America’s Debt Problem Is Bitcoin’s Bull Case | Andy Constan

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The fact that the volatility has come down both daily, weekly, monthly, annual, all volatilities
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are falling, makes it more likely that I want to own it.
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No one has a lot of confidence in our policymakers.
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They haven't had confidence for as long as I can remember.
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So it's not a new thing that suddenly central banks have a credibility concern.
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But it's getting worse, and the question is, what's next?
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Is it going to get worse or better?
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If it gets worse, that's good for Bitcoin.
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future point, we're not going to be able to afford what we are committed to providing our citizens.
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And inflation is going to drag down our purchasing power. That's inevitable. And as long as they
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continue to make choices like they've made, we're going to get the outcomes we're going to get.
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And frankly, that's a bull case for Bitcoin. Andy, it is great to see you again. You're a
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star of one of the more controversial shows I've done that we did with Lynn Olden probably about a
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year ago now. But how have you been? Yeah, it was last summer of 2025. I love that one. It was so
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much fun. And it turned out prescient at many levels, but I also learned a ton when we moved
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from DATS to stablecoins. So that's interesting. And it's becoming more topical regarding the need
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for the treasury to do its financing. So it's lots of interesting stuff at this stage.
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Yeah, absolutely. So we're going to get into some more macro stuff today. I've got a fun idea,
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a little thought experiment I want to run through with you. But for the audience, I think it's very
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relevant that they know your background before we do that. So do you want to just tell everyone
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what you've done for the last 30 years of your career?
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Sure. Well, I'll start when I started, which is, gosh, it's now 40 years ago. Started at
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solomon brothers in 1986 as a corporate finance analyst and then moved to the trading floor after
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i was assigned to work on the brady commission that investigated the stock market of 1987
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and that's when i fell in love with markets and um that anniversary is coming up i guess it was
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a few years a few months a month um anyway um i became a convertible bond trader then became a
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started to work in equity derivatives, then took on many management roles, and ultimately left
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Solomon as the head of the global equity derivatives business, where I started my own
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hedge fund with some fixed income partners. It worked out great. We built a great company,
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but then our partnership sort of fractured. And by 2008, we had closed down ahead of the financial
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crisis, and I was starting to launch another fund. And that really never got off the ground,
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because frankly, when you're trying to raise money in 2008, every allocator, institutional
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allocator, isn't really interested in giving out money. It just wants all its old money back from
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all the other hedge funds. Couldn't have been a worse time to try and do that.
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It was a bad fundraising environment. But I thought about retiring at that point,
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And then I realized that what had been missing in my career had been an understanding of macro.
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And I had the great fortune of joining Bridgewater Associates in 2010, worked for them for a number of years in their research area, in their portfolio construction area, and contributed and had a great time learning macro from, I think, the best macro fund in the world.
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So after that, I decided to go to another macro house that was, instead of entirely systematic, was entirely discretionary.
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And that was Brevin Howard.
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Brevin Howard actually became quite active in crypto during that period of time when I was there and still are.
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And so I got some exposure to the things that we tend to talk about when you and I are together.
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from those guys at that time.
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And that was very early on in the whole institutionalization of crypto.
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At the time, it was primarily Bitcoin.
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So after four years, the fund broadly had sort of struggled for a number of years,
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and the number of traders had fallen down.
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And I was a resource to those traders as the chief strategist.
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and Alan said, hey, I want to spin you off into your own company.
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I'll be your biggest client.
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I'll sponsor you, but you should do that.
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And I said, sure.
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You know, it fit me well during that,
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and so I started Damp Spring in spring of 2019,
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and I've been doing that ever since.
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It's a macro strategy and research firm,
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that primarily services the biggest macro hedge funds in the world
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and all of the pod shops as well as some other large institutional investors And I also provide that insight to whatever insight I have which may not be much
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but whatever insight I have, I provide to a variety of smaller clients.
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And I'm quite active on Twitter in the community and on Substack,
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providing as much of passing forward as much of my understanding of markets as possible
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to a wide audience. Yeah, I see you there sharing the information and getting in the occasional fight.
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I do get in fights. You've had a massive, hugely successful career. And one of the things I think
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is interesting in Bitcoin right now is we've been saying really, I think probably since Michael
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sailor first bought bitcoin everyone's always been saying the institutions are coming um and they
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certainly have to a degree like obviously the most clear example of that is black black rock um
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issuing the bitcoin etf which is the most successful etf in history like that's huge
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but we don't see like every hedge fund in the world buying bitcoin yet and as a previous hedge
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fund manager i kind of wanted to walk through how you would assess bitcoin if you were in charge and
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and someone at the firm wanted to look at Bitcoin.
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Because I know you know about Bitcoin,
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but you're not a Bitcoiner.
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At least last time we spoke, you didn't own any Bitcoin.
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So given sort of today's macro environment,
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can you walk me through how you would assess Bitcoin
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and whether it was worth an allocation?
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Sure.
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I've gotten, since I last spoke,
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I think I did buy some Bitcoin.
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I think it was after we spoke.
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I bought some Bitcoin at the meme 69, 420 level.
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Nice.
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Sold it at 84,000.
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and have since been Bitcoin-less.
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But let me describe how I think about...
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So there's how I think...
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I think your question is, you know,
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how does an institution think about adding a new asset
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for them to trade?
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Yeah.
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And to sort of, you know,
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put myself in the shoes of a person who's doing that.
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And I think the first thing is to define what investment strategies there are.
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And I think the, you know, you mentioned BlackRock.
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BlackRock's investment strategy, ETFs guys generally's investment strategy, is not investing.
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It's just converting something into something they then can sell to an ongoing end investor.
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And so BlackRock is just an intermediary. They have absolutely no opinion on the direction. They don't need to have an opinion on the direction of Bitcoin. All they need to know is that they can sell Bitcoin to an end investor who is an ETF investor.
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So that's an easy, if you think about an institution's role in Bitcoin, that's an easy one. You pass on all the exposure at the price they buy it, and you have an ETF.
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Saylor had a, we've spent a lot of time on that.
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Saylor had a different thing.
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I think that has reached its inevitable end
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such that it's essentially become an ETF right now
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with some leverage on it.
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But that's, again, you're passing through ownership.
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Let's come back to that bit later.
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Let's come back to Saylor later.
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Yeah.
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That's not how investors who are investing other people's money or their own money in a discretionary or systematic way think about investing.
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They're not trying to pass on exposures.
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They think there's a reason to own the asset as either part of their portfolio or as a way of making money in markets.
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um and so back gosh it was i think i don't remember exactly when i was i think it was the winter of
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2020 by four when everyone was well sailor in particular but the whole community was um focused
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on getting um microsoft and others to begin holding bitcoin as a core asset yeah it got
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brought up in one of the shareholder meetings and michael say they did a very short video
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about why they should adopt it i think it was 2024 winter of 2024 and they rejected it and fine
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but that's it but that's one way an investor an institutional investor thinks about it they think
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about an allocation to their their savings so i'll come back to that that's one that's
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investor one investor two sorry and and what i mean by that there's cash savings it's not to
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it's to protect them from you know it's to use their cash in a way that
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um isn necessarily for big returns it for safety And so Microsoft has math had they spending it now on AI
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but had massive amounts of cash,
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and they needed to manage that cash.
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They weren't benchmarked against the S&P 500
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or anything like, not super risky.
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They just wanted to manage their cash in a good way.
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So there's that pool of institutions.
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There's a second pool that is, hey, I want to manage my client's money in the best possible way to generate long-only.
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I want to generate the best possible long-only returns possible.
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And so to do that, you have to think about all the possible, let me just get out of the sun a little bit, all the possible assets one can own with cash to generate the best portfolio.
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Okay?
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Then there's institutions that are in the business of, so that's two.
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Then there's institutions that are in the business of market timing.
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buying cheap, selling rich, short selling rich, buying cheap, and speculating on the direction
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of an asset. So that's three. And then four, there's arbitrageurs that look at assets and say,
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I don't really have a view on the asset, but I think it's rich to that asset.
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and they use the two assets as a pair or part of a portfolio of things that they're trying to
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extract. They're not betting directionally on any one of the things, they're betting on a portfolio.
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So that's the sort of four seats that I see that you could explore. Is there one that you
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particularly want or should I go through each? This show is brought to you by our lead sponsor,
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especially if it's GBTC, you need to listen up. Spot Bitcoin ETFs provide price exposure to Bitcoin,
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not direct ownership. You can't withdraw it, you can't self-custody it, and they charge you a
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spot Bitcoin ETF shares into real on-chain Bitcoin. It does that without selling on the
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open market and it's designed to support a tax-efficient outcome. So for example, if you
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hold GBTC, you're paying 1.5% a year in management fees for Bitcoin price exposure.
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but by swapping GBTC for real Bitcoin with RBX
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you can drop that figure as low as 0%
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by just holding Bitcoin in self-custody
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this is designed in a way that maintains your cost basis
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and in a manner that supports the deferral of capital gains tax
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so if you own a Bitcoin ETF
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especially if it's GBTC
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you need to talk to Swan Private about RBX today
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that's swan.com forward slash WBD
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recent hardware wallet vulnerabilities
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have definitely made me rethink my entire security setup,
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as I'm sure it has for a lot of Bitcoiners.
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And the uncomfortable truth is that no single security product
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can promise there'll never be a problem,
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which is exactly why the design matters.
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BitKey is a self-custody hardware wallet
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that uses three keys created in three separate environments.
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There's one on your phone, one on the BitKey hardware itself,
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and one on a secure BitKey server.
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Two of those three keys are required to sign any transaction.
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So a problem isolated to just one key
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is never enough to move your Bitcoin.
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So if you are rethinking your setup right now, as I'm sure a lot of people are, you should really think about the BitKey.
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The hardware looks great, the app and the user experience is second to none, backing up and restoring your wallet is seamless, and they even have inheritance built in.
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So I really don't think you'd be disappointed.
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So download BitKey today, use the code WBD for 10% off the second generation BitKey, which is this device right here with the screen.
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Download the app, download BitKey, use code WBD and get 10% off.
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I think we should go through each.
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The ones that I'm less interested in are sort of three and four.
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The ones that are using this as just a trade.
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Um, it's really the people that are taking like a directional play on Bitcoin here.
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Long-term, long-only holders.
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Yeah.
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Yeah.
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I think that frankly where the value is Like you can trade anything And so just to put those aside to trade something you have to have an edge
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I mean, listen, casinos earn a lot of money.
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Betting, prediction markets earn money.
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DraftKings earns money.
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the people in those places even if the casino wasn't extracting money from every bet that's
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placed the people in that they're just trading with each other yeah and you know some are sharp
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some aren't sharp some are just there for the drinks and the entertainment and so bitcoin is
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one of those just like nvidia the s&p the tre the 10-year treasury they're just one of those and you
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have to decide whether you have the ability to beat the people you're playing. And so that's a,
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by the way, if you do, then you include, if you're an institution like Brevin, institution
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believed they could beat the market and so became a long, short trader of that thing.
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But I think you're right. Most of us are in the business of long-term savings. And so you have to
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consider whether any asset you pick helps your portfolio.
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And so the way I think about that is in a framework I mostly learned from Bridgewater,
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but even that framework had stood on the shoulders of a lot of prior frameworks, in particular
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Harry Brown's permanent portfolio framework that he wrote a book in the late 70s during the
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inflation scare, not scare, the inflation experience, about how to build a portfolio
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that is capable of earning returns throughout all environments. And then just holding it.
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And so when I think about that, I come from that framework and say, what is it about an asset that
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makes me want to include it in that type of portfolio.
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So, a couple of things.
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One, it should have a reason for it to have a long-term risk premium,
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meaning somebody who sold it to you wants your money
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and knows to get your money, they need to compete.
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And they have to compete with stocks and bonds
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and all the other assets in the world, businesses, anything,
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that generates a return,
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and they know they have to compensate you for your money
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because they want it now and you have it now.
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And everybody's competing for your cash
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and no one has cash.
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That's what they want.
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And so you need a risk premium.
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Ideally.
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I don't think there exists a reason
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that Bitcoin has a risk,
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that pays a risk premium.
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Similarly, I don't think gold pays a risk premium.
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Can you explain why that is?
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Why you don't think it has a risk premium?
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Well, there's no person who is selling you Bitcoin.
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There's only 21 million of them.
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Everybody who has them has them for the same reasons, by and large.
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And when they sell it, sure, they may need money, but it's not like an issuer who's taking that cash and putting it into a business project.
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a physical investment.
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It's just cash.
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Like, the euro doesn't have a risk premium versus the dollar.
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Because people don't really care about how they hold a cash-like asset.
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So anyway, that doesn't mean I have to exclude it from my portfolio.
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I own 10% of my portfolio is in gold.
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I own it for the other reasons, and those are twofold.
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One is, and by far the most important one, is diversification under certain economic scenarios.
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And so, for instance, one owns stocks and commodities
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because they do really well when the economy grows rapidly,
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above expectations, and they do really poorly when they
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economy doesn't do well. Bonds, which are doing terribly lately because the economy is doing so
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great, do really well when the economy does poorly. Both of those things, so owning both
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stocks and bonds allows me to own more stocks and have a risky portfolio that's better than
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owning just stocks alone because I own some bonds. And so that's general portfolio theory,
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how diversification makes a higher risk adjusted return. But so can I just ask a quick question on
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that part? Because I know sort of historically the 60-40 portfolio between equities and bonds
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was like the common thing. Is that still the case considering how badly bonds have done for the last
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six, seven years, however long it's been.
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I mean, I just wrote a Substack that is free on Substack that describes the case for 6040,
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and I called it the 6040 Strikes Back with the Empire Strikes Back meme.
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Holy moly, the 6040 portfolio, any portfolio that has held bonds since what I call the bond
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bubble of summer of 2020 burst is a disaster, just a disaster.
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Now, wind back the clock, we had another bond, massive bond sell-off in the 80s, late 70s,
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80s.
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But even if you wind the clock back to the 70s, early 70s, where you experienced that
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terrible outcome for bonds in the 80s. Bonds basically matched the S&P 500 for 50 years leading
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up to that bond bubble. And in fact, on a risk-adjusted basis, which is, you know, if you
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is on a sharp ratio basis, outperformed stocks. So a modestly leveraged bond portfolio
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outperformed stocks. But even better, a modestly leveraged combination of stocks and bonds
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at the same risk level outperformed both of those things. And so that's the proof.
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Now, one thing I think the lesson is, so let's wind back the clock to the summer of 2020.
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The economy was closed. The 10-year bond yield was at 65 basis points, down from a peak of 16%, and currently 5.2%, 5.15%, could be 5.2 by the end of this episode.
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that yield was a bubble
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if you looked at that bond at the time and we all did
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and said what is the potential for this bond to earn
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positive expected returns over its life had to be
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close to zero but people owned them and
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financial advisors who are
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there's a wide range of the skill set of financial advisors um some are super sharp but even they are
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ill-equipped for some of these conversations but most are not super sharp they're just doing what
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they're told by their script they just read that script and they didn't get anybody out of bonds
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and so yeah at this stage geez six years of terrible returns i can't imagine their the
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financial advisors are going to be pitching to their clients, hey, you really should keep the
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bonds that have cost you all this money. And certainly the financial climate, the investment,
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you know, the sentiment out there is that bonds, you can't own bonds. And the fact is,
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they're much better than they used to be. They're nowhere near a bubble.
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They have, this is the most important thing. When in 2020, if the economy had, instead of recovering from COVID, had continued to get worse, your bonds would have had limited to no appreciation potential, which is why you owned them in the first place.
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because you needed them to balance your equity exposure.
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Today, if interest rates could fall 200 basis points in the next year,
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if the economy weakens, you're going to make a piss load out of bonds in that case.
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Now, that's not the current sentiment.
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The current sentiment is growth is going to just go forever,
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but that's already in the pricing.
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So any disappointment, you're going to see capital appreciation.
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And so that's why I want to own bonds in my portfolio today.
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Not backward looking.
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No that was terrible to all of them But today looking forward they actually provide a decent balance and let me hold equities at a desired risk target without being fearful that I going to get caught in a growth slowdown because my bonds will protect me
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So I get to own equities and I don't have to puke them when the growth does disappoint, which it inevitably will.
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So anyway, circling all that back, gold is an interesting asset in that it does very well when currencies are being debased, when cash is trash, essentially.
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Now, a lot of people say, well, it's supposed to be an inflation hedge.
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Not entirely.
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It does help, but during inflation, interest rates tend to be lifted by central banks, and that can hurt the relative value of gold versus other things that are like gold, like tips.
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So it doesn't work as an inflation hedge, but it really works in a monetary debasement.
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So I want to have that.
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I want to have, and so anyway, that's an asset I want to have because I have confidence in a debasement environment.
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it'll deliver while other assets may not, particularly bonds in that case.
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And so what I'm trying to get at is that if you're a long-term investor and you have to consider all the assets,
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you need a reason to have at least one reason to have them.
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And the first reason is that they have a positive risk premium.
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The second reason is they offer a balance to your portfolio.
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And gold had been, prior to Bitcoin, had been, and maybe Swiss francs and certain other currencies are like gold, but had been a unique asset that responds to something that no other asset responds to.
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And so, as I said, gold doesn't have a risk premium because there's nobody that it's like a currency.
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It doesn't need a risk premium because people just swap it for goods and services and assets.
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It's like a currency.
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That's what a currency does.
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They don't carry risk premiums.
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They're just a spot thing that people swap.
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And so it doesn't carry a risk premium.
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I don't want it.
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But because of its unique properties and long history and relatively low volatility,
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and it really behaves the way it should, all of those things make it an essential part of my
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portfolio. Because what you're talking about there essentially with gold is that it's protection,
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it's the debasement trade. Would gold and Bitcoin not make more sense to have like a small,
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maybe it's a smaller allocation for you, but a allocation to Bitcoin in that sense?
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And so I am very excited to one day replace some of my gold with a diversifier like Bitcoin.
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And today is not that day.
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And not even at the margin.
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And I'll describe why.
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And listen, this is just my reason.
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And you asked me how I think about it.
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This is how I think about it.
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It's too volatile.
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it's too correlated to something i already own which is nasdaq
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and it's not correlated to gold which is the thing i want to replace it with
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like i don't need any more nasdaq i just don't i got plenty so that it's that part
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and it has a lot of sense um like i do understand like it has been incredibly correlated to the
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NASDAQ. I think at some point that will change. Who knows what the actual catalyst for that is.
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I think it's actually going in the right direction. Like, when I look at Bitcoin and
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the recent experience, and I've paid a lot of attention to it the last few years, particularly
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because of my interest in the debt companies, but, you know, just growing as a person and
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looking at these sort of things. And I like the fact that it had this long period of low volatility
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and low correlation with the Nasdaq. So it's becoming less correlated to Nasdaq,
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which is a good thing for me. And it's becoming lower vol, which is a good thing for me.
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Yeah, that's what I was going to ask you about.
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Because this bear market, like Bitcoin dropped 50%, whereas previously it's always been 80%.
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And the difference, I think people don't understand fully, the difference between
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50% drop and an 80% drop is another 50% after 50% drop. It's a huge difference.
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Like, when you see that, does that start making you a little more interested?
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Yeah, 100%.
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I you know I think it the vol is the fact that the volatility has come down both daily weekly monthly annual all volatilities are falling makes it more likely that I want to own it
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And the reason is, the reason is, is I don't think it has a risk premium because there's no fundamental need for anybody to part with Bitcoin to get some other, to get US dollar cash beyond what normal currency exchanges do.
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and meaning spot consumption.
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And because of that, volatility, idiosyncratic volatility
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on no expected return is a real disaster, right?
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So you need the vol to come down.
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It's coming down.
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I think that's good.
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The correlation has broken with NASDAQ, which is good.
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Unfortunately, and this is a problem for me,
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is everything's going in the right direction
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for me to add Bitcoin as a replacement to gold,
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except the fact that its correlation to gold
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is going down.
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And it's practically uncorrelated to gold
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over the last three years.
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That's not a great fact pattern for me.
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It makes me wonder whether...
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00:32:33,904 --> 00:32:36,804
So again, let me step back and say,
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I'm thinking about Bitcoin as a...
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debasement asset, an alternative fiat, a hard currency, all of those sort of things that
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gold are like. And that's my bias. That's the only thing I see its value as.
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If there's something else, it's possible it could have that, for instance, correlates well with
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growth or correlates well with inflation in either direction, up or down. I could find myself using
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it, but no one's made a good case for me beyond hard money.
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And so again, that's my limitation.
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That's why I'm comparing it to gold.
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If you told me, hey, you should compare it to something else and you could prove that
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it's better than something else, that it carries a higher risk premium so that it has a higher
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expected sharp ratio and behaves like something else that I already have in my portfolio.
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I'd happily consider it, but that's not where my head's at. So I'm just comparing it to gold.
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00:33:45,104 --> 00:33:51,844
And for that, it needs to act like gold at much lower volatility. And then it'll go in my portfolio
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for sure. To be fair, the lack of correlation with gold over the last couple of years has
380
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surprised me as well. Obviously, all the fast money has been in AI the last couple of years.
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So Bitcoin didn't have the crazy boom like it normally does in a bull market. But at the same
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00:34:05,564 --> 00:34:11,264
time gold was ripping, Bitcoin was sideways and down. Do you have any theory on why that might be?
383
00:34:12,444 --> 00:34:21,084
Yeah, I mean, I know why I have a feeling why gold and equities have behaved the way they are.
384
00:34:21,384 --> 00:34:28,224
Very strong growth and very easy monetary policy, which are both good for equities and
385
00:34:28,224 --> 00:34:35,504
the monetary policy is good for gold and suppressed long-term interest rates
386
00:34:35,504 --> 00:34:43,084
and heavy fiscal. All those things are pretty good for gold and pretty good for
387
00:34:43,084 --> 00:34:52,944
really good for stocks. And so those assets have acted the way the economic climate has developed.
388
00:34:53,124 --> 00:34:58,164
So then you have to say, why didn't Bitcoin? That's outside my jurisdiction. I don't know.
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00:34:58,224 --> 00:35:05,464
it's curious that it hasn't but if i had to guess it's because there's still
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00:35:05,464 --> 00:35:14,784
a shitload of people who use the asset for things not what i just described for speculative trading
391
00:35:14,784 --> 00:35:21,224
for leveraged speculative trading not listen stocks are used that way gold is used that way
392
00:35:21,224 --> 00:35:42,064
But I don't know. Again, outside my jurisdiction, I think it's because it was a speculative frenzy for that started in early, well, there's been many, but started in early 2021 and peaked by 2025 into this nonsense about Trump.
393
00:35:42,844 --> 00:35:50,464
You know, oh, you pick it. There's lots of narratives. It's outside of my jurisdiction. But it didn't act the way it should.
394
00:35:51,224 --> 00:35:54,264
Every Bitcoiner eventually has to answer one question.
395
00:35:54,624 --> 00:35:57,084
If something happened to me, could my family access my Bitcoin?
396
00:35:57,664 --> 00:35:59,984
Would my children inherit what I've spent years stacking?
397
00:36:00,564 --> 00:36:05,024
That's why Anchor Watch builds Bitcoin custody solutions designed to protect you and your family
398
00:36:05,024 --> 00:36:08,964
against real-life accidents, errors, kidnappings, and even death.
399
00:36:09,604 --> 00:36:14,744
Every solution includes their inheritance protocol designed to help your Bitcoin reach the people you intend it for.
400
00:36:15,244 --> 00:36:19,184
And US-based customers can also add Bitcoin insurance backed by Lloyds of London.
401
00:36:19,184 --> 00:36:39,060
whether you a self expert or want multi support your bitcoin estate plan should not be an afterthought bitcoin is only generational wealth if it can be passed down so make sure your family can access tomorrow what you built today anchor watch is your custody your way so visit anchorwatch to get started that anchorwatch
402
00:36:39,060 --> 00:36:43,960
you wouldn't reuse a bitcoin address so why does your phone broadcast the same identifier for life
403
00:36:43,960 --> 00:36:49,620
every sim has a static id and carriers ad networks and bad actors all use it to track you
404
00:36:49,620 --> 00:36:53,120
The big carriers have been caught selling that data over and over again.
405
00:36:53,120 --> 00:36:56,120
CAPE is America's privacy first mobile carrier.
406
00:36:56,120 --> 00:37:00,120
Their identifier rotation feature changes your ID every 24 hours,
407
00:37:00,120 --> 00:37:02,620
so you look like a different subscriber every single day.
408
00:37:02,620 --> 00:37:04,620
And SIM swaps are off the table.
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00:37:04,620 --> 00:37:08,120
Your number can't move without a 24-word phrase that only you hold.
410
00:37:08,120 --> 00:37:11,120
There's also no name at sign up, no social security number,
411
00:37:11,120 --> 00:37:13,120
and there's no profile to build on you.
412
00:37:13,120 --> 00:37:15,120
If you're a Bitcoiner in America,
413
00:37:15,120 --> 00:37:17,120
I honestly don't know why you'd use any other network.
414
00:37:17,120 --> 00:37:24,300
You can head over to cape.co forward slash WBD and use the code WBD for 33% off your first six months.
415
00:37:24,720 --> 00:37:28,680
That's C-A-P-E dot co forward slash WBD.
416
00:37:29,520 --> 00:37:30,860
Yeah, it surprised me as well.
417
00:37:30,940 --> 00:37:36,080
And I think a big part of it is like Bitcoin was always the fastest horse in any sort of bull market.
418
00:37:36,420 --> 00:37:39,800
Bitcoin is where that hot money was going and that just became AI.
419
00:37:40,520 --> 00:37:43,280
And it kind of lost the narrative to AI in that sense.
420
00:37:43,380 --> 00:37:45,780
I don't think it lost any narrative that's real to Bitcoin.
421
00:37:45,780 --> 00:37:50,520
Plus, I think AI actually has a better fundamental story.
422
00:37:50,700 --> 00:37:52,760
Like the Bitcoin fundamental story, I buy.
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00:37:52,940 --> 00:37:54,460
I mean, it's a hard currency.
424
00:37:54,620 --> 00:37:56,460
I buy, and look what's happening to the world.
425
00:37:57,080 --> 00:38:06,100
But man, AI is just fundamentally not only just hot money, it's fundamentally a hotter, faster horse.
426
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Yeah.
427
00:38:06,900 --> 00:38:10,960
Just one last question on this, how you would assess Bitcoin before we get on to some macro stuff.
428
00:38:11,140 --> 00:38:13,680
You said one of the reasons that you wouldn't do it is the volatility.
429
00:38:13,680 --> 00:38:18,300
But can volatility not be solved by sort of position sizing?
430
00:38:20,360 --> 00:38:20,960
Sure.
431
00:38:21,520 --> 00:38:26,360
But the reason why I don't like the volatility is because I don't like the expected return on the risk.
432
00:38:27,280 --> 00:38:29,260
Like, I don't mind volatility.
433
00:38:29,760 --> 00:38:30,800
I love volatility.
434
00:38:31,080 --> 00:38:32,780
As long as I'm compensated for it.
435
00:38:34,260 --> 00:38:41,340
I don't see the compensation that I'd get for owning Bitcoin.
436
00:38:41,340 --> 00:38:45,460
but that gold doesn't provide at a much lower volatility.
437
00:38:46,240 --> 00:38:49,560
Now, and I can lever my gold to have the same volatility as Bitcoin.
438
00:38:49,640 --> 00:38:55,500
If I like Bitcoin volatility, whatever it is, 50%, 60%, 70%, and gold's at 20%, 30%,
439
00:38:55,500 --> 00:38:59,500
I can buy twice as much gold on leverage and have the same vol.
440
00:39:00,020 --> 00:39:04,100
But I'm more confident about the expected return on that risk.
441
00:39:04,780 --> 00:39:07,640
And so vol to me is the numerator on this thing.
442
00:39:07,640 --> 00:39:35,140
And the denominator, sorry, the denominator and the numerator just isn't great for the, given the size of the denominator. And so I want the, if the, unless the expected return increases dramatically, which there's no reason for it too, right? Because when you think about markets, expected return is fully, is what's priced. Like everyone expects a return, but they're not going to get it necessarily.
443
00:39:35,140 --> 00:39:40,360
But the denominator, if it comes down, it makes the asset more attractive, full stop.
444
00:39:40,500 --> 00:39:41,860
It doesn't make it less attractive.
445
00:39:42,240 --> 00:39:43,900
It only makes it more attractive.
446
00:39:44,100 --> 00:39:45,420
And I think people miss that.
447
00:39:45,680 --> 00:39:49,880
They think, chase the thing with the high vol because it has the high return.
448
00:39:50,200 --> 00:39:50,960
Well, does it?
449
00:39:51,580 --> 00:39:54,120
Or is it just vol that's not compensated for?
450
00:39:54,540 --> 00:40:01,240
And for me, Bitcoin is vol that's not compensated for, adequately compensated for.
451
00:40:01,680 --> 00:40:02,680
So I don't understand that.
452
00:40:02,760 --> 00:40:04,440
And like, none of this is me trying to convince you.
453
00:40:04,440 --> 00:40:05,960
I'm just trying to understand the way you look at this.
454
00:40:06,040 --> 00:40:07,660
But, you know, over the last 10 years,
455
00:40:07,760 --> 00:40:10,580
Bitcoin's gone from $1,000 to right now,
456
00:40:10,660 --> 00:40:12,040
like $80-something thousand dollars.
457
00:40:12,780 --> 00:40:14,500
How is that not enough compensation?
458
00:40:16,580 --> 00:40:18,300
Because it's looking backward.
459
00:40:19,780 --> 00:40:21,480
It was a great trade at $1,000.
460
00:40:21,620 --> 00:40:22,520
Wow, fantastic.
461
00:40:22,680 --> 00:40:24,300
The risk-adjusted return on Bitcoin
462
00:40:24,300 --> 00:40:26,520
in the rear of your mirror was fantastic.
463
00:40:26,640 --> 00:40:27,020
Full stop.
464
00:40:27,580 --> 00:40:31,860
Hasn't been for many other points.
465
00:40:32,440 --> 00:40:34,000
Like, what is it going forward?
466
00:40:34,000 --> 00:40:38,680
What drives the expected return on Bitcoin that gold doesn't provide?
467
00:40:39,640 --> 00:40:50,640
And why should I get a lot of investment return for going forward?
468
00:40:51,200 --> 00:41:02,100
And I think what you need to get more investment returns on Bitcoin is certain conditions to occur.
469
00:41:02,100 --> 00:41:08,260
and those conditions could occur and you're going to make money on your bitcoin if those things
470
00:41:08,260 --> 00:41:13,860
occur the question is is there a way to make more money on your on something that has the same vol
471
00:41:13,860 --> 00:41:21,280
and for now i think it's gold and when you could be wrong when you say uh certain conditions need
472
00:41:21,280 --> 00:41:24,580
to occur what are you talking about there are you talking about sort of slashing interest rates
473
00:41:24,580 --> 00:41:30,040
money like quantitative easing yield curve control like these kind of extreme scenarios
474
00:41:30,040 --> 00:41:39,000
Well, I mean, it's a combination of things like just the expectation that the central banks are going to not fight inflation.
475
00:41:39,997 --> 00:41:50,857
For instance, not that they cut rates, they just say, you know, if tomorrow they announced the inflation target went from 2% to 3%, I would expect Bitcoin to do very well.
476
00:41:51,457 --> 00:41:56,177
Even though nothing happened, nothing changed in the economy, but, you know, that would be good.
477
00:41:56,777 --> 00:42:07,497
If Besant, sorry, not Besant, Warsh, hard to distinguish who's who, Warsh had decided not to hike at the last meeting.
478
00:42:07,497 --> 00:42:21,457
I would expect Bitcoin to have done very well if the Fed decides to use RMPs, which increased the size of the balance sheet, which they did in December.
479
00:42:23,077 --> 00:42:24,197
I bought gold.
480
00:42:25,097 --> 00:42:27,797
I didn't buy Bitcoin, but I was very bullish on Bitcoin.
481
00:42:28,237 --> 00:42:29,197
Gold did great.
482
00:42:30,077 --> 00:42:30,777
Bitcoin didn't.
483
00:42:30,777 --> 00:42:38,337
So, you'd want, there are many conditions in which a hard currency should do well.
484
00:42:38,337 --> 00:42:40,297
I think we know all of them.
485
00:42:40,297 --> 00:42:46,617
Some of them are actual things, and some of them are confidence in our policymakers shifting.
486
00:42:46,617 --> 00:42:51,017
No one, let me just be clear, no one has a lot of confidence in our policymakers.
487
00:42:51,017 --> 00:42:55,297
They haven't had the confidence for as long as I can remember.
488
00:42:55,297 --> 00:43:00,517
So it's not a new thing that suddenly central banks have a credibility concern.
489
00:43:00,777 --> 00:43:01,617
But it's getting worse.
490
00:43:01,737 --> 00:43:03,577
And the question is, what's next?
491
00:43:03,617 --> 00:43:04,657
Is it going to get worse or better?
492
00:43:04,737 --> 00:43:05,997
If it gets worse, that's good for Bitcoin.
493
00:43:06,917 --> 00:43:07,917
And what is your take there?
494
00:43:07,957 --> 00:43:09,217
What do you think is coming next?
495
00:43:09,277 --> 00:43:10,397
Do you think it is going to get worse?
496
00:43:10,937 --> 00:43:11,657
I hope not.
497
00:43:11,777 --> 00:43:17,497
And I hope not because I am bearish or bullish on assets or Bitcoin or anything.
498
00:43:17,997 --> 00:43:18,597
Just for the world.
499
00:43:19,517 --> 00:43:20,477
I don't like inflation.
500
00:43:20,637 --> 00:43:22,657
I don't think it's good for society.
501
00:43:24,257 --> 00:43:29,737
And so I hope they, I don't think they, they haven't shown evidence that they're willing to.
502
00:43:29,737 --> 00:43:33,357
I think there's a lot of hope that inflation will magically come down.
503
00:43:33,817 --> 00:43:49,477
And all of the prior sins of money printing, easy financial conditions, asset prices, all the things that we know have happened get reversed without any pain being felt, and somehow inflation comes down.
504
00:43:50,837 --> 00:43:54,497
And so I think it's been 66 months of that, and it's not coming down.
505
00:43:54,497 --> 00:44:21,237
And so I hope they do what's right. I don't think fiscal policymakers, both here and abroad, but particularly here, are trying to solve the inflation problem in a way that is a fundamental demand destruction.
506
00:44:21,237 --> 00:44:38,997
They want to solve it by capping diesel prices, which they chose not to do, or tacoing on tariffs or tacoing on the war in Iran, or manipulating treasury bond yields or buying mortgages.
507
00:44:38,997 --> 00:44:58,877
None of those are root causes, and many of them, many of the policies they've done, because the deficit continues to be 6%, are not helping inflation come down.
508
00:44:59,697 --> 00:45:06,197
And the things they need to do to bring inflation down are just too painful for them.
509
00:45:06,197 --> 00:45:27,457
They are increase taxes, reduce spending. Neither party likes that. One likes to reduce spending, the other likes to increase taxes. Neither of them agree, and so we do both. We don't increase taxes, and we don't cut spending, and that's inflationary.
510
00:45:27,457 --> 00:45:46,777
And so no one is willing to take the pain. And I think it's a shame. I think it's sad and shows no leadership in the country or the world to not have dealt with inflation because it really does create outcomes that are difficult for people.
511
00:45:46,777 --> 00:46:09,537
While everybody's standard of living may have grown over the last few years, the pace at which they grow hasn't been great, and some have not grown. And so I think that's policymakers making choices. And as long as they continue to make choices like they've made, we're going to get the outcomes we're going to get. And frankly, that's a bull case for Bitcoin.
512
00:46:09,537 --> 00:46:14,557
And is that partly driven by the four-year political cycle? I mean, really, two years
513
00:46:14,557 --> 00:46:18,617
before you have midterms anyway. Is it just politically unpopular to do those things,
514
00:46:18,717 --> 00:46:20,977
therefore, they can't really risk their career on it?
515
00:46:20,997 --> 00:46:27,657
I wish to say it was partisan or political. These guys, ever since Richard Nixon decided
516
00:46:27,657 --> 00:46:33,157
to abandon Bretton Woods and get off the gold standard, every politician has done the same
517
00:46:33,157 --> 00:46:40,557
thing. Increase the deficit. Bill Clinton got lucky. Sorry, increased the national debt. Bill
518
00:46:40,557 --> 00:46:57,673
Clinton got lucky that he happened to be constrained by the Newt Gingrich and the Tea Party to reduce the deficit Was that in 2001 the last time there was a surplus Not the Tea Party Not the Tea Party Gingrich in 94
519
00:46:58,993 --> 00:47:01,733
We had a surplus in 97 and 98.
520
00:47:01,933 --> 00:47:05,533
And the reason why we had a surplus is they slashed spending,
521
00:47:06,153 --> 00:47:09,433
and we had a productivity boom of the internet.
522
00:47:10,293 --> 00:47:13,693
And so we went from a deficit to a slight surplus.
523
00:47:13,693 --> 00:47:16,973
But every political party since then, certainly,
524
00:47:16,973 --> 00:47:19,593
has grown the deficit and grown the debt.
525
00:47:20,393 --> 00:47:23,133
And it's bipartisan.
526
00:47:23,933 --> 00:47:25,593
And it's not going to change.
527
00:47:26,913 --> 00:47:31,213
Gridlock keeps the status quo.
528
00:47:31,393 --> 00:47:32,593
It doesn't make any changes.
529
00:47:33,073 --> 00:47:39,073
And so the status quo is roughly 6% deficit to GDP.
530
00:47:39,373 --> 00:47:42,753
That's not going to go up or down in a particular way
531
00:47:42,753 --> 00:47:47,653
unless somebody leads, and no leadership has said,
532
00:47:47,833 --> 00:47:50,473
we're going to do what it takes to get the deficit down.
533
00:47:50,973 --> 00:47:55,853
Besson came up with his 3-3-3 plan, 3% deficit target.
534
00:47:56,573 --> 00:47:57,693
They've done nothing.
535
00:47:58,053 --> 00:47:59,093
Doge didn't work.
536
00:48:00,193 --> 00:48:04,333
Tariffs were implemented in a way that made them illegal,
537
00:48:04,633 --> 00:48:05,653
and so they didn't work.
538
00:48:06,153 --> 00:48:08,853
And the reason why they couldn't be done legally
539
00:48:08,853 --> 00:48:14,353
is because the Congress was unwilling to legislate tariffs.
540
00:48:16,453 --> 00:48:18,933
Status quo is just going to get the same outcome,
541
00:48:19,073 --> 00:48:22,673
which is increasing our national debt.
542
00:48:23,513 --> 00:48:25,093
So what would you do, Andy?
543
00:48:25,173 --> 00:48:27,633
Like, let's say tomorrow you get the keys to the kingdom,
544
00:48:27,853 --> 00:48:30,233
you're in charge of the Treasury and the Fed at the same time,
545
00:48:30,493 --> 00:48:31,753
and you're not allowed to say you'd quit.
546
00:48:31,873 --> 00:48:32,893
What would you do?
547
00:48:36,353 --> 00:48:38,593
So I've said this a number of times,
548
00:48:38,593 --> 00:48:45,633
And I think Warren Buffett said it before me, and Ray Dalio said it in some form.
549
00:48:45,813 --> 00:48:49,673
I heard him say it at work, and he's said it in the press.
550
00:48:50,013 --> 00:48:50,913
And I think it's right.
551
00:48:51,273 --> 00:48:55,713
I'd raise taxes on every single dollar of revenue that we collect.
552
00:48:56,313 --> 00:48:59,133
I'd take $1.03 instead of $1.
553
00:48:59,713 --> 00:49:03,973
Just write on the tax code in some way.
554
00:49:04,893 --> 00:49:05,873
No, it's not $1.
555
00:49:05,973 --> 00:49:07,813
It's $1.03, and hand it over.
556
00:49:07,813 --> 00:49:10,793
So I'd raise taxes by 3%.
557
00:49:10,793 --> 00:49:16,473
I'd also cut spending on everything, every dollar that goes out of the treasury.
558
00:49:17,373 --> 00:49:27,893
That dollar that goes to a poor Social Security elderly, take three cents back from her.
559
00:49:28,133 --> 00:49:33,653
The same money that goes to building bombs, take 3% back.
560
00:49:33,653 --> 00:49:36,893
The only thing I can't take 3% back is interest rates.
561
00:49:36,893 --> 00:49:45,653
But frankly, my plan, not my plan, Buffett, you know, this is not rocket science, would lower interest rates.
562
00:49:45,773 --> 00:49:46,693
So that would work.
563
00:49:47,273 --> 00:49:48,913
And so that's what I do.
564
00:49:49,173 --> 00:49:51,013
And it would be a disaster.
565
00:49:51,453 --> 00:49:52,533
Oh, my God.
566
00:49:53,073 --> 00:49:55,213
Would this be full blown recession, depression?
567
00:49:56,273 --> 00:49:59,913
It would be very bad for the economy.
568
00:50:00,893 --> 00:50:01,933
Very bad.
569
00:50:02,553 --> 00:50:03,873
So it's not going to happen.
570
00:50:04,013 --> 00:50:04,173
Yeah.
571
00:50:04,733 --> 00:50:05,873
But you ask me what I'm going to do.
572
00:50:05,873 --> 00:50:12,573
Oh, by the way, I'd cut interest rates to offset it because I'd run the Fed too.
573
00:50:14,793 --> 00:50:15,353
Fantastic.
574
00:50:15,853 --> 00:50:24,553
I'd do everything I can to offset it, but it would be painful.
575
00:50:26,173 --> 00:50:31,793
The reason it's painful is that every single person in America today,
576
00:50:31,793 --> 00:50:45,333
At some point, certainly anybody that's lived more than 30 years, I would say, has had their assets go up.
577
00:50:45,873 --> 00:51:00,933
And if they're an employee, their company, which is the overall employer base of America, has done great, which means their job has been more secure.
578
00:51:00,933 --> 00:51:24,273
Now, obviously, people lost jobs, but in aggregate, the massive levering up when you transfer $40 trillion of debt from savers to spenders, you get an economic outcome, a robust above-trend outcome.
579
00:51:24,273 --> 00:51:39,133
That's what debt does. And so we've had a debt cycle of 50 years. We thought it might be over in the GFC. And so after the GFC, what did we get? Very mediocre growth.
580
00:51:39,133 --> 00:51:41,853
and then COVID.
581
00:51:43,353 --> 00:51:45,133
And so that whole debt cycle,
582
00:51:45,933 --> 00:51:49,173
what could have been a very long-term,
583
00:51:49,673 --> 00:51:53,253
fairly painful period post-GFC
584
00:51:53,253 --> 00:51:55,793
that could have lasted decades,
585
00:51:56,393 --> 00:51:59,273
right back on the track.
586
00:52:00,753 --> 00:52:22,769
And so here we are Everybody every American no matter what place on the economy has probably gotten more money spent on them from government programs better wages more secure job and for anybody who had any capital unbelievable investment returns
587
00:52:24,629 --> 00:52:26,289
Where did that come from?
588
00:52:26,289 --> 00:52:36,189
some future point, we're not going to be able to afford what we are committed to providing our
589
00:52:36,189 --> 00:52:44,469
citizens, and inflation is going to drag down our purchasing power. That's inevitable. That bill
590
00:52:44,469 --> 00:52:50,369
will be paid. It'll be paid by some future generation that doesn't vote, that isn't even
591
00:52:50,369 --> 00:52:51,609
necessarily alive.
592
00:52:52,809 --> 00:52:54,609
And it's inevitable.
593
00:52:54,969 --> 00:52:55,709
It's inevitable.
594
00:52:56,009 --> 00:53:00,489
Now, does that mean the world's going to be like, so whenever I talk about standard of
595
00:53:00,489 --> 00:53:05,429
living, it's like, okay, so let's say our standard of living improves by 3% a year.
596
00:53:07,509 --> 00:53:12,749
We could, the pain, and should have improved by 2% a year.
597
00:53:13,469 --> 00:53:18,229
So we're accruing a bill of 1% a year that somebody's going to have to pay in the future.
598
00:53:20,369 --> 00:53:22,709
Oh, that doesn't have to happen all at once.
599
00:53:24,369 --> 00:53:27,509
It's just the future standard of living improvement
600
00:53:27,509 --> 00:53:31,489
is going to be flatter than the past standard of living improvement.
601
00:53:32,349 --> 00:53:37,769
And so, to me, I'm like, man, we really took advantage of this.
602
00:53:38,189 --> 00:53:42,569
Everybody today that votes took advantage of this future voters.
603
00:53:43,309 --> 00:53:44,849
We should give a little back.
604
00:53:45,489 --> 00:53:46,429
And so a little pain.
605
00:53:47,069 --> 00:53:48,689
Let's just try something.
606
00:53:48,689 --> 00:53:53,869
Hey, all I'm saying is 3% more taxes, 3% less spending.
607
00:53:54,129 --> 00:53:55,349
Let's see how it goes.
608
00:53:56,529 --> 00:53:58,009
Let's get our house in order.
609
00:53:58,429 --> 00:54:07,389
Let's take a little pain ourselves instead of greedily just feed ourselves and see what the outcome is.
610
00:54:07,549 --> 00:54:12,669
And, of course, there's no party that represents me nor most economists that would say that's a good idea.
611
00:54:12,989 --> 00:54:13,869
It's a terrible idea.
612
00:54:13,929 --> 00:54:16,769
It's going to be bad for a lot of people very quickly.
613
00:54:16,769 --> 00:54:22,189
when did the world more broadly but i guess america as we're talking about specifically here
614
00:54:22,189 --> 00:54:26,869
just forget about the idea that market cycles happen and you have to go through some periods
615
00:54:26,869 --> 00:54:31,729
of pain like obviously after the gfc there was a lot of pain but there was the top bailouts there
616
00:54:31,729 --> 00:54:37,089
was a lot of money printed to try and paper over those cracks covid was that on steroids and
617
00:54:37,089 --> 00:54:42,309
who knows what really happened in covid but there was obviously a lot of people struggled but they
618
00:54:42,309 --> 00:54:46,809
quite quickly tried to paper over that by, again, just printing an absolute shit ton of money.
619
00:54:47,389 --> 00:54:51,549
Why did they give up on the idea of you do have to go through periods of recession?
620
00:54:53,629 --> 00:54:59,529
Yeah, I mean, that's a good question. Part of that is, well, that's a good question.
621
00:55:00,849 --> 00:55:05,969
I don't have an answer to you. The first thing I heard when I heard that is,
622
00:55:05,969 --> 00:55:18,809
should we have done 2008 differently or should we have done 2020 differently?
623
00:55:19,129 --> 00:55:22,929
I think the answer is maybe, but not really.
624
00:55:22,929 --> 00:55:31,709
Like, those were legitimate painful crises that were worth offsetting.
625
00:55:31,709 --> 00:55:38,249
But once you've offset the pain, it's the removal of the accommodation.
626
00:55:38,249 --> 00:55:48,529
in, since after the GFC, you'd hear the Fed go up to Capitol Hill and say, you know, all
627
00:55:48,529 --> 00:55:50,949
the politicians would say, we're seeing mediocre growth.
628
00:55:51,489 --> 00:55:54,949
The Democrats would blame, the Republicans would blame Obama.
629
00:55:55,289 --> 00:55:57,749
The Democrats eventually would blame Trump.
630
00:55:57,849 --> 00:55:59,409
We're getting suboptimal returns.
631
00:56:00,049 --> 00:56:01,769
The fiscal has to do its part.
632
00:56:01,769 --> 00:56:08,149
And, sorry, and the central banker would say, well, we're doing our part.
633
00:56:08,149 --> 00:56:09,149
the fiscal isn't.
634
00:56:09,149 --> 00:56:10,589
And that's true.
635
00:56:10,589 --> 00:56:15,349
The fiscal was actually fairly responsible after the financial crisis.
636
00:56:15,349 --> 00:56:19,609
They didn't spend and increase the debt massively.
637
00:56:19,609 --> 00:56:22,429
You could argue whether the bailouts were a good idea.
638
00:56:22,429 --> 00:56:23,649
I think they probably were.
639
00:56:23,649 --> 00:56:27,169
I wish some more people had taken the heat for that.
640
00:56:27,169 --> 00:56:31,809
But you know, saving the financial system, that was a good outcome, I think.
641
00:56:31,809 --> 00:56:36,429
And they didn't create massive inflation by doing all the spending.
642
00:56:38,149 --> 00:56:51,609
You can blame, I think most people rightly say the cusp of the overdoing of COVID was the Biden era stimulus.
643
00:56:51,609 --> 00:56:56,389
Like, that was just, that was $2 trillion you didn't need to do.
644
00:56:56,389 --> 00:57:07,149
probably right, but, you know, the pork that went to the Republicans during the
645
00:57:07,149 --> 00:57:25,646
prior stimulus informed there had to be some evenness to that perhaps Not a good reason to be honest and I think that was a mistake But we overdid it The Fed overdid it Why did they buy mortgages There was no housing crisis
646
00:57:26,206 --> 00:57:34,286
It was the opposite. Lots of mistakes. But the big problem is since 2020, 2022, when we had this
647
00:57:34,286 --> 00:57:41,426
bond sell-off and stock market sell-off, there's been no willingness to buy either party or the
648
00:57:41,426 --> 00:57:48,486
central bank to actually withdraw the stimulus they think they had every you know you'd get a
649
00:57:48,486 --> 00:57:54,126
little wiggle down and they think they'd have solved the problem here we are today same old
650
00:57:54,126 --> 00:58:02,266
problem and it's just a matter of taking the pain why since 2022 has so i think the simple answer
651
00:58:02,266 --> 00:58:12,846
to your question is, it was going okay. It wasn't great. But there was pain in 87, in 91, in 94,
652
00:58:12,846 --> 00:58:22,906
in 98, in 2000, in 2001, in 2004. I lived through a lot of pain. 2008, plenty of pain.
653
00:58:23,206 --> 00:58:26,446
And then there was mediocre growth for 10 years after the GFC.
654
00:58:26,446 --> 00:58:35,706
2022 is where we were ready to take some pain we had overdone it we were ready to take some pain
655
00:58:35,706 --> 00:58:43,106
and both the central banks and the fiscal failed us
656
00:58:43,106 --> 00:58:47,166
so i think it's a much shorter story
657
00:58:47,166 --> 00:58:55,866
and so why is that i don't know could be massive divisiveness it could be a rise of
658
00:58:55,866 --> 00:59:01,726
populism it could be a rise of nationalism listen i think back in 2020 this whole idea of
659
00:59:01,726 --> 00:59:09,666
deglobalization and which drove a tremendous amount of nationalism those were relevant
660
00:59:09,666 --> 00:59:17,126
events they changed society a little bit and the politicians grabbed onto those things and used them
661
00:59:17,126 --> 00:59:22,586
as their political motivation
662
00:59:22,586 --> 00:59:24,566
to appeal to the populace.
663
00:59:25,946 --> 00:59:28,186
It's, I mean, it's such a mess
664
00:59:28,186 --> 00:59:29,366
and it doesn't seem like
665
00:59:29,366 --> 00:59:30,166
there's a clear way out of it.
666
00:59:30,246 --> 00:59:30,926
Like you say,
667
00:59:30,986 --> 00:59:32,206
maybe there is a clear way out of it,
668
00:59:32,246 --> 00:59:33,166
but it doesn't seem like
669
00:59:33,166 --> 00:59:34,546
anyone's actually going to do that.
670
00:59:35,946 --> 00:59:37,406
In sort of Bitcoin land,
671
00:59:37,706 --> 00:59:38,826
there's a lot of talk around
672
00:59:38,826 --> 00:59:40,066
sort of debt crisis
673
00:59:40,066 --> 00:59:41,426
and this is going to,
674
00:59:41,886 --> 00:59:42,726
you know, at some point,
675
00:59:42,806 --> 00:59:43,886
whether that's in a decade,
676
00:59:44,086 --> 00:59:45,486
in 50 years, who knows,
677
00:59:45,486 --> 00:59:49,266
the debt is going to become totally unsustainable the system is going to collapse
678
00:59:49,266 --> 00:59:55,826
do you think that is a potential outcome of course it's an out a potential outcome is it a likely
679
00:59:55,826 --> 01:00:05,006
outcome um no it's an outcome likely is the likely as we keep soldiering on and doing the same old
680
01:00:05,006 --> 01:00:11,986
thing what probability would you put on sort of full-blown collapse uh gosh i have no idea
681
01:00:11,986 --> 01:00:12,986
Yeah.
682
01:00:12,986 --> 01:00:13,986
I wouldn't.
683
01:00:13,986 --> 01:00:15,986
It was less than 50 greater than five.
684
01:00:15,986 --> 01:00:23,986
So you think they're just going to be able to keep kicking this can down the road?
685
01:00:23,986 --> 01:00:27,706
I presume you imagine debt's still going to continue to grow, debt to GDP is going to
686
01:00:27,706 --> 01:00:30,086
continue to grow, and they're just going to have to do more intervention to keep this
687
01:00:30,086 --> 01:00:32,086
system running.
688
01:00:32,086 --> 01:00:41,466
So I actually had this conversation last night in a big macro dinner I had.
689
01:00:41,986 --> 01:00:54,666
I think people either don't appreciate or underestimate or don't understand or whatever it is, the levers that governments have.
690
01:00:54,666 --> 01:01:05,806
I think an important thing
691
01:01:05,806 --> 01:01:07,866
when you take all the world's
692
01:01:07,866 --> 01:01:08,806
national debt
693
01:01:08,806 --> 01:01:11,626
the US has a lot of it and it's owned by a lot of
694
01:01:11,626 --> 01:01:13,086
some of it's owned by foreigners
695
01:01:13,086 --> 01:01:14,486
it's sort of irrelevant
696
01:01:14,486 --> 01:01:15,506
most of the debt
697
01:01:15,506 --> 01:01:18,326
is owned by Americans
698
01:01:18,326 --> 01:01:20,326
right
699
01:01:20,326 --> 01:01:23,386
the government
700
01:01:23,386 --> 01:01:26,886
borrowed from Americans
701
01:01:26,886 --> 01:01:29,306
and needs to pay back Americans.
702
01:01:30,366 --> 01:01:31,506
So they can choose.
703
01:01:32,446 --> 01:01:37,546
So there are people that own the debt
704
01:01:37,546 --> 01:01:39,806
and there are people that have benefited
705
01:01:39,806 --> 01:01:41,926
from the spending that the debt's paid for.
706
01:01:42,846 --> 01:01:46,726
And if you want to honor the debt,
707
01:01:47,866 --> 01:01:49,146
you're going to have a crisis
708
01:01:49,146 --> 01:01:53,326
where the people that don't have owned the debt
709
01:01:53,326 --> 01:01:56,046
have to live under austerity.
710
01:01:56,826 --> 01:01:59,046
Because you're going to have to devote a lot of resources
711
01:01:59,046 --> 01:02:01,126
that you could otherwise use on spending
712
01:02:01,126 --> 01:02:02,946
to paying back the debt,
713
01:02:03,106 --> 01:02:04,526
to paying interest on the debt,
714
01:02:04,586 --> 01:02:05,506
to all those things.
715
01:02:05,926 --> 01:02:07,086
But you don't have to.
716
01:02:07,446 --> 01:02:10,566
You can inflate the currency,
717
01:02:10,566 --> 01:02:14,286
and that hurts the people that own the debt.
718
01:02:16,986 --> 01:02:17,966
That's a choice.
719
01:02:18,066 --> 01:02:19,566
That's a choice.
720
01:02:19,566 --> 01:02:25,506
And the government has all the levers it needs to make those choices.
721
01:02:25,946 --> 01:02:29,866
Because really, so the government, this is a topic that...
722
01:02:29,982 --> 01:02:32,222
I find, um, frustrating.
723
01:02:32,442 --> 01:02:34,622
People think of the government as a corporation.
724
01:02:34,822 --> 01:02:38,622
All the government does is two, has two principal functions.
725
01:02:38,882 --> 01:02:40,802
One, it does certain things.
726
01:02:40,962 --> 01:02:41,962
Well, three, I guess.
727
01:02:42,302 --> 01:02:47,222
One, it does certain things that nobody else can do, but literally the
728
01:02:47,222 --> 01:02:48,362
private sector cannot do.
729
01:02:49,002 --> 01:02:52,362
And then two, it probably does a bunch of things that the private
730
01:02:52,362 --> 01:02:56,542
sector would do better, but you know, that's where politics, that's, that's
731
01:02:56,542 --> 01:02:57,582
all politics stuff.
732
01:02:57,582 --> 01:03:27,562
Like, you need the things done. Maybe the private sector would be doing better. Maybe they wouldn't. Different parties would think differently about those things. But the primary function that is to reallocate wealth, to tax from some sets of people, to spend on others, to inflate the economy at the cost of one cohort for the benefit of another cohort, to deflate the economy.
733
01:03:27,582 --> 01:03:35,682
society, presumably the opposite, to grow labor, to grow capital.
734
01:03:35,682 --> 01:03:42,462
All of those things are the transferring of wealth amongst the cohorts of the society.
735
01:03:42,462 --> 01:03:49,742
And the government just has a lot of ability to do that through laws and policy.
736
01:03:49,742 --> 01:03:57,302
And so, yeah, I think they can kick this thing down the road a long, long time and have
737
01:03:57,302 --> 01:04:04,142
outcomes that are not the destruction of society.
738
01:04:05,142 --> 01:04:08,822
Which, like, no matter how well Bitcoin does, I don't want to see the destruction of society.
739
01:04:09,562 --> 01:04:11,722
And so, like, if there are two options...
740
01:04:11,722 --> 01:04:12,262
Well, that's good.
741
01:04:12,742 --> 01:04:13,302
That's good.
742
01:04:13,442 --> 01:04:15,822
There are people that do.
743
01:04:16,242 --> 01:04:17,342
Yeah, I think that's crazy, though.
744
01:04:17,442 --> 01:04:21,082
Like, no one's going to be proud of being really rich when the world's burning down
745
01:04:21,082 --> 01:04:21,962
around them, I don't think.
746
01:04:22,042 --> 01:04:22,582
Trust me.
747
01:04:23,102 --> 01:04:24,422
I've always thought about this.
748
01:04:24,422 --> 01:04:27,082
And by the way, people ask me, do you own physical gold?
749
01:04:27,202 --> 01:04:28,682
Or firstly, I'm not going to tell you.
750
01:04:28,882 --> 01:04:37,602
But secondly, in that dystopia, I don't have enough guns.
751
01:04:38,662 --> 01:04:49,162
Somebody's going to come and put a gun to my loved one's head and say, surrender your physical gold or for that matter, your cold storage tokens.
752
01:04:50,022 --> 01:04:51,142
And I'm gonna.
753
01:04:51,142 --> 01:04:51,582
Yeah.
754
01:04:51,582 --> 01:04:58,062
Yeah. Yeah. Having Bitcoin in a zombie apocalypse is not the future I want. Um, but, oh yeah. And
755
01:04:58,062 --> 01:05:17,972
then there the electrical grid during that situation So you know what I want to see so when I think about gold and Bitcoin I don think about the end game disaster dystopia I think which way are we heading Are we heading to more debasement or less
756
01:05:18,912 --> 01:05:27,332
Are our central bankers trying to control or are they trying to expand the monetary supply?
757
01:05:28,392 --> 01:05:30,992
That's why I care about those things.
758
01:05:30,992 --> 01:05:35,152
dystopia. I don't have enough guns. And I'm old.
759
01:05:35,152 --> 01:05:40,032
One of my good friends, Matt O'Dell, has been in Bitcoin for a long time. And he, uh,
760
01:05:40,032 --> 01:05:44,672
he obviously stacks Bitcoin for everything, every good scenario, but for the zombie apocalypse,
761
01:05:44,672 --> 01:05:48,752
he's stacking ammo because that's more likely to be the currency in that situation.
762
01:05:48,752 --> 01:05:54,432
That won't work either. He can't, there's always a bigger guy with more ammo.
763
01:05:54,432 --> 01:05:56,272
Oh, I think he's talking about trading with it though.
764
01:05:56,272 --> 01:05:59,712
And by the way, by the way, by the way, it will be the government.
765
01:05:59,712 --> 01:06:00,352
Mm-hmm.
766
01:06:00,992 --> 01:06:07,392
they will take all your stuff yeah i mean that's clear they're going to do everything they can
767
01:06:07,392 --> 01:06:12,752
um so let's forget about the absolute worst case scenario in the things that they can do
768
01:06:12,752 --> 01:06:17,492
inflate the debt way being one uh you know three percent inflation or whatever we're at now that's
769
01:06:17,492 --> 01:06:22,552
going to take a very long time do you think is it likely that we see inflation go a lot higher in the
770
01:06:22,552 --> 01:06:30,332
next sort of decade good if they want it to it will if they don't want it it won't
771
01:06:30,332 --> 01:06:32,072
It's a policy choice.
772
01:06:32,672 --> 01:06:34,192
It's always been a policy choice.
773
01:06:34,292 --> 01:06:36,112
It always will be a policy choice.
774
01:06:36,512 --> 01:06:38,212
It's just a policy choice.
775
01:06:38,472 --> 01:06:42,912
And so are you asking me, do I think they're going to choose to continue to do what they've been doing?
776
01:06:43,972 --> 01:06:44,872
I don't know.
777
01:06:45,832 --> 01:06:46,612
We'll see.
778
01:06:46,912 --> 01:06:50,932
Inflation's a hot-button topic.
779
01:06:50,932 --> 01:07:00,452
I think, you know, the horseshoe of populism that people talk about, this is way out of my jurisdiction.
780
01:07:00,752 --> 01:07:01,972
Way, way out.
781
01:07:02,132 --> 01:07:10,512
And macro guys and options guys and guys who have no business talking to this talk about this all the time, and I'm uncomfortable talking about it.
782
01:07:11,232 --> 01:07:18,532
But it is true that populism from the left and the right has a lot of similarities.
783
01:07:18,532 --> 01:07:35,712
And so in order to get anything done to get elected, you have to have these two guys fighting against each other on some unrelated issue to the things they actually care about. And our politicians have been very successful at doing that for the time being.
784
01:07:35,712 --> 01:07:55,482
One day they may not and if they don that a fairly dystopian sort of outcome but you know you could have a very significant political revolution of some sort either armed or not So those are possibilities Again we way outside of where I spend my time
785
01:07:55,862 --> 01:08:00,502
Well, to maybe go back to more your wheelhouse, it seems like what they're trying to do at the
786
01:08:00,502 --> 01:08:09,622
moment or looking to do is grow their way out using AI. Like AI is the big opportunity that's
787
01:08:09,622 --> 01:08:12,682
not been there in the past. Do you think they have any chance of doing that?
788
01:08:15,262 --> 01:08:27,402
Yeah. So again, understanding the future of AI is something that I can't claim expertise on.
789
01:08:27,402 --> 01:08:57,382
I can tell you what does matter, which is there's going to be an impact on labor, which, depending on how it goes, is going to have an impact on the way governments allocate resources.
790
01:08:57,402 --> 01:09:17,862
They could tax AI and pay that to displaced workers to retrain them and to rehire them and all those sort of things. It could be, you know, we could have the robots make all of our stuff and all we are is, you know, leisure.
791
01:09:17,862 --> 01:09:23,282
You know, that's, and you have a UBI sort of situation, though it's a possible outcome.
792
01:09:24,282 --> 01:09:29,442
When I think about this, I don't think in those sort of, and I've, again, not, there's so,
793
01:09:29,562 --> 01:09:35,422
everybody's, smart people have said lots of things about the future of AI and, you know,
794
01:09:35,662 --> 01:09:38,342
doom probabilities of 100 to zero.
795
01:09:39,962 --> 01:09:41,522
I don't know.
796
01:09:41,522 --> 01:10:00,102
What I do know is that AI is very computer intensive and computers cost a compute costs a lot of money and a lot of investment is being placed in to make compute and being borrowed from savers.
797
01:10:01,462 --> 01:10:03,362
And its returns are uncertain.
798
01:10:03,362 --> 01:10:12,322
And at some point, and there are also other constraints, physical constraints like data
799
01:10:12,322 --> 01:10:13,322
centers.
800
01:10:13,322 --> 01:10:18,922
NIMBY is not something I care much about, but it's political.
801
01:10:18,922 --> 01:10:36,872
But energy consumption all the resources copper consumption all the resources you know those are constraints And I think we could have some bumps along the way to whatever outcome it is And at the same time gosh I been using algorithms
802
01:10:37,572 --> 01:10:40,732
generally ones that are statistical algorithms,
803
01:10:41,412 --> 01:10:45,612
from regressions to neural networks to machine learning
804
01:10:45,612 --> 01:10:46,792
for my whole career.
805
01:10:48,952 --> 01:10:51,032
And AI is just an extension of that.
806
01:10:51,052 --> 01:10:52,512
And really, really good and cool.
807
01:10:52,512 --> 01:10:55,512
And I use it every day and it's really cool and it's fantastic and all.
808
01:10:56,012 --> 01:10:58,892
But it's not that new.
809
01:11:00,352 --> 01:11:06,052
It's just accelerating at a very rapid pace.
810
01:11:06,392 --> 01:11:14,692
And so to me, yeah, I think it's an incredible tool and is going to change the world and has changed the world and will change the world further.
811
01:11:14,692 --> 01:11:22,252
and along the way in my very narrow window of how do I make money in markets I suspect there's
812
01:11:22,252 --> 01:11:27,972
going to be some bumps along the way it's like everything you've laid out here Andy makes me
813
01:11:27,972 --> 01:11:33,792
think you need to own some bitcoin whatever that percentage might be I think I think one day in the
814
01:11:33,792 --> 01:11:38,572
next few years you'll uh you'll come around and you'll be I owned it briefly you know and I have
815
01:11:38,572 --> 01:11:47,732
a bid at, in this case, 420.69 with 420.69 is my new meme level. I think I may never get hit on
816
01:11:47,732 --> 01:11:54,892
that bid. I may never get hit. It's actually going pretty well. I like the path it's going on.
817
01:11:58,392 --> 01:12:04,052
Maybe. I do love that you just buy the memes. I don't think you'll get hit on that one, but
818
01:12:04,052 --> 01:12:07,092
I think when we have this conversation in a year's time,
819
01:12:07,252 --> 01:12:08,752
maybe things will change, but maybe not.
820
01:12:09,092 --> 01:12:11,072
But I really appreciate your perspective on all this.
821
01:12:11,132 --> 01:12:12,272
It's been super interesting.
822
01:12:12,792 --> 01:12:14,492
I'd love to do it again at some point in the future.
823
01:12:14,952 --> 01:12:16,932
And I'd actually, I'd really like to get someone,
824
01:12:17,292 --> 01:12:19,012
like the person that springs to mind is Parker Lewis
825
01:12:19,012 --> 01:12:20,532
to come on and have this discussion with you.
826
01:12:20,552 --> 01:12:23,092
Because I think he would be able to make the case for Bitcoin
827
01:12:23,092 --> 01:12:25,172
to you in a way that I couldn't.
828
01:12:26,392 --> 01:12:28,092
So maybe we should do that at some point.
829
01:12:28,732 --> 01:12:30,372
But really appreciate the time, Andy.
830
01:12:30,372 --> 01:12:32,692
And tell everyone where they can go to find your Substack,
831
01:12:32,692 --> 01:12:38,672
your everything you do your twitter sure it's all at damp spring damp spring um twitter damp
832
01:12:38,672 --> 01:12:43,672
spring substack um and damp spring.com if you're interested in a client relationship
833
01:12:43,672 --> 01:12:47,192
perfect thank you so much for the time thanks danny
834
01:13:02,692 --> 01:13:32,672
Thank you.