is the hedge against so much of that because you know, we've seen Speaking of authoritarian actions. We've seen the u.s. Government shut down make it illegal to hold gold we've seen That there's all there's a sustained campaign to go to kind of just systematically shut down cryptocurrency exchanges I pretty much buy into the operation choke point to 2.0 thesis. We had nick carter on here talking about that a few weeks ago um Why is it that you think bitcoin is particularly resistant against this creeping if not already hear authoritarianism Go to a couple of articles on this but one thing I want to say is I'm not a utopian. I'm pragmatist and uh, you know the greatest freedom You know in terms of like ordo liberal right like the the greatest uh freedom that's possible That is consistent with still a functioning society, right? There's always tension between the rights of individual rights of society and so on like you can you can go to extremes in either direction with that said in the current Like status quo bitcoin is a very powerful tool to protect against abuses of both the dollar and the renminbi Um for essentially american dissidents and chinese citizens if you want to put it that way, right because it can't be frozen It can't be inflated. It can't be seized Um, you can also by the way use the private keys with something like noster to get you free speech, right? And you fundamentally I think you know orange coins with new blue jeans Right at the end of the soviet union Um, you know the blue jeans were the symbol of like freedom and prosperity. That's what bitcoin is It's a global symbol of freedom and prosperity Your free person if you can have bitcoin and you can move it around because the state ultimately is limited in its rights And um, I grant that there are different hybrids here I grant that el salver may not be to everybody's liking and I'm not living there or would have you I I actually do think on balance. He's probably improved the lives of the people there But I grant that people may not like the particular formula that that he's used Uh with that said I think that if you believe in you know, free speech and you believe in free markets privacy rule of law provable fairness economic stability transparency Bitcoin is those things and the fed is not Right and more generally. I think um, you know, the us was You know, I've got two articles here. One is called, uh, bitcoin is civilization in in Barry Weiss's Free cross and the second is great protocol politics and foreign policy those kind of express the domestic and international case respectively But just to briefly talk about the international case, you know, for many many years the us was the champion of the so-called rules based order I'm sure you've heard that term, right? And it set up a system of rules for trade between countries and standards and so on and now essentially both the trump and biden administrations have taken a wrecking ball to that because the us no longer wins in the rules that itself set up Okay, now you might say Well, of course if we're not winning then, you know, screw the game. Okay, right? Because china's bad. Okay, fine But most of the world is neither american nor chinese It's four percent of the world's american 20 percent is chinese the 75 percent That's just watching the rule based order smash just some of the reins in order to get china And they're like, okay Well, I liked this old rules based order, but america doesn't like it anymore And I definitely do not want to live in the greater east asia co-prosperity sphere 2.0 Which is what china would set up. So what's my option, right? And I think the option in the fullness of time is going to be um, you know, what I call great protocol politics, which is Bitcoin it's smart contracts theorem and so on and so forth for trade between countries Sort of like the the law of sea is a demilitarized zone, you know between countries Obviously, there's ships crashing to each other and so on and so forth, but there's they're going to establish standard for kind of the law of the sea So the law of the chain Is the you know, just like the law of the sea governs the sea the law of the chain governs the cloud That's how states Transact in the sort of neutral zone between themselves as cloud commerce becomes a bigger deal. It's like a neutral zone um As opposed to just being under the chinese sort of boot for example, or You know the more chaotic and you know, the quote rules based order that's becoming the chaos So so that's kind of you know, you asked how do I think about this? That's how the protocols in their neutrality Again, it's not perfect It is closer to division of universal rights Without discrimination against any citizen of the internet, right that we wanted And free speech and free marks is not everything. It's not physical safety and whatnot, but it's a lot. It's a good chunk of us, right? That's abbreviated version the longer versions are in those articles um, I'm gonna wrap up with a couple of final questions for both of you because I know it's very late over there in in singapore and You know, we've been It's been a lot of a doomer type talk throughout the stream You both seem to agree that the banking system Is in big trouble that you disagree on the prospect of hyperinflation I want to bring in a different take real quick just to have you both react because it's From someone who I think all of us on the stream respect. Tyler cowan gmu economists Says this banking crisis won't wreck the economy The various bailouts we've been engaging in are not costless They might introduce more moral hazard the next time around but it doesn't mean we should expect a spectacular financial crash right now More likely we'll see increases in deposit insurance premiums and higher capital requirements for financial institutions And the rational expectation is that the us will muddle through the current problems And patch up the present at the expense of the future for better or worse. This is how we deal with most of our crises What do you think of that more Just it's all gonna kind of work out in a you know, messy, but not catastrophic way type of take Lawrence first Well, I have a fair amount of sympathy for that I it might be a little optimistic and that we don't want to state the insolvency of the banking system and so the cost to taxpayers may be higher than Tyler is allowing for but as far as it not needing to create a huge financial crisis much less Hyper expansionary monetary policy. I think he's right about that And what about you Bellagio does that uh easier nerves at all to you know, consider that less catastrophic scenario I think that um, I mean, obviously it'd be good if that was the case. Uh, I think I think that the situation Today is just very different than 2008 because there are scale competitors to usd. I think The background inflation rate is very high. I think this is a consumer crisis In 2008 basically it was just guys and skyscrapers trading piece of paper with markdowns Yeah And uh, you know with some like I think there's long room and whatnot and That's an issue there, but for the most part we don't recall it be Here's the long view of kind of the the macro situation And we we brought this up when we were talking with uh, arnold cling and lin olden So this show the blue line at the top shows the federal debt-to-gdp ratio and that's the line that that looks totally Uh, uh kind of a a historical like there's no precedent for that. We're at new levels of debt-to-gdp The red line interest rates you see post 2020 obviously spiking up the green line inflation Also spiking up Um Given this situation How do you think it all shakes out? Larry because I mean we haven't really talked about the role that you know debt-to-gdp And just deficit spending in general plays in all this Well, so the the debt problem really is a problem and It's hard to find examples of countries that have been that indebted Uh, especially not even as a result of exiting a big war, but have taken on that much debt just in Normal times who have gotten out of it without inflating it away So the the higher the debt goes the higher the probability that we're going to see Uh a return to double-digit inflation in the u.s Yes And so that's and that will derange the economy the way it did in the 70s and 80s. So that's not a welcome prospect Let me let me ask for a kind of a final question for Um apology here, uh, you know So much of what we're talking about here is the the collapse of trust in a lot of american institutions global institutions Um, it's it's been broken, you know more for I mean it's been going down for Years if not decades those past few years. It's taken a huge hit How do you reckon is actually the best way on the individual level to operate in The increasingly trustless world that we find ourselves in Well, so first of all, I want to say I'm actually I'm not a doomer. There's actually a good term called Dumer optimist, right? where We're basically like, you know, you might think that the old system is crashing but You know, for example, I have a book called the network state on what like that new system might look like Um on how you can start new countries in the event the old system is actually You know falling away. I do think if you on my mental model I think it's like the time before world war one where you had all the kings and that that world seemed eternal The monarchs and so on but underneath there was the churning of technology and the industrial revolution and various movements And then that all just burst forth after you know during world war one And I think in the same way we have this digital thing that's building and we have the old institutions that seem eternal And I think the strain tensions are going to be sort of revealed with this with this crisis But we'll see what happens. Um, and what we want is a vision for what's on the other side Uh, and uh, I think we want something that protects civil liberties and that protects free markets and that reflects the best of american values Um, I do think that's possible. I think we have to actually Have a model in our heads of what happens if I love tyler. I think he's amazing What happens tyler is not actually right and this is actually a big crisis What if it's something like what y'all talked about where it's actually the you know, the inflationary and the leveraging Or the printing money Now actually I digress because Zach you asked a different question. So why don't you ask your question again? Yeah, I would just like to hear your advice for you know, you're you're laying out You know, you're you're a doomer optimist. You're laying out a very alarming scenario What do you suggest on the individual level? how people think about kind of recalibrating what they're doing, um, both, you know Financially but also just personally politically On on every level like what is the what is the proper reaction to this this news? Okay, so preface with not financial advice, right? Yeah um, so let's say that um, I think You know option one is you can just do nothing and say nothing's going to happen State's going to take care of option two people can wire their money to big banks or money market funds I think that's probably That might be better than leaving your money, you know, just intact somewhere But okay option three is you hedge to some extent into bitcoin option four is You get to a bitcoin friendly jurisdiction whether inside the u.s Like Florida or texas or outside of the u.s. I'll salivate or UAE or or you know, like one of many of them um I think number five is You know, certainly at the same time. This is happening markets, you know Are seizing up in different ways bank crisis happening. You have the rise of AI You also have This third movie that's playing where china's doing all these deals Um, and I'd say I mean I kind of think in some ways. This is the prelude to the camera moving to Asia AI and crypto Um, and so like the more leveraged you can be on that that's probably better, right? So certainly learning the eye tools Being physically in Asia And understanding why crypto by the way the other thing is commodities Because of the rise of AI everything digital becomes cheap So community cryptography commodities are the things that are hard on their side because the AI can't create people It can't fake digital signatures and it can you know fake national resources So that's a compliment. That's a type of stuff that's still there on the other side of this disruption um And that's what I think one should probably do Uh, and of course that's that ranges all from do nothing to like Reinvent your life on the side you can pick whatever you think is is good on that Or you can ignore me, which is totally fine. And that's totally your progress, you know, just then buy treasuries you know So similar question for you larry because uh, you know, you just you just published a book about the history of money and uh, you are the history and future of money and and um, you know, you make the case that Switching to a fiat standard is responsible for a lot of the problems that we're facing today Um, and you also lay out as you said some possible paths forward You have a different outlook from belagio. You don't think we're on the brink of hyper bitcoinization Um, but you recognize that there are some looming dangers ahead So what would you recommend? is a sustainable viable path forward to secure kind of the the economic and monetary stability of the united states Yeah, so bitcoin is great at what it does which is provide a censorship resistant method of payment it It's censorship resistant because it doesn't go through central banks When you send somebody bitcoin that transactions not being cleared through a central bank, which You know can whitelist and blacklist who it likes and doesn't like But it isn't well designed for the role of a commonly accepted medium of exchange that is You know for paying your rent or buying your coffee Because it's purchasing power is just too volatile And the volatility isn't because it's young it hasn't diminished with age It hasn't diminished when the market cap has been higher It's built into bitcoin because the release schedule is pre-programmed and fixed So the supply of bitcoin the quantity of coins in circulation doesn't respond to a run-up in the purchasing power Even in the long run And so it doesn't stabilize the value of bitcoin Unlike the classical gold standard where the supply of gold does respond in the long run To an increase in the purchasing power gold because it pays miners to dig a little deeper when the purchasing power is high And that brings the purchasing power back down So if I had my druthers um I think the way to depoliticize money and have a money of stable purchasing power is to Resurrect in some modern form A commodity standard for gold standard. We've got lots of gold is still sitting there in central bank vaults We could make use of it uh Is that politically likely? No, unless we have a really terrible crisis Uh, which not something I want to hope for but Personally, uh, I advise people to diversify their investments If you have more than a hundred two hundred and fifty thousand dollars in a u.s bank Get it out of there Get the excess out of there into something safer Uh, if you have all your money in long-term bonds, you diversify away from there Uh, so follow the advice of wu tank financial and diversify your bonds Uh, I think inflation is more of a threat than the market currently does so I think inflation index bonds are underpriced and That's a way to hedge against inflation Although you do have to worry about whether the treasury will make good on its promise to compensate you for inflation They've they've done okay with that so far Um And so that's that's my personal financial advice Warning, I'm not a licensed investment advisor and what about the role of actual competition in money, uh, is there a way to Improve that and and can that yeah, so more figure out, you know, what what is actually the soundest? Yeah, so people should be free to exit from the dollar into whatever they think is a better currency Whether it's euros swiss francs gold or bitcoin And that provides a little bit of discipline on central banks Uh, not many people are going to do that As long as inflation rates are moderate and that's okay because it's not that important as long as inflation is moderate But as inflation rises Uh, it's becomes increasingly important to have those exit options So it's important not to let, uh, the authorities cut those off Uh to close the exits. So I'm as concerned about that as biology is Okay, well, thank you larry. Thank you. Bellagio. We'll be watching the bets and you know, thank you for Starting this conversation, uh with it I think that there's a lot of important underlying issues that that you've laid out here today that Are important to draw people's attention to so um in in that sense, you know, your bet I think has accomplished something And uh, thank you also to all the viewers who tuned in today We'll be back next week. Uh, same time on uh on thursday And we'll see you then. Thanks Thanks